The Supreme People's Court on the application

Interpretation of some issues on the general principles of contracts in the the People's Republic of China Civil Code

(Adopted at the 1889th meeting of the Judicial Committee of the Supreme People's Court on May 23, 2023, and effective as of December 5, 2023)

This Interpretation is formulated in accordance with the Civil Code of the People's Republic of China, the Civil Procedure Law of the People's Republic of China and other relevant laws and regulations, and in combination with trial practice, in order to correctly hear cases of contract disputes and cases of disputes over creditor's rights and debts not arising from contracts, and to protect the legitimate rights and interests of the parties in accordance with the law.

I. General Provisions

Article 1 when interpreting the terms of a contract in accordance with the provisions of paragraph 1 of Article 142 and paragraph 1 of Article 466 of the Civil Code, the people's court shall determine the meaning of the disputed terms on the basis of the usual meaning of the words and expressions, in combination with the relevant provisions, the nature and purpose of the contract, customs and the principle of good faith, with reference to the background of the contract, the process of consultation, the act of performance and other factors.

If there is evidence that the parties have other common understanding of the terms of the contract that is different from the usual meaning of the words, the people's court shall not support one party's claim to understand the terms of the contract in accordance with the usual meaning of the words.

If there are two or more interpretations of a contract clause that may affect the validity of the clause, the people's court shall choose the interpretation that is conducive to the validity of the clause; if it is a gratuitous contract, it shall choose the interpretation that is less burdensome to the debtor.

Article 2 Under the following circumstances, if it does not violate the mandatory provisions of laws and administrative regulations and does not violate public order and good customs, the people's court may determine the "trading habits" referred to in the Civil Code ":

(I) practices between the parties in dealing activities;

Practices that (II) know or should know at the time of the conclusion of the contract for the counterparty in the local area or in a particular field or industry.

In the case of trading habits, the burden of proof is borne by the party making the claim.

II. Conclusion of the Contract

Article 3 If there is a dispute between the parties as to whether a contract is established, and the people's court is able to determine the name or names, subject matter and quantity of the parties, it shall generally determine that the contract is established. However, unless otherwise provided by law or otherwise agreed by the parties.

If a contract can be determined to have been established in accordance with the provisions of the preceding paragraph, the people's court shall determine the contents of the contract in accordance with the provisions of Articles 51 and 51 of the Civil Code.

If the parties claim that the contract is invalid or request to cancel or terminate the contract, and the people's court considers that the contract is not established, it shall, in accordance with the provisions of Article 53 of the "Several Provisions of the Supreme People's Court on Evidence in Civil Litigation", conduct the trial on whether the contract is established or not, and may re-designate the time limit for adducing evidence according to the specific circumstances of the case.

Article 4 If a contract is concluded by means of bidding, the people's court shall support the request of the parties to confirm that the contract is established when the notice of winning the bid reaches the winning bidder. If, after the establishment of a contract, the parties refuse to sign a written contract, the people's court shall determine the contents of the contract on the basis of the tender documents, tender documents and notice of winning the bid.

If a contract is concluded by means of public bidding such as on-site auction or online auction, and the parties request to confirm that the contract is established when the auctioneer falls the hammer and the electronic trading system confirms the transaction, the people's court shall support it. After the establishment of the contract, if the parties refuse to sign a confirmation of the transaction, the people's court shall determine the content of the contract on the basis of the auction announcement, the bidder's quotation, etc.

The property rights exchange and other institutions preside over auctions and listing transactions, and the auction announcements, trading rules and other documents published by them publicly determine the conditions that need to be met for the establishment of the contract. If the parties request to confirm that the contract has been established when the conditions are met, the people's court shall support it.

Article 5 If a third party commits fraud or coercion, so that the parties enter into a contract against their true will, and the party who suffers losses requests the third party to bear the liability for compensation, the people's court shall support it in accordance with the law; if the parties also violate the principle of good faith, the people's court shall determine the corresponding liability according to their respective faults. However, if the law or judicial interpretation provides otherwise on the civil liability of the parties and third parties, such provisions shall prevail.

Article 6 If the parties agree to conclude a contract within a certain period of time in the future in the form of a subscription, order, reservation, etc., or pay a deposit for the conclusion of a contract within a certain period of time in the future, and can determine the subject and subject matter of the contract to be concluded in the future, the people's court shall determine the establishment of the appointment contract.

The parties only express the intention of the transaction by signing a letter of intent or memorandum, and do not agree to conclude a contract within a certain period of time in the future, or although there is an agreement, it is difficult to determine the subject and subject matter of the contract to be concluded in the future, and if one party claims to make an appointment for the establishment of the contract, the people's court will not support it.

The subscription letter, order letter, reservation letter, etc. concluded by the parties have reached an agreement on the main contents of the contract subject matter, quantity, price or remuneration, and meet the conditions for the establishment of the contract stipulated in the first paragraph of Article 3 of this interpretation. If a contract is concluded separately within a certain period of time, or although there is an agreement, one party has performed the performance and the other party accepts it, the people's court shall determine that this contract is established.

Article 7 After the appointment contract comes into effect, if one of the parties refuses to conclude this contract or violates the principle of good faith while negotiating the conclusion of this contract, the people's court shall determine that the party has failed to perform the obligations stipulated in the appointment contract.

If the people's court determines whether one of the parties violates the principle of good faith in negotiating the conclusion of the contract, it shall comprehensively consider whether the conditions put forward by the party at the time of the consultation clearly deviate from the content of the appointment contract and whether reasonable efforts have been made to negotiate.

Article 8 After the appointment contract comes into effect, if one of the parties fails to perform its obligation to conclude this contract, and the other party requests it to compensate for the losses caused by it, the people's court shall support it in accordance with the law.

If the parties have agreed on the compensation for losses stipulated in the preceding paragraph, they shall follow the agreement; if there is no agreement, the people's court shall comprehensively consider the degree of completeness of the content of the appointment contract and the degree of achievement of the conditions for the conclusion of this contract.

Article 9 If the terms of a contract conform to the provisions of paragraph 1 of Article 496 of the Civil Code, the people's court shall not support the claim that the terms of the contract are not standard terms on the grounds that the contract is made on the basis of the model text of the contract or that the parties have expressly agreed that the terms of the contract are not standard terms.

