Laws & Regulations

Chapter I General Principles

Article 1 This Law is enacted to protect the lawful rights and interests of the contracting parties, to maintain social and economic order and to promote socialist modernization.

Article 2 A contract referred to in this Law is an agreement among natural persons, legal persons and/or other organizations as equal parties for the establishment, modification or termination of a relationship involving the civil rights and obligations of such entities.
Agreements with respect to personal relationships such as marriage, adoption, guardianship, etc., shall be governed by the provisions in other laws.

Article 3 The parties to a contract shall have equal legal status, and no party shall impose its own will upon the other party.

Article 4 The parties have the right to lawfully enter into a contract of their own free will, and no entity or individual shall unlawfully interfere therewith.

Article 5 In defining their respective rights and obligations, the parties shall adhere to the principle of fairness.

Article 6 In exercising their rights and performing their obligations, the parties shall observe the principles of honesty and good faith.

Article 7 In forming and performing a contract, the parties shall comply with the laws and administrative regulations, respect social morals, and shall not disrupt the social and economic order or impair the social and public interests.

Article 8 A contract formed under the law shall be legally binding on the parties thereto, each of whom shall perform its own obligations as agreed, and no party shall unilaterally alter or rescind the contract.
A contract lawfully formed shall receive protection under the law.

Chapter II Contract Formation

Article 9 In forming a contract, the parties shall possess the appropriate capacities for civil rights and civil acts.
A party may lawfully authorize an agent to enter into a contract on its behalf.

Article 10 In forming a contract, the parties may use written, oral or other forms.
Where the laws and administrative regulations so provide, a written form shall be adopted. Where the parties so agree, a written form shall be adopted.

Article 11 "Written form" means a form such as a written contractual instrument, letter, electronic data text (including a telegram, telex, facsimile, electronic data exchange and electronic mail) that can tangibly express the contents contained therein.

Article 12 The contents of a contract are to be agreed by the parties. Such contents generally include the following:
(1) name and domicile of each party;
(2) subject matter;
(3) quantity;
(4) quality;
(5) price or remuneration;
(6) specified time, place and manner of performance;
(7) liability for breach of contract; and
(8) method of dispute resolution.
In forming a contract, the parties may refer to texts of various model contracts.

Article 13 In forming a contract, the parties shall adopt the method of offer and acceptance.

Article 14 An offer is the expression of an intent to enter into a contract with another person. Such expression of intent shall conform to the following:
(1) the contents are specific and definite; and
(2) it is clearly expressed that once the offeree accepts, such expression of intent shall be binding upon the offeror.

Article 15 An invitation to offer is an expression of intent by a person to have another person tender an offer to him or her. Price lists that are mailed or delivered, public announcements of auctions, public announcements of invitations to tender a bid, stock offering prospectuses, commercial advertisements, etc., are invitations to offer.
Where the contents of a commercial advertisement conform to the provisions concerning offers, such advertisement shall be deemed to be an offer.

Article 16 An offer shall become effective once it reaches the offeree.
If a contract is concluded in the form of electronic data text and the addressee designates a particular system through which to receive the electronic data text, the time it enters the particular system shall be deemed the arrival time. If no particular system is designated, the time the electronic data text first enters any system of the addressee shall be deemed the arrival time.

Article 17 An offer may be withdrawn. The notification of withdrawal of the offer must reach the offeree prior to or at the same time the offer reaches the offeree.

Article 18 An offer may be revoked. The notification of the revocation of the offer must reach the offeree prior to the dispatch of the notification of acceptance by the offeree.

Article 19 An offer shall not be revoked under any of the following circumstances:
(1) the offeror specifies a time limit for acceptance or clearly indicates in another manner that the offer is irrevocable; or
(2) the offeree has grounds to believe that the offer is irrevocable and has already carried out preparatory work for the performance of the contract.

Article 20 An offer shall become void if:
(1) the notification of the rejection of the offer reaches the offeror;
(2) the offeror revokes the offer in accordance with the law;
(3) the offeree fails to accept the offer before the expiration of the time limit for acceptance; or
(4) the offeree makes a material alteration to the contents of the offer.

Article 21 An acceptance is the expression of an intent by the offeree to assent to the offer.

Article 22 An acceptance shall be given in the form of a notice, except where acceptance may be given by an act on the basis of customary business practice or as expressed in the offer.

Article 23 The acceptance shall reach the offeror within the time specified in the offer.
Where the offer does not specify a time limit for acceptance, the arrival of the acceptance shall be determined in accordance with the following provisions:
(1) unless otherwise agreed by the parties, if the offer is made verbally, the acceptance shall be made immediately;
(2) if the offer is not made verbally, the acceptance shall arrive within a reasonable period.

Article 24 If an offer is made by letter or telegram, the time limit for acceptance shall accrue from the date indicated on the letter or from the date the telegram is submitted for transmission. If the letter is not dated, the time limit for acceptance shall accrue from the postmark date on the letter. When the offer is made using a rapid form of communication such as the telephone or facsimile, the time limit for acceptance shall accrue from the time the offer reaches the offeree.

Article 25 A contract is concluded when the acceptance becomes effective.

Article 26 A notice of acceptance shall become effective once it reaches the offeror. Where notice of acceptance is not required, the acceptance shall become effective upon the act of acceptance based on customary business practice or the requirements in the offer.
If electronic data text is used to form the contract, the provisions in Article 16, Section 2 of this Law shall apply as to the time of arrival of the acceptance.

Article 27 An acceptance may be withdrawn. The notice of withdrawal of acceptance shall reach the offeror prior to or at the same time the notice of acceptance reaches the offeror.

Article 28 If the offeree dispatches the acceptance after the time limit for acceptance has expired, such acceptance shall constitute a new offer, unless the offeror notifies the offeree in a timely manner that the acceptance is valid.

Article 29 If the offeree dispatches its acceptance within the time specified for acceptance, and under normal circumstances the acceptance would have reached the offeror in time, but due to other reasons the acceptance reaches the offeror after the time limit for acceptance has expired, such acceptance shall be valid, unless the offeror notifies the offeree in a timely manner that it does not accept the acceptance due to the failure of the acceptance to arrive within the time limit.

Article 30 The contents of the acceptance shall be identical to the contents of the offer. A material alteration made by the offeree to the contents of the offer shall constitute a new offer. Alterations such as those concerning the subject matter, quantity, quality, price or remuneration, specified time of performance, place and manner of performance, liability for breach, dispute resolution, etc., under the contract are material alterations to the contents of an offer.

Article 31 Unless the offeror objects to the alteration to the offer in a timely manner or the offer clearly indicates that the acceptance shall not make any alterations to the contents of the offer, an acceptance that contains a non-material alteration to the contents of the offer shall be valid, and the contents of the contract shall be based upon the contents of the acceptance.

Article 32 Where the parties form a contract using a written contract, the contract is concluded at the time both parties sign the contract or affix their seals thereon.

Article 33 In forming a contract using a letter or electronic data text, etc., the parties may, prior to the conclusion of the contract, require the signing of a written confirmation. The contract is concluded at the time of the signing of the written confirmation.

Article 34 The place of the conclusion of the contract is the place where the acceptance becomes effective.
If the contract is formed using electronic data text, the place of the conclusion of the contract is the principal place of business of the addressee. In the absence of a principal place of business, the place of the conclusion of the contract is the addressee's usual residence. If the parties agree otherwise, such agreement shall apply.

