Civil Code of Einsenland – Contracts (British English)
Reference translation into British English. The Chinese source is available here. This translation preserves its numbering and legal status; it is not a jointly authenticated text of equal legal authority. See source and translation notes. The source is draft material with unresolved institutional references and other defects; translating it does not adopt or correct those provisions.
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Section 369 [Definition of a contract]
A contract is an agreement between civil-law persons establishing, varying or terminating a civil legal relationship.
Agreements concerning personal status, including marriage, adoption and guardianship, are governed by the law relating to that status. In the absence of such provisions, this Book may apply by analogy according to the nature of the agreement.
Section 370 [Binding force of contracts]
A lawfully concluded contract is legally binding on the parties. They must perform their agreed obligations and must not unilaterally vary or terminate the contract without authority.
A lawfully concluded contract is protected by law.
Section 371 [Privity of contract]
A contract has effect only between its parties, unless otherwise provided by law.
Section 372 [Equal legal status of contracting parties]
Contracting parties have equal legal status. Neither may impose its will on the other.
Section 373 [Freedom of contract]
Parties have the right to conclude contracts voluntarily in accordance with law. No organisation or individual may unlawfully interfere.
Section 374 [Principles to be observed in contracts]
Parties must act in good faith when exercising rights and performing obligations.
In concluding and performing contracts, parties must comply with legislation and administrative regulations, respect public morals, and refrain from disrupting the social and economic order or harming the public interest.
Subchapter 1 Offers
Section 375 [Definition of an offer]
Parties may conclude a contract by offer and acceptance.
An offer is a declaration of intention to conclude a contract with another person and must:
(1) be specific and definite in content;
(2) indicate that the offeror will be bound by the declaration upon acceptance by the offeree.
Section 376 [Invitation to treat]
An invitation to treat is a declaration inviting others to make offers. Auction notices, invitations to tender, share prospectuses, bond offering documents, fund prospectuses, commercial advertising and publicity, and distributed price lists are invitations to treat.
Commercial advertising and publicity that satisfy the requirements of an offer constitute an offer.
[Case illustration: when an advertisement constitutes an offer]
A commercial advertisement is an offer rather than an invitation to treat if its terms are specific and definite and indicate that a contract will arise upon the other party's performance of a specified act. For example, an advertisement expressly promising that “the company will pay a specified sum to anyone who uses this product as directed and nevertheless experiences a specified event”, supported by objective conduct demonstrating the seriousness of the promise, such as lodging a guarantee deposit with a bank, constitutes an offer to the public. Performance of the required act constitutes acceptance and concludes the contract.
Section 377 [When an offer takes effect]
An offer takes effect when it reaches the offeree.
Where a contract is concluded by data message, Section 93 of this Code governs when the offer takes effect.
Section 378 [Withdrawal of an offer]
An offer may be withdrawn. Section 96 of this Code governs withdrawal.
Section 379 [Revocation of an offer]
An offer may be revoked unless:
(1) the offeror expressly indicates, by fixing an acceptance period or otherwise, that it is irrevocable;
(2) the offeree has reasonable grounds to regard it as irrevocable and has made reasonable preparations to perform the contract.
A declaration revoking an offer must reach the offeree before the offeree dispatches notice of acceptance.
Section 380 [Lapse of an offer]
An offer lapses where:
(1) it is rejected;
(2) it is lawfully revoked;
(3) the acceptance period expires without acceptance;
(4) the offeree materially alters its terms.
Subchapter 2 Acceptance
Section 381 [Definition of acceptance]
Acceptance is the offeree's declaration of assent to an offer.
Section 382 [Method of acceptance]
Acceptance must be made by notice, unless commercial practice or the offer permits acceptance by conduct.
[Acceptance by conduct]
Where the offer specifies, or commercial practice provides, that notice is unnecessary, acceptance may be made by conduct and takes effect when the conduct is completed.
For unilateral legal acts, including public offers of reward and public promises, acceptance by performance of the specified act takes effect upon completion of that act, without prior notice to the offeror.
Section 383 [Period for acceptance]
Acceptance must reach the offeror within the period fixed in the offer.
If no period is fixed:
(1) an offer made in a conversation must be accepted immediately;
(2) an offer made otherwise must be accepted within a reasonable period.
Section 384 [Commencement of the acceptance period]
For an offer made by letter or telegram, the period runs from the date stated in the letter or the date on which the telegram is handed in for dispatch. If the letter is undated, it runs from the postmark date of posting. For an offer made by telephone, fax, email or another rapid means of communication, it runs from the time the offer reaches the offeree.
Section 385 [When acceptance takes effect]
Notice of acceptance takes effect when it reaches the offeror. If notice is unnecessary, acceptance takes effect when the act required by commercial practice or the offer is performed.
For a contract concluded by data message, Section 93 of this Code governs the time of receipt of acceptance.
Section 386 [Withdrawal of acceptance]
Acceptance may be withdrawn. Section 96 of this Code governs withdrawal.
Section 387 [Acceptance dispatched out of time]
An acceptance dispatched after expiry of the acceptance period, or dispatched within it but ordinarily incapable of arriving in time, constitutes a new offer, unless the offeror promptly notifies the offeree that the acceptance is effective.
Section 388 [Late arrival of acceptance]
An acceptance dispatched within the acceptance period that would ordinarily arrive in time but arrives late for another reason remains effective, unless the offeror promptly notifies the offeree that it is rejected because it arrived out of time.
Section 389 [Content of acceptance]
Acceptance must correspond to the offer. A material alteration of the offer constitutes a new offer. Alterations concerning the subject matter, quantity, quality, price or remuneration, time, place or method of performance, liability for breach, or dispute resolution, among other matters, are material.
Section 390 [Non-material alterations]
Acceptance containing a non-material alteration is effective and its terms govern the contract, unless the offeror promptly objects or the offer prohibits any alteration.