If one of the parties engaged in business activities claims that the contract terms drawn up in advance and not negotiated with the other party are not standard terms on the grounds of not actually repeated use, the people's court shall not support them. However, unless there is evidence that the clause is not pre-drafted for repeated use.

Article 10 Where the party providing the standard terms adopts obvious marks such as words, symbols and fonts that are usually enough to attract the attention of the other party at the time of conclusion of the contract, the people's court may determine that it has fulfilled the prompt obligation stipulated in paragraph 2 of Article 496 of the Civil Code.

If the party providing the standard clause provides the other party with a written or oral explanation of the concept, content and legal consequences of the abnormal clause that has a major interest in the other party in accordance with the request of the other party, the people's court may determine that it has already Fulfill the obligation of explanation stipulated in the second paragraph of Article 496 of the Civil Code.

The party providing the format clause bears the burden of proof that it has fulfilled its obligation to prompt or explain. In the case of an electronic contract concluded through an information network such as the Internet, if the party providing the format clause claims that it has fulfilled its obligation to prompt or explain only by setting up a check, pop-up window, etc., the people's court shall not support it, except where the evidence is in accordance with the provisions of the preceding two paragraphs.

Validity of 3. contract

Article 11: One party is a natural person. Based on the age, intelligence, knowledge, and experience of the party, combined with the complexity of the transaction, it can be determined that it lacks the nature of the contract, the legal consequences of the conclusion of the contract, or the specific risks in the transaction. If the people's court has the cognitive ability, the people's court may determine that the situation constitutes a "lack of judgment ability" as stipulated in Article 151 of the Civil Code ".

Article 12 After the contract is established in accordance with the law, if the party with the obligation of reporting for approval fails to perform the obligation of reporting for approval or the performance of the obligation of reporting for approval does not conform to the provisions of the contract or the provisions of laws or administrative regulations, and the other party requests it to continue to perform the obligation of reporting for approval, the people's court shall support it.

If the people's court decides that one of the parties has fulfilled its obligation to report for approval, but it still fails to perform, and the other party claims to terminate the contract and requests it to bear the liability for compensation by reference to the liability for breach of contract, the people's court shall support it.

Before the contract is approved, if one of the parties sues to request the other party to perform the main obligations stipulated in the contract and refuses to change the claim after explanation, the people's court shall decide to reject its claim, but it shall not affect its separate litigation.

If the party with the obligation to report for approval has gone through the formalities such as applying for approval or has fulfilled the obligation of reporting for approval as determined by the effective judgment, the approving organ decides not to approve, and the other party requests it to bear the liability for compensation, the people's court shall not support it. However, if the contract is not approved due to reasons attributable to the parties, such as delay in performing the obligation of reporting for approval, and the other party requests compensation for the losses suffered as a result, the people's court shall deal with it in accordance with the provisions of Article 157 of the Civil Code.

Article 13 If a contract is invalid or revocable, the people's court shall not support the claim that the contract is valid on the grounds that the contract has been filed with the relevant administrative department, has been approved by the approval authority or has been registered for the change or transfer of property rights in accordance with the contract.

Article 14 If the parties conclude more than one contract relating to the same transaction, the people's court shall determine that the contract concluded with a false intention is invalid. In order to circumvent the mandatory provisions of laws and administrative regulations, if the parties hide their true intentions with false intentions, the people's court shall determine the validity of the hidden contract in accordance with the provisions of the first paragraph of Article 153 of the Civil Code; in order to circumvent laws, Administrative regulations stipulate that contracts should be approved and other procedures, concealing true intentions with false intentions, the people's court shall determine the validity of the concealed contract in accordance with the provisions of the second paragraph of Article 52 of the Civil Code.

If a concealed contract is found to be invalid or determined not to be effective in accordance with the provisions of the preceding paragraph, the people's court shall, on the basis of the facts, determine the civil liability of the parties in accordance with the provisions of Article 157 of the Civil Code. However, unless otherwise provided by law.

If the parties enter into multiple contracts for the same transaction are true intentions and there are no other circumstances affecting the validity of the contract, the people's court shall determine whether the content of the contract has been changed on the basis of ascertaining the order in which the contracts were established and the actual performance. Where laws and administrative regulations prohibit the modification of the contents of a contract, the people's court shall determine that the corresponding modification of the contract is invalid.

Article 15 When the people's court determines the relationship of rights and obligations between the parties, it shall not be bound by the name used in the contract, but shall be based on the content of the contract. If the relationship of rights and obligations claimed by the parties is inconsistent with the relationship of rights and obligations determined according to the contents of the contract, the people's court shall determine the actual civil legal relationship between the parties in the light of the facts such as the background of the contract, the purpose of the transaction, the structure of the transaction, the act of performance and whether the parties have fabricated the subject matter of the transaction.

Article 16 If a contract violates the mandatory provisions of laws and administrative regulations and has one of the following circumstances, the perpetrator shall bear administrative or criminal liability to achieve the legislative purpose of the mandatory provisions, the people's court may, in accordance with the provisions of paragraph 1 of Article 153 of the Civil Code, "except that the mandatory provision does not render the civil legal act invalid", determine that the contract is not invalid because of violation of the mandatory provision:

Although the mandatory provisions of the (I) are aimed at maintaining public order, the actual performance of the contract has a significantly minor impact on public order, and the invalidity of the contract will lead to an unfair and just outcome of the case;

(II) mandatory provisions are designed to safeguard the government's national interests such as taxation, land transfer fees, or the legitimate interests of other civil subjects rather than the civil rights and interests of the parties to the contract, the validity of the contract will not affect the realization of the purpose of the specification;

(III) mandatory provisions are intended to require one of the parties to strengthen risk control, internal management, etc., the other party is unable or not obliged to examine whether the contract violates the mandatory provisions, and the invalidity of the contract will make it bear adverse consequences;

(IV) one of the parties, although in the conclusion of the contract in violation of the mandatory provisions, but after the conclusion of the contract it has the conditions to correct the violation of the mandatory provisions but in violation of the principle of good faith not to correct;

Other circumstances as prescribed by (V) laws and judicial interpretations.

The mandatory provisions of laws and administrative regulations are aimed at regulating the performance of the contract after the conclusion of the contract. If the parties request that the contract be invalid on the grounds that the contract violates the mandatory provisions, the people's court shall not support it. However, the performance of the contract will inevitably lead to a violation of mandatory provisions or other provisions of the law or judicial interpretation.

