Chapter 7: Liability For Breach Of Contracts

Article 107 Where one party to a contract fails to perform the contract obligations or its performance fails to satisfy the terms of the contract, the party shall bear such liabilities for breach of contract as to continue to perform its obligations, to take remedial measures, or to compensate for losses.

Article 108 Where one party to a contract expresses explicitly or indicates through its acts that it will not perform the contract, the other party may demand it to bear the liability for the breach of contract before the expiry of the performance period.

Article 109 If one party to a contract fails to pay the price or remuneration, the other party may request it to make the payment.

Article 110 Where one party to a contract fails to perform the non- monetary debt or its performance of non- monetary debt fails to satisfy the terms of the contract, the other party may request it to perform it except under any of the following circumstances:

It is unable to be performed in law or in fact;
The object of the debt is unfit for compulsory performance or the performance expenses are excessively high; or
The creditor fails to request for the performance within a reasonable time period.

Article 111 If the quality fails to satisfy the terms of the contract, the breach of contract damages shall be borne according to the terms of the contract agreed upon by the parties. If there is no agreement in the contract on the liability for breach of contract or such agreement is unclear, nor can it be determined in accordance with the provisions of Article 61 of this Law, the damaged party may, in light of the character of the object and the degree of losses, reasonably choose to request the other party to bear the liabilities for the breach of contract such as repairing, substituting, reworking, returning the goods, or reducing the price or remuneration.

Article 112 Where one party to a contract fails to perform the contract obligations or its performance fails to satisfy the terms of the contract, the party shall, after performing its obligations or taking remedial measures, compensate for the losses, if the other party suffers from other losses.

Article 113 Where one party to a contract fails to perform the contract obligations or its performance fails to satisfy the terms of the contract and causes losses to the other party, the amount of compensation for losses shall be equal to the losses caused by the breach of contract, including the interests receivable after the performance of the contract, provided not exceeding the probable losses caused by the breach of contract which has been foreseen or ought to be foreseen when the party in breach concludes the contract.

The business operator who commits default activities in providing to the consumer any goods or service shall be liable for paying compensation for damages in accordance with the Law of the People's Republic of China on the Protection of Consumer Rights and Interests.

Article 114 The parties to a contract may agree that one party shall, when violating the contract, pay breach of contract damages of a certain amount in light of the breach, or may agree upon the calculating method of compensation for losses resulting from the breach of contract.

If the agreed breach of contract damages are lower than the losses caused, any party may request the people's court or an arbitration institution to increase it; if it is excessively higher than the losses caused, any party may request the people's court or an arbitration institution to make an appropriate reduction.

If the parties to a contract agree upon breach of contract damages in respect to the delay in performance, the party in breach shall perform the debt obligations after paying the breach of contract damages.

Article 115 The parties to a contract may, according to the Guaranty Law of the People's Republic of China, agree that one party pays a deposit to the other party as the guaranty for the creditor's rights. After the debt obligations are performed by the obligor, the deposit shall be returned or offset against the price. If the party that pays the deposit fails to perform the agreed debt obligations, it shall have no right to reclaim the deposit. If the party that receives the deposit fails to perform the agreed debt obligations, it shall return twice the amount of the deposit.

Article 116 Where the parties to a contract agree on both breach of contract damages and a deposit, when one party violates the contract, the other party may choose to apply the breach of contract damages clause or the deposit clause.

Article 117 I n case that a contract is not able to be performed because of force majeure, the liabilities shall be exempted in part or wholly in light of the effects of force majeure, except as otherwise stipulated by law. If the force majeure occurs after one party has delayed in performance, the liability may not be exempted.

Force majeure as referred to in this Law means the objective circumstances that are unforeseeable, unavoidable and insurmountable.

Article 118 One party to a contract that is not able to perform the contract because of force majeure shall make a notice to the other party promptly so as to reduce the probable losses to the other party and provide evidence within a reasonable time limit.

Article 119 After one party violates a contract, the other party shall take proper measures to prevent from the enlargement of losses; if the other party fails to take proper measures so that the losses are enlarged, it may not claim any compensation as to the enlarged losses.

The reasonable expenses paid by the party to prevent the enlargement of losses shall be borne by the party in breach.

Article 120 In case that both parties violate a contract, they shall bear the liabilities respectively.

Article 121 One party that violates the contract because of a third party shall be liable for the breach of contract to the other party. The disputes between the said party and the third party shall be settled according to law or their agreement.

Article 122 In case that the breach of contract by one party infringes upon the other party's personal or property rights, the aggrieved party shall be entitled to choose to claim the assumption by the violating and infringing party of liabilities for breach of contract according to this Law, or to claim the assumption by the violating and infringing party of liabilities for infringement according to other laws.