Subchapter 3 Formation of Contracts
Section 391 [Time of formation]
A contract is concluded when acceptance takes effect, unless otherwise provided by law or agreed by the parties.
Section 392 [Place of formation]
The place where acceptance takes effect is the place of formation.
For a contract concluded by data message, the recipient's principal place of business is the place of formation; if none exists, it is the recipient's domicile. Any agreement of the parties to the contrary applies.
Section 393 [Formation of a written contract]
Where the parties use a contract document, the contract is concluded when all parties sign, affix their seals or affix their fingerprints. If, before then, one party performs its principal obligations and the other accepts performance, the contract is concluded upon acceptance.
Where legislation, administrative regulations or the parties require writing, but one party performs its principal obligations without a written contract and the other accepts performance, the contract is concluded.
Section 394 [Formation requiring a confirmation document]
Where parties concluding a contract by correspondence, data message or similar means require a confirmation document, the contract is concluded when that document is signed.
Section 395 [Form of contracts]
Parties may conclude a contract in writing, orally or in another form.
Writing includes contract documents, letters, telegrams, telexes, faxes and other forms that tangibly record their content, as well as data messages, including electronic data interchange and email, that tangibly record their content and can be retrieved for reference at any time.
For a contract concluded by telephone or similar means, if a party requests a contract document or confirmation document, the contract is concluded when that document is signed.
Section 396 [Terms of a contract]
The parties agree the terms, which generally include:
(1) the parties' names or designations and domiciles;
(2) the subject matter;
(3) quantity;
(4) quality;
(5) price or remuneration;
(6) time, place and method of performance;
(7) liability for breach;
(8) dispute resolution.
Parties may use model forms for different types of contract as a reference.
Section 397 [Remedying omitted terms]
After a contract takes effect, parties may supplement by agreement absent or unclear terms concerning quality, price or remuneration, place of performance and similar matters. If no supplementary agreement is reached, the terms must be determined by the relevant contractual provisions or commercial practice.
Section 398 [Rules for determining unclear terms]
If unclear terms remain indeterminable under the preceding Section:
(1) unclear quality requirements are determined by mandatory national standards, failing which recommended national standards apply, then industry standards; if neither national nor industry standards exist, ordinary standards or particular standards consistent with the contractual purpose apply;
(2) an unclear price or remuneration is determined by the market price at the place of performance when the contract was concluded; government-fixed or government-guided prices apply where legally required;
(3) if the place of performance is unclear, payment is made at the recipient's location, delivery of immovable property at its location, and performance concerning other subject matter at the obligor's location;
(4) if the time of performance is unclear, the debtor may perform and the creditor may demand performance at any time, allowing the other party necessary preparation time;
(5) if the method is unclear, performance must favour achievement of the contractual purpose;
(6) if responsibility for performance expenses is unclear, the obligor bears them; additional expenses attributable to the creditor are borne by the creditor.
Section 399 [Public offers of reward]
Where a person publicly promises remuneration to anyone performing a specified act, a person who performs it may demand payment.
A claimant must provide evidence of performance. The person offering the reward must pay according to the public offer.
A public offer of reward binds its maker upon publication. Withdrawal before completion does not prejudice a claim for appropriate compensation by a person who has begun performance and incurred reasonable expenditure in reliance on the offer.
Section 400 [Preliminary contracts]
Subscription, purchase-order, reservation and similar documents by which parties agree to conclude a contract within a future period constitute preliminary contracts.
If a party fails to perform its obligation to conclude the contract, the other may require liability for breach of the preliminary contract.
Section 401 [Liability for fault in negotiations]
A party must compensate loss caused to the other party during negotiations by:
(1) negotiating in bad faith under the pretence of concluding a contract;
(2) intentionally concealing material facts concerning conclusion or providing false information;
(3) other conduct contrary to good faith.
Section 402 [Confidentiality]
Trade secrets and other confidential information learned during negotiations must not be disclosed or improperly used, whether or not a contract is concluded. A party causing loss through disclosure or improper use must pay compensation.
Subchapter 4 Standard Terms
Section 403 [Definition of standard terms]
Standard terms are terms prepared in advance for repeated use and not negotiated with the other party when concluding the contract.
Section 404 [Incorporation of standard terms]
A party supplying standard terms must determine rights and obligations fairly, reasonably draw attention to exclusions or reductions of its liability and other terms materially affecting the other party's interests, and explain them on request. If failure to draw attention or explain causes the other party not to notice or understand a term materially affecting its interests, that party may assert that the term does not form part of the contract.
Section 405 [Invalid standard terms]
A standard term is void if its supplier unreasonably excludes or reduces its liability, increases the other party's liability or restricts that party's principal rights.
A standard term excluding the other party's principal rights is void.
Section 406 [Interpretation of standard terms]
Disputed standard terms must be interpreted according to their ordinary meaning. If two or more interpretations are possible, the interpretation adverse to the supplier must be adopted. A non-standard term prevails over an inconsistent standard term.
Section 407 [When a contract takes effect]
A lawfully concluded contract takes effect upon conclusion, unless otherwise provided by law or agreed by the parties.
Section 408 [Conditional and time-limited contracts]
Parties may subject the effect of a contract to a condition. A suspensive condition brings the contract into effect upon fulfilment; a resolutive condition terminates its effect upon fulfilment.
Parties may subject its effect to a time limit. A commencement term brings it into effect when that time arrives; an expiry term terminates its effect upon expiry.
Section 409 [Approval and registration]
Where legislation or administrative regulations require approval or other formalities, those provisions apply. Failure to complete formalities affecting the contract's effectiveness does not invalidate terms requiring an application for approval or related terms. If the responsible party fails to apply, the other may require liability for breach of that obligation.
The preceding paragraph also applies where approval or other formalities are required for variation, assignment or termination.