If the contract is determined to be valid in accordance with the preceding two paragraphs, but the illegal acts of the parties have not been dealt with, the people's court shall make judicial recommendations to the relevant administrative department. If the act of the party is suspected of committing a crime, the clues of the case shall be transferred to the criminal investigation organ; if it is a criminal private prosecution case, the party shall be informed that the party may bring a separate lawsuit to the people's court with jurisdiction.

Article 17 Although a contract does not violate the mandatory provisions of laws or administrative regulations, the people's court shall determine the contract as invalid in accordance with the provisions of the second paragraph of Article 153 of the Civil Code in any of the following circumstances:

(1) The contract affects national security such as political security, economic security, military security, etc;

(II) contracts affect social stability, the order of fair competition, or damage social public interests and violate public order;

(III) contract deviates from social morality, family ethics or damages personal dignity and violates good customs.

When determining whether the contract violates public order and good customs, the people's court shall be guided by the socialist core values, comprehensively consider the subjective motivation and transaction purpose of the parties, the supervision intensity of the government departments, the frequency of the parties engaging in similar transactions within a certain period of time, the social consequences of the behavior and other factors, and fully reason in the judgment documents. If the parties do conduct transactions due to their daily needs, do not have a significant impact on social public order, and do not affect national security, nor violate good customs, the people's court shall not determine the contract to be invalid.

Article 18 Although the provisions of laws and administrative regulations contain expressions such as "should", "must" or "must not", the provisions are intended to restrict or confer civil rights. If the actor violates the provisions, it will constitute unauthorized disposition, unauthorized agency, ultra vires representative, etc., or cause the contract counterpart or the third party to obtain civil rights such as the right of revocation and rescission, the people's court shall determine the validity of the contract in accordance with the civil legal consequences of violation of the provisions stipulated by laws and administrative regulations.

Article 19 The people's court shall not support a contract concluded for the purpose of transferring or creating property rights, where the parties or the real right holder only claims that the contract is invalid on the grounds that the transferor has no ownership or disposition of the subject matter at the time of the conclusion of the contract; where the contract cannot be performed because the real right holder has not obtained the subsequent consent or the right to dispose of the person after the transfer, the transferee claims to terminate the contract and requests the liability for breach of the contract, the people's court shall support it in accordance with the law.

If the contract stipulated in the preceding paragraph is found to be valid and the transferor has delivered or transferred the property to the transferee, and the real right holder requests that the property rights have not changed or requests the return of the property, the people's court shall support it. However, the assignee acquires property rights in good faith in accordance with the provisions of Article 341 of the Civil Code, etc.

Article 20 In order to limit the representation of the legal representative of a legal person or the person in charge of an unincorporated organization, laws and administrative regulations stipulate that the matters involved in the contract shall be decided by the authority or decision-making body of the legal person or unincorporated organization, or shall be decided by the executive body of the legal person or unincorporated organization, if the counterpart who has not fulfilled the obligation of reasonable review claims that the contract has effect on a legal person or an unincorporated organization and is liable for breach of contract, the people's court shall not support it, but if the legal person or unincorporated organization is at fault, it may be judged to bear the corresponding liability by reference to the provisions of Article 157 of the Civil Code. If the counterpart has fulfilled his obligation of reasonable examination and constitutes a representative, the people's court shall deal with it in accordance with the provisions of Article 54 of the Civil Code.

The matters involved in the contract do not exceed the representative authority of the legal representative or the person in charge as stipulated by laws and administrative regulations, but exceed the restrictions on the representative rights of the legal person or unincorporated organization's articles of association or authority. If the counterpart claims that the contract is effective against the legal person or unincorporated organization and it bears the liability for breach of contract, the people's court shall support it according to law. However, except where a legal person or an unincorporated organization provides evidence that the counterpart knew or should have known of the restriction.

Where a legal person or an unincorporated organization, after assuming civil liability, recovers the losses caused by the ultra vires representative's acts from the legal representative or person in charge at fault, the people's court shall support it in accordance with the law. Where the law or judicial interpretation provides otherwise on the civil liability of the legal representative or person in charge, such provisions shall apply.

Article 21 If a staff member of a legal person or an unincorporated organization enters into a contract in the name of a legal person or an unincorporated organization on a matter beyond the scope of his or her authority, and the relative claims that the contract has effect on the legal person or the unincorporated organization and that it is liable for breach of contract, the people's court shall not support it. However, if a legal person or an unincorporated organization is at fault, the people's court may judge it to bear the corresponding liability for compensation by reference to the provisions of Article 157 of the Civil Code. If the aforementioned circumstances constitute apparent agency, the people's court shall deal with them in accordance with the provisions of Article 172 of the Civil Code.

If the matters involved in the contract are in any of the following circumstances, the people's court shall determine that the staff of the legal person or unincorporated organization exceeded the scope of their powers when concluding the contract:

(I) matters that should be decided by the authority or decision-making body of a legal person or an unincorporated organization according to law;

(II) matters that should be decided by the executive body of a legal person or an unincorporated organization according to law;

(III) matters that should be implemented by legal representatives or persons in charge on behalf of legal persons or unincorporated organizations according to law;

(IV) is not a matter that can normally be dealt with in accordance with its functions and powers.

If the matters involved in the contract do not exceed the scope of authority determined in accordance with the preceding paragraph, but exceed the restrictions on the scope of authority of the staff of a legal person or an unincorporated organization, and the counterparty claims that the contract has the effect of a legal person or an unincorporated organization and that it is liable for breach of contract, the people's court shall support it. However, except where a legal person or an unincorporated organization provides evidence that the counterpart knew or should have known of the restriction.

If a legal person or an unincorporated organization, after assuming civil liability, recovers compensation from a staff member who intentionally or has gross negligence, the people's court shall support it in accordance with the law.

Article 22 If the legal representative, person in charge or staff member enters into a contract in the name of a legal person or an unincorporated organization without exceeding his authority, and the legal person or unincorporated organization only claims that the seal affixed to the contract is not a record seal or a forged seal, the people's court shall not support it.

If the contract is concluded in the name of a legal person or an unincorporated organization, but only the legal representative, person in charge or staff member signs or fingerprints without the seal of the legal person or unincorporated organization, and the counterpart can prove that the legal representative, person in charge or staff member did not exceed the authority when concluding the contract, the people's court shall determine that the contract has effect on the legal person or unincorporated organization. However, unless the parties agree to affix a seal as a condition for the establishment of the contract.

