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| Provisional Regulations of the State Administration for Industry and Commerce on the Confirmation and Handling of Invalid Economic Contracts | |||||
| 更新时间：2007-5-2 | |||||
STATE ADMINISTRATION OF INDUSTRY & COMMERCE PROVISIONAL REGULATIONS OF THE STATE ADMINISTRATION FOR INDUSTRY AND COMMERCE ON THE CONFIRMATION AND HANDLING OF INVALID ECONOMIC CONTRACTS (Promulgated 25 July 1985 by the State Administration for Industry and Commerce) These Regulations are formulated in accordance with the Economic Contract Law of the People's Republic of China with a view to accurately confirming and handling invalid economic contracts, in order to protect the legal rights and interests of the parties concerned and to maintain social and economic order. I THE BASIS OF CONFIRMATION OF AN INVALID ECONOMIC CONTRACT Invalid economic contracts shall, in accordance with the provisions of Article 7 of the Economic Contract Law, be confirmed in line with the following aspects: (1) A principal party to an economic contract shall not be considered competent if: (a) the economic contract is signed in the name of a legal person by a social group or organisation which is not eligible as a legal person; (b) the economic contract is signed in the name of an individual household business operation which has obtained a business licence without verification of its registration; or (c) the economic contract is signed by a person whose capacity is limited State law. (2) The subject matter of an economic contract shall render the contract illegal if: (a) the articles of the economic contract violate State laws, administrative legislation, policies or plans; (b) the purpose of the economic contract is the purchase or sale of goods that are explicitly forbidden by the State, or the contract involves the sale of goods without a permit, or constitutes conduct contravening the law or policies; (c) the economic contract is signed by a party with false intentions or through such means as coercion or deception; or (d) a party to the economic contract has evaded the law and brought losses upon State interests, public interests or the interests of another person. (3) An agent's signature shall be invalid if: (a) a contract is signed by an agent who does not have a power of attorney or who goes beyond the authorised sphere of representation or whose power of agency has terminated, and the signature is not ratified by the represented party; (b) A contract is signed between an agent on behalf of the represented party and the agent itself; (c) a contract is signed between an agent on behalf of the represented party and another party represented by the agent; or (d) a contract is signed by an agent who is involved in a conspiracy with the other party to the contract to harm the inter ests of the represented party. II THE HANDLING OF AN INVALID ECONOMIC CONTRACT An invalid economic contract shall have no legal binding force from the time of its formulation. If an economic contract is declared invalid, the contract shall not be implemented if it has yet to be executed, and if it is being executed, its implementation shall immediately cease. If a party of an economic contract is declared invalid and this party does not affect the validity of the rest of the contract, the rest shall remain valid. Property losses which occur as a result of an invalid economic contract shall be handled in accordance with any of the three methods stipulated by the provisions of Article 16 of the Economic Contract Law, namely restoration, compensation and confiscation, depending on the extent of the mistake committed by the party concerned. (1) Restoration of property shall be undertaken to re-establish the relationship of the parties in relation to the property prior to the signing of contract. If goods obtained by a party to an invalid economic contract from the other party to the contract still exist, these goods shall be returned. If the goods no longer exist or have been legally repossessed by a third party thereby making restoration impossible, the method of compensation for losses may be employed. (2) Compensation for losses shall be the responsibility of the party at fault when the loss occurs. If both parties are at fault, primary and secondary responsibility shall be ascertained so that the portion of the financial losses to be borne by each party shall correspond to their respective liabilities. (3) Confiscation of property shall be a means of penalising a party which intentionally causes losses to State or public interests. If both parties to an economic contract are intentional offenders, property which has been procured or is to be procured in accordance with an agreement by both parties, shall be confiscated. If one party to a contract is an intentional offender, this party shall return a property procured from the other party to the said party, and property procured or to be procured in accordance with an agreement by an unintentional party, shall be repossessed. When property is repossessed from an unintentional party, proper care shall be taken to protect the legal rights and interests of that party. III PROCEDURES FOR THE CONFIRMATION OF AN ECONOMIC CONTRACT AS INVALID (1) The Administration for Industry and Commerce shall establish a file and deal with economic contracts which are found through examination or through