Section 410 [Contracts by persons with limited capacity]
A contract concluded by a person with limited capacity for civil acts is effective upon consent or ratification by the legal representative. No consent or ratification is required for a contract conferring only benefits or appropriate to that person's age, intelligence or mental health.
The other party may require ratification within thirty days of the legal representative's receipt of notice. Silence is treated as refusal. Before ratification, a party acting in good faith may revoke by notice.
Section 411 [Void contracts]
A contract is void where:
(1) a party concludes it by fraud or duress, harming state interests;
(2) malicious collusion harms state, collective or third-party interests;
(3) a lawful form conceals an unlawful purpose;
(4) it harms the public interest;
(5) it breaches mandatory provisions of legislation or administrative regulations.
Section 412 [Partial invalidity]
If invalidity of part of a contract does not affect the rest, the rest remains effective.
Section 413 [Void exclusion clauses]
Clauses excluding liability for the following are void:
(1) personal injury caused to the other party;
(2) property loss caused to the other party intentionally or through gross negligence.
Section 414 [Voidable contracts]
A party may request the People's Court or an arbitration institution to vary or rescind a contract:
(1) concluded under a material mistake;
(2) manifestly unfair at the time of conclusion.
Where fraud, duress or exploitation of distress causes a party to conclude a contract contrary to its true intention, the injured party may request the People's Court or an arbitration institution to vary or rescind it.
Where variation is requested, the People's Court or arbitration institution must not rescind the contract.
Section 415 [Extinction of the right to rescind]
The right to rescind is extinguished where:
(1) it is not exercised within one year after the party knew or ought to have known the grounds;
(2) after learning the grounds, the party expressly waives the right or demonstrates waiver by conduct.
A party subjected to duress loses the right if it is not exercised within one year after the duress ends.
Section 416 [Consequences of invalidity or rescission]
Property obtained under a void or rescinded contract must be returned; if return is impossible or unnecessary, its value must be compensated. A party at fault must compensate the other's resulting loss; where all are at fault, each bears corresponding liability.
Section 417 [Contracts involving malicious collusion]
Where parties maliciously collude to harm state, collective or third-party interests, property thereby obtained is vested in the State or returned to the collective or third party.
Section 418 [Full performance]
Parties must fully perform their obligations as agreed.
They must act in good faith and perform duties of notification, assistance, confidentiality and similar duties according to the nature and purpose of the contract and commercial practice.
Section 419 [Avoidance of waste]
In performing a contract, parties must avoid wasting resources, polluting the environment or destroying the ecology.
Section 420 [Government-fixed and government-guided prices]
Where a government-fixed or government-guided price changes within the agreed delivery period, the price at delivery applies. For late delivery, the original price applies if prices rise and the new price if they fall. For late collection or payment, the new price applies if prices rise and the original price if they fall.
Section 421 [Performance to a third party]
Where the parties agree that the debtor will perform to a third party, failure to perform or non-conforming performance entails liability for breach towards the creditor.
Where legislation or agreement permits the third party to demand performance directly, and the third party has not expressly refused within a reasonable period, that party may require liability for breach if the debtor fails to perform to it or performs otherwise than agreed. The debtor may raise against the third party any defence available against the creditor.
Section 422 [Performance by a third party]
Where the parties agree that a third party will perform to the creditor, the debtor must bear liability for breach towards the creditor if the third party fails to perform or performs otherwise than agreed.
Section 423 [Alternative obligations]
Where an obligation has several possible subjects but only one need be performed, the debtor has the right to choose, unless legislation, agreement or commercial practice provides otherwise.
If the party entitled to choose makes no choice within the agreed period or by the due date, and still makes none within a reasonable period after demand, the right passes to the other party.
Section 424 [Claims and debts in shares]
Where there are two or more creditors, the subject matter is divisible and each holds a share, the claims are held in shares. Where there are two or more debtors, the subject matter is divisible and each bears a share, the debts are borne in shares.
Shares are deemed equal where their amounts are difficult to determine.
Section 425 [Joint and several claims and debts]
A claim is joint and several where, among two or more creditors, some or all may demand performance from the debtor. A debt is joint and several where, among two or more debtors, the creditor may demand full performance from some or all of them.
Joint and several claims or debts arise by legislation or agreement.
Section 426 [Exercise of joint and several claims]
Where one joint and several creditor demands performance, the debtor's defences are available against all creditors.
Performance to one such creditor discharges the debt. Where one releases part or all of the debt, the other creditors' claims are extinguished to the extent of that creditor's share.
Where a claim of one joint and several creditor is discharged by payment, substituted performance, deposit, set-off or merger, the joint and several claim is extinguished to that extent.
The creditors' respective shares are determined by their agreement; absent agreement, they are presumed equal.
Section 427 [Performance of joint and several debts]
Payment by one joint and several debtor extinguishes the creditor's claim.
Where such a debtor's debt is discharged by payment, set-off, deposit, release or merger, the other debtors' obligations are correspondingly extinguished or reduced.
Where discharge occurs through merger, the others' debts are extinguished to that extent.
Release of one joint and several debtor does not affect the shares borne by the others.
The debtors' respective shares are determined by agreement; absent agreement, they are presumed equal.
Section 428 [Contribution between joint and several debtors]
A joint and several debtor who performs more than its share is entitled to recover the excess from the others.
If a debtor from whom contribution is sought cannot pay its share, the other joint and several debtors must bear it proportionately.
Section 429 [Early and partial performance]
A creditor may refuse early performance unless it does not prejudice the creditor's interests.
Additional expenses caused to the creditor by early performance are borne by the debtor.
A creditor may refuse partial performance unless it does not prejudice the creditor's interests.
Additional expenses caused to the creditor by partial performance are borne by the debtor.
Section 430 [Order of appropriation of payment]
Where a debtor owes several debts of the same kind to one creditor and payment is insufficient to discharge all, the debtor must designate the debt being performed at payment, unless otherwise agreed.