If the contract is only stamped with the seal of a legal person or an unincorporated organization without the signature or fingerprint of the person, and the relative can prove that the contract was concluded by the legal representative, person in charge or staff member within the scope of his authority, the people's court shall determine that the contract has effect on the legal person or unincorporated organization.

Under the circumstances specified in the preceding three paragraphs, although the legal representative, person in charge or staff member exceeds the authority of representative or agency at the time of conclusion of the contract, but constitutes an apparent representative in accordance with the provisions of Article 54 of the Civil Code, or constitutes an apparent agency in accordance with the provisions of Article 172 of the Civil Code, the people's court shall determine that the contract has effect on legal persons or unincorporated organizations.

Article 23 Where a legal representative, person in charge or agent maliciously colludes with a counterpart to enter into a contract in the name of a legal person or an unincorporated organization, which harms the legitimate rights and interests of a legal person or an unincorporated organization, and the people's court shall support the claim of a legal person or an unincorporated organization that does not bear civil liability. If a legal person or an unincorporated organization requests the legal representative, person in charge or agent and the counterpart to bear joint and several liability for the losses suffered as a result, the people's court shall support it.

According to the evidence provided by the legal person or unincorporated organization, the people's court can determine that there is a high possibility of malicious collusion between the legal representative, the person in charge or the agent and the counterpart, taking into account the transaction habits between the parties, whether the contract is obviously unfair at the time of conclusion, whether the relevant personnel have obtained improper benefits, and the performance of the contract, the aforementioned persons may be required to make statements or provide corresponding evidence on the relevant facts such as the process of conclusion and performance of the contract. If the person refuses to make a statement without justifiable reasons, or if the statement is unreasonable and cannot provide corresponding evidence, the people's court may determine that the fact of malicious collusion is established.

Article 24 If the contract is not established, invalid, revoked or determined to be ineffective, and the parties request the return of the property, and the property can be returned after examination, the people's court shall, in accordance with the specific circumstances of the case, apply the methods of returning the subject matter in possession, correcting the records in the registration book, etc, the people's court shall judge the discount compensation on the basis of the market value of the property or the value calculated by other reasonable means on the date on which the contract is found to be unfounded, invalid, revoked or determined not to be effective.

In addition to the circumstances specified in the preceding paragraph, if the parties also request compensation for losses, the people's court shall, in the light of the return of property or compensation at a discount, comprehensively consider the facts such as property appreciation gains, depreciation losses and transaction costs, and reasonably determine the amount of compensation for losses in accordance with the degree of fault of both parties and the principle of good faith and fairness.

If the contract is not established, invalid, revoked or determined not to be effective, and the acts of the parties are suspected of being illegal and have not been dealt with, which may lead to one or both parties obtaining improper benefits through illegal acts, the people's court shall make judicial recommendations to the relevant administrative department. If the act of the party is suspected of committing a crime, the clues of the case shall be transferred to the criminal investigation organ; if it is a criminal private prosecution case, the party shall be informed that the party may bring a separate lawsuit to the people's court with jurisdiction.

Article 25 If the contract is not established, invalid, revoked or determined not to be effective, and the party who has the right to request the return of the price or remuneration requests the other party to pay the fund occupation fee, the people's court shall, within the scope of the party's request, follow the People's Bank of China The one-year loan market quotation rate (LPR) published by the National Interbank Funding Center authorized by the Bank of China is calculated. However, if the party occupying the funds is not at fault for the non-establishment, invalidity, revocation or determination of non-validity of the contract, it shall be calculated on the basis of the benchmark interest rate for similar deposits for the same period published by the People's Bank of China.

If both parties are mutually obligated to return, and the parties claim to perform at the same time, the people's court shall support it; if the party in possession of the subject matter uses the subject matter or can use it according to law, and the other party requests that the capital occupation fee payable and the subject matter should be collected should be offset against each other, the people's court shall support it, unless otherwise provided by law.

Performance of 4. Contract

Article 26 If one of the parties fails to perform non-major debts such as issuing invoices or providing supporting documents in accordance with the provisions of the law or the contract, and the other party requests to continue to perform the debt and compensate for the losses caused by the failure to perform the debt, the people's court shall support it in accordance with the law; if the other party requests to terminate the contract, the people's court shall not support it, unless the purpose of the contract cannot be achieved due to be achieved due to be performed or otherwise agreed by the other party.

Article 27 If the debtor or a third party and the creditor reach an agreement on debt relief after the expiration of the debt performance period, and there are no circumstances affecting the validity of the contract, the people's court shall determine that the agreement shall take effect when the parties express the same intention.

After the debtor or a third party fulfills the debt-in-kind agreement, the people's court shall determine that the corresponding original debt is eliminated at the same time; the debtor or the third party fails to perform the debt-in-kind agreement in accordance with the agreement, and fails to perform within a reasonable period of time after being urged. If the creditor chooses to request the performance of the original debt or the debt-in-kind agreement, the people's court shall support it, unless otherwise provided by the law or the parties.

The people's court shall not support the creditor's claim that the property right has changed since the confirmation letter or the conciliation letter has been made by the people's court on the basis of the agreement reached by the parties, or has the effect against a bona fide third party.

Where the debtor or a third party enters into a debt-for-property agreement with a property right that does not enjoy ownership or disposition, it shall be dealt with in accordance with the provisions of Article 19 of this Interpretation.

Article 28 If the debtor or a third party and the creditor reach an agreement on debt relief before the expiration of the time limit for the performance of the debt, the people's court shall determine the validity of the agreement on the basis of the trial of the relationship between the creditor and the debt.

If the parties agree that the debtor fails to pay off the debt at maturity, and the creditor may auction, sell or discount the debt-relief property in order to realize the claim, the people's court shall find the agreement valid. If the parties agree that the debtor fails to pay off the debt at maturity and the debt-relief property belongs to the creditor, the people's court shall find the agreement invalid, but it shall not affect the validity of other parts; if the creditor requests the auction, sale or discount of the debt-relief property in order to realize the claim, the people's court shall support it.

After the parties have entered into the debt-for-property agreement stipulated in the preceding paragraph, the debtor or a third party has not transferred the property rights to the creditor, and the creditor claims priority to be paid, the people's court will not support it; the debtor or a third party has transferred the property rights to If it is in the name of the creditor, it shall be dealt with in accordance with Article 68 of the Interpretation of the Supreme People's Court on the Application of the Guarantee System of the Civil Code of the the People's Republic of China.

