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Contract Low of the People's Republic of China (SPECIFIC PROVISIONS I)
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SPECIFIC PROVISIONS

Chapter Nine: Sales Contracts

Article 130 Definition of Sales Contract
A sales contract is a contract whereby the seller transfers title to the subject matter to the buyer, who pays the price.

Article 131 Additional Terms
In addition to the terms set forth in Article 12 hereof, a sales contract may include terms such as packing method, inspection standard and inspection method, method of settlement of account, and the language versions of the contract and the authenticity thereof, etc.

Article 132 Title or Disposal Power; Prohibition of or Restriction on Transfer
The seller shall have title to, or the power to dispose of, the subject matter for sale.
Where a law or administrative regulation prohibits or restricts the transfer of the subject matter, such provision applies.

Article 133 Passing of Title
Title to the subject matter passes at the time of its delivery, except otherwise provided by law or agreed by the parties.

Article 134 Conditional Sale
The parties may prescribe in the sales contract that title to the subject matter remain in the seller until the buyer has paid the price or has performed other obligations.

Article 135 Seller’s Obligations with Respect to Title Transfer
The seller shall perform the obligations of delivering to the buyer the subject matter or the document for taking delivery thereof, as well as transferring title to the subject matter.

Article 136 Delivery of Related Materials by Seller
In addition to the document for taking delivery, the seller shall deliver to the buyer documents and materials related to the subject matter in accordance with the contract or in accordance with the relevant usage.

Article 137 Sales Involving Intellectual Property
In a sale of any subject matter which contains intellectual property such as computer software, etc., the intellectual property in the subject matter does not vest in the buyer, except otherwise provided by law or agreed by the parties.

Article 138 Time of Delivery
The seller shall deliver the subject matter at the prescribed time. Where the contract prescribes a period during which delivery is to take place, the seller may deliver at any time during the delivery period.

Article 139 Absence of Provision for Time of Delivery
Where the time for delivery of the subject matter was not prescribed or clearly prescribed, Article 61 and Item 4 of Article 62 apply.

Article 140 Time of Delivery of Subject Matter Already in Buyer’s Possession
Where the subject matter was in buyer’s possession prior to conclusion of the contract, the time when the contract becomes effective is the time of delivery.

Article 141 Absence of Provision for Place of Delivery
The seller shall deliver the subject matter at the prescribed place. Where the place of delivery was not prescribed or clearly prescribed, and cannot be determined in accordance with Article 61 hereof, the following provisions apply:
(i) If the subject matter needs carriage, the seller shall deliver the subject matter to the first carrier for transmission to the buyer;
(ii) Where the subject matter does not need carriage, if at the time of conclusion of the contract, the buyer and the seller knew the subject matter was at a particular place, the seller shall deliver the subject matter at such place; and if they did not know the location of the subject matter, delivery shall take place at the seller’s place of business at the time of conclusion of the contract.

Article 142 Passing of Risk
The risk of damage to or loss of the subject matter is borne by the seller prior to delivery, and by the buyer after delivery, except otherwise provided by law or agreed by the parties.

Article 143 Risk Allocation in Case of Delayed Delivery
Where the subject matter was not delivered at the prescribed time due to any reason attributable to the buyer, the buyer shall bear the risk of damage to or loss of the subject matter as from the date of breach.

Article 144 Risk Allocation for Subject Matter in Transit
Where the seller sells the subject matter which has been delivered to a carrier for transportation and is in transit, unless otherwise agreed by the parties, the risk of damage or loss is borne by the buyer as from the time of formation of the contract.

Article 145 Passing of Risk in Case of Seller Arranged Carriage
Where the place of delivery was not prescribed or clearly prescribed, if the subject matter needs carriage as provided in Item (i) of Paragraph 2 of Article 141, the risk of damage to or loss of the subject matter is borne by the buyer as from the time the seller delivers the subject matter to the first carrier.

Article 146 Risk Allocation in Case of Delay in Taking Delivery
Where the seller placed the subject matter at the place of delivery in accordance with the contract or in accordance with Item (ii) of Paragraph 2 of Article 141 hereof and the buyer fails to take delivery in breach of the contract, the risk of damage to or loss of the subject matter is borne by the buyer as from the date of breach.

Article 147 Passing of Risk Notwithstanding Failure to Deliver Documents
Failure by the seller to deliver the documents and materials relating to the subject matter in accordance with the contract does not affect passing of the risk of damage to or loss of the subject matter.

Article 148 Rejection on Grounds of Quality Non-compliance; Risk Allocation in Case of Rejection
Where the purpose of the contract is frustrated due to failure of the subject matter to meet the quality requirements, the buyer may reject the subject matter or terminate the contract. If the buyer rejects the subject matter or terminates the contract, the risk of damage to or loss of the subject matter is borne by the seller.

Article 149 Right to Remedy Notwithstanding Assumption of Risk
Buyer’s assumption of the risk of damage to or loss of the subject matter does not prejudice its right to hold the seller liable for breach of contract if the seller rendered non-conforming performance.

Article 150 Third Party Claim Warranty
The seller is obligated to warrant that the buyer will be free from any third party claim against it in respect of the subject matter delivered, except otherwise provided by law.