Article 35 If the parties form a contract using a contractual instrument, the place of the conclusion of the contract is the place where the parties sign or affix their seals on the contract.

Article 36 Where the laws or administrative regulations provide that the contract be in written form or where the parties agree to form a contract in written form, and the parties fail to use a written form, but one party has already performed its principal obligations which have been accepted by the other party, the contract is concluded.

Article 37 If the contract is formed using a written contractual instrument, and prior to the signing of, or affixing of seals to, the contract, one party has already performed its principal obligations which have been accepted by the other party, such contract is concluded.

Article 38 If the State, based on its needs, issues a mandatory assignment or an assignment with respect to an order for goods for the State, the relevant legal persons and/or the other organizations shall enter into a contract on the basis of the rights and obligations prescribed in the relevant laws and administrative regulations.

Article 39 Where a contract is formed using standardized clauses, the party that provides the standardized clauses shall, adhering to the principle of fairness, define the rights and obligations of the parties and shall, in a reasonable manner, bring to the attention of the other party any clause that releases or limits such party's liability. Upon request by the other party, the party providing the standardized clauses shall give an explanation of such clauses.
A standardized clause is a clause that is drafted in advance by a party for repeated use and one that is not discussed with the other party at the time of the formation of the contract.

Article 40 A standardized clause is invalid if its contents fall under the provisions in Article 52 and Article 53 of this Law, or the party providing the standardized clause releases its own liabilities, increases the liabilities of the other party, or excludes a primary right of the other party.

Article 41 If a dispute arises over the understanding of a standardized clause, the interpretation rendered shall be pursuant to the common understanding of such clause. If two or more different interpretations of a standardized clause exist, the standardized clause shall be construed against the party that provides the standardized clause. If a standardized clause and a non-standardized clause are inconsistent, the non-standardized clause shall be used.

Article 42 If a party engages in any of the following during the course of the formation of a contract, thereby causing damages to the other party, such party shall be liable for damages:
(1) bad faith negotiations under the pretext of forming a contract;
(2) intentional concealment of important facts related to the formation of the contract or the provision of false information; or
(3) other acts that violate the principles of honesty and good faith.

Article 43 A trade secret that becomes known to a party during the course of the formation of a contract shall not be disclosed or improperly used whether or not the contract is concluded. If such trade secret is disclosed or improperly used, causing damages to the other party, the party that discloses or improperly uses the trade secret shall be liable for damages.

Chapter III Contract Validity

Article 44 A contract that is lawfully concluded shall become effective at the time of its conclusion.
If the laws and administrative regulations provide that approval and registration procedures shall be carried out for a contract to become effective, such laws and regulations shall govern.

Article 45 The parties may agree that the validity of a contract be subject to certain conditions. A contract whose effectiveness is subject to certain conditions shall become effective upon the satisfaction of such conditions. A contract whose rescission is subject to certain conditions shall cease to be effective upon the satisfaction of such conditions.
If a party improperly prevents the satisfaction of a condition for its own benefit, the condition shall be deemed to have been satisfied. If a party improperly facilitates the satisfaction of a condition, the condition shall be deemed not to have been satisfied.

Article 46 The parties may agree on fixing a specific term for the validity of the contract. A contract that fixes a specific time for the contract to become effective shall become effective at such time. A contract that fixes a specific time for the termination of the contract shall cease to be effective at such time.

Article 47 A contract entered into by a person with a limited capacity for civil acts shall be valid upon ratification by his or her statutory representative. However, where the contract is purely for the procurement of benefit, or is formed in such a way as to correspond to the age, intellectual capacity or mental health status of such person, such contract need not be ratified by the statutory representative.
The opposite party may demand the statutory representative to ratify the contract within one month. The failure of the statutory representative to respond shall be deemed a refusal to ratify. Prior to the ratification of the contract, the opposite party in good faith shall have the right to rescind the contract. Such rescission shall be made by way of notice.

Article 48 If a person enters into a contract using the name of another, but the person performing such act lacks the authority to act as agent, or exceeds the scope of such authority, or such authority has terminated, such contract, in the absence of ratification by the person whose name is used, has no effect as to such person, and the person performing such act shall bear liability.
The opposite party may demand the person whose name is used to ratify the contract within one month. The failure of such person to respond shall be deemed a refusal to ratify. Prior to the ratification of the contract, the opposite party in good faith shall have the right to rescind the contract. Such rescission shall be made by way of notice.

Article 49 If a person enters into a contract using the name of another, but the person performing such act lacks the authority to act as agent, or exceeds the scope of such authority, or the agency has terminated, and the opposite party has grounds to believe that the agent has such agency rights, the act of agency shall be valid.

Article 50 If a legal representative or person in charge of a legal person or other organizations enters into a contract beyond the scope of his or her authority, the act of representation shall be valid unless the opposite party knows or should have known that the scope of authority has been exceeded.

Article 51 A contract under which a person without the right of disposition disposes of the property of another person shall be valid upon ratification by the person with such right or upon the acquisition of such right by the person without such right subsequent to the formation of the contract.

Article 52 A contract shall be void if:
(1) a party enters into a contract by fraudulent or coercive means, thereby impairing the interests of the State;
(2) there is a malicious collusion to impair the interests of the State, a collective or a third party;
(3) it conceals an illegal purpose by using legal means;
(4) it impairs social and public interests; or
(5) it violates a mandatory provision in the laws or administrative regulations.

Article 53 The following exculpatory clauses in a contract shall be invalid:
(1) one which results in bodily injury to the other party; and
(2) one which intentionally or through gross negligence results in the loss of, or damage to, property of the other party.

Article 54 A party shall have the right to petition the People's Court or an arbitration institution to alter or nullify a contract if:
(1) it is formed as a result of a major misunderstanding; or
(2) it is manifestly unfair at the time of the formation of the contract.
If a party by fraud or duress, or by taking advantage of the other party's plight causes the other party to enter into a contract under circumstances that are contrary to the true intent of such party, the injured party has the right to petition the People's Court or an arbitration institution to alter or nullify the contract.
If a party requests an alteration to the contract, the People's Court or the arbitration institution shall not nullify the contract.

Article 55 The right to nullify shall lapse under the following circumstances:
(1) a party with the right to nullify fails to exercise such right within one year from the date the party knows or should have known of the matter giving rise to the right to nullify; or
(2) a party with the right to nullify waives such right by clear expression or through its conduct, after knowing of the reason for the nullification.

Article 56 A contract that is invalid or nullified shall have no legally binding effect ab initio. If a contract is partially invalid and such partial invalidity does not affect the validity of the other parts of the contract, the other portions shall remain valid.

Article 57 The invalidity, nullification, or termination of a contract shall not affect the validity of any independently existing contractual provision related to the manner of dispute resolution.

Article 58 If a contract is invalid or is nullified, the property that was acquired as a result of such contract shall be returned. If it is impossible or unnecessary to return such property, monetary compensation shall be paid based on the value of the property. The party at fault shall compensate the other party for the damages incurred. If both parties are at fault, each party shall bear its respective liability.

Article 59 If property is acquired by way of a malicious collusion by the parties to impair the interests of the State, a collective or a third party, the property so acquired shall be recovered by the State or returned to the collective or third party.