Article 29 Where a third party as stipulated in the second paragraph of Article 222 of the Civil Code requests the debtor to perform his debts to himself, the people's court shall support it; where a request is made to exercise civil rights such as the right of revocation or rescission, the people's court shall not support it, unless otherwise provided by law.

If the contract is revoked or terminated in accordance with the law, and the debtor requests the creditor to return the property, the people's court shall support it.

If the debtor performs the debt to a third party in accordance with the agreement, the third party refuses to accept it, and the creditor requests the debtor to perform the debt to itself, the people's court shall support it, except where the debtor has already extinguished the debt by means of withdrawal and other means. If the third party refuses to receive or delays in receiving the claim, and the debtor requests the creditor to compensate for the losses caused thereby, the people's court shall support it in accordance with the law.

Article 30 The following civil subjects may be recognized by the people's court as a third person who has a legitimate interest in the performance of debts as stipulated in the first paragraph of Article 524 of the Civil Code:

(1) The guarantor or the third person who provides the guarantee of the goods;

The transferee, usufructuary or lawful possessor of the (II) security property;

(III) a subsequent subordinate security holder in the encumbered property;

(IV) a third party who has a legitimate interest in the debtor's property and that interest will be lost as a result of the enforcement of the property;

If the (V) debtor is a legal person or an organization without legal person, its capital contributor or sponsor;

If the (VI) debtor is a natural person, its close relatives;

(VII) other third parties who have a legitimate interest in the performance of the debt.

A third party obtains a claim against the debtor to the extent that it has performed on its behalf, provided that the interests of the creditor are not harmed.

If a guarantor claims a security right from another guarantor after obtaining a claim on behalf of the performance of a debt, it shall be dealt with in accordance with the provisions of Articles 13, 14 and the second paragraph of Article 18 of the Interpretation of the Supreme People's Court on the Application of the Guarantee System of the Civil Code of the People's the People's Republic of China of China.

Article 31 If the parties owe debts to each other, and one party refuses to perform its main debt on the grounds that the other party has not performed a non-main debt, the people's court shall not support it. However, unless the other party fails to perform a non-principal obligation that makes it impossible to achieve the purpose of the contract or unless otherwise agreed by the parties.

If one of the parties sues to request the other party to perform the debt, the defendant claims the defense of both parties to perform at the same time in accordance with the provisions of Article 525 of the Civil Code and the defense is established, and the defendant does not file a counterclaim, the people's court shall judge the defendant to perform his own debt while the plaintiff performs the debt, and make it clear in the judgment that the plaintiff applies for compulsory execution, if the people's court shall make a judgment that both parties shall perform their own debts at the same time and make it clear in the judgment that either party applies for compulsory execution, the people's court shall take enforcement action against the other party after the party has performed its own debts.

If one of the parties sues to request the other party to perform the debt, and the defendant claims that the plaintiff should perform the defense first and the defense is established in accordance with the provisions of Article 526 of the Civil Code, the people's court shall reject the plaintiff's claim, but it shall not affect the plaintiff's performance of the debt. File a separate lawsuit.

Article 32 After the establishment of the contract, due to policy adjustments or abnormal changes in market supply and demand, the price will rise or fall that the parties could not foresee at the time of the conclusion of the contract and is not a commercial risk, and the continued performance of the contract is obviously unfair to one of the parties The people's court shall determine that the basic conditions of the contract have undergone a "significant change" as stipulated in the first paragraph of Article 533 of the Civil Code ". However, contracts involving commodities with active market attributes and long-term price fluctuations, as well as venture capital financial products such as stocks and futures, are excluded.

The basic conditions of the contract have undergone major changes as stipulated in the first paragraph of Article 533 of the Civil Code. If the parties request to change the contract, the people's court shall not terminate the contract; if one of the parties requests to change the contract and the other party requests to terminate the contract, or if one of the parties requests to terminate the contract and the other party requests to change the contract, the people's court shall, in light of the actual situation of the case, decide on the principle of fairness.

If the people's court decides to modify or terminate the contract in accordance with the provisions of Article 533 of the Civil Code, it shall comprehensively consider the time of major changes in the basic conditions of the contract, the re-negotiation of the parties, and the losses caused to the parties due to the modification or termination of the contract. Factors, specify the time of contract modification or termination in the judgment.

If the parties have agreed in advance to exclude the application of Article 533 of the Civil Code, the people's court shall find the agreement invalid.

Preservation of 5. contracts

Article 33 If the debtor fails to perform its due debts to the creditor, and does not claim its creditor's rights or subordinate rights related to the creditor's rights to the counterparty by means of litigation or arbitration, resulting in the failure to realize the creditor's due creditor's rights, the people's court may determine that the debtor is lazy in exercising its creditor's rights or subordinate rights related to the creditor's rights as stipulated in Article 535 of the Civil Code, affecting the realization of the creditor's due creditor's claims ".

Article 34 The following rights may be determined by the people's court to be exclusive to the debtor's own rights as stipulated in the first paragraph of Article 535 of the Civil Code:

(I) maintenance, alimony or the right to claim maintenance;

(2) the right to claim compensation for personal injury;

(3) The right to claim labor remuneration, except for the part exceeding the living expenses of the debtor and his dependent family members;

(IV) the right to request payment of basic pension insurance, unemployment insurance, minimum living security, etc. to protect the basic livelihood of the parties;

(V) other rights that are exclusive to the debtor itself.

Article 35 Where a creditor files a subrogation action against the debtor's counterpart in accordance with the provisions of Article 535 of the Civil Code, the people's court of the place where the defendant is domiciled shall have jurisdiction, except where the provisions of exclusive jurisdiction shall be applied in accordance with the law.

If the debtor or the relative raises an objection on the ground that there is a jurisdictional agreement between the two parties, the people's court shall not support it.

Article 36 After a creditor has filed a subrogation action, the people's court shall not support it if the debtor or the counterparty objects to the head of the court on the ground that there is an arbitration agreement in the relationship between the claims and debts between the two parties. However, if the debtor or the counterparty applies for arbitration on the relationship between the debtor and the counterparty before the first hearing, the people's court may suspend the subrogation litigation in accordance with the law.