Article 151 Buyer’s Knowledge Releasing Third Party Claim Warranty
Where the buyer knew or should have known that the subject matter was subject to a third party claim at the time of conclusion of the contract, the seller does not assume the obligation prescribed in Article 150 hereof

Article 152 Right to Withhold Payment in Case of Third Party Claim
Where the buyer has conclusive evidence establishing that a third person may make a claim on the subject matter, it may withhold payment of the corresponding price, except where the seller has provided appropriate assurance.

Article 153 Quality Specifications
The seller shall deliver the subject matter in compliance with the prescribed quality requirements. Where the seller gave quality specifications for the subject matter, the subject matter delivered shall comply with the quality requirements set forth therein.

Article 154 Absence of Prescribed Quality Requirements
Where the quality requirements for the subject matter were not prescribed or clearly prescribed, and cannot be determined in accordance with Article 61 hereof, Item (i) of Article 62 hereof applies.

Article 155 Quality Non-compliance Giving Rise to Claims
If the subject matter delivered by the seller fails to comply with the quality requirements, the buyer may hold the seller liable for breach of contract in accordance with Article 111 hereof.

Article 156 Packing Method
The seller shall deliver the subject matter packed in the prescribed manner. Where a packing method was not prescribed or clearly prescribed, and cannot be determined in accordance with Article 61 hereof, the subject matter shall be packed in a customary manner, or, if there is no customary manner, in a manner adequate to protect the subject matter.

Article 157 Inspection upon Receipt of Subject Matter
Upon receipt of the subject matter, the buyer shall inspect it within the prescribed inspection period. Where no inspection period was prescribed, the buyer shall timely inspect the subject matter.

Article 158 Consequence of Failure to Inspect; Exceptions
Where an inspection period was prescribed, the buyer shall notify the seller of any non-compliance in quantity or quality of the subject matter within such inspection period. Where the buyer delayed in notifying the seller, the quantity or quality of the subject matter is deemed to comply with the contract. Where no inspection period was prescribed, the buyer shall notify the seller within a reasonable period, commencing on the date when the buyer discovered or should have discovered the quantity or quality non-compliance. If the buyer fails to notify within a reasonable period or fails to notify within 2 years, commencing on the date when it received the subject matter, the quantity or quality of the subject matter is deemed to comply with the contract, except that if there is a warranty period in respect of the subject matter, the warranty period applies and supersedes such two year period. Where the seller knew or should have known the non-compliance of the subject matter, the buyer is not subject to the time limits for notification prescribed in the previous two paragraphs.

Article 159 Absence of Price Provision
The buyer shall pay the price in the prescribed amount. Where the price was not prescribed or clearly prescribed, the provisions of Article 61 and Item (ii) of Article 62 apply.

Article 160 Place of Payment
The buyer shall pay the price at the prescribed place. Where the place of payment was not prescribed or clearly prescribed, and cannot be determined in accordance with Article 61 hereof, the buyer shall make payment at the seller’s place of business, provided that if the parties agreed that payment shall be conditional upon delivery of the subject matter or the document for taking delivery thereof, payment shall be made at the place where the subject matter, or the document for taking delivery thereof, is delivered.

Article 161 Time of Payment
The buyer shall pay the price at the prescribed time. Where the time for payment was not prescribed or clearly prescribed, and cannot be determined in accordance with Article 61 hereof, the buyer shall make payment at the same time it receives the subject matter or the document for taking delivery thereof.

Article 162 Buyer’s Option in Case Delivered Quantity Exceeds Prescribed Amount
Where the seller delivered the subject matter in a quantity greater than that prescribed in the contract, the buyer may accept or reject the excess quantity. Where the buyer accepts the excess quantity, it shall pay the price based on the contract rate; where the buyer rejects the excess quantity, it shall timely notify the seller.

Article 163 Title to Fruits Before and After Delivery
The fruits of the subject matter belong to the seller if accrued before delivery, and to the buyer if accrued after delivery.

Article 164 Effect of Termination on Grounds of Non-compliance of Main or Ancillary Components
Where a contract is terminated due to non-compliance of any main component of the subject matter, the effect of termination extends to the ancillary components. Where the contract is terminated due to non-compliance of any ancillary component of the subject matter, the effect of termination does not extend to the main components.

Article 165 Termination in Part or in Whole
Where the subject matter comprises of a number of components, one of which does not comply with the contract, the buyer may terminate the portion of the contract in respect of such component, provided that if severance of such component with the other components will significantly diminish the value of the subject matter, the party may terminate the contract in respect of such number of components.

Article 166 Effect of Termination in Case of Delivery in Installments
Where the seller is to deliver the subject matter in installments, if the seller’s failure to deliver or non-conforming delivery of one installment frustrates the purpose of the contract in respect of such installment, the buyer may terminate the portion of the contract in respect thereof. If the seller’s failure to deliver or non-conforming delivery of one installment frustrates the purpose of the contract in respect of all subsequent installments notwithstanding their delivery, the buyer may terminate the portion of the contract in respect of such installment as well as any subsequent installment. If the buyer is to terminate the portion of the contract in respect of a particular installment which is interdependent with all other installments, it may terminate the contract in respect of all delivered and undelivered installments.

Article 167 Termination in Case of Sale by Installment Payment
In a sale by installment payment, where the buyer failed to make payments as they became due, if the delinquent amount has reached one fifth of the total price, the seller may require payment of the full price from the buyer or terminate the contract. If the seller terminates the contract, it may require the buyer to pay a fee for its use of the subject matter.

