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China Sales Contract Law From The Inside.

Posted in Legal News

Our most frequent job as China lawyers is to write sales contracts between Chinese companies and foreign companies.  And our most frequent email questions from blog readers also relate to China sales contracts.  Sales contracts are relevant for just about any company doing business in China.

So we figured we would start a series of blog posts explaining in depth China’s contract law relating to sales and this is the first in what we plan as a long running, quasi-weekly series.

By:  Steve Dickinson 

One of the things the Chinese authorities are doing to improve the application of law in China is to provide more authoritative guidance on the interpretation of statutory law. China is a civil law country. The sources for interpretation of the statute law follow the German civil law pattern.

Under this approach, sources for the interpretation of the law are as follows:

  1. The text of the statute.
  2. Supreme Court and other binding interpretations of the statute.
  3. Authoritative commentary.
  4. Government approved illustrative cases.

This familiar civil law pattern is followed in China in the area of disputes concerning contracts for the sale of goods. The applicable PRC sources are as follows:

1. Statute: One of the first civil law statutes promulgated by the Chinese government was the Contract Law of 1999: 合同法:  Chinese version, English version. Articles 130 – 175 of the Contract Law specifically address the sale of goods.

2. Interpretive regulations. The PRC Supreme Court has issued a number of interpretations of the Contract Law. Under the Chinese system, these interpretations have the force of law. The most important for sales of goods contracts are as follows.  Notice that the most recent was issued in May of this year, showing the continuing development of the law in this area.

 a. 关于审理买卖合同纠纷案件适用法律问题的解释 [Interpretation of issues relating to the interpretation of law arising from the adjudication of sales contracts disputes], promulgated by the PRC Supreme Court on May 10, 2012.

 b. 关于使用《合同法》若干问题的解释I,II.[Interpretation of some questions relating to the Contract Law], promulgated by the PRC Supreme Court, volume I on December 19, 1999, volume II on April 24, 2009.

 c. 关于当前形势下审理民商事合同纠纷案件若干问题的指导意见 [Opinion on guidance on some questions relating to adjudication of civil commercial contracts under current conditions], promulgated by the PRC Supreme Court on July 7, 2009.

 3. Commentary.

 a. A full commentary on the sales provisions of the PRC Contract Law can be found at: 买卖合同纠纷 [Sales Contract Disputes], 田郎亮 [Tian Langliang], editor, pages 1 – 47. Published by China Legal Publishing House, August, 2012. Pages 48 – 105 of the same text contain a full commentary on the Sales Contract Interpretation discussed at 2.a above.

b. The PRC Contract Law is ultimately based on the work of a group of scholars under the chairmanship of Professor Wang Liming of People’s University. This group has issued a fully annotated version of their draft that provides the source and reasoning behind every provision of their proposed version of the Contract Law. Though this scholar’s version was not adopted as proposed, the commentary in this volume nevertheless serves as a sort of “legislative history” of the Contract Law. The commentary is published as: 中国民法典学者建议稿及立法理由:合同编 [A Propositional Version with Legislative Reasons for Civil Code Draft of China: Contract Section], Wang Limin chief editor, Legal Press, June 2005.

c. There are numerous commentaries on contract law. The best is by Wang Limin who was influential in the promulgation of the current PRC Contract Law: 合同法研究 [Studies on Contract Law], Two Volumes, People’s University Press, 2003. There are numerous more recent commentaries, but none surpass Wang in depth of analysis and clarity.

d. The Chinese ultimately base their version of contract law on the German system. Very few Chinese scholars are comfortable with original German commentary. Most therefore rely on the excellent Chinese translation of the 12th Edition of the standard German commentary on Schuldrecht [Obligations/Contract] by Dieter Medicus published in 2003 as 德国债法:总论,分论。Though this translation is quite influential in China, a quick review will show primarily how far the Chinese approach departs from the German approach.

4. Case law. The PRC Supreme Court now treats sales contracts as a separate area of concern. In order to provide guidance in adjudication, the Supreme Court annually issues a volume of annotated authoritative cases. The Supreme Court also periodic issues in depth annotations of cases relating to sales contract issues. The most recent examples of these are:

a. 中国法院2012 年度案例:买卖合同纠纷 [Chinese courts decisions for 2012: sales contract disputes], edited by by the National Judges College, February, 2012.

b. 买卖合同纠纷 [Sales Contract Disputes], 田郎亮 [Tian Langliang], editor, pages 106 – 503.

Foreign commentators (mostly from common law countries like the United States, England and Australia) frequently complain that Chinese law is too vague and general to provide concrete guidance. However, such commentators would almost certainly say the same thing if they simply read the provisions of German or Japanese statute law. In all civil law jurisdictions, no one is in a position to comment on the state of the law until after they have mastered the four levels of explanatory material discussed above. It is simply false to state that this explanatory material does not exist with respect to Chinese law. The material does exist and the Chinese courts, scholars and lawyers have worked very hard over the past decade to generate this material.

Most such statements about the state of Chinese sales contract law are thus usually based on a lack of familiarity with civil law systems. Note that this extensive material discussed above is almost exclusively in Chinese and, to my knowledge, only the Contract Law has been translated into English. Therefore, only those who can read large amounts of legal materials in Chinese are equipped to provide in depth perspectives on Chinese civil law.

Over the next year I will be discussing some of the key issues of Chinese sales contract law. I will make use of the explanatory materials introduced in this post as the basis for discussion. The result will be a small glimpse at China sales contract law from the inside.

  • Peonian

    Great Dan and Steve:

    1) Please take into consideration of the Chinese international private law for applicable law and jurisdiction concerning sales contract;

    2) Regarding Statute: please take into consideration of the Vienna Convention on Sale of Goods;

    3) Please make sure about the order of source of law, namely between your point 3 and 4;

    Looking forward.