Article 37 If a creditor files a suit of subrogation with the people's court against the debtor as the defendant and fails to list the debtor as a third party, the people's court shall add the debtor as a third party.

If two or more creditors file a suit of subrogation with the same counterparty of the debtor as the defendant, the people's court may hear the case together. If the debtor's claim to the relative is not sufficient to pay off the debt it has borne to two or more creditors, the people's court shall determine the relative's share of performance in proportion to the creditor's claim, unless otherwise provided by law.

Article 38 If a creditor, after suing the debtor in a people's court, brings a suit of subrogation against the debtor's counterpart in the same people's court, which falls under the jurisdiction of the people's court, it may be tried together. If it does not fall under the jurisdiction of the people's court, it shall be notified to bring a separate suit in the people's court with jurisdiction; before the end of the action against the debtor, the subrogation action shall be suspended.

Article 39 In a subrogation action, if the debtor sues the counterparty for the portion of the claim that exceeds the amount of the creditor's subrogation request and falls under the jurisdiction of the same people's court, the trial may be consolidated. If it does not fall under the jurisdiction of the same people's court, it shall be informed to bring a separate suit in the people's court with jurisdiction.

Article 40 In a suit of subrogation, if the people's court finds that the creditor's claim does not meet the conditions for the exercise of the right of subrogation, it shall reject the claim, but it shall not affect the creditor to sue again on the basis of new facts.

If the debtor's counterpart claims that the creditor's lawsuit does not meet the conditions for the exercise of the right of subrogation, the people's court shall not support it on the grounds that the creditor's claim and debt relationship between the creditor and the debtor at the time of the creditor's subrogation action has not been confirmed by the effective legal instrument.

Article 41 After a creditor has filed a suit of subrogation, if the debtor reduces or reduces the debts of the counterpart or extends the period of performance of the counterpart without justifiable reasons, the people's court shall not support the defense of the counterpart to the creditor.

Article 42 For "obviously unreasonable" low or high prices as stipulated in Article 539 of the Civil Code, the people's court shall, in accordance with the judgment of the general operator in the place where the transaction is conducted, make a determination with reference to the market transaction price or the guide price of the price department at the time of the transaction.

If the transfer price does not reach the market transaction price or guide price 70% of the trading place at the time of the transaction, it can generally be regarded as an "obviously unreasonable low price"; if the transfer price is higher than the market transaction price or guide price 30% of the trading place at the time of the transaction, it can generally be regarded as an "obviously unreasonable high price".

Where the debtor has a kinship or association with the counterparty, it shall not be subject to the 70% and 30% restrictions provided for in the preceding paragraph.

Article 43 If the debtor carries out acts such as exchanging property, offsetting debts with property, leasing or leasing property, and licensing the use of intellectual property rights at an obviously unreasonable price, which affects the realization of the creditor's claim, the debtor's counterpart knows or should know the situation, and the creditor requests the cancellation of the debtor's behavior, the people's court shall support it in accordance with the provisions of Article 539 of the Civil Code.

Article 44 Where a creditor files an avoidance action in accordance with the provisions of Articles 538 and 539 of the Civil Code, the debtor and the debtor's counterpart shall be co-defendants, and the people's court of the place of residence of the debtor or the relative shall have jurisdiction, except where the provisions of exclusive jurisdiction shall be applied in accordance with the law.

If two or more creditors file an action for the right of avoidance for the same act of the debtor, the people's court may combine the proceedings.

Article 45 In a creditor's right of avoidance action, the subject matter of the revoked act is divided, and if the parties claim to revoke the debtor's act within the scope of the affected claim, the people's court shall support it.

The reasonable attorney's fees, travel expenses, etc. paid by the creditor in the exercise of the right of avoidance may be recognized as "necessary expenses" under Article 540 of the Civil Code ".

Article 46 Where a creditor simultaneously requests the debtor's counterparty to bear the legal consequences of returning property, compensating for discount and performing debts due to the debtor in an avoidance action, the people's court shall support it in accordance with the law.

The people's court that the creditor requests to accept the right of avoidance action to hear the relationship between the creditor and the debtor together, and if it falls under the jurisdiction of the people's court, it may be tried together. If it does not fall under the jurisdiction of the people's court, it shall be notified to file a separate lawsuit in the people's court with jurisdiction.

Where a creditor applies for enforcement on the basis of an effective legal instrument arising from its litigation with the debtor or the right of avoidance, the people's court may take enforcement measures to realize the creditor's claim in respect of the debtor's rights to the counterparty. If a creditor applies for preservation measures against the property of the counterparty in an avoidance action, the people's court shall grant permission in accordance with the law.

Alteration and assignment of 6. contracts

Article 47 If, after the assignment of a claim, the debtor claims to the assignee its defense against the assignor, the people's court may add the assignor as a third party.

After the debt is transferred, if the new debtor claims the original debtor's defense against the creditor, the people's court may add the original debtor as a third party.

If, after one of the parties has transferred the contractual rights and obligations together, the other party claims a defense to the assignee in respect of the contractual rights and obligations or the assignee claims a defense to the other party in respect of the contractual rights and obligations, the people's court may add the assignor as a third party.

Article 48 If the debtor has performed to the assignor before receiving notice of the assignment of the claim, and the assignee requests the debtor to perform, the people's court shall not support it; if the debtor still performs to the assignor after receiving notice of the assignment of the claim, and the assignee requests the debtor to perform, the people's court shall support it.

If the assignor fails to notify the debtor, the assignee directly sues the debtor for performance of the debt, and the people's court confirms the fact of the transfer of the claim after hearing, it shall determine that the transfer of the claim is effective against the debtor when the copy of the complaint is served. If the debtor claims that the additional costs or losses caused by the failure to notify it shall be deducted from the amount of the determined claim, the people's court shall support it in accordance with the law.

Article 49 After the debtor receives notice of the assignment of claims, the people's court shall not support the request of the assignor to the debtor to perform on the grounds that the contract of assignment of claims is not established, invalid, revoked or determined not to be effective. However, the notice of the transfer of claims is revoked in accordance with the law.

The people's court shall not support the transferee's refusal to perform to the transferee on the grounds that the debtor has confirmed the transfer of the claim on the basis of the debtor's confirmation of the true existence of the claim. However, unless the assignee knows or should know that the claim does not exist.

