Lloyd's Maritime and Commercial Law Quarterly
TOWARDS A CONTRACT LAW OF CHINA: SOME SALIENT FEATURES
Duncan Webb*
This article attempts to identify the emerging principles and framework of the contract law of the People’s Republic of China. While there are a number of similarities between the law of contract in China and that of other developed economies, the author stresses that these similarities do not indicate a similar underlying jurisprudence. There are fundamental differences in the way contracts, and the law, is viewed in China. However, this is not to say that the approach is unprincipled. The author identifies and discusses a number of cases, and attempts to formulate a number of principles which may underpin some of the decisions that the courts have made, which appear unjustifiable by western standards. Those principles include: equality and mutual benefit, limited contractual autonomy, the paramountcy of the State interest, the recognition of contract as a matrix of interests, a relational concept of contract, and a reluctance of the courts to enforce onerous duties.
A. Introduction
There is a widespread conception that matters of contract in China are not determined according to any particular set of norms or rules but rather according to the existence of connections and bureaucratic power. While there is an element of truth in this, such a view may be largely due to a failure to appreciate the radically different basis on which the law of contract of China is founded. One of the key factors which sets western economies apart from the Chinese economy is the established legal structure through which they operate. In general the legal systems of developed economies, be they civilian or common law based, are similar in principle. The keystone of western contract law is autonomy. The parties are free to enter into any contractual relations they like within certain minimum bounds (such as legality). Parties are prima facie entitled to enter into any contract they wish, without obtaining any permissions and only rarely will a court see fit to enquire into the equality of any exchange. Where the parties are under no special disadvantage, the bargain will be binding regardless of any possible disparity. The lack of government intervention in markets typifies most western legal and economic frameworks.
The framework upon which the Chinese law of contract rests could not be more dissimilar. First and foremost the Chinese economy remains a State-planned, and largely State-owned, economy. The Constitution of the PRC, which was amended in 1993, proclaims that “The State-owned economy is the sector of the socialist economy under the
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