Fifteen Eighty Four

You can read Part I here.

Equal treatment of state and private interests in contract law

The equal protection of private and state interests is not an empty statement. It can be shown in the streamlining of the previously complicated rules on validity of contract. Contract is considered a subcategory of civil juristic acts in German-inspired civil law systems including China. Traditionally, there have been inconsistencies and contradictory rules concerning the validity of contracts and civil juristic acts.

Despite the presence of same vitiating factors, whether a contract is voidable may depend on the existence of a state interest. For example, under the 1986 General Principles of Civil Law, vitiating factors such as fraud, duress, and mistake will render a civil juristic act void. In the Contract Law statute, the concept of relative nullity was first introduced to give the aggrieved party to option to keep the contract alive. Vitiating factors will then make a contract only voidable, which contradicts the General Principles of Civil Law. Moreover, even within the soon-to-be-replaced Contract Law, there are tensions between article 52-1 and article 54. Fraud and duress would render a contract merely voidable under article 54 but the contract will be void and null if fraud and duress harmed a state interest under article 52-1. Here, a state interest is not public interest but more likely to be the financial interest of state-owned enterprises, which encourages the SOEs to renege on a bad bargain and adds to the legal and doctrinal uncertainties of a business contract between a private party and a state-owned enterprise.

The Civil Code streamlined the rules concerning validity and eliminated the differences in the treatment of contracts and civil juristic acts. Now there is only one set of rules that deals with the validity of civil juristic acts, and it applies to contracts. According to the Civil Code, illegality, sham transactions, and violation of good morals will render a civil juristic act null and void. Victims of fraud, duress, mistake and obvious unfairness have the option to avoid the civil juristic act including a contract. More importantly, there will no longer be a different treatment of State-owned enterprises. Finally, there is no longer s separate state interest separate from the public interest.

Personality rights outside tort law: a challenging innovation

Perhaps, the biggest structural innovation in the code is to have an independent book on personality rights. Article 990 provides: “Personality rights are rights enjoyed by civil subjects including the right to life, the right to body, the right to health, the right to one’s name, the right to name, the right to one’s image, the right to honor, the right to reputation, the right to privacy etc.” The academic community and public has praised this innovation as an illustration of Chinese ingenuity in making its own civil law and an implementation of the constitutional protection of human dignity. However, in order to fulfil its purpose to enhance the protection of personality rights, this innovation needs to survive the doctrinal challenge. Simply put, violation of personality rights is either a tort or not. If it is an independent basis of claim outside torts, does it mean that claimant does not need to satisfy the basic elements of torts? If it is still a tort, would the claimant need to satisfy both tort law and personality rights law provisions in order to receive protection? If that is the case, wouldn’t it be actually harder for the claimant to obtain relief?

The need for interpretations

The enactment of Chinese Civil Code is groundbreaking and much is to be expected from it. Still, any experienced comparative lawyer would immediately raise concerns towards the compatibility of various legal transplants from different legal families, the vagueness of certain important doctrines such as the scope of rights protected and the efficacy of the newly innovative approach to protect personality rights. In the end, its efficacy heavily depends upon the interpretations of the code. Authoritative commentary from the drafters and the judicial interpretations from the Supreme People’s Court will decide the fate of the Code.

You can read Part I here.