Absent designation, debts already due are paid first. If several are due, a debt with no security or the least security for the creditor is paid first; if security is absent or equal, the debt more burdensome to the debtor is paid first; if equally burdensome, debts are paid in order of maturity; if due together, payment is proportionate.
Section 431 [Appropriation of payment towards debts]
Where a debtor owes several debts to one creditor and payment is insufficient to discharge all, it must be appropriated to the principal debt. If insufficient to discharge the principal debt, it must first be appropriated to interest and then principal. The court may, however, determine another order if favourable to realisation of the claim.
Section 432 [Creditor's right of subrogation]
Where a debtor's failure to exercise a claim or an accessory right impairs realisation of the creditor's due claim, the creditor may request the People's Court to permit it, in its own name, to exercise the debtor's rights against the other person by subrogation, except rights exclusively personal to the debtor.
Exercise is limited to the creditor's due claim. Necessary expenses are borne by the debtor.
The other person may raise against the creditor any defence available against the debtor.
Section 433 [Effect of exercise of subrogation]
After the creditor brings subrogation proceedings, performance by the other person to the debtor is ineffective against the creditor. Before the creditor obtains an effective legal instrument, however, that person may assert the effectiveness of performance to the debtor if the creditor knew or ought to have known of it.
After performance to the creditor, both the other person's debt to the debtor and the debtor's debt to the creditor are extinguished to the corresponding extent. The debtor's claim or associated accessory rights against the other person are assigned to the creditor to the corresponding extent.
The People's Court must not uphold a claim to priority satisfaction out of the debtor's property merely on the basis of the creditor's claim, unless otherwise provided by law.
Section 434 [Creditor's right to avoidance]
Where a debtor gratuitously disposes of property interests by waiving claims or security, transferring property without consideration or otherwise, or maliciously extends the performance period of a due claim, thereby impairing realisation of the creditor's claim, the creditor may request the People's Court to avoid that act.
The creditor may also request avoidance where the debtor transfers property at a manifestly unreasonable low price, acquires property at a manifestly unreasonable high price or provides security for another's debt, impairing the creditor's claim, and the other party knew or ought to have known the circumstances.
Section 435 [Scope and expenses of avoidance]
Exercise of avoidance is limited to the creditor's claim. Necessary expenses are borne by the debtor.
Section 436 [Period for exercising avoidance]
Avoidance must be sought within one year after the creditor knew or ought to have known its grounds. The right is extinguished if not exercised within five years after the debtor's act.
Section 437 [Variation]
Parties may vary a contract by agreement.
Any statutory or administrative-regulatory requirements for approval, registration or other formalities apply.
Section 438 [Assignment of claims]
A creditor may assign all or part of a claim to a third party unless:
(1) its nature precludes assignment;
(2) agreement prohibits assignment;
(3) legislation prohibits assignment.
An agreement prohibiting assignment of a non-monetary claim cannot be asserted against a third party acting in good faith. An agreement prohibiting assignment of a monetary claim cannot be asserted against a third party.
Section 439 [Notice of assignment]
Assignment is ineffective against the debtor unless the creditor notifies the debtor.
Notice cannot be revoked without the assignee's consent.
Section 440 [Transfer of accessory rights]
The assignee acquires accessory rights associated with the assigned claim, except those exclusively personal to the creditor.
Their acquisition is unaffected by failure to register transfer or deliver possession.
Section 441 [Debtor's defences]
After receiving notice of assignment, the debtor may raise against the assignee any defence available against the assignor.
Section 442 [Debtor's right of set-off]
Where, on receiving notice, the debtor holds a claim against the assignor that falls due before or at the same time as the assigned claim, the debtor may assert set-off against the assignee.
Section 443 [Transfer of debts]
Transfer of all or part of a debt to a third party requires the creditor's consent.
The debtor or third party may request consent within a reasonable period. Silence is treated as refusal.
Section 444 [New debtor's defences]
The new debtor may raise defences that the original debtor had against the creditor. It may not, however, set off a claim held by the original debtor against that creditor.
Section 445 [Transfer of accessory obligations]
The new debtor must assume accessory obligations associated with the principal debt, except those exclusively personal to the original debtor.
Section 446 [Accession to a debt]
Where a third party agrees with the debtor to accede and notifies the creditor, or expresses willingness to accede directly to the creditor, and the creditor does not expressly reject this within a reasonable period, the creditor may require the third party to be jointly and severally liable with the debtor to the extent it agreed to assume the debt.
Section 447 [Transfer of contractual rights and obligations together]
With the other party's consent, a party may transfer its contractual rights and obligations together to a third party.
The rules on assignment of claims and transfer of debts apply.
Section 448 [Statutory transfer of contractual rights and obligations]
Where all or part of a party's contractual claims or debts are transferred, that party must promptly notify the other party.
Section 449 [Grounds for termination]
Contractual rights and obligations terminate where:
(1) the debt has been performed;
(2) the debts have been set off;
(3) the debtor lawfully deposits the subject matter;
(4) the creditor releases the debt;
(5) creditor and debtor become the same person;
(6) another ground prescribed by law or agreement occurs.
Termination of a contract terminates its relationship of rights and obligations.
Section 450 [Ancillary duties after discharge]
After termination of contractual rights and obligations, parties must act in good faith and, according to commercial practice, perform duties including notification, assistance, confidentiality and recovery of used items.
Section 451 [Statutory set-off]
Where parties owe each other obligations concerning subject matter of the same kind and quality, either may set off its debt against the other's due debt, unless the nature of the obligations, agreement or law precludes set-off.
Set-off must be notified and takes effect when notice reaches the other party. It must not be conditional or subject to a time limit.
Section 452 [Agreed set-off]
Parties may agree to set off mutual debts even where the subject matter differs in kind or quality.