Article 168 Quality Provisions in Case of Sale by Sample
In a sale by sample, the parties shall place the sample under seal, and may specify the quality of the sample. The subject matter delivered by the seller shall comply with the sample as well as the quality specifications.

Article 169 Latent Defect in Sample
In a sale by sample, if the buyer was not aware of a latent defect in the sample, the subject matter delivered by the seller shall nevertheless comply with the normal quality standard for a like item, even though the subject matter delivered complies with the sample.

Article 170 Sale by Trial
In a sale by trial, the parties may prescribe the trial period. Where a trial period was not prescribed or clearly prescribed, and cannot be determined in accordance with Article 61 hereof, it shall be determined by the seller.

Article 171 Purchase or Rejection During Trial Period
In a sale by trial, the buyer may either purchase or reject the subject matter during the trial period. At the end of the trial period, the buyer is deemed to have made the purchase if it fails to manifest its intention to purchase or reject the subject matter.

Article 172 Sale by Tender Governed by Relevant Laws
In a sale by tender, matters such as the rights and obligations of the parties and the tendering procedure, etc. are governed by the relevant laws and administrative regulations.

Article 173 Sale by Auction Governed by Relevant Laws
In a sale by auction, matters such as the rights and obligations of the parties and the auctioning procedure, etc. are governed by the relevant laws and administrative regulations.

Article 174 General Applicability to Contracts for Value
For any other contract for value, if the law provides for such contract, such provisions apply; absent any such provision, reference shall be made to the relevant provisions governing sales contracts.

Article 175 Applicability to Barter Transaction
Where the parties agree on a barter transaction involving transfer of title to the subject matters, such transaction shall be governed by reference to the relevant provisions governing sales contracts.


Chapter Ten: Contracts for Supply of Power, Water, Gas , Or Heat

Article 176 Definition of Power Supply Contract
A power supply contract is a contract whereby the power supplier supplies power to the power customer, who pays the electricity charge.

Article 177 Terms of Power Supply Contract
A power supply contract includes terms such as the method, quality, and time of power supply, and the capacity, location and nature of power use, and the metering method, electricity rate, the method of settlement of electricity charge, and the responsibility for maintenance of the power supply and power use facilities, etc.

Article 178 Place of Performance of Power Supply Contract
The place of performance of a power supply contract shall be the place prescribed by the parties, and if not prescribed or clearly prescribed, the place of performance shall be the boundary where ownership of the power supply facilities is divided.

Article 179 Obligations of Power Supplier
The power supplier shall supply power in a safe manner in accordance with the power supply quality standard mandated by the state and in accordance with the contract. Where the power supplier failed to supply power in a safe manner in accordance with the power supply quality standard mandated by the state and in accordance with the contract, thereby causing loss to the power customer, it shall be liable for damages.

Article 180 Obligation to Notify in Case of Scheduled Suspension
Where the power supplier needs to suspend power supply due to reasons such as periodical maintenance or provisional maintenance of the power supply facilities, legally required power rationing, or illegal use of power by the power customer, etc., it shall notify the power customer in advance in accordance with the relevant stipulations of the state.
Where the power supplier suspended power supply without notifying the power customer in advance, thereby causing loss to the power customer, it shall be liable for damages.

Article 181 Obligation to Make Emergency Repair in Case of Power Outage
Where a power outage is caused by reasons such as natural disasters, etc., the power supplier shall timely make emergency repair in accordance with the relevant stipulations of the state. Where the power supplier failed to timely make emergency repair, thereby causing loss to the power customer, it shall be liable for damages.
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Article 182 Payment of Electricity Charge
The power customer shall timely pay the electricity charge in accordance with the relevant stipulations of the state and in accordance with the contract. Where the power customer delayed in paying the electricity charge, it shall pay liquidated damages in accordance with the contract. Where the power customer failed to pay the electricity charge and liquidated
damages within a reasonable time after receiving demand for payment, the power supplier may shut off the power supply in accordance with the procedure prescribed by the state

Article 183 Power Customer’s Obligation of Proper Use
The power customer shall use power in a safe manner in accordance with the relevant stipulations of the state and in accordance with the contract. Where the power customer failed to use power in a safe manner in accordance with the relevant stipulations of the state and in accordance with the contract, thereby causing loss to the power supplier, it shall be liable for damages.

Article 184 Applicability to Contract for Supply of Water, Gas or Heat
A contract for the supply of water, gas or heat shall be governed by reference to the relevant provisions governing power supply contracts.


Chapter Eleven: Gift Contracts

Article 185 Definition of Gift Contract
A gift contract is a contract whereby the donor conveys his property to the donee without reward and the donee manifests his acceptance of the gift.

Article 186 Revocation Prior to Transfer of Rights; Exception
Prior to the transfer of rights to the gift property, the donor may revoke the gift.
The previous paragraph does not apply to any gift contract the nature of which serves public interests or fulfills a moral obligation, such as disaster relief, poverty relief, etc., or any gift contract which has been notarized.

Article 187 Observance of Conveyance Procedure
Where conveyance of the gift property is subject to any procedure such as registration, etc. under the law, the relevant procedure shall be carried out.

