GILS Commercial contracts: China

GENERAL CONTRACT LAW REGULATIONS

CHINA

1. Is it mandatory for a commercial contract to be governed by local law?

No. Parties of the contract may select the governing law.

2. What language applies to commercial contracts on the territory of the Country? Is it possible to establish the prevailing language? 

There is no compulsory regulation on the language applied to commercial contracts. If the contract is signed in different languages, the parties may select one as the prevailing language.

3. Is it possible to use electronic signatures for the execution of commercial contracts between private entities? 

It is possible to use electronic signatures for the execution of commercial contracts between private entities according to Chinese Electronic Signatures Law. Basically if the execution of the electronic signatures has gone through a verification process, the identity of the signers has been confirmed, and the signed document has not been altered, the validity of execution may be recognized. 

4. Are there any requirements to the form of a commercial contract? Are there any standard forms of commercial contracts? 

There are various forms of contracts, including written form, oral form and other forms. Most contracts are in written form, which refers to forms such as written agreements, letters, data messages (including telegrams, telex, faxes, electronic data interchange, and email) that can tangibly express the contents of the contract.

Contracts such as Labourhood Contract and Insurance Contract must be in written forms. Some contracts such as Contracts for Sales of Real Estate, and Technique Import and Export Contracts must be registered in the administrations.

Standard forms of commercial contracts are allowed and regulated by the Civil Code.

5. Are there any types of preliminary agreement or “gentleman’s agreement” in the Country?

In the Civil Code, there is no legal definition or  a type of contract that is named as “preliminary agreement”. However in practice preliminary agreements are allowed and feasible in China. 

6. What currency is allowed to be used for commercial contracts in the Country?

The parties may select currency for the international  contracts as long as it is practical in the banks’ process. In practice USD, EURO, CNY, English Pound, etc., are often selected as the currency for the commercial contracts and processed by banks.

7. Are there options for the limitation of liability of a party under the commercial contract?

There are options for the limitation of liability. The parties may come to the agreement on the liability (fulfilment or limitation, etc.), however such agreement is subject to legal limitation. The content on (limitation of) liability agreed upon by the parties shall comply with the mandatory provisions of laws and administrative regulations, as well as the constraints of public order and good customs.

8. Is the concept of release from liability or indemnity enforceable in the Country?

Yes.

9. Is there the concept of “consequential damages” in the Country? Can it be excluded from liability? 

Yes, there is the concept of “consequential damages” in China. It can be excluded from liability. 

10. Is the concept of “force majeure” recognized by the legislation and courts on the territory of the Country?

Yes. 

11. Are export control provisions due to the economic sanctions specified by legislation and enforceable in the Country?

There are legislations on Export Control in China, but in the level of legislation, there are no regulations specially aiming to response to sanction. 

12. Is there a mandatory dispute resolution regime in the Country for commercial contracts?

Generally the contract dispute resolution may be agreed by the parties of the contract, except for the maritime cases. Maritime cases can only be under the jurisdiction of maritime courts. 

13. May the arbitration (local or foreign) be chosen by parties as a method of dispute resolution? 

Yes.

Author: Claire ZHAO, Counsel