The Economic Contract Law of the People’s Republic of China
The Economic Contract Law of the People’s Republic of China is a piece of legislation designed to ensure the protection of economic contract rights between individuals and entities within Mainland China. The law was enacted on April 5th of 1999 in order to improve the protection of civil economic contract rights and facilitate the fair, valid and rational formation and performance of contracts. This law is composed of 183 articles divided into 10 Chapters and provides a comprehensive account of topics ranging from the type of contracts permissible in Mainland China to the liabilities arising from breaches of contract.
The first Chapter of the Economic Contract Law broadly discusses the performance of contracts. Article 2 specifies the general policy of encouraging legal economic activities and protecting economic contracts. Article 3 offers the clarification of the concept of economic contracts specifying them as obligations arising between two or more parties that relate to production and circulation of commodities, labor services or other activities in the primary and secondary market. Article 4 thus states that economic contracts must be voluntarily entered into by both parties with free will and should take into account the interests of all affected parties. Moreover, Chapter I also includes provisions which address issues such as the validity of contracts, mutual compliance with the terms and conditions of a contract, any alterations to a contract and the remedies for failure to perform a contract.
The following Chapters provide further detail by working through the general guidelines provided in Chapter I. For instance, Chapter II examines the issue of contracting parties such as their legal capacity and liabilities, the formation of contracts and the potential consequences of breaching a contract. Chapter III tackles standard contract clauses, the structure of these clauses and the manner in which they interact with other contractual clauses. Chapter IV looks at agreements between employers and employees, the rights and obligations of employees and the consequences of non-fulfillment of agreements by either party. Chapter V dives into the area of labor protection in economic contracts, including applicable laws/regulations, labor safety protection and remedies or compensation in the event of non-compliance with the provisions of Chapter V.
Furthermore, Chapters VI-IX take on various topics of increasing complexity such as maritime economic contracts and other economic contracts, dispute resolution, economic contracts with foreign elements and related laws, and finally, the lawyers employed to perform work related to economic contracts.
Finally, the tenth and last Chapter of the Economic Contract Law provides for supplemental regulations as well as the effective period and repealment of this law. While some articles have been amended by other laws, the Economic Contract Law has remained unchanged since its enactment and is applicable to all economic contracts concluded in Mainland China.
In sum, The Economic Contract Law of the People’s Republic of China is a comprehensive set of regulations concerning all aspects of economic contract performance inside Mainland China. The legislation provides for contractual freedom of parties, places reasonable restrictions on certain contractual arrangements, provides for civil and criminal liability for non-compliance, and outlines standardized contract clauses, etc. This law ensures the protection of every parties’ rights and interests and also safeguards the public’s interest. Therefore, it is an important cornerstone of the modern Chinese legal system and business environment.