Chapter IV Contract Performance

Article 60 Each party shall fully perform its own obligations as agreed.
Each party shall observe the principles of honesty and good faith and perform the obligations of notification, assistance, confidentiality, etc. in accordance with the nature and purpose of the contract and customary business practice.

Article 61 After the contract becomes effective, in the absence of an agreement on such contents as quality, price or remuneration, place of performance, etc., or if the agreement on such contents is ambiguous, the parties may supplement such contents by agreement. In the event that a supplemental agreement cannot be reached, a determination shall be made according to the relevant provisions in the contract or the customary business practice.

Article 62 If certain contents agreed by the parties in the contract are ambiguous and cannot be determined pursuant to the provisions in Article 61 of this Law, the following provisions shall apply:
(1) If the quality requirements are ambiguous, performance shall be rendered in accordance with the national standard or industry standard; if neither a national standard nor an industry standard exists, performance shall be rendered in accordance with the customary standard or specific standard set in conformance with the purpose of the contract;
(2) If the price or remuneration is ambiguous, payment shall be made in accordance with the prevailing market price at the place of performance at the time the contract is formed; if the price is fixed or guided by the government, payment shall be made in accordance with the regulations thereof;
(3) If the place of performance is ambiguous, the place of performance shall be at the location of the recipient of the currency where currency is to be tendered; at the location of the real property where real property is to be delivered; and for other subject matter, at the location of the party who is to perform the obligation;
(4) If the time limit for performance is ambiguous, the obligor may perform at any time, and the obligee may also demand performance at any time, provided that necessary preparatory time is given to the other party;
(5) If the manner of performance is ambiguous, performance shall be rendered in a manner conducive to achieving the purpose of the contract; and
(6) If the responsibility for the cost of performance is ambiguous, such cost shall be borne by the party who performs the obligation.

Article 63 If a governmentally fixed or guided price is used, and the official price is adjusted during the specified term for delivery as provided in the contract, the price shall be the prevailing price at the time the goods are delivered. If delivery of the subject matter is delayed and the price rises, the original price shall be adopted; if the price falls, the new price shall be adopted. If a party takes delivery of the subject matter after the specified time limit, or payment is made after the due date and the price rises, the new price shall be adopted; if the price falls, the original price shall be adopted.

Article 64 If the parties agree that the obligor shall perform its obligations towards a third party, and the obligor fails to perform its obligations towards such third party or its performance of the obligations is not in conformance with the agreement, the obligor shall be liable to the obligee for breach.

Article 65 If the parties agree that a third party shall perform the obligations of the obligor towards the obligee, and the third party fails to perform the obligations of the obligor, or its performance of the obligations of the obligor is not in conformance with the agreement, the obligor shall be liable to the obligee for breach.

Article 66 If the parties have mutual obligations towards one another, and there is no order of priority with respect to the timing of the performance of such obligations, both parties shall perform such obligations concurrently. Each party has the right to reject any demand by the other party for performance prior to the performance by the other party. If the performance of a party's obligations fails to conform to the agreement, the other party has the right to reject such party's demand for corresponding performance.

Article 67 If an order of priority exists with respect to the timing of the performance of the mutual obligations between the parties, and the party who is to perform first fails to perform, the party who is to perform later has the right to reject the other party's demand for performance. If the performance of the obligations of the party who is to perform first is not in conformance with the agreement, the party who is to perform later has the right to reject the other party's demand for corresponding performance.

Article 68 The party who is to perform first may suspend its performance if it has clear evidence which shows that any of the following situations applies to the other party:
(1) a serious deterioration of the business condition;
(2) the transfer of its assets or withdrawal of its capital to evade its obligations;
(3) a loss of its business reputation; or
(4) other situations relating to the loss or possible loss of the obligor's ability to perform its obligations.
A party who suspends its performance without clear evidence in support thereof shall be liable for breach.

Article 69 A party who suspends performance pursuant to the provisions in Article 68 of this Law shall notify the other party in a timely manner. Performance shall resume when the other party provides an appropriate guaranty. After performance is suspended, if the other party fails to restore its ability to perform or provide an appropriate guaranty within a reasonable period, the party who suspends performance may rescind the contract.

Article 70 If the obligee is divided, merged, or has its address changed without notifying the obligor, thereby causing the obligor hardship in the performance of its obligations, the obligor may suspend its performance or escrow the subject matter.

Article 71 The obligee may reject the early performance of the obligor, unless such early performance does not impair the interests of the obligee.
The additional expenses incurred by the obligee due to the obligor's early performance of its obligations shall be borne by the obligor.

Article 72 The obligee may reject the obligor's partial performance of its obligations, unless such partial performance does not impair the interests of the obligee.
The additional expenses incurred by the obligee as a result of obligor's partial performance of its obligations shall be borne by the obligor.

Article 73 If the obligor is remiss in exercising its vested rights, thereby causing damages to the obligee, the obligee may petition the People's Court to grant the obligee the right to exercise, in its own name, the rights of the obligor by way of subrogation, unless such rights are the exclusive rights of the obligor.
The extent to which the subrogation rights can be exercised is limited to the rights of the obligee. The expenses necessary for the obligee to exercise such subrogation rights shall be borne by the obligor.

Article 74 If the obligor waives its vested rights or transfers assets gratuitously, thereby causing damages to the obligee, the obligee may petition the People's Court to nullify the acts of the obligor. If the obligor transfers any of its assets at a manifestly unreasonable low price, thereby causing damages to the obligee, and the transferee is aware of this situation, the obligee may also petition the People's Court to nullify the acts of the obligor.
The extent to which the right to nullify can be exercised is limited to the rights of the obligee. The expenses necessary for the obligee to exercise the right to nullify shall be borne by the obligor.

Article 75 The right to nullify shall be exercised within one year from the date the obligee knows or should have known of the matter for nullification. Such right to nullify shall lapse if the obligee fails to exercise such right within five years from the date of the occurrence of such act.

Article 76 Once a contract becomes effective, a party may not refuse to perform its contractual obligations due to a change in its name, or its legal representative, the person in charge or the person undertaking the performance of the contractual obligations.

Chapter V Contract Amendments and Assignments

Article 77 Upon reaching a consensus through consultation, the parties may amend the contract.
If the laws and administrative regulations so provide, approval and registration procedures for such amendment shall be carried out in accordance with such laws and regulations.

Article 78 Where an agreement by the parties on the contents of an amendment is ambiguous, the contract shall be presumed as not having been amended.

Article 79 The obligee may assign the rights under a contract, in whole or in part, to a third party, except under the following circumstances:
(1) such rights may not be assigned based on the nature of the contract;
(2) such rights may not be assigned pursuant to the agreement of the parties; or
(3) such rights may not be assigned pursuant to the laws and regulations.

Article 80 In assigning its rights, the obligee shall notify the obligor. Without notice thereof, such assignment will have no effect on the obligor.
A notice by the obligee to assign its rights shall not be revoked, unless such revocation is consented to by the assignee.

Article 81 If the obligee assigns its rights, the assignee acquires the ancillary rights related to the rights of the obligee, unless such ancillary rights are the exclusive rights of the obligee.

Article 82 Upon receipt of the notice of assignment of rights, the obligor may assert against the assignee any defenses it has against the assignor.