Article 50 If the assignor assigns the same claim to two or more assignees, the people's court shall support the debtor's claim that it will no longer perform the debt on the ground that it has performed to the first notified assignee. If the debtor knows that the assignee accepting performance is not the first assignee notified, and the first assignee notified requests the debtor to continue to perform the debt or requests the assignor to bear the liability for breach of contract according to the creditor's rights transfer agreement, the people's court shall support it; If the assignee notified first requests the assignee accepting performance to return the property it has accepted, the people's court will not support it, except that the assignee accepting performance knows that the creditor's rights have been transferred to other assignee.

The first notified assignee referred to in the preceding paragraph means the assignee specified in the notification of the assignment that first reaches the debtor. If there is a dispute between the parties over the time of arrival of the notice, the people's court shall make a comprehensive judgment in the light of factors such as the manner of the notice, and shall not determine it solely on the basis of the time of the notice approved by the debtor or the time recorded in the notice. If the party concerned sends the notice by mail, electronic communication system, etc., the people's court shall take the postmark time or the time recorded in the electronic communication system as the basis for determining the arrival time of the notice.

Article 51 If a third party joins in the debt and agrees with the debtor on the right of recovery, and claims to recover from the debtor after performing the debt, the people's court shall support it; if there is no agreement on the right of recovery, if the third party requests the debtor to perform to the creditor within the scope of the performance of the debt to the creditor in accordance with the provisions of the Civil Code, the people's court shall support it, except that the third party knows or should know that joining the debt will harm the debtor's interests.

The people's court shall support the debtor's claim against a third party joining the debt in respect of its defense against the creditor.

Termination of rights and obligations under 7. contracts

Article 52 If the parties fail to deal with the liability for breach of contract, settlement and liquidation after the termination of the contract, and one party claims that the contract has been terminated, the people's court shall support it. However, unless otherwise agreed by the parties.

Under any of the following circumstances, the people's court may determine the termination of the contract, unless one of the parties indicates otherwise:

(I) one of the parties claims to exercise the right of rescission as stipulated in the law or the contract, the other party agrees to the rescission if the conditions for exercising the right of rescission are not met after trial;

(II) both parties do not meet the conditions for the exercise of the right of discharge, they both advocate the termination of the contract.

The people's court shall deal with the liability for breach of contract, settlement and liquidation under the circumstances of the preceding two paragraphs in accordance with Articles 566 and 567 of the Civil Code and the provisions on liability for breach of contract.

Article 53 If one of the parties rescinds the contract by notice and claims that the contract has been rescinded on the ground that the other party has not raised an objection within the agreed period of objection or other reasonable period of time, the people's court shall examine whether it enjoys the right of rescission as stipulated by law or the contract. After examination, if the right of rescission is enjoyed, the contract shall be rescinded when the notice reaches the other party; if the right of rescission is not enjoyed, the effect of contract rescission shall not occur.

Article 54 If one of the parties directly claims to terminate the contract by filing a lawsuit without notifying the other party, and after withdrawing the lawsuit, the people's court sues again for the termination of the contract, and if the people's court supports the claim after hearing, the contract shall be terminated when a copy of the complaint for the second lawsuit is served on the other party. However, unless one of the parties notifies the other party of the termination of the contract after withdrawing the case and the notice has reached the other party.

Article 55 If one of the parties claims set-off in accordance with the provisions of Article 568 of the Civil Code, and if the people's court finds that the right of set-off is established after hearing, it shall determine that the principal debt, interest, liquidated damages or damages and other debts borne by both parties at the time the notice reaches the other party shall be eliminated within the same amount.

Article 56 If the party exercising the right of set-off bears several debts of the same type, but the claims enjoyed are not sufficient to offset all the debts, and if the parties have a dispute over the order of set-off, the people's court may refer to the provisions of Article 560 of the Civil Code.

If the claim enjoyed by the party exercising the right of set-off is not sufficient to offset all the debts borne by it, including the principal debt, interest and the expenses related to the realization of the claim, the people's court may refer to the provisions of Article 561 of the Civil Code.

Article 57 The people's court shall not support the compensation debt for damages arising from the infringement of the personal rights and interests of natural persons, or intentional or gross negligence infringement of the property rights and interests of others, if the infringer claims to offset.

Article 58 Where the parties owe debts to each other, and one party notifies the other party of its claim for set-off with its claim that the limitation period has expired, and the other party raises a defense of the limitation of action, the people's court shall support the defense. If the limitation period of a party's claim has expired and the other party claims offset, the people's court shall support it.

8. liability for breach of contract

Article 59 If one of the parties requests the termination of the contractual rights and obligations in accordance with the provisions of the second paragraph of Article 580 of the Civil Code, the people's court shall generally take the time when the copy of the complaint is served on the other party as the time when the contractual rights and obligations are terminated. According to the specific circumstances of the case, if it is more in line with the principles of fairness and good faith to use other time as the time for the termination of the contractual rights and obligations, the people's court may use that time as the time for the termination of the contractual rights and obligations, but the reasons shall be fully explained in the judgment document.

Article 60 When the people's court determines the benefits that can be obtained after the performance of the contract in accordance with the provisions of Article 584 of the Civil Code, it may, after deducting the reasonable costs incurred by the non-breaching party for the conclusion and performance of the contract, calculate the production profit, operating profit or resale profit that the non-breaching party can obtain.

If the non-breaching party exercises the right to terminate the contract and implements a substitute transaction in accordance with the law, and claims to determine the benefits that can be obtained after the performance of the contract according to the difference between the substitute transaction price and the contract price, the people's court shall support it in accordance with the law.

If the non-breaching party exercises the right to terminate the contract in accordance with the law but fails to implement the substitute transaction, and claims to determine the benefits that can be obtained after the performance of the contract according to the difference between the market price of the place of performance of the contract and the contract price within a reasonable period of time after the occurrence of the breach, the people's court shall support it.

Article 61 In a fixed-term contract with the content of continuously performed debts, if one party fails to perform monetary debts such as payment of price and rent, and the other party requests to terminate the contract, and the people's court holds that the contract should be dissolved according to law, the reasonable period for the non-breaching party to find a substitute transaction may be determined according to the claims of the parties, with reference to the contract subject, transaction type, market price change, remaining performance period and other factors, the benefits to be obtained after the performance of the contract are determined by deducting the corresponding performance costs to be paid by the non-breaching party, such as the price and rent corresponding to the period.