Section 453 [Conditions for deposit]
Where performance is difficult, the debtor may deposit the subject matter if:
(1) the creditor refuses receipt without justification;
(2) the creditor's whereabouts are unknown;
(3) the creditor has died without an identified heir or estate administrator, or has lost capacity for civil acts without an identified guardian;
(4) another statutory circumstance arises.
If the subject matter is unsuitable for deposit or deposit costs are excessive, the debtor may lawfully auction or sell it and deposit the proceeds.
Section 454 [Effect of deposit]
After deposit, the debtor must promptly notify the creditor or the creditor's heir, estate administrator, guardian or property custodian, unless the creditor's whereabouts are unknown.
Section 455 [Risk after deposit]
After deposit, the creditor bears the risk of damage or loss. Fruits arising during deposit belong to the creditor. The creditor bears deposit expenses.
Section 456 [Creditor's right to collect deposited property]
The creditor may collect deposited property at any time. If the creditor owes a due debt to the debtor, however, the deposit authority must, at the debtor's request, refuse collection until that debt is performed or security provided.
The creditor's collection right is extinguished if not exercised within five years after deposit, and the property, less deposit expenses, vests in the State. Where the debtor has not performed its reciprocal obligation, however, the debtor's right to collect is extinguished if not exercised within five years after the debtor knew or ought to have known that the performance obligation had been fulfilled.
Section 457 [Release of a debt]
Release of all or part of a debt terminates the claim and debt to that extent, unless the debtor rejects release within a reasonable period.
Section 458 [Merger of creditor and debtor]
Where claim and debt vest in the same person, both terminate unless this prejudices a third party's interests.
Section 459 [Agreed termination]
Parties may terminate a contract by agreement.
They may agree grounds entitling one party to terminate. Upon occurrence of such a ground, that party may terminate.
Section 460 [Statutory termination]
A party may terminate where:
(1) force majeure prevents achievement of the contractual purpose;
(2) before performance is due, one party expressly states or demonstrates by conduct that it will not perform its principal obligations;
(3) a party delays a principal obligation and still fails to perform within a reasonable period after demand;
(4) delay or another breach prevents achievement of the contractual purpose;
(5) another statutory ground arises.
A contract of indefinite duration involving continuing obligations may be terminated at any time on reasonable advance notice.
Section 461 [Exercise of termination]
A party lawfully asserting termination must notify the other. Termination takes effect upon receipt. If the notice states that the contract will terminate automatically unless the debtor performs within a specified period, and the debtor fails to do so, termination takes effect upon expiry of that period. If termination is disputed, either party may request the People's Court or an arbitration institution to confirm its effect.
Where termination is asserted directly by proceedings or arbitration without prior notice and the People's Court or arbitration institution upholds it, termination takes effect when a copy of the claim or arbitration application is served on the other party.
Section 462 [Period for exercising termination]
Where neither law nor agreement fixes a period, the right is extinguished if not exercised within one year after its holder knew or ought to have known the ground, or within a reasonable period after demand by the other party.
Section 463 [Effect of termination]
Unperformed obligations cease upon termination. For performance already rendered, parties may, according to the state of performance and nature of the contract, seek restoration or other remedies and claim compensation for loss.
Where termination results from breach, the terminating party may require the defaulting party to bear liability for breach, unless otherwise agreed.
Termination of the principal contract does not discharge the security provider's liability for civil obligations borne by the debtor, unless otherwise agreed in the security contract.
Section 464 [Change of circumstances]
Where, after conclusion, the fundamental conditions undergo a major change unforeseeable at conclusion and outside commercial risk, making continued performance manifestly unfair to one party, the adversely affected party may renegotiate. If no agreement is reached within a reasonable period, either party may request the People's Court or an arbitration institution to vary or terminate the contract.
The People's Court or arbitration institution must do so according to fairness and the actual circumstances.
Section 465 [Liability for breach]
A party that fails to perform contractual obligations or performs otherwise than agreed must bear liability for breach, including continued performance, remedial measures or compensation for loss.
Section 466 [Anticipatory breach]
Where a party expressly states or demonstrates by conduct that it will not perform its contractual obligations, the other may require liability for breach before performance falls due.
Section 467 [Refusal and delay in performance]
Where a party expressly states or demonstrates by conduct that it will not perform its principal obligations, the other may terminate the contract and require liability for breach.
Where a party delays a principal obligation and still fails to perform within a reasonable period after demand, the other may terminate and require liability for breach.
Section 468 [Defective performance]
A party performing otherwise than agreed must bear liability for breach.
Where no clear remedy is agreed and none can be determined under Section 397, the injured party may reasonably choose repair, re-performance, replacement, return, reduction of price or remuneration, or another remedy according to the nature of the subject matter and extent of loss.
Section 469 [Principles of damages]
Where non-performance or non-conforming performance causes loss, damages must equal the loss caused by breach, including the benefits obtainable upon performance, but must not exceed the loss that the defaulting party foresaw or ought to have foreseen at conclusion as a possible consequence of breach.
Section 470 [Calculation of obtainable benefits]
After a breach, the other party must take appropriate measures to prevent increased loss. It may not claim compensation for an increase caused by failure to take appropriate measures.
Reasonable expenses incurred in preventing increased loss are borne by the defaulting party.
Section 471 [Agreed damages]
Parties may agree a specified sum payable for breach according to its circumstances, or a method for calculating damages resulting from breach.
On a party's request, the People's Court or arbitration institution may increase an agreed sum below the loss caused, or appropriately reduce one excessively above that loss.
Where agreed damages concern delay, payment does not discharge the obligation to perform.
Section 472 [Earnest-money deposit]
Parties may agree that one pays the other an earnest-money deposit as security for a claim. The deposit contract is concluded upon actual delivery.
The agreed deposit must not exceed 20 per cent of the value of the principal contract's subject matter; any excess has no effect as earnest money. Delivery of more or less than the agreed amount is treated as variation of that amount.