Article 83 Upon receipt by the obligor of the notice of assignment of rights, the obligor shall have vested rights against the assignor, and if the rights of the obligor vest prior to or at the same time as the assigned rights, the obligor may claim an offset against the assignee.

Article 84 A delegation of the obligations under the contract, in whole or in part, by the obligor to a third party shall be subject to the consent of the obligee.

Article 85 If the obligor delegates its obligations, the new obligor may exercise any defense that the original obligor had against the obligee.

Article 86 If the obligor delegates its obligations, the new obligor shall assume the ancillary obligations related to the primary obligations of the obligor, unless such ancillary obligations are exclusive to the original obligor.

Article 87 If the laws and administrative regulations so provide, approval and registration procedures shall be carried out for the assignment of rights of the obligee and the delegation of obligations of the obligor in accordance with such laws and regulations.

Article 88 Upon the consent of the other party, a party may transfer its rights together with its obligations under a contract to a third party.

Article 89 Where the rights and obligations are transferred together, the provisions in Article 79, Articles 81 through 83, and Articles 85 through 87 of this Law shall apply.

Article 90 Where a party is merged after the contract has been formed, the legal person or other organization that survives the merger shall exercise the rights and perform the obligations under the contract. Unless otherwise agreed by the obligor and obligee, where a party is divided after the contract has been formed, the legal persons and other organizations that exist after the division shall jointly enjoy the rights and jointly assume the obligations under the contract.

Chapter VI Termination of Contractual Rights and Obligations

Article 91 The rights and obligations under a contract shall terminate under any of the following circumstances:
(1) the obligations have been fully performed as agreed;
(2) the contract has been rescinded;
(3) the obligations have been mutually offset;
(4) the obligor has escrowed the subject matter in accordance with the law;
(5) the obligee has released the obligor of its obligations;
(6) the rights and obligations have vested in one party; or
(7) other circumstances for termination as set forth in the law or as agreed by the parties.

Article 92 After the termination of the rights and obligations under the contract, the parties shall observe the principles of honesty and good faith and perform the obligations of notification, cooperation, confidentiality, etc., in accordance with customary business practice.

Article 93 Upon reaching a consensus through consultation, the parties may rescind the contract.
The parties may agree upon condition(s) under which either party may rescind the contract. Upon the satisfaction of the condition(s), the party who has the right to rescind may rescind the contract.

Article 94 A party may rescind the contract under any of the following circumstances:
(1) the purpose of the contract is rendered impossible to achieve due to an event of force majeure;
(2) prior to the expiration of the period of performance, the other party expressly states, or indicates through its conduct, that it will not perform its principal obligation;
(3) the other party delays performance of its principal obligation after such performance has been demanded, and fails to perform within a reasonable period;
(4) the other party delays performance of its obligations, or breaches the contract in some other manner, rendering it impossible to achieve the purpose of the contract; or
(5) other circumstances as provided by law.

Article 95 If a party does not exercise the right to rescind prior to the end of the rescission period as prescribed by law or as agreed by the parties, such right shall lapse.
If the period to exercise the right to rescind is not prescribed by law or agreed by the parties, and such right is not exercised within a reasonable period after a demand for the exercise of such right is made on the other party, such right shall lapse.

Article 96 A party demanding rescission in accordance with Article 93, Section 2 and Article 94 of this Law shall notify the other party. The contract shall be rescinded upon receipt of the notice by the other party. If the other party objects to such rescission, it may petition the People's Court or an arbitration institution to adjudicate the validity of the rescission of the contract.
If the laws and administrative regulations so provide, the approval and registration procedures for the rescission of the contract shall be carried out in accordance with such laws and regulations.

Article 97 After the rescission of the contract, performance shall cease if the contract has not been performed; if the contract has been performed, a party may, in accordance with the circumstances of performance or the nature of the contract, demand the other party to restore such party to its original state or adopt other remedial measures, and such party shall have the right to demand compensation for damages.

Article 98 The termination of rights and obligations under a contract shall not affect the validity of clauses that relate to the final settlement of accounts and winding-up.

Article 99 If the parties are liable to one another for obligations that have became due, and if the type and nature of the subject matter of such obligations are the same, any party may offset its own obligations against the obligations of the other party, unless such offset is not allowed pursuant to the laws and regulations or cannot be made given the nature of the contract.
The party who claims such offset shall notify the other party. The notice shall be effective upon receipt by the other party. The offset shall not be subject to any condition or time limit.

Article 100 If the parties have obligations towards one another, and the type and nature of such obligations are different, the obligations may also be offset upon consensus between the parties after consultation.

Article 101 The obligor may escrow the subject matter under any of the following circumstances which render performance of the obligations difficult:
(1) the obligee refuses acceptance without a proper reason;
(2) the whereabouts of the obligee are unknown;
(3) the obligee is deceased and the successor has not been determined, or the obligee has lost civil capacity and a guardian has not been appointed; or
(4) other circumstances as provided for in the laws or regulations.
If the subject matter is not suitable for escrow or the cost of escrow is excessively high, the obligor may auction or sell the subject matter in accordance with the law, and escrow the proceeds therefrom.

Article 102 Unless the whereabouts of the obligee are unknown, the obligor shall notify the obligee, or the successor or guardian of the obligee immediately after the subject matter has been placed in escrow.

Article 103 After the subject matter has been placed in escrow, the risk of destruction, damage to, or loss of, the subject matter shall be borne by the obligee. The obligee shall be entitled to any fruits of the subject matter during the escrow period. Escrow costs shall be borne by the obligee.

Article 104 The obligee may reclaim the escrowed subject matter at any time, except that if the obligee has any outstanding obligations towards the obligor, the escrow institution shall, at the request of the obligor, refuse the obligee's claim of the escrowed subject matter prior to the obligee's performance of its obligations or the obligee's provision of security for its performance.
The right of the obligee to reclaim the escrowed subject matter shall lapse if such right is not exercised within five (5) years from the date the subject matter is placed in escrow, and the escrowed subject matter shall revert to the national treasury after the deduction of the escrow costs.

Article 105 If an obligee releases the obligor of its obligations, in whole or in part, the contractual rights and obligations related thereto shall terminate in whole or in part.

Article 106 If the rights and obligations vest in one person, such rights and obligations under the contract shall terminate, unless they involve the interests of a third party.

Chapter VII Liability for Breach

Article 107 If one party fails to perform its contractual obligations, or the performance of its contractual obligations fails to conform to the agreement, such party shall continue its performance, take remedial measures or compensate the other party for damages, etc..

Article 108 If one party clearly expresses, or by its conduct clearly indicates, that it will not perform its contractual obligations, the other party may demand that it bear liability for breach of contract prior to the time such performance is due.

Article 109 If one party fails to pay the price or remuneration, the other party may demand that it pay such price or remuneration.

Article 110 If one party fails to perform a non-monetary obligation, or the performance of a non-monetary obligation fails to conform to the agreement, the other party may demand performance, except under the following circumstances:
(1) such performance cannot be rendered, in law or in fact;
(2) the object of the obligation is not suitable for specific performance, or the expenses for performance are excessively high; or
(3) the obligee fails to demand performance within a reasonable period.