Article 188 Donee’s Right to Require Delivery in Certain Cases
In the case of a gift contract the nature of which serves public interests or fulfills a moral obligation, such as disaster relief, poverty relief, etc., or a gift contract which has been notarized, if the donor fails to deliver the gift property, the donee may require delivery.

Article 189 Liability of Donor for Misconduct or Gross Negligence
Where the gift property is damaged or lost due to any intentional misconduct or gross negligence of the donor, he shall be liable for damages.

Article 190 Gift May Be Subject to Obligations
A gift may be subject to obligations.
Where the gift is subject to obligations, the donee shall perform his obligations in accordance with the contract.

Article 191 Donor Not Liable for Defect; Exceptions
The donor is not liable for any defect in the gift property. Where the gift is subject to obligations, and the gift property is defective, the donor has the same warranty obligations as a seller to the extent of the prescribed obligations.
Where the donor intentionally omitted to inform the donee of the defect or warranted the absence of any defect, thereby causing loss to the donee, he shall be liable for damages.

Article 192 Circumstances Giving Rise to Revocation Right
Where the donee is in any of the following circumstances, the donor may revoke the gift:
(i) seriously harming the donor or any immediate family member thereof;
(ii) failing to perform support obligations owed to the donor;
(iii) failing to perform the obligations under the gift contract.
The donor shall exercise his revocation right within one year after he became, or should have become, aware of the cause for revocation.

Article 193 Exercise of Revocation Right by Heir
Where the donor is deceased or incapacitated due to the donee’s illegal act, his heir or legal agent may revoke the gift.
The heir or legal agent of the donor shall exercise the right of revocation within six months after he became, or should have become, aware of the cause for revocation.

Article 194 Remedies in Case of Revocation
Upon revocation of the gift, the person with the revocation right may claim restitution of the gift property from the donee.

Article 195 Economic Hardship Releases Gift Obligation
If the donor’s economic situation has deteriorated significantly, thereby seriously impacting on his business operation or family life, he may be released from the gift obligations.


Chapter Twelve: Contracts for Loan of Money

Article 196 Definition of Contract for Loan of Money
A contract for loan of money is a contract whereby the borrower borrows a sum of money from the lender, and returns the sum borrowed and pays interest thereon at the prescribed time.

Article 197 Writing Requirement; Terms
A contract for loan of money shall be in writing, except where the loan is between natural persons who have agreed otherwise.
A contract for loan of money includes terms such as the loan’s type, currency, purpose, amount, interest rate, term and method of repayment, etc.

Article 198 Assurance by Borrower
In entering into a contract for loan of money, the lender may require the borrower to provide assurance. Such assurance shall be arranged in accordance with the Security Law of the People’s Republic of China.

Article 199 Borrower’s Disclosure Obligation
In entering into a contract for loan of money, the borrower shall provide true information concerning its business operation and financial condition in connection with the loan as required by the lender.

Article 200 Deduction of Interest in Advance Prohibited
No interest shall be deducted from the principal in advance.
Where any interest amount is deducted from the principal in advance, the repayment of principal and calculation of interest shall be based on the actual amount borrowed.

Article 201 Remedies in Case of Failure to Make Loan Amount Available Or Failure to Draw Down
Where the lender failed to make the loan amount available on the prescribed date and in the prescribed amount, thereby causing loss to the borrower, it shall pay damages.
Where the borrower failed to draw down on the prescribed date and in the prescribed amount, it shall nevertheless pay the interest on the prescribed date and in the prescribed amount.

Article 202 Lender Entitled to Monitor Use of Proceeds
The lender may examine and monitor the application of the proceeds in accordance with the contract. The borrower shall periodically provide the lender with materials such as related financial and accounting reports, etc. in accordance with the contract.

Article 203 Lender’s Remedies in Case of Borrower’s Misuse of Proceeds
Where the borrower fails to use the proceeds for the prescribed purpose, the lender may withhold funding, call the loan, or terminate the contract.

Article 204 Minimum and Maximum Interest Rates
The interest rate on the loan provided by a financial institution engaged in lending operation shall be prescribed between the minimum and maximum rates mandated by the People’s Bank of China.

Article 205 Time of Interest Payment
The borrower shall pay the interest at the prescribed time.
Where the time of interest payment was not prescribed or clearly prescribed, and cannot be determined in accordance with Article 61 hereof, if the loan term is less than one year, the interest shall be paid together with the principal at the time of repayment; if the loan term is one year or longer, the interest shall be paid at the end of each annual period, and where the remaining period is less than one year, the interest shall be paid together with the principal at the time of repayment.

Article 206 Time of Principal Repayment
The borrower shall repay the principal at the prescribed time.
Where the time of repayment was not prescribed or clearly prescribed, and cannot be determined in accordance with Article 61 hereof, the borrower may repay at any time; and the lender may demand repayment from the borrower within a reasonable time.

Article 207 Delayed Repayment Interest
Where the borrower failed to repay the loan at the prescribed time, it shall pay delayed repayment interest in accordance with the contract or the relevant stipulations of the state.

Article 208 Calculation of Interest in Case of Prepayment
Where the borrower prepays the loan, unless otherwise agreed by the parties, the interest shall be calculated based on the actual period of loan.

Article 209 Extension of Loan Term
The borrower may apply to the lender for extension of the loan term before its maturity. Upon consent by the lender, the loan term may be extended.