Section 473 [Consequences of default concerning earnest money]
Upon performance, the deposit must be credited against the price or returned. If the payer fails to perform or performs otherwise than agreed so that the contractual purpose cannot be achieved, it has no right to its return. If the recipient does so, it must return twice the deposit.
Section 474 [Relationship between earnest money, agreed damages and damages]
If the deposit does not cover the loss caused by breach, the other party may claim damages exceeding the deposit.
If both agreed damages and earnest money are stipulated, the non-defaulting party may choose which clause to apply.
Section 475 [Exemption for force majeure]
A party unable to perform because of force majeure is wholly or partly exempt from liability according to its impact, unless otherwise provided by law. It must promptly notify the other party to reduce possible loss and provide evidence within a reasonable period.
Force majeure arising after a party is in delay does not exempt it from liability for breach.
Section 476 [Breach attributable to a third party]
A party whose breach is attributable to a third party must bear liability to the other party under law. Its dispute with the third party is governed by legislation or agreement.
Section 477 [Breach by both parties]
Where both parties breach the contract, each must bear corresponding liability.
Section 478 [Concurrent liabilities]
Where breach infringes the other party's personal or property rights or interests, the injured party may choose to claim liability for breach or tort liability.
Section 479 [Definition of a sale contract]
A sale contract is a contract under which the seller transfers ownership of the subject matter to the buyer and the buyer pays the price.
Section 480 [Terms of a sale contract]
Terms generally include the designation, quantity, quality and price of the subject matter, time, place and method of performance, packaging, inspection standards and methods, settlement method, and the language of the contract and its effect.
Section 481 [Delivery]
The seller must deliver at the agreed place.
If no clear place is agreed and it remains indeterminable under Section 398:
(1) where carriage is required, the seller must hand the subject matter to the first carrier for transmission to the buyer;
(2) where carriage is unnecessary and both parties knew at conclusion that the subject matter was at a particular place, delivery must be there; otherwise, it must be at the seller's place of business at conclusion.
Section 482 [Time of delivery]
The seller must deliver at the agreed time. Where a delivery period is agreed, it may deliver at any time within it.
If no clear delivery period is agreed and it remains indeterminable under Section 398, the seller may deliver and the buyer may demand delivery at any time, allowing the other party necessary preparation time.
Section 483 [Entitlement to fruits]
Fruits arising before delivery belong to the seller and those arising afterwards to the buyer, unless otherwise agreed.
Section 484 [Risk]
Risk of damage or loss passes from seller to buyer upon delivery, unless otherwise provided by law or agreed.
Section 485 [Risk where the buyer breaches]
Where delivery within the agreed period is prevented by a cause attributable to the buyer, the buyer bears risk of damage or loss from the time of breach.
Section 486 [Risk where carriage is required]
Where the seller sells subject matter already in transit with a carrier, risk passes to the buyer upon conclusion, unless otherwise agreed.
Where no clear delivery place is agreed and carriage is required under Section 481, second paragraph, subparagraph (1), risk passes to the buyer when the seller hands the subject matter to the first carrier.
Section 487 [Risk where the seller breaches]
Where the seller places the subject matter at the delivery place as agreed or under Section 481, second paragraph, subparagraph (2), and the buyer breaches by failing to collect it, the buyer bears risk from that breach.
Failure by the seller to deliver related documents and materials as agreed does not affect transfer of risk.
Section 488 [Seller's warranty against defects]
The seller must deliver subject matter meeting the agreed quality requirements. If the seller supplies a quality description, the delivered subject matter must meet it.
Section 489 [Seller's warranty of title]
The seller must ensure that no third party has any right over the delivered subject matter, unless otherwise provided by law.
The seller must ensure that it does not infringe third-party intellectual property rights.
Section 490 [Buyer's inspection duties]
Where an inspection period is agreed, the buyer must notify the seller within it of any quantity or quality non-conformity. Failure to notify is treated as conformity.
If no period is agreed, the buyer must notify within a reasonable period after discovering or being expected to discover the non-conformity. Failure within a reasonable period or within two years after receipt is treated as conformity. Where a quality guarantee period exists, it applies instead of that two-year rule.
If the seller knew or ought to have known of non-conformity, those notification time limits do not bind the buyer.
Section 491 [Instalment sales]
If unpaid instalments falling due reach one fifth of the total price and remain unpaid within a reasonable period after demand, the seller may require payment of the whole price or terminate the contract.
On termination, the seller may claim a charge for use of the subject matter.
Section 492 [Retention of title]
Parties may agree that ownership remains with the seller until payment or other obligations are performed.
Unregistered retention of title cannot be asserted against a third party acting in good faith.
Section 493 [Seller's right of recovery under retained title]
Where title is retained, the seller may recover the subject matter before ownership transfers if the buyer causes loss to the seller by any of the following, unless otherwise agreed:
(1) failing to pay as agreed and still failing within a reasonable period after demand;
(2) failing to satisfy an agreed particular condition;
(3) selling, pledging or otherwise improperly disposing of the subject matter.
Recovery may be agreed with the buyer; failing agreement, procedures for enforcement of security rights may apply by analogy.
Section 494 [Tendering and auctions]
Parties concluding a contract by tender must comply with tendering legislation.
Parties concluding a contract by auction must comply with auction legislation.
Section 495 [Sale on approval]
During the trial period, the buyer may buy or refuse to buy the subject matter. Silence upon expiry is treated as purchase.
Part payment, sale, letting, creation of a security right or similar conduct during the trial period is treated as agreement to buy.
Section 496 [Application to special subject matter]
Sale provisions apply to the supply and use of electricity, water, gas and heat, except where their characteristics make them inapplicable.
Special statutory sale provisions prevail.
Section 497 [Electricity supply contract]
An electricity supply contract is a contract under which the supplier provides electricity and the user pays electricity charges.