Article 111 If the quality does not conform to the agreement, liability for breach should be borne in the manner agreed by the parties. In the absence of an agreement on liability for breach, or if the agreement on liability for breach is ambiguous and cannot be determined pursuant to the provisions in Article 61 of this Law, the injured party may demand, by way of making a reasonable choice based on the nature of the object and the extent of the damages, the other party to repair, replace, re-make, return, or reduce the price or remuneration of the object, etc., as liability for breach of contract.

Article 112 If one party fails to perform its contractual obligations, or the performance of its contractual obligations fails to conform to the agreement, and the other party still suffers from other damages after the performance of the obligations or adoption of remedial measures, such party shall compensate the other party for such damages.

Article 113 If one party fails to performs its contractual obligations, or the performance of the contractual obligations fails to conform to the agreement, causing damages to the other party, the amount of compensation for damages shall be equal to the damages caused by the breach, including the benefit that could have been obtained had the contract been performed; however, the amount of compensation shall not exceed the damages for breach that were foreseeable or should have been foreseeable to the party in breach at the time the contract was formed.
If an operator of the business engages in a fraudulent act while providing goods or services to a consumer, the operator of a business shall bear liability for damages to the consumer pursuant to the provisions of the Law of the People's Republic of China on the Protection of the Rights and Interests of Consumers.

Article 114 The parties may agree that when a party breaches the agreement, it shall, based on the circumstances of the breach, pay the other party liquidated damages in a fixed amount, and may also agree on a method for calculating the amount of compensation for the damages incurred as a result of the breach.
If the amount of the agreed liquidated damages is lower than the damages incurred, a party may petition the People's Court or an arbitration institution to make an increase; if the agreed upon liquidated damages are significantly higher than the damages incurred, a party may petition the People's Court or an arbitration institution to make an appropriate reduction.

Article 115 The parties may, pursuant to the Guaranty Law of the People's Republic of China, agree that one party pay a deposit to the other party as a guaranty for the obligation. After the obligor has performed its obligation, the deposit shall be offset against the price or returned to the other party. If the party who pays the deposit fails to perform the agreed obligations, such party has no right to demand the return of the deposit. If the party who accepts the deposit fails to perform the agreed obligations, such party shall refund twice the value of the deposit.

Article 116 If the parties have agreed upon liquidated damages as well as a deposit, and one party is in breach, the other party may elect to apply either the provision for liquidated damages or the provision for the deposit.

Article 117 Unless otherwise provided by law, if the contract cannot be performed due to an event of force majeure, the responsibilities with respect to performance may be wholly or partially exempted, depending on the effect of the force majeure. If an event of force majeure occurs after a party has delayed its performance, such responsibilities cannot be exempted.
"Force majeure" as referred to in this Law means objective circumstances that cannot be foreseen, avoided or overcome.

Article 118 A party who cannot perform a contract due to an event of force majeure shall notify the other party in a timely manner in order to mitigate the damages that could be caused to the other party, and such party shall, within a reasonable period, provide the other party with evidence of such event of force majeure.

Article 119 After one party breaches a contract, the other party shall take appropriate measures to prevent the damages from increasing. If the other party's failure to take appropriate measures results in additional damages, it cannot demand compensation for the additional damages.
Reasonable costs paid by a party to prevent an increase in damages shall be borne by the party in breach.

Article 120 If both parties breach a contract, each party shall bear its own respective liability.

Article 121 If a party breaches a contract for reasons attributable to a third party, such party shall be liable to the other party for the breach. A dispute between a party and a third party shall be resolved as provided by law or in accordance with the agreement.

Article 122 If an act of breach by a party physically injures or impairs the property interests of the other party, the injured party has the right to choose to demand the other party to bear liability for the breach in accordance with this Law or to assume liability in tort in accordance with other laws.

Chapter VIII Miscellaneous

Article 123 If other laws provide otherwise with respect to a contract, the provisions therein shall govern.

Article 124 The General Principles of this Law shall apply to contracts that are not expressly provided for in the Specific Provisions of this Law or in other laws; in addition, reference may be made to the provisions in the Specific Provisions or in other laws that most closely relate to such contracts.

Article 125 If a dispute arises between the parties over the interpretation of a provision in the contract, the true meaning of such provision shall be determined according to the terms and phrases used in the contract, the relevant provisions in the contract, the purpose of the contract, customary business practice and the principles of honesty and good faith.
If the contract is formed using two or more language versions, and it is agreed that such versions shall have equal validity, the terms and phrases used in the different versions are presumed to have the same meaning. If an inconsistency exists between the terms or phrases used in the different versions, an interpretation shall be rendered based upon the purpose of the contract.

Article 126 Unless otherwise provided for by law, the parties to a foreign-related contract may select the applicable law for the resolution of disputes under the contract. Where the parties to a foreign-related contract do not make such a selection, the laws of the country to which the contract has the closest contacts shall apply.
Sino-foreign equity joint venture contracts, Sino-foreign cooperative joint venture contracts and Sino-foreign cooperative contracts for the exploration of natural resources that are performed within the boundaries of the People's Republic of China shall be governed by the laws of the People's Republic of China.

Article 127 The industry and commerce administrative departments and other relevant administrative departments in charge shall, within the scope of their respective functions and powers and pursuant to the provisions of the laws and administrative regulations, be responsible for controlling and dealing with illegal activities with respect to contracts used to impair the interests of the State or the interests of the public and society; and if such activities constitute a crime, criminal liability shall be pursued in accordance with the law.

Article 128 The parties may resolve contractual disputes through reconciliation or mediation.
If the parties are unwilling to resolve a dispute through reconciliation or mediation, or if the reconciliation or mediation is unsuccessful, the parties may, on the basis of the arbitration agreement, apply to an arbitration institution for arbitration. The parties to a foreign-related contract may, on the basis of the arbitration agreement, apply to a Chinese arbitration institution or other arbitration institution for arbitration. If the parties have not entered into an agreement with respect to arbitration, or if the arbitration agreement is invalid, the parties may institute legal proceedings in the People's Court. The parties shall comply with any legally valid judgment, arbitration award or mediation agreement; if a party refuses to comply, the other party may petition the People's Court to enforce such judgment, arbitration award or mediation agreement.

Article 129 With respect to a dispute arising from a contract for the international sale of goods or a contract for the import and export of technology, the statute of limitations for instituting an action or applying for arbitration is four years from the date a party knows or should have known of the infringement on such party's rights. As to the statute of limitations for instituting an action or applying for arbitration with respect to a dispute arising from other contracts, the provisions of the relevant laws shall govern.

Chapter IX Sales Contracts

Article 130 A sales contract is a contract under which the seller transfers the subject matter to the purchaser, and the purchaser pays the price to the seller.

Article 131 The contents of a sales contract may include, in addition to the provisions in Article 12 of this Law, the manner of packaging, the standard and method of inspection, the method for the settlement of accounts as well as the languages versions used and their validity.

Article 132 The subject matter for sale shall be owned by the seller, or the seller shall have the right to dispose of it.
If the transfer of the subject matter is prohibited or restricted by law or administrative regulation, the provisions therein shall govern.

Article 133 Unless otherwise prescribed by law or agreed by the parties, title of the subject matter shall pass upon delivery of the subject matter.

Article 134 The parties may agree in the sales contract that if the purchaser fails to make payment or to perform other obligations, title of the subject matter shall remain with the seller.