Article 210 Time of Effectiveness of Loan Contract between Natural Persons
A contract for loan of money between natural persons becomes effective at the time the lender makes the loan amount available.

Article 211 Interest under Loan Contract between Natural Persons
Under a contract for loan of money between natural persons, if payment of interest was not prescribed or clearly prescribed, the loan is deemed interest free.
Under a contract for loan of money between natural persons, the interest rate on the loan may not contravene the relevant stipulations of the state regarding limit on loan interest rate.              

Chapter Thirteen: Leasing Contracts

Article 212 Definition of Leasing Contract
A leasing contract is a contract whereby the lessor delivers to the lessee the lease item for it to use or accrue benefit from, and the lessee pays the rent.

Article 213 Terms of Leasing Contract
A leasing contract includes terms such as the name, quantity and purpose of the lease item, lease term, amount of rent, time and method of rent payment, as well as maintenance and repair of the lease item, etc.

Article 214 Limit on Lease Term; Renewal
The lease term may not exceed twenty years. If the lease term exceeds twenty years, the portion of the lease term beyond the initial twenty year period is invalid.
At the end of the lease term, the parties may renew the lease, provided that the renewed term may not exceed twenty years commencing on the date of renewal.

Article 215 Writing Requirement in Case Lease Term Is Six Months or Longer
Where the lease term is six months or longer, the lease shall be in writing. If the parties fail to adopt a writing, the lease is deemed a non-term lease.

Article 216 Lessor’s Obligation to Deliver Lease Item
The lessor shall deliver the lease item to the lessee in accordance with the contract and shall, during the lease term, keep the lease item fit for the prescribed purpose.

Article 217 Manner of Using Lease Item
The lessee shall use the lease item in the prescribed manner.
Where the manner of use of the lease item was not prescribed or clearly prescribed, and cannot be determined in accordance with Article 61 hereof, the lease item shall be used in a manner consistent with its nature.

Article 218 Lessee Not Liable for Wear and Tear
Where the lessee used the lease item in the prescribed manner or in a manner consistent with its nature, thereby causing wear and tear to the lease item, it is not liable for damages.

Article 219 Lessor Entitled to Terminate in Case of Unauthorized Use
Where the lessee failed to use the lease item in the prescribed manner or in a manner consistent with its nature, thereby causing damage to it, the lessor may terminate the contract and claim damages.

Article 220 Lessor’s Maintenance Obligations
The lessor shall perform the obligations of maintenance and repair of the lease item, except otherwise agreed by the parties.

Article 221 Lessee’s Remedies in Case of Lessor’s Failure to Maintain Lease Item
Where the lease item needs maintenance or repair, the lessee may require the lessor to perform maintenance or repair within a reasonable time. If the lessor fails to fulfill its obligations of maintenance or repair, the lessee may maintain or repair the lease item on its own at the lessor’s expense. Where the lessee’s use of the lease item is impaired due to maintenance or repair thereof, the rent shall be reduced or the lease term shall be extended accordingly.

Article 222 Lessee’s Obligation of Due Care
The lessee shall keep the lease item with due care and shall be liable for damages if the lease item was damaged or lost due to improper care.

Article 223 Improvement or Addition
Subject to consent by the lessor, the lessee may make improvement on or addition to the lease item. If the lessee made improvement on or addition to the lease item without consent by the lessor, the lessor may require the lessee to restore the lease item to its original condition or claim damages.

Article 224 Sublease
Subject to consent by the lessor, the lessee may sublease the lease item to a third person. Where the lessee subleases the lease item, the leasing contract between the lessee and the lessor remains valid, and if the third person causes damage to the lease item, the lessee shall pay damages.
Where the lessee subleases the lease item without the consent of the lessor, the lessor may terminate the contract.

Article 225 Benefit Accrued from Lease Item During Lease Term
During the lease term, any benefit accrued from the possession or use of the lease item belongs to the lessee, except otherwise agreed by the parties.

Article 226 Time for Rent Payment
The lessee shall pay the rent at the prescribed time. Where the time of payment was not prescribed or clearly prescribed, and cannot be determined in accordance with Article 61 hereof, the rent shall be paid at the end of the lease term if it is less than one year; if the lease term is one year or longer, the rent shall be paid at the end of each annual period, and where the remaining period is less than one year, the rent shall be paid at the end of the lease term.

Article 227 Lessor’s Remedies in Case of Non-Payment of Rent
Where the lessee failed to pay or delayed in paying the rent without cause, the lessor may require the lessee to pay the rent within a reasonable period. If the lessee fails to pay the rent at the end of such period, the lessor may terminate the contract.


Article 228 Lessee’s Remedies in Case of Third Party Claim; Duty to Notify
If due to any claim by a third person, the lessee is unable to use or accrue benefit from the lease item, the lessee may require reduction in rent or refuse to pay rent.
In case of any claim by a third person, the lessee shall timely notify the lessor.

Article 229 Leasing Contract Not Affected by Change of Ownership
Any change of ownership to the lease item does not affect the validity of the leasing contract.

Article 230 Sale of Dwelling Unit under Lease
Where the lessor is to sell a dwelling unit under a lease, it shall give the lessee a reasonable advance notice before the sale, and the lessee has the right of first refusal under the same conditions.