A supplier serving the public must not refuse a user's reasonable request to conclude a contract.
Section 498 [Terms of electricity supply contracts]
Terms generally include the method, quality and times of supply, capacity, address and nature of use, metering method, tariffs, billing arrangements, and maintenance responsibilities for supply and use facilities.
Section 499 [Supplier's obligations]
The supplier must supply safely according to national quality standards and agreement. It must compensate loss caused by failure to do so.
Section 500 [Notice of interruption]
Where supply must be interrupted for scheduled or temporary maintenance, lawful restrictions, unlawful use or similar reasons, the supplier must give advance notice as required by state provisions. It must compensate loss caused by interruption without such notice.
Following interruption caused by natural disaster or otherwise, the supplier must promptly carry out emergency repairs as prescribed. It must compensate loss caused by failure to repair promptly.
Section 501 [User's obligations]
The user must pay charges on time according to state provisions and agreement. Late payment entails agreed damages. If charges and agreed damages remain unpaid within a reasonable period after demand, the supplier may suspend supply following the prescribed procedure.
The supplier must give advance notice before suspension under the preceding paragraph.
Section 502 [Safe use of electricity]
The user must use electricity safely, economically and according to plan, in compliance with state provisions and agreement. It must compensate loss caused to the supplier by non-compliance.
Section 503 [Application to water, gas and heat]
The relevant electricity supply provisions apply by analogy to contracts for the supply and use of water, gas and heat.
Section 504 [Definition of a gift contract]
A gift contract is a contract under which the donor gives its property without consideration and the donee accepts it.
Section 505 [Discretionary revocation of gifts]
The donor may revoke before rights in the gift property pass.
This does not apply to notarised gift contracts or legally irrevocable gifts serving public welfare or moral obligations, including disaster relief, poverty relief and assistance to persons with disabilities.
Section 506 [Performance of the duty to give]
Under notarised gift contracts and legally irrevocable gifts serving public welfare or moral obligations, including disaster relief, poverty relief and assistance to persons with disabilities, the donee may demand delivery if the donor fails to deliver.
If property required to be delivered under the preceding paragraph is damaged or lost through the donor's intentional conduct or gross negligence, the donor must pay compensation.
Section 507 [Gifts subject to obligations]
A gift may be subject to obligations.
The donee must perform those obligations as agreed.
Section 508 [Defects in gift property]
The donor is not liable for defects in gift property. For a gift subject to obligations, it bears the same liability as a seller to the extent of those obligations.
A donor that intentionally conceals defects or warrants their absence and causes loss must pay compensation.
Section 509 [Statutory revocation]
The donor may revoke if the donee:
(1) seriously infringes the lawful rights or interests of the donor or the donor's close relatives;
(2) fails to perform a maintenance duty owed to the donor;
(3) fails to perform an obligation under the gift contract.
Revocation must be exercised within one year after the donor knew or ought to have known the ground.
Section 510 [Revocation by the donor's heir or legal representative]
If the donee's unlawful conduct causes the donor's death or loss of capacity for civil acts, the donor's heir or legal representative may revoke.
The right must be exercised within six months after learning or being expected to learn the ground.
Section 511 [Effect of revocation]
A person revoking a gift may demand return of the gift property from the donee.
Section 512 [Non-performance owing to impoverishment]
The donor may cease to perform the gift obligation if its financial position deteriorates markedly, seriously affecting its business operations or family life.
Section 513 [Definition of a loan contract]
A loan contract is a contract under which the borrower borrows money from the lender, repays it at maturity and pays interest.
Section 514 [Form of a loan contract]
A loan contract must be in writing, unless natural persons agree otherwise for a loan between them.
Terms generally include the type, currency, purpose, amount, interest rate, term and method of repayment.
Section 515 [Lender's duty to advance the loan]
The lender must advance the agreed amount on the agreed date and compensate loss caused by failure to do so.
The borrower must receive the agreed amount on the agreed date.
Section 516 [Restriction on use]
The borrower must use the loan for the agreed purpose.
Section 517 [Interest payments]
The borrower must pay interest at the agreed times. If no clear time is agreed and it remains indeterminable under Section 397, interest on a loan of less than one year is paid with repayment; for a loan of one year or more, it is paid at the end of each year, with interest for any remaining period of less than one year paid upon repayment.
Section 518 [Interest rate]
If no interest is agreed, the loan is deemed interest-free.
If the agreement on interest is unclear and no supplementary agreement can be reached, interest is determined by local or party-specific transaction methods, commercial practice, market rates and other factors. A loan between natural persons is deemed interest-free.
Section 519 [Prohibition of usurious lending]
Usurious lending is prohibited. Loan interest rates must not contravene state provisions.
If no interest is agreed, the loan is deemed interest-free.
If the agreement on interest is unclear and no supplementary agreement can be reached, interest is determined by local or party-specific transaction methods, commercial practice, market rates and other factors. A loan between natural persons is deemed interest-free.
Section 520 [Duty to repay]
The borrower must repay within the agreed term. If no clear term is agreed and it remains indeterminable under Section 397, the borrower may repay at any time; the lender may demand repayment within a reasonable period.
Section 521 [Early repayment]
For early repayment, interest is calculated for the actual borrowing period, unless otherwise agreed.
Section 522 [Late repayment]
A borrower failing to repay on time must pay default interest according to agreement or state provisions.
Section 523 [Use contrary to the agreed purpose]
If the borrower fails to use the loan for its agreed purpose, the lender may stop further advances, recover the loan early or terminate the contract.
Section 524 [Formation of loans between natural persons]
A loan contract between natural persons is concluded when the lender provides the loan.
Section 525 [Definition of a guarantee contract]
A guarantee contract is an agreement between guarantor and creditor, securing realisation of a claim, under which the guarantor performs the debt or bears liability if the debtor fails to perform a due debt or an agreed circumstance occurs.