Article 135 The seller shall perform the obligations of delivering the subject matter or the documents for taking possession of the subject matter to the purchaser and of transferring title thereto.

Article 136 In addition to the documents for taking possession of the subject matter, the seller shall deliver to the purchaser the relevant documentation and materials in accordance with the agreement or customary business practice.

Article 137 Unless otherwise prescribed by law or agreed by the parties, where the subject matter sold involves intellectual property rights such as computer software, etc., such intellectual property rights related to the subject matter do not belong to the purchaser.

Article 138 The seller shall deliver the subject matter by the agreed time limit. If the time for delivery is agreed upon, the seller may deliver the subject matter at any time within the specified time period.

Article 139 If the parties fail to agree upon the time for delivery of the subject matter or the agreement on the time of delivery is ambiguous, the provisions in Article 61 and Article 62, Section 4 of this Law shall apply.

Article 140 If the subject matter is in the possession of the purchaser prior to the formation of the contract, the contract becomes effective at the time of delivery.

Article 141 The seller shall deliver the subject matter at the agreed place.
If the parties fail to agree upon a place of delivery or the agreement on the place of delivery is ambiguous and cannot be determined pursuant to the provisions in Article 61 of this Law, the following provisions shall apply:
(1) If the subject matter needs to be transported, the seller shall deliver the subject matter to the first carrier for shipment to the purchaser;
(2) If the subject matter does not need to be transported, and both the seller and the purchaser were aware of the location of the subject matter at the time the contract was formed, the seller shall deliver the subject matter to such location; if the seller and purchaser were not aware of the location, the subject matter shall be delivered to the seller's place of business at the time the contract was formed.

Article 142 Unless otherwise prescribed by law or agreed by the parties, the risk of destruction, damage to, and loss of, the subject matter shall be borne by the seller prior to delivery of the subject matter, and borne by the purchaser after delivery of the subject matter.

Article 143 If for reasons attributable to the purchaser, the subject matter cannot be delivered by the agreed time, the purchaser shall bear the risk of destruction, damage to, or loss of, the subject matter from the date it breaches the agreement.

Article 144 Unless otherwise agreed by the parties, where the subject matter is sold by the seller who is to tender it to the carrier for transport, the risk of destruction, damage to, and loss of, the subject matter while in transit shall be borne by the purchaser from the time the contract is formed.

Article 145 If the parties fail to agree upon a place of delivery for the subject matter, or the agreement on the place of delivery is ambiguous, and the subject matter requires transportation pursuant to the provisions in Article 141, Section 2, Subsection 1 of this Law, the risk of destruction, damage to, or loss of, the subject matter after the seller delivers the subject matter to the first carrier shall be borne by the purchaser.

Article 146 If the seller places the subject matter at the place for delivery pursuant to the agreement or the provisions in Article 141, Section 2, Subsection 2 of this Law, and the purchaser, in breach of the agreement, fails to take delivery of the subject matter, the risk of destruction, damage to, or loss of, the subject matter shall be borne by the purchaser from the date the purchaser breaches the agreement.

Article 147 If the seller does not deliver the documentation and materials related to the subject matter as agreed, the passing of the risk of destruction, damage to, and loss of, the subject matter shall not be affected.

Article 148 If the quality of the subject matter fails to conform to the quality requirements, rendering it impossible to achieve the purpose of the contract, the purchaser may refuse to accept the subject matter or may rescind the contract. If the purchaser refuses to accept the subject matter or rescinds the contract, the risk of destruction, damage to, and loss of, the subject matter shall be borne by the seller.

Article 149 If the risk of destruction, damage to, and loss of, the subject matter is borne by the purchaser, the purchaser's right to demand the seller to bear liability for breach of contract due to the seller's failure to perform its obligations in conformance with the agreement shall not be affected.

Article 150 Unless otherwise prescribed by law, the seller shall have an obligation to warrant that no third party shall exercise against the purchaser any rights with respect to the delivered subject matter.

Article 151 If at the time of formation of the contract the purchaser knows or should have known that a third party has rights to the subject matter, the seller shall not assume the obligations prescribed under Article 150 of this Law.

Article 152 If the purchaser has clear evidence that a third party could assert a right to the subject matter, the purchaser may suspend the corresponding payment, unless the seller provides a proper guaranty.

Article 153 The seller shall deliver the subject matter in accordance with the agreed quality requirements. If the seller provides specifications regarding the quality of the subject matter, the delivered subject matter shall conform to the quality requirements therein.

Article 154 If the parties fail to agree upon the quality requirements, or the agreement on quality requirements is ambiguous and cannot be determined pursuant to the provisions in Article 61 of this Law, the provisions in Article 62, Section 1 of this Law shall apply.

Article 155 If the subject matter delivered by the seller fails to conform to the quality requirements, the purchaser may demand the seller to bear liability for breach of contract pursuant to the provisions in Article 111 of this Law.

Article 156 The seller shall deliver subject matter in the manner of packaging as agreed. If a manner of packaging is not agreed, or the agreement on the manner of packaging is ambiguous and cannot be determined pursuant to the provisions in Article 61 of this Law, the packaging shall be done in the customary manner, or in the absence of a customary manner, the manner of packaging adopted shall be adequate to protect the subject matter.

Article 157 Upon receipt of the subject matter, the purchaser shall inspect the subject matter during the agreed period for inspection. If a period for inspection is not agreed upon, inspection shall be conducted in a timely manner.

Article 158 If the parties have agreed upon a time period for inspection, the purchaser shall, during the inspection period, notify the seller of the circumstances under which the quantity or quality of the subject matter fails to conform to the agreement. If the purchaser is remiss in making such notification, the quantity or quality of the subject matter shall be deemed to be in conformance with the agreement.
If the parties have not agreed upon a period for inspection, the purchaser shall notify the seller within a reasonable period after the purchaser discovers or should have discovered that the quantity or quality is not in conformance with the agreement. If the purchaser fails to notify the seller within a reasonable period, or fails to notify the seller within two (2) years from the date of receipt of the subject matter, the quantity or quality of the subject matter shall be deemed to be in conformance with the agreement; however, if there is a quality warranty period for the subject matter, the quality warranty period shall apply and the provision regarding the two-year period shall not be applied.
If the seller knows or should have known that the subject matter provided does not conform to the agreement, the purchaser shall not be restricted by the notification period prescribed in the preceding two sections.

Article 159 The purchaser shall pay the price in the agreed amount. If a price is not the agreed upon, or the agreement on the price is ambiguous, the provisions in Article 61 and Article 62, Section 2 of this Law shall be applied.

Article 160 The purchaser shall make payment(s) at the agreed place. If the place of payment is not agreed upon, or the agreement on the place of payment is ambiguous and cannot be determined pursuant to the provisions in Article 61 of this Law, the purchaser shall make payment(s) at the seller's place of business; however, if it is agreed that payment(s) of the price shall be conditioned upon the delivery of the subject matter or the delivery of documents for taking possession of the subject matter, payment(s) shall be made at the place where the subject matter or the documents for taking possession of the subject matter is to be tendered.

Article 161 The purchaser shall make payment at the agreed time. If the time of payment is not agreed upon, or the agreement on the time of payment is ambiguous and cannot be determined pursuant to the provisions in Article 61 of this Law, the purchaser shall make payment at the time it receives the subject matter or the documents for taking possession of the subject matter.