Article 231 Lessee’s Remedies in Case of Damage Not Attributable to Itself
Where the lease item was damaged or lost in part or in whole due to any reason not attributable to the lessee, the lessee may require reduction in rent or refuse to pay rent; where the purpose of the contract is frustrated due to damage to or loss of the lease item in part or in whole, the lessee may terminate the contract.

Article 232 Non-Term Lease
Where the term of a lease was not prescribed or clearly prescribed, and cannot be determined in accordance with Article 61 hereof, such lease is deemed a non-term lease. Either party may terminate the contract at any time, provided that the lessor shall give the lessee a reasonable advance notice before it terminates the contract.

Article 233 Lessee Entitled to Terminate in Case of Danger to Safety or Health
Where the lease item poses a danger to the safety or health of the lessee, the lessee may terminate the contract at any time even if the lessee was aware of the quality non-compliance of the lease item at the time of conclusion of the contract.

Article 234 Lease of Dwelling Unit Assumable
Where the lessee is deceased during the term of a dwelling unit lease, the person jointly living in the unit with the lessee while the lessee was alive may continue leasing it on the terms of the original leasing contract.

Article 235 Condition of Lease Item at End of Lease Term
The lessee shall return the lease item at the end of the lease term. The returned lease item shall be in a condition resulting from its use in the prescribed manner or in a manner consistent with its nature.

Article 236 Effect of Continued Use Beyond Lease Term
Upon expiration of the lease term, if the lessee continues to use the lease item without objection by the lessor, the original leasing contract remains effective, provided that it becomes a non-term lease.

                
Chapter Fourteen: Financial Leasing Contracts

Article 237 Definition of Financial Leasing Contract
A financial leasing contract is a contract whereby the lessor, upon purchase of the lessee-selected lease item from a lessee-selected seller, provides the lease item to the lessee for its use, and the lessee pays the rent.

Article 238 Terms of Financial Leasing Contract; Writing Requirement
A financial leasing contract includes terms such as the name, quantity, specifications, technical performance, and method of inspection of the lease item, the lease term, the rental components and the time, method and currency of payment, as well as the ownership of the lease item at the end of the lease term, etc.
A financial leasing contract shall be in writing.

Article 239 Lessee’s Assumption of Buyer’s Rights
Under the sales contract concluded by the lessor according to the lessee’s selection of the seller and the lease item, the seller shall deliver the subject matter to the lessee in accordance with the contract, and the lessee enjoys the rights of the buyer in respect of taking delivery of the subject matter.

Article 240 Lessee’s Assumption of Buyer’s Remedies in Case of Seller’s Non-performance
The lessor, the seller and the lessee may agree that any claim arising from the seller’s non-performance of its obligations under the sales contract will be made by the lessee. Where the lessee makes such a claim, the lessor shall provide assistance.

Article 241 Certain Amendment of Sales Contract Subject to Consent by Lessee
Absent consent by the lessee, the lessor may not amend any lessee-related term in the sales contract concluded by it according to the lessee’s selection of the seller and the lease item.

Article 242 Exclusion of Lease Item from Bankruptcy Assets of Lessee
Title to the lease item vests in the lessor. In case the lessee enters into bankruptcy, the lease item is not part of its bankruptcy assets.

Article 243 Determination of Rental Components
Unless otherwise agreed by the parties, the rent under a financial leasing contract shall be determined based on the major portion of or full costs of purchasing the lease item and the lessor’s reasonable profit.

Article 244 Lessor Not Liable for Non-fitness of Lease Item; Exceptions
Where the lease item does not comply with the contract or is not fit for the intended purpose, the lessor is not liable, except where the lessee relied on the skills of the lessor in selecting the lease item or the lessor interfered in the selection thereof.

Article 245 Warranty by Lessor
The lessor shall give warranty in respect of the lessee’s possession and use of the lease item.

Article 246 Lessor Not Liable for Damage or Injury
If while in the possession of the lessee, the lease item caused personal injury or property damage to any third person, the lessor is not liable.

Article 247 Lessee’s Obligation of Due Care; Maintenance Obligations
The lessee shall keep and use the lease item with due care. While in possession of the lease item, the lessee shall perform the obligations of maintenance and repair thereof.

Article 248 Lessor’ s Remedies in Case of Non-payment by Lessee
The lessee shall pay the rent in accordance with the contract.
Where the lessee fails to pay the rent within a reasonable period after receiving demand for payment from the lessor, the lessor may require payment of the full rent; or it may terminate the contract and repossess the lease item.

Article 249 Partial Refund in Case of Termination by Lessor
Where the parties agreed that title to the lease item will vest in the lessee at the end of the lease term, and after paying a major portion of the rent, the lessee is unable to pay the remaining balance, resulting in the lessor’s termination of the contract and repossession of the lease item, if the value of the repossessed lease item exceeds the rent owed by the lessee and other expenses, the lessee may require partial refund.

Article 250 Ownership of Lease Item at End of Lease Term
The lessor and the lessee may agree on the ownership of the lease item at the end of the lease term. Where ownership of the lease item was not prescribed or clearly prescribed, and cannot be determined in accordance with Article 61 hereof, title to the lease item shall vest in the lessor.

                 
Chapter Fifteen: Contracts of Hired Works

Article 251 Definition of Contract of Hired Work
A contract of hired work is a contract whereby the hiree completes certain work as required by the hirer and delivers the work product, and the hirer pays the remuneration. Hired works include works such as processing, custom-made work, repair, reproduction, testing, and inspection, etc.