The people's court shall not support the non-breaching party's claim that the benefits that can be obtained after the performance of the contract shall be determined in accordance with the corresponding price and rent of the remaining performance period after the termination of the contract. However, unless the remaining period of performance is less than the reasonable period for seeking alternative transactions.

Article 62 If the benefits that the non-breaching party can obtain after the performance of the contract are difficult to determine in accordance with the provisions of Articles 60 and 61 of this Interpretation, the people's court may comprehensively consider the benefits obtained by the breaching party due to the breach, The degree of fault of the breaching party, other circumstances of the breach and other factors shall be determined in accordance with the principles of fairness and good faith.

Article 63 When determining the "losses that the breaching party foresees or should foresee when concluding the contract" as stipulated in Article 584 of the Civil Code, the people's court shall, in accordance with the purpose of the party's conclusion of the contract, comprehensively consider the contract subject, contract content, transaction type, transaction habits, negotiation process and other factors, it is determined on the basis of the loss foreseen or should have been foreseen by a civil subject in the same or similar situation as the breaching party at the time of the conclusion of the contract.

In addition to the benefits that can be obtained after the performance of the contract, the non-breaching party claims that there are other losses caused by the breach of contract, such as the additional expenses that it should pay for the breach of contract to the third party, and requests the breaching party to compensate. The people's court shall support the loss that was foreseen or should have been foreseen when the breaching party concluded the contract.

In determining the amount of damages for breach of contract, if the breaching party claims to deduct the expanded losses caused by the non-breaching party's failure to take appropriate measures, the corresponding losses caused by the non-breaching party's fault, the additional benefits obtained by the non-breaching party as a result of the breach, or the reduction of necessary expenses, the people's court shall support it in accordance with the law.

Article 64 If one of the parties requests adjustment of liquidated damages by way of counterclaim or defense, the people's court shall support it according to law.

If the breaching party claims that the agreed breach of contract is excessively higher than the loss caused by the breach, and requests an appropriate reduction, it shall bear the burden of proof. If the non-breaching party claims that the agreed liquidated damages are reasonable, it shall also provide corresponding evidence.

If the parties only claim not to adjust the liquidated damages on the ground that the contract stipulates that the liquidated damages shall not be adjusted, the people's court shall not support it.

Article 65: Where the parties claim that the agreed liquidated damages are excessively higher than the losses caused by the breach of contract and request an appropriate reduction, the people's court shall, on the basis of the losses stipulated in Article 584 of the Civil Code, take into account the subject of the contract and the type of transaction, The performance of the contract, the degree of fault of the parties, the background of performance and other factors, follow the principles of fairness and good faith to measure, and make a judgment.

If the agreed liquidated damages exceed the 30% of the loss caused, the people's court may generally determine that it is excessively higher than the loss caused.

If a party to a malicious breach of contract requests a reduction in the breach of contract, the people's court generally does not support it.

Article 66 If one party requests the other party to pay liquidated damages, and the other party defends on the grounds that the contract is not established, invalid, revoked, determined not to be effective, does not constitute a breach of contract, or there is no loss to the non-breaching party, and does not claim to adjust the excessive liquidated damages, the people's court shall explain whether the party requests to adjust the liquidated damages if the defense is not supported. If the people's court of first instance considers that the defense is established and has not been explained, and the people's court of second instance considers that it should be decided to pay liquidated damages, it may directly explain it, and according to the request of the parties, after the parties have fully proved, cross-examined and debated whether the liquidated damages should be adjusted, the liquidated damages shall be appropriately reduced according to law.

If the defendant does not appear in court to participate in the proceedings of first instance due to objective reasons, but participates in the proceedings of second instance and requests a reduction in liquidated damages, the people's court of second instance may, after the parties have fully provided evidence, cross-examined and debated on whether the liquidated damages should be adjusted, the liquidated damages shall be appropriately reduced in accordance with the law.

Article 67 If a party pays a lien, guarantee, security deposit, contract, deposit or deposit, but does not agree on the nature of the deposit, and a party claims to apply the deposit penalty stipulated in Article 587 of the Civil Code, the people's court shall not support it. If the parties agree on the nature of the deposit, but do not agree on the type of deposit or the agreement is unclear, and if one party claims to be a deposit for breach of contract, the people's court shall support it.

If the parties agree to pay a deposit as a guarantee for the conclusion of the contract, if one party refuses to conclude the contract or violates the principle of good faith in negotiating the conclusion of the contract, resulting in the failure to conclude the contract, and the other party claims to apply the deposit penalty stipulated in Article 587 of the Civil Code, the people's court shall support it.

If the parties agree to take the delivery of the deposit as a condition for the establishment or entry into force of the contract, the party that shall deliver the deposit has not delivered the deposit, but the main obligations of the contract have been fulfilled and accepted by the other party, the people's court shall determine that the contract has been established or entered into force when the other party accepts the performance.

If the parties agree that the nature of the deposit is the release deposit, and the party who delivers the deposit claims to terminate the contract at the cost of losing the deposit, or the party receiving the deposit claims to terminate the contract at the cost of double the return of the deposit, the people's court shall support it.

Article 68 If both parties have committed a breach of contract that makes it impossible to achieve the purpose of the contract, the people's court shall not support the application of the deposit penalty by one of the parties. If one of the parties has only a minor breach of contract, the other party has a breach of contract that makes it impossible to achieve the purpose of the contract, the minor breaching party claims the application of the deposit penalty, and the other party defends that the minor breaching party also constitutes a breach of contract, the people's court does not support the defense.

If one of the parties has partially performed the contract, and the other party accepts and claims to apply the deposit penalty in proportion to the unperformed part, the people's court shall support it. If the other party claims to apply the deposit penalty in accordance with the contract as a whole, the people's court shall not support it, except if the part fails to perform and the purpose of the contract cannot be achieved.

If the contract cannot be performed due to force majeure, the people's court shall not support the non-breaching party's claim to apply the deposit penalty.

9. by-laws

Article 69 This Interpretation shall come into force as of December 5, 2023.

For civil cases caused by legal facts after the implementation of the Civil Code, this Interpretation shall apply if the trial has not been final after the implementation of this Interpretation; if the trial has been final before the implementation of this Interpretation, and the parties apply for a retrial or decide to retrial in accordance with the trial supervision procedure, this Interpretation shall not apply.

(Source: Supreme People's Court)