Article 162 If the seller delivers the subject matter in excess quantity, the purchaser may accept or reject the excess portion. If the purchaser accepts the excess portion, the purchaser shall pay the price in accordance with the contract price; if the purchaser rejects the excess portion, the purchaser shall so notify the seller in a timely manner.

Article 163 Any fruits derived from the subject matter prior to delivery shall belong to the seller, and fruits derived after delivery shall belong to the purchaser.

Article 164 If the contract is rescinded because the principal part of the subject matter fails to conform to the agreement, the effect of the rescission of the contract shall extend to all ancillary parts of the subject matter. If the contract is rescinded because an ancillary part of the subject matter fails to conform to the agreement, the effect of such rescission shall not extend to the principal part of the subject matter.

Article 165 If the subject matter consists of several objects and only one of the objects fails to conform to the agreement, the purchaser may rescind the contract with respect to such object; however, if the severance of such object from the other objects manifestly impairs the value of the subject matter, either party may rescind the contract with respect to all objects.

Article 166 If the seller delivers the subject matter in installments, and the seller fails to deliver one installment of the subject matter or the delivery fails to conform to the agreement, rendering it impossible for such installment of subject matter to achieve the purpose of the contract, the purchaser may rescind the contract with respect to such installment of subject matter.
Where the seller delivers the subject matter in installments, if the seller fails to deliver one installment of the subject matter or the delivery fails to conform to the agreement, rendering it impossible for the subsequent delivery of other installments of the subject matter to achieve the purpose of the contract, the purchaser may rescind the contract with respect to such installment as well as other subsequent installments of the subject matter.
If the purchaser rescinds the contract with respect to one installment of the subject matter, and such installment and other installments of subject matter are interdependent, the purchaser may rescind the contract with respect to each of those installments of subject matter that has or has not been delivered.

Article 167 If the purchaser who makes payment by installment fails to make payment(s) equal to or exceeding one-fifth of the total price due, the seller may demand the purchaser to pay the price in full, or may rescind the contract.
If the seller rescinds the contact, the seller may demand the purchaser to pay a usage fee for the use of such subject matter.

Article 168 The parties who use a sample for a sales transaction shall seal up the sample, and specifications regarding the quality of the sample may be provided. The subject matter delivered by the seller shall have the same quality as that of the samples and that described in the quality specifications.

Article 169 If the purchaser who uses a sample for a purchase is unaware of a hidden defect in the sample, and even if the subject matter delivered is identical to the sample, the quality of the subject matter delivered by the seller shall nevertheless conform to the usual standards for the same type of object.

Article 170 The parties to a sale that includes a period for trial use may agree upon the period for trial use for the subject matter. If a period for trial period is not agreed upon, or the agreement on the period for trial use is ambiguous and cannot be determined pursuant to the provisions in Article 61 of this Law, the period for trial use shall be determined by the seller.

Article 171 The purchaser in a sale that includes a period for trial use may purchase or refuse to purchase the subject matter during the period for trial use. If the purchaser fails to indicate whether or not it will purchase the subject matter prior to the expiration of the period for trial use, a purchase shall be deemed to have been effected.

Article 172 For a sale by bidding, the rights and obligations of the parties as well as the bidding procedures shall conform to the provisions of the relevant laws and administrative regulations.

Article 173 For a sale by auction, the rights and obligations of the parties as well as the auction procedures shall conform to the provisions of the relevant laws and administrative regulations.

Article 174 If there are provisions in the law for other non-gratuitous contracts, such provisions shall apply; in the absence of such provisions, reference shall be made to the relevant provisions in Sales Contracts.

Article 175 If the parties agree to a barter transaction under which the title of the subject matter is transferred, reference shall be made to the relevant provisions in Sales Contracts.

Chapter X Contracts for the Supply of Electricity, Water, Gas and Heat

Article 176 An electricity supply contract is a contract under which the electricity supplier provides electricity to the electricity user, and the electricity user pays an electricity fee.

Article 177 The contents of an electricity supply contract shall include clauses relating to the manner, quality and time of the supply of electricity, the capacity, address and nature of electricity usage, method of measurement, methods of settlement for pricing and electricity fees, and the duties with respect to the maintenance of the facilities for the supply and use of electricity.

Article 178 The place of performance for the electricity supply contract shall conform to the agreement of the parties; if the parties have no such agreement, or the agreement is ambiguous, the place of performance shall be the place within which the property rights of the electricity supply facilities are demarcated.

Article 179 The electricity supplier shall supply electricity safely in accordance with quality standards for electricity supply as prescribed by the State and as agreed by the parties. If the electricity supplier fails to supply electricity safely in accordance with quality standards for electricity supply as prescribed by the State and as agreed by the parties, causing damages to the electricity user, the electricity supplier shall be liable for damages.

Article 180 If the electricity supplier needs to suspend electricity supply due to reasons such as a scheduled or necessary examination or repair of the electricity supply facilities, rationing of electricity in accordance with the law, or the illegal use of electricity by the electricity user, the electricity supplier shall notify the electricity user in advance pursuant to relevant State regulations. If the electricity supplier fails to notify the electricity user in advance of the suspension of electricity, resulting in losses or damages to the electricity user, the electricity supplier shall be liable for damages.

Article 181 If the electricity supply is suspended due to a natural disaster or other causes, the electricity supplier shall carry out repairs in a timely manner in accordance with relevant State provisions. If the failure to carry out emergency repairs in a timely manner results in losses or damages to the electricity user, the electricity supplier shall be liable for damages.

Article 182 The electricity user shall pay the electricity fee in accordance with relevant State regulations and the agreement of the parties. If the electricity user fails to pay the electricity fee within the specified time period, the electricity user shall pay the agreed late payment penalty. If the electricity user does not pay the electricity fee and late payment penalty within a reasonable period after having been demanded to do so, the electricity supplier may suspend electricity supply in accordance with the procedures prescribed y the State.

Article 183 The electricity user shall use the electricity supplied safely in accordance with relevant State regulations and the agreement of the parties. If the electricity user fails to use the electricity safely in accordance with relevant State regulations and the agreement of the parties, resulting in losses or damages to the electricity supplier, the electricity user shall be liable for damages.

Article 184 For contracts for the supply of water, gas and heat, reference shall be made to the relevant provisions for electricity supply contracts.

Chapter XI Gift Contracts

Article 185 A gift contract is a contract under which a donor gives its own property to a donee gratuitously and the donee expresses its acceptance.

Article 186 The donor may revoke the gift prior to the passing of title of the gifted property.
The preceding section shall not apply to a gift contract that serves the public interest or is in the nature of a moral duty, such as disaster relief and aid to the poor, or for a gift contract that has been notarized.

Article 187 Where procedures such as registration are required for the property to be lawfully gifted, such procedures shall be undertaken.

Article 188 With respect to a gift contract that serves the public interest or is in the nature of an moral duty, such as disaster relief and aid to the poor, or a gift contract that has been notarized, if the donor fails to deliver the gifted property, the donee may demand delivery of such property.

Article 189 If damage, destruction or loss is caused to the gifted property due to the intentional act or gross negligence of the donor, the donor shall be liable for damages.

Article 190 A gift may be conditioned on an obligation.
Where the gift is conditioned on an obligation, the donee shall perform the obligation as agreed.