the advice of a third party to be invalid. If, during arbitration, an economic contract is found to be invalid in part' both the invali d and valid parts of the contract shall be dealt with through arbitration. Arbitration procedures for a completely invalid economic contract shall be terminated and the contract shall be confirmed as invalid by the Administration for Industry and Commerce. (2) The person handling such a case shall examine contract documents, collect evidence and question the parties concerned. (3) The person handling the case shall, based on clarification of the facts and responsibilities, present suggestions on dealing with the case and, after submission is made and approval issued, a letter of confirmation of an invalid economic contract shall be prepared. A letter of confirmation of an invalid economic contract shall clearly state the names and addresses of the parties concerned, the names and addresses of representatives or agents, the facts ascertained, the applicable laws, administrative legislation and policies, action to be taken, and the time limit and name of the organ to which a request for reconsideration may be lodged if a decision is contested. (4) A party which does not agree with a decision to confirm an economic contract as invalid may, within 15 days of receiving the letter of confirmation of an invalid contract, lodge an application for reconsideration with a higher level Administration for Industry and Commerce. After receiving an application for reconsideration, the higher level Administration for Industry and Commerce shall conduct a careful examination. If the original confirmation decision is upheld, the application for reconsideration shall be rejected. If the original decision is found to be incorrect, a review shall be conducted. The higher level Administration for Industry and Commerce after reconsideration of a case shall confirm the economic contract is valid, and that decision shall be final. (5) If a party does not lodge an application for reconsideration within the stipulated time limit, the letter of confirmation shall remain valid. The parties concerned shall conscientiously execute a valid letter of confirmation in accordance with regulations. In a case of failure to execute such a letter within the stipulated time limit, the Administration for Industry and Commerce may handle its execution. (6) If a higher level Administration for Industry and Commerce discovers that a letter of confirmation already issued by a lower level Administration for Industry and Commerce is incorrect, it shall cancel the letter of confirmation and review the case. ests of the represented party. II THE HANDLING OF AN INVALID ECONOMIC CONTRACT An invalid economic contract shall have no legal binding force from the time of its formulation. If an economic contract is declared invalid, the contract shall not be implemented if it has yet to be executed, and if it is being executed, its implementation shall immediately cease. If a party of an economic contract is declared invalid and this party does not affect the validity of the rest of the contract, the rest shall remain valid. Property losses which occur as a result of an invalid economic contract shall be handled in accordance with any of the three methods stipulated by the provisions of Article 16 of the Economic Contract Law, namely restoration, compensation and confiscation, depending on the extent of the mistake committed by the party concerned. (1) Restoration of property shall be undertaken to re-establish the relationship of the parties in relation to the property prior to the signing of contract. If goods obtained by a party to an invalid economic contract from the other party to the contract still exist, these goods shall be returned. If the goods no longer exist or have been legally repossessed by a third party thereby making restoration impossible, the method of compensation for losses may be employed. (2) Compensation for losses shall be the responsibility of the party at fault when the loss occurs. If both parties are at fault, primary and secondary responsibility shall be ascertained so that the portion of the financial losses to be borne by each party shall correspond to their respective liabilities. (3) Confiscation of property shall be a means of penalising a party which intentionally causes losses to State or public interests. If both parties to an economic contract are intentional offenders, property which has been procured or is to be procured in accordance with an agreement by both parties, shall be confiscated. If one party to a contract is an intentional offender, this party shall return a property procured from the other party to the said party, and property procured or to be procured in accordance with an agreement by an unintentional party, shall be repossessed. When property is repossessed from an unintentional party, proper care shall be taken to protect the legal rights and interests of that party. III PROCEDURES FOR THE CONFIRMATION OF AN ECONOMIC CONTRACT AS INVALID (1) The Administration for Industry and Commerce shall establish a file and deal with economic contracts which are found through examination or through the advice of a third party to be invalid. If, during arbitration, an economic contract is found to be invalid in part' both the invali |
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