Chapter 3: Effectiveness Of Contracts | Doing Business with China

Article 44 The contract established according to law becomes effective when it is established.

With regard to contracts which are subject to approval or registration as provided for by the laws or administrative regulations, the provisions thereof shall be followed.

Article 45 The parties may agree on some collateral conditions relating to the effectiveness of a contract. The contract with entry-into-force conditions shall be effective when such conditions are accomplished. The contract with dissolving conditions shall be null and void when such conditions are accomplished.

To unfairly prevent the conditions from being accomplished by one party for its own interests shall be regarded as those conditions have been accomplished. To unfairly promoting the accomplishment of such conditions by one party shall be regarded as non-accomplishment.

Article 46 The parties may agree on a conditional time period as to the effectiveness of the contract. A contract subject to an effective time period shall come into force when the period expires. A contract with termination time period shall become invalid when the period expires .

Article 47 A contract concluded by a person with limited civil capacity of conduct shall be effective after being ratified afterwards by the person's statutory agent, but a pure profit-making contract or a contract concluded which is appropriate to the person's age, intelligence or mental health conditions need not be ratified by the person's statutory agent.

The counterpart may urge the statutory agent to ratify the contract within one month. It shall be regarded as a refusal of ratification that the statutory agent does not make any expression. A bona fide counterpart has the right to withdraw it before the contract is ratified. The withdrawal shall be made by means of notice.

Article 48 A contract concluded by an actor who has no power of agency, who oversteps the power of agency, or whose power of agency has expired and yet concludes it on behalf of the principal, shall have no legally binding force on the principal without ratification by the principal, and the actor shall be held liable.

The counterpart may urge the principal to ratify it within one month. It shall be regarded as a refusal of ratification that the principal does not make any expression. A bona fide counterpart has the right to withdraw it before the contract is ratified. The withdrawal shall be made by means of notice.

Article 49 If an actor has no power of agency, oversteps the power of agency, or the power of agency has expired and yet concludes a contract in the principal's name , and the counterpart has reasons to trust that the actor has the power of agency, the act of agency shall be effective.

Article 50 Where a statutory representative or a responsible person of a legal person or other organization oversteps his/her power and concludes a contract, the representative act shall be effective except that the counterpart knows or ought to know that he/she is overstepping his/her powers.

Article 51 Where a person having no right to disposal of property disposes of other persons' properties, and the principal ratifies the act afterwards or the person without power of disposal has obtained the power after concluding a contract, the contract shall be valid.

Article 52 A contract shall be null and void under any of the following circumstances:

A contract is concluded through the use of fraud or coercion by one party to damage the interests of the State;
Malicious collusion is conducted to damage the interests of the State, a collective or a third party;
An illegitimate purpose is concealed under the guise of legitimate acts;
Damaging the public interests;
Violating the compulsory provisions of the laws and administrative regulations.

Article 53 The following immunity clauses in a contract shall be null and void:

those that cause personal injury to the other party;
those that cause property damages to the other party as a result of deliberate intent or gross fault.

Article 54 A party shall have the right to request the people's court or an arbitration institution to modify or revoke the following contracts:

those concluded as a result of serious misunderstanding;
those that are obviously unfair at the time when concluding the contract.

If a contract is concluded by one party against the other party's true intentions through the use of fraud, coercion or exploitation of the other party's unfavourable position, the injured party shall have the right to request the people's court or an arbitration institution to modify or revoke it.

Where a party requests for modification, the people's court or the arbitration institution may not revoke the contract.

Article 55 The right to revoke a contract shall extinguish under any of the following circumstances:

A party having the right to revoke the contract fails to exercise the right within one year from the day that it knows or ought to know the revoking causes;
A party having the right to revoke the contract explicitly expresses or conducts an act to waive the right after it knows the revoking causes.

Article 56 A contract that is null and void or revoked shall have no legally binding force ever from the very beginning. If part of a contract is null and void without affecting the validity of the other parts, the other parts shall still be valid.

Article 57 If a contract is null and void, revoked or terminated , it shall not affect the validity of the dispute settlement clause which is independently existing in the contract.

Article 58 The property acquired as a result of a contract shall be returned after the contract is confirmed to be null and void or has been revoked; where the property can not be returned or the return is unnecessary, it shall be reimbursed at its estimated price. The party at fault shall compensate the other party for losses incurred as a result therefrom. If both parties are at fault, each party shall respectively be liable.

Article 59 If the parties have maliciously conducted collusion to damage the interests of the State, a collective or a third party, the property thus acquired shall be turned over to the State or returned to the collective or the third party.