Article 252 Terms of Contract of Hired Work
A contract of hired work includes terms such as the subject matter of hire, quantity, quality, remuneration, method of hire, supply of materials, time of performance, standard applicable to and method of acceptance inspection, etc.

Article 253 Use of Hiree’s Own Resources; Delegation of Main Task Subject to Consent
The hiree shall use its own equipment, skills and labor to complete the main tasks, except otherwise agreed by the parties.
Where the hiree has delegated a main task of the hired work to a third person for completion, it shall be responsible to the hirer for the work product completed thereby; if the delegation was not approved by the hirer, the hirer may also terminate the contract.

Article 254 Delegation of Ancillary Task by Hiree
The hiree may delegate any ancillary task of the hired work to a third person for completion. Where the hiree delegated any ancillary task of the hired work to a third person for completion, it shall be responsible to the hirer for the work product completed thereby.

Article 255 Materials Supplied by Hiree Subject to Inspection
Where the hiree is to supply the materials, it shall select the materials in accordance with the contract and shall make such materials available for inspection by the hirer.

Article 256 Hiree’s Timely Inspection of Materials Supplied by Hirer
Where the hirer is to supply the materials, it shall supply the materials in accordance with the contract. The hiree shall timely inspect the materials supplied by the hirer, and where non-compliance is discovered, it shall timely instruct the hirer to replace or supplement the materials or otherwise cure the non-compliance.
The hiree may not replace the materials supplied by the hirer without authorization, and may not replace any component which does not require repair.

Article 257 Hiree’s Remedies in Case of Hirer’s Delay in Responding
Where the hiree discovers that the drawings or technical requirements provided by the hirer are unreasonable, it shall timely notify the hirer. Where the hiree sustains any loss due to reasons such as the hirer’s delay in responding, etc., the hirer shall pay damages.

Article 258 Hirer Responsible for Its Change of Requirements
Where the hirer changed its requirements for the hired work while the work was under way, thereby causing loss to the hiree, the hirer shall indemnify the hiree.

Article 259 Hirer’s Obligation to Assist in Performance
Where performance of the hired work requires assistance by the hirer, it is obligated to provide assistance. Where the hired work is not capable of being completed due to failure by the hirer to fulfill its obligation to assist, the hiree may demand performance from the hirer within a reasonable period and extend the time of its own performance; where the hirer fails to perform at the end of such period, the hiree may terminate the contract.

Article 260 Hirer’s Right to Monitor
In the course of performing the hired work, the hiree shall consent to any necessary monitoring and inspection by the hirer. Any monitoring or inspection conducted by the hirer may not impair the normal work of the hiree.

Article 261 Delivery of Work Product by Hiree
Upon completion of the hired work, the hiree shall deliver the work product to the hirer and shall submit thereto the required technical materials and related quality certificate. The hirer shall conduct acceptance inspection of the work product.

Article 262 Hirer’s Remedies in Case of Quality Non-compliance
Where the work product delivered by the hiree fails to meet the quality requirements, the hirer may require the hiree to assume liabilities for breach of contract by way of repair, remaking, reduction in remuneration, or payment of damages.

Article 263 Time of Payment of Remuneration
The hirer shall pay the remuneration at the prescribed time.
Where the time of payment was not prescribed or clearly prescribed, and cannot be determined in accordance with Article 61 hereof, the hirer shall make payment at the time of the hiree’s delivery of the work product; where the work product is partially delivered, the hirer shall make payment accordingly.

Article 264 Hiree’s Possessory Lien in Case of Non-Payment
Where the hirer fails to pay the remuneration or cost of materials, etc. to the hiree, the hiree is entitled to a possessory lien on the work product completed, except otherwise agreed by the parties.

Article 265 Hiree’s Obligation of Due Care for Materials and Work Product
The hiree shall keep the materials supplied by the hirer and the completed work product with due care, and shall be liable for damages in case of any damage or loss due to improper care.

Article 266 Hiree’s Confidentiality Obligations
The hiree shall keep the relevant information confidential as required by the hirer, and may not retain any replica or technical material without permission by the hirer.

Article 267 Liability of Joint Hirees
Joint hirees are jointly and severally liable to the hirer, except otherwise agreed by the parties.

Article 268 Hirer’s Termination Right Subject to Indemnification
The hirer may terminate the contract of hired work at any time, provided that it shall indemnify the hiree for its loss as a result, if any.

                
Chapter Sixteen: Contracts for Construction Projects

Article 269 Definition of Contract for Construction Project
A contract for construction project is a contract whereby the contractor performs project construction, and the developer pays the price.
Contracts for construction projects include contracts for survey, design, and construction.

Article 270 Writing Requirement
A contract for construction project shall be in writing.

Article 271 Tendering Process in Construction Project
Tendering for a construction project shall be conducted in an open, fair and impartial manner in accordance with the relevant laws.

