Chapter 14: Contracts For Financial Lease

Article 237     A financial lease contract refers to a contract whereby the lessor buys the leased property from the seller based on the lessee's choice of the seller and the leased property, and supplies it to the lessee for the latter's use, and the lessee pays the rent.

Article 238     The contents of a financial lease contract shall contain such clauses as the title, quantity, specifications, technical performance and inspection methods of the leased property, the term of the lease, the rent composition and the time limit and kinds of currencies for payment of the rent, and the attribution of the leased property at the expiry of the lease term .

A financial lease contract shall be in written form.

Article 239     With regard to the sales contract concluded by the lessor based on the lessees' choice of the seller and the leased property, the seller shall deliver the object to the lessee according to the terms of the contract, and the lessee shall enjoy the rights of a buyer relating to the received object.

Article 240     The lessor, seller and lessee may agree that, where the sellor fails to perform the sales contract, the lessee shall exercise the right to claims. Where the lessee exercises the right, the lessor shall provide assistance.

Article 241     The sales contract concluded by the lessor based on the lessee's choice of the seller and the leased property, shall not be modified in respect of the contents of the contract relating to the lessee without the consent of the lessee.

Article 242     The lessor shall be entitled to the ownership of the leased property. In case of bankruptcy of the lessee, the leased property does not belong to the bankrupt property.

Article 243     The rent under a financial lease contract shall be determined according to the major part or whole of the cost for purchasing the leased property and reasonable profits of the lessor, except as otherwise agreed upon by the parties.

Article 244     Where the leased property does not conform to the terms of the contract or the purpose of its use, the lessor shall not bear any liability, except that the lessee decides on the choice of the leased property depending on the skills of the lessor or the lessor interferes with the choice of the leased property.

Article 245     The lessor shall insure the lessee's possession and use of the leased property.

Article 246     Where the leased property causes personal injury or property damage to a third party during the period wherein the lessee possesses the leased property, the lessor does not bear liability.

Article 247     The lessee shall keep the leased property in a proper storage and use it properly.

The lessee shall perform the obligation for maintenance of the leased property during the period wherein the lessee possesses the leased property.

Article 248     The lessee shall pay the rent according to the terms of the contract. If the lessee still does not pay the rent within a reasonable time limit after being urged, the lessor may request it to pay all the rent, or rescind the contract and take back the leased property.

Article 249     Where the parties agree in the contract that the leased property shall belong to the lessee at the expiry of the lease term, the lessee has paid the majority of the rent but is unable to pay the remaining rent, and the lessor rescinds the contract for this reason and takes back the leased property, the lessee may request the lessor to return a certain part if the value of the leased property taken back exceeds the rent and other expenses which the lessee owes to the lessor.

Article 250     The lessor and lessee may agree upon the attribution of the leased property at the expiry of the lease term. Where there is no agreement in the contract as to the attribution of the leased property or such agreement is unclear, nor can it be determined according to the provisions of Article 61 of this Law, the ownership of the leased property shall belong to the lessor.

Article 251     A work contract refers to a contract whereby the contractor shall, in light of the requirements of the ordering party, complete the work and deliver the results therefrom, and the ordering party pays the remuneration therefor.

Work includes processing, ordering, repairing, duplicating, testing, inspecting, etc.

Article 252     The contents of a work contract shall contain such clauses as the object, quantity, quality, remuneration and method of the work, supply of materials, term of performance, standards and method of inspection.

Article 253     The contractor shall use its own equipment, technology and labour force to complete the principal part of the work, except as otherwise agreed upon by the parties.

Where the contractor assigns the contracted work to a third party for completion, the contractor shall be responsible to the ordering party in respect of the work results completed by the third party. Where the assignment is without the consent by the ordering party, the ordering party may rescind the contract.

Article 254     The contractor may assign some auxiliary work contracted to a third party for completion. The contractor shall be responsible to the ordering party for the work results completed by a third party if the contractor assigns the auxiliary work to the third party.

Article 255     Where the contractor provides with materials, the contractor shall select and use the materials according to the terms of the contract and accept inspection by the ordering party.

Article 256     Where the ordering party supplies materials, the ordering party shall supply the materials according to the terms of the contract. The contractor shall promptly inspect the materials supplied by the ordering party and, if it discovers that they do not conform to the agreement in the contract, it shall promptly notify the ordering party to replace them or supply what is lacking or take other remedial measures.

The contractor may not unilaterally replace any materials supplied by the ordering party, and may not replace the components which do not need to be repaired.

Article 257     Where the contractor discovers that the drawings supplied by the ordering party or the technical requirements are unreasonable, it shall promptly notify the ordering party. If, due to the indolent reply of the ordering party and other reasons, losses are caused to the contractor, the ordering party shall be liable for making compensation.

Article 258     Where the ordering party changes the requirements of the contracted work midway and causes losses to the contractor, the ordering party shall be liable for making compensation.

Article 259     If the contracted work needs the assistance of the ordering party, the ordering party shall have the obligation to provide assistance Where the ordering party does not perform the assistance obligation and causes the contracted work unable to be completed, the contractor may urge the ordering party to perform its obligation within a reasonable time limit and may prolong the term of performance; the contractor may rescind the contract if the ordering party does not perform such obligation within the time limit.

Article 260     The contractor shall, during the period of working, accept the necessary supervision over and inspection of the work by the ordering party. The ordering party may not obstruct the contractor's normal work with the supervision and inspection.

Article 261     Where the contractor completes the work, it shall deliver the results of the work to the ordering party, and submit necessary technical materials and the relevant quality certificates. The ordering party shall examine and accept the results of the work.

Article 262     Where the results of the work delivered by the contractor do not conform to the quality requirements, the ordering party may request the contractor to bear such liabilities for the breach of contract as repairing, reprocessing, reducing remuneration and making compensation.

Article 263     The ordering party shall pay remuneration according to the time limit agreed by the parties in the contract. Where there is no agreement in the contract as to the time limit for payment of remuneration or such agreement is unclear, nor can it be determined according to the provisions of Article 61 of this Law, the ordering party shall pay it at the same time when the results of the work are delivered; where only part of the work results is delivered, the ordering party shall make corresponding payment.

Article 264     Where the ordering party fails to pay the remuneration or the price for the materials and etc, the contractor shall have the right to lien upon the results of the work, except as otherwise agreed upon by the parties.

Article 265     The contractor shall keep in a proper storage the materials supplied by the ordering party and the work results completed, and the contractor shall be liable for damages if they are destroyed , damaged or lost due to improper storage.

Article 266     The contractor shall maintain confidentiality according to the requirements of the ordering party and may not, without permission thereby, withhold and preserve the duplicates or technical materials.

Article 267     Co-contractors shall bear joint and several liability to the ordering party, except as otherwise agreed upon by the parties.

Article 268     The ordering party may rescind the contract at any time, but it shall bear the liability for making compensation for losses, if the contractor suffers losses therefrom.