Article 191 If the gifted property has a defect, the donor shall not bear any liability with respect thereto. If the gift is conditioned on an obligation, and the gifted property has a defect, the donor shall, to the extent of such obligation, bear the same liability as would a seller.
If the donor intentionally fails to inform the donee of the defect, or warrants that the property has no defect, resulting in damages to the donee, the donor shall be liable for damages.

Article 192 The donor may revoke a gift if one of the following applies to the donee:
(1) the donee seriously injures or infringes upon the interests of the donor or a close relative of the donor;
(2) the donee has an obligation of support towards the donor and fails to perform such obligation; or
(3) the donee fails to perform its obligations as agreed in the gift contract.
The donor's right to revoke a gift shall be exercised within one year from the date the donor knows or should have known of the reason for the revocation.

Article 193 If an illegal act of the donee results in the death or loss of civil capacity of the donor, the successor or legal representative of the donor may revoke the gift.
The right of revocation of the successor or legal representative of the donor shall be exercised within six (6) months from the date the successor or legal representative of the donor knows or should have known of the reason for the revocation.

Article 194 The person who has the right to revoke a gift may demand the donee to return the gifted property.

Article 195 If the economic condition of the donor significantly deteriorates so as to severely affect the production and operations, or family life of the donor, the donor may discontinue performance of the gift obligation.

Chapter XII Loan Contacts

Article 196 A loan contract is a contract under which the borrower borrows money from the lender and repays the borrowed money, together with interest, on the due date.

Article 197 Unless a loan is between natural persons and such natural persons agree otherwise, a loan contract shall be in writing.
The contents of a loan contract shall include clauses relating to the nature, currency, purpose, amount, rate of interest, term and manner of repayment of the loan.

Article 198 In forming a loan contract, the lender may demand the borrower to provide security. The security shall conform to the provisions of the Guaranty Law of the People's Republic of China.

Article 199 In forming a loan contract, the borrower shall, in accordance with the requirements of the lender, provide the true status of its business activities and financial condition related to the loan.

Article 200 The loan interest shall not be deducted from the principal in advance. If the interest has been deducted from the principal in advance, the loan shall be repaid and the interest shall be calculated in accordance with the actual amount of the loan.

Article 201 If the lender fails to extend the loan on the date and in the amount as agreed, causing losses to the borrower, the lender shall compensate the borrower for such losses.
If the borrower fails to collect the loan on the date and in the amount as agreed, the borrower shall pay interest on the date and in the amount as agreed.

Article 202 The lender may inspect and supervise the use of the loan as agreed. The borrower shall provide to the lender relevant materials such as financial and accounting statements on a regular basis as agreed.

Article 203 If the borrower fails to use the loan for the agreed upon purpose, the lender may cease disbursement of the loan, accelerate repayment of the loan or rescind the contract.

Article 204 The interest rate on a loan extended by a financial institution engaged in loan operations shall be set within the range for loan interest rates as prescribed by the People's Bank of China.

Article 205 The borrower shall pay interest within the agreed time period. If the term for the payment of interest is not agreed upon, or the agreement on the term for the payment of interest is ambiguous and cannot be determined pursuant to the provisions in Article 61 of this Law, the interest shall be paid upon repayment of the loan if the loan term is less than one year; if the loan term exceeds one year, the interest shall be paid at the end of each one-year period of the loan during the loan term; and if there is a period remaining on loan term of less than one year, the interest shall be paid together with the repayment of the loan.

Article 206 The borrower shall repay the loan within the agreed time period. If the loan term is not agreed upon, or the agreement on the repayment of the loan is ambiguous and cannot be determined pursuant to the provisions in Article 61 of this Law, the borrower may repay the loan at any time; the lender may demand that repayment by made within a reasonable period.

Article 207 If the borrower fails to repay the loan within the agreed time period, the borrower shall pay the default interest in accordance with the agreement or relevant State regulations.

Article 208 Unless otherwise agreed by the parties, if the borrower repays the loan in advance, the interest shall be calculated based on the actual period of the loan.

Article 209 Prior to the expiration of the term for repayment, the borrower may apply to the lender for an extension of the term for repayment. If the lender consents, the term may be extended.

Article 210 A loan contract between natural persons shall become effective at the time the lender provides the loan.

Article 211 If the payment of interest in a loan contract between natural persons is not agreed upon, or the agreement is ambiguous, the loan shall be deemed interest free.
If the payment of interest is agreed upon in the loan contract between natural persons, the interest rate for the loan shall not violate the relevant State regulations regarding the limitations on interest rates for loans.

Chapter XIII Lease Contracts

Article 212 A lease contract is a contract under which the lessor delivers a leased object to the lessee for the lessee to use or to obtain benefit from, and the lessee pays rent therefor.

Article 213 The contents of a lease contract shall include clauses such as the name, quantity, purpose, lease term, rent, time and method of payment, and maintenance of the leased object, etc..

Article 214 The lease term shall not exceed twenty (20) years. Any part of the term exceeding twenty (20) years shall be invalid.
Upon expiration of the lease term, the parties may renew the lease contract, provided that the agreed lease term does not exceed twenty (20) years from the date of renewal.

Article 215 If the lease term is more than six (6) months, the lease contract shall be in written form. If the parties fail to adopt a written form, the lease shall be deemed as a lease of a non-fixed term.

Article 216 The lessor shall deliver the leased object to the lessee as agreed, and shall ensure that the use of the leased object during the lease term conforms to the agreed purpose.

Article 217 The lessee shall use the leased object in the agreed manner. If the manner of use is not agreed upon, or the agreement on the manner of use is ambiguous and cannot be determined pursuant to the provisions in Article 61 of this Law, the leased object shall be used in accordance with the nature of the leased object.

Article 218 If the lessee uses the leased object in accordance with the agreed manner or consistent with the nature of the leased object, and such use results in wear and tear on the leased object, the lessee shall not be liable for damages.

Article 219 If the lessee fails to use the leased object in accordance with the agreed manner or uses the leased object in a manner inconsistent with the nature of the leased object, and such use results in damage to the leased object, the lessor may rescind the contract and demand compensation for damages.

Article 220 Unless otherwise agreed by the parties, the lessor shall perform maintenance obligations on the leased object.

Article 221 When the leased object requires maintenance, the lessee may demand the lessor to carry out such maintenance within a reasonable period. If the lessor fails to perform its maintenance obligations, the lessee may carry out such maintenance on its own, and the cost for such maintenance shall be borne by the lessor. If the maintenance on the leased object affects the lessee's use thereof, the rent shall be reduced accordingly or the lease term shall be extended.

Article 222 The lessee shall properly care for the leased object. If damage, destruction or loss is caused to the leased object due to improper safekeeping, the lessee shall be liable to compensate the lessor for damages.

Article 223 Subject to the consent of the lessor, the lessee may make improvements on, or additions to, the leased object.
If the lessee makes any improvement on, or additions to, the leased object without the lessor's consent, the lessor may demand the lessee to restore the leased object to its original condition or may demand compensation for damages.

Article 224 Subject to the consent of the lessor, the lessee may sublet the leased object to a third party. If the lessee sublets the leased object, the lease contract between the lessee and the lessor shall remain in effect. If the third party causes damage to the leased object, the lessee shall compensate the lessor for such damage.
If the lessee sublea