Section 526 [Accessory character]
A guarantee contract is accessory to the principal creditor-debtor contract. Invalidity of the principal contract invalidates the guarantee, unless otherwise provided by law.
After a guarantee is declared void, any debtor, guarantor or creditor at fault must bear corresponding civil liability according to that fault.
Section 527 [Type of guarantee]
Where no clear type is agreed, the guarantor bears liability under an ordinary guarantee.
Section 528 [Ordinary guarantee]
An ordinary guarantee provides that the guarantor bears liability when the debtor is unable to perform.
The ordinary guarantor may refuse liability until the principal dispute has been adjudicated or arbitrated and lawful enforcement against the debtor's property has failed to satisfy the debt, unless:
(1) the debtor's whereabouts are unknown and no property is available for enforcement;
(2) the People's Court has accepted insolvency proceedings against the debtor;
(3) the creditor proves that the debtor's property is insufficient to satisfy all debts or that the debtor has lost the ability to perform;
(4) the guarantor waives this right in writing.
Section 529 [Joint and several guarantee]
A joint and several guarantee provides that guarantor and debtor are jointly and severally liable for the debt.
If the debtor fails to perform a due debt or an agreed circumstance occurs, the creditor may demand performance from the debtor or require the guarantor to bear liability within the guarantee's scope.
Section 530 [Scope of guarantee liability]
Liability covers the principal claim, interest, agreed damages, damages and expenses of realising the claim, unless otherwise agreed.
Section 531 [Guarantee period]
An ordinary guarantor ceases to be liable if the creditor fails to sue the debtor or apply for arbitration within the guarantee period.
A joint and several guarantor ceases to be liable if the creditor fails to demand liability from the guarantor within that period.
Section 532 [Unclear guarantee period]
Creditor and guarantor may agree a period, but a period expiring before or simultaneously with the principal debt's performance term is treated as unagreed. If no clear period is agreed, it is six months from expiry of that term.
If creditor and debtor have not clearly agreed the principal debt's term, the guarantee period runs from expiry of the grace period granted by the creditor's demand for performance.
Section 533 [Guarantor's recourse]
After bearing liability, the guarantor may, within the amount borne, recover from the debtor and exercise the creditor's rights against it, unless otherwise agreed, but must not prejudice the creditor's interests.
Section 534 [Ordinary guarantor's claim for reimbursement]
Where there are two or more guarantors for one debt, each bears the share agreed in the guarantee contract. Without agreed shares, the creditor may require any guarantor to bear liability within its guarantee's scope.
Section 535 [Contribution between co-guarantors]
A guarantor that has borne liability for a debt with two or more guarantors may recover from the debtor or require the other guarantors to pay their shares.
Those shares are determined by the guarantee agreement; absent agreement, they follow the proportions of liability borne by each guarantor; if indeterminable, they are deemed equal.
Section 536 [Effect of assignment on a guarantee]
Assignment of all or part of the claim is ineffective against a guarantor not notified.
If creditor and guarantor prohibit assignment and the creditor assigns without the guarantor's written consent, the guarantor ceases to be liable to the assignee.
Section 537 [Effect of variation of the debt]
Where creditor and debtor vary the principal contract without the guarantor's written consent, reducing the debt leaves the guarantor liable for the reduced debt; increasing it does not make the guarantor liable for the increase.
Variation of the performance term without the guarantor's written consent does not affect the guarantee period.
Section 538 [Effect of transfer of the debt]
A change of debtor requires the guarantor's written consent. The guarantor ceases to be liable for a debt transferred without that consent.
Accession of a third party to the debt does not affect guarantee liability.
Section 539 [Exemption of the guarantor]
The guarantor bears no guarantee liability where:
(1) the principal contract is void and the guarantor is not at fault;
(2) the principal parties maliciously collude to deceive the guarantor into giving the guarantee;
(3) the principal creditor uses fraud, duress or similar means to obtain a guarantee contrary to the guarantor's true intention.
(The following chapters concern leases, finance leases, factoring, contracts for work, construction contracts, carriage, technology contracts, custody, warehousing, mandates, property services, commission agency, brokerage, partnerships and other contracts. Their specific provisions are omitted here owing to space limitations.)
Section 600 [Definition of management without mandate]
A manager who, without a statutory or agreed duty, manages another's affairs to prevent loss to that person's interests may require the beneficiary to reimburse necessary expenses. If the manager suffers loss through the management, appropriate compensation may be sought from the beneficiary.
If management is contrary to the beneficiary's true intention, the manager has no such rights, unless that intention contravenes legislation, public order or good morals.
Section 601 [Manager's duties]
The manager must adopt methods favourable to the beneficiary. If interruption would prejudice the beneficiary, management must not be interrupted without justification.
Section 602 [Notice, reporting and transfer]
The manager must promptly inform the beneficiary of the management. Upon termination, the manager must report on it and transfer property acquired through it.
Section 603 [Manager's compensation liability]
A manager whose fault in managing another's affairs causes loss to the beneficiary must pay compensation. The beneficiary may claim compensation where the manager causes loss intentionally or through gross negligence.
Section 604 [Definition of unjust enrichment]
A person suffering loss because another has obtained an unjust benefit without legal basis may require its return.
Section 605 [Circumstances not constituting unjust enrichment]
A recipient who neither knew nor ought to have known that the benefit lacked legal basis is not obliged to return a benefit that no longer exists.
Section 606 [Restitution by a recipient in bad faith]
If the recipient knew or ought to have known that the benefit lacked legal basis, the person suffering loss may require return of the benefit and compensation for loss according to law.
Section 607 [Exclusions from unjust enrichment]
Return may not be claimed despite absence of legal basis where:
(1) performance fulfils a moral obligation;
(2) a debt is discharged before maturity;
(3) a debt is discharged with knowledge that there is no duty to perform;
(4) another circumstance complying with law applies.