Article 272 Contracting and Subcontracting in Construction Projects
The developer may enter into a contract for construction project with a prime contractor, or enter into contracts for survey, design, and construction with the surveyor, designer, and constructor respectively. The developer may not divide a construction project which should be completed by one contractor into several parts and contract them out to several contractors.
Subject to consent by the developer, the prime contractor or the contractor for survey, design, or construction may delegate part of the contracted work to a third person. The third person and the prime contractor or the contractor for survey, design, or construction shall be jointly and severally liable to the developer in respect of the work product completed by such third person. The contractor may not assign in whole to any third person the contracted construction project, or divide the whole contracted construction project into several parts and separately assign each part to a third person under the guise of sub-contracting.
The contractor is prohibited from sub-contracting any part of the project to an entity not appropriately qualified. A sub-contractor is prohibited from further sub-contracting its contracted work. The main structure of the construction project must be constructed by the contractor itself.

Article 273 Major State Construction Projects
A contract for a major state construction project shall be concluded in accordance with the procedure prescribed by the state and in compliance with the state-approved documents such as the investment plan and feasibility studies report, etc.

Article 274 Terms of Contract for Survey or Design
A contract for survey or design includes terms such as the time limit for submission of the relevant basic information and documents (including budget estimate), the quality requirements, fees, and other conditions of cooperation, etc.

Article 275 Terms of Construction Contract
A construction contract includes terms such as the scope of the project, the construction period, the time for commencement and completion of any work to be commissioned in the interim, the quality of the project, the cost of the project, the time for delivery of technical materials, the responsibilities for the supply of materials and equipment, the appropriation of funds and settlement of account, inspection upon completion of the project, the scope and period of quality warranty, and cooperation between the parties, etc.

Article 276 Supervision of Construction Project
Where the construction project is subject to supervision, the developer shall enter into an agency appointment contract for project supervision with a project supervisor in writing. The rights, obligations and associated legal liabilities of the developer and supervisor shall be prescribed in accordance with the provisions hereof concerning agency appointment contracts and the provisions of other relevant laws and administrative regulations.

Article 277 Developer’s Right to Inspect
Provided that the developer does not interfere with the normal operation of the contractor, it may inspect the progress and quality of the work at any time.

Article 278 Concealed Work
In the case of concealed work, the contractor shall give the developer notice for inspection prior to concealment. Where the developer fails to timely conduct inspection, the contractor may extend the relevant project milestones, and is entitled to claim damages for work stoppage or work slowdown, etc.

Article 279 Inspection of Completed Project; No Use Prior to Inspection
Upon completion of the construction project, the developer shall conduct acceptance inspection according to the construction drawings and specifications, and in accordance with the rules of construction inspection and quality inspection standard prescribed by the state. Once the construction project has passed the acceptance inspection, the developer shall pay the prescribed price and accept the construction project. The completed construction project may be put into use only after it has passed the acceptance inspection; if the construction project has not been inspected or has failed the inspection, it may not be put into use.

Article 280 Developer’s Remedies in Case of Non-compliant Survey or Design
Where the developer sustains any loss from construction delay due to non-compliance of the survey or design or due to delayed delivery of the survey or design documents, the surveyor or the designer shall continue to improve the survey or design, reduce or forgo the survey fee or design fee, and pay damages.

Article 281 Developer’s Remedies in Case of Non-conforming Construction
Where the construction project fails to meet the prescribed quality requirements due to any reason attributable to the constructor, the developer is entitled to require the constructor to repair, re-construct or make alteration free of charge within a reasonable time. Where delivery of the project is delayed due to such repair, re-construction or alteration, the constructor shall be liable for breach of contract.

Article 282 Contractor Liable for Personal and Property Damage
Where the construction project caused personal injury and property damage during its reasonable usage period due to any reason attributable to the contractor, the contractor shall be liable for damages.

Article 283 Contractor’s Remedies in Case of Developer’s Failure to Provide Necessary Conditions
Where the developer fails to provide raw materials, equipment, site, funds, or technical information at the prescribed time and in accordance with the contractual requirements, the contractor may extend the relevant project milestones, and is entitled to claim damages for work stoppage or slowdown, etc.

Article 284 Contractor’s Remedies in Case of Project
Interruption Due to Reasons Attributable to Developer If an ongoing project is stopped or delayed due to any reason attributable to the developer, the developer shall take the appropriate measures to make up or mitigate the loss, and shall indemnify the contractor for its loss and out-of-pocket expenses arising from resulting work stoppage, slowdown, reshipment, re-dispatch of mechanical equipment, and excess inventory of materials and assemblies, etc.

Article 285 Surveyor’s Remedies in Case of Developer’s Failure to Cooperate
Where in the course of survey or design, any repeating work, work stoppage or change of design occurs due to the developer’s change of plan, the incorrect information provided by it, or its failure to provide the working conditions necessary for the survey or design at the prescribed time, the developer shall increase the fees in light of the actual amount of work done by the surveyor or designer.

Article 286 Contractor’s Remedies in Case of Developer’s Failure to Pay Price
If the developer failed to pay the price in accordance with the contract, the contractor may demand payment from the developer within a reasonable period. Where the developer fails to pay the price at the end of such period, the contractor may enter into an agreement with the developer to liquidate the project, and may also petition the People’s Court to auction the project in accordance with the law, unless such project is not fit for liquidation or auction in light of its nature. The construction project price shall be paid in priority out of proceeds from the liquidation or auction of the project.

Article 287 Provisions Governing Contracts of Hired Works Applicable
A matter not provided for in this Chapter shall be governed by the relevant provision governing contracts of hired works.


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