Introduction to Chinese Law

Lecture 9

Civil Law

Issues
1.

2.
3.

4.
5.

6.

Concept of civil law in PRC Drafting of a Civil Code The General Principles of Civil Law (GPCL) 1986 Property Law 2007 and State Council Zhengshou Regulations 2011 Contract Law (Uniform Contract Law) 1999 Cases: nail house and forced demolition

Civil Law v. Economic Law

Civil law: Between civil subjects with equal status: citizens, legal persons
General Principles of Civil Law (GPCL), Contract Law;

Intellectual Property laws; Marriage Law; Adoption Law; Succession Law; Property Law (wuquan fa, )

Economic law: Between the state and civil subjects, i.e. with unequal status;
Laws on macro-economic control: budget, audit, government

purchase, banking, pricing, taxation, etc. Laws on market regulation: consumer protection, product liability, anti-monopoly, etc. Laws on national property and resources: land management, mineral resources, water, agriculture, highway, etc. Laws on trade and investment.
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Civil Law v. Commercial Law

Two areas combined in China: fusion of civil law and

commercial law ()

Commercial laws are taken as special law departments of the

civil law. General principles of civil laws are equally applicable to commercial laws.

Examples of commercial laws include: Company Law, Partnership Law, Securities Law, Insurance Law, Law on Negotiable Instruments, Maritime Law, Bankruptcy Law, etc. NB: The scope of commercial laws in civil law jurisdictions is much narrower than that in common law jurisdictions. Cf. what you have learned or what you will be learning in Commercial Law (common law).
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Civil Code: Models

Common law: loose, more concluded from cases French model: 2 main parts ()
Dealing with personal relationship and property

relationship separately. Jus Personam ( ): law of natural persons; family law; law of legal persons; inheritance law. Jus Rerem (); general principles of the law of obligations; all types of contracts; intellectual property German model: 7 parts (() General principles; jus ad rerem, jus in personam; contracts; torts; kindred; succession.
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Drafting Civil Code: Chapters

Law on personality: right to human dignity such as right

to name, image, reputation, honor, and privacy Property: ownership, mortgage, pledge, both real estate and personal goods Family relations: marriage, adoption, succession Civil liabilities: contracts, torts, restitution Intellectual property law: copyright, trademark, patent

General Principles of Civil Law 1986 (GPCL, )

General principles (Chapter 1). Civil law subjects:

Natural persons (Chapter 2)

Legal persons (Chapter 3) Civil law acts and agency (Chapter 4) Civil law rights (Chapter 5) Civil liabilities (Chapter 6) Statute of limitation, conflict of law, supplementary

provisions (Chapters 7, 8 and 9)

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GPCL: Principles
Equal status of parties; Fairness; Voluntariness; Exchange and compensation on the basis of equal

value (); Honesty and good faith; Relevant state policies on economic life.

GPCL: Civil Law Subjects

Natural persons (): citizens
Individuals; and Individual industrial-commercial business (); the

village changbao () operation business; partnership of individuals (), popular in rural areas.

Legal persons (): organizations

State enterprises () Collective enterprises () Sino-foreign equity joint ventures () Sino-foreign cooperative joint ventures () Foreign capital enterprises ()

Others: social organizations, economic associations, etc.

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GPCL: Civil Law Acts and Agency

Civil law acts
E.g. contracting, marriage, making will, adoption, establishing a company,

etc. Definitions and conditions: A civil juristic act shall be the lawful act of a citizen or legal person to establish, change or terminate civil rights and obligations (Art.54). A civil juristic act shall meet the following requirements: (1) the actor has relevant capacity for civil conduct; (2) the intention expressed is genuine; and (3) the act does not violate the law or the public interest (Art.55). Void or voidable acts Legal consequences

Agency
Appointed by principals Arising by operation of law, such as custodian relations Designated by a court or other authorized entity, such as in liquidation

proceedings
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GPCL: Civil Law Rights

Personal Rights (or Personality Rights): Right of life and health, right to name, etc. Property Rights ( ): in relation to ownership and use

of property Neighboring rights (), right to use national resources, mining rights, chengbao () operational rights in rural areas, state enterprise operational rights, etc. Contractual rights, rights arising from tortious acts and unjust enrichment Debts or obligations ( ) Intellectual Property Rights () Copyrights, trademarks, patents, etc.
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Personal Rights
Natural persons:
Rights of life and health, rights to name, portrait, reputation,

honor, marriage, family.

Legal persons:
Rights to name, commercial reputation and honor.

Other laws protecting personal rights

Marriage Law (1950, 1980, and 2001): Law on Succession (1985) Adoption Law (1991) Law on Protection of Minors (1991, revised 2006) Law on Compulsory Education (1986, revised 2006) Law on Protection of Womens Rights and Interests (1993)
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Property Rights
Neighboring rights Right to water supply, drainage, pass-way, etc.

Right to use national resources Exclusive to state-owned or collective-owned enterprises.

Mining rights Owned by the State, but may be granted to state-owned or collectively owned units and citizens. Chengbao operational rights (GPCL, Art 80) Also governed by the Law of Rural Land Contracts 2002 and Property Law 2007 (wu quan fa). 30 years land use right to farmers for agricultural use. Can be renewed and extended (Property Law, Art 126) Can be inherited, subcontracted, leased, exchanged, assigned, or used as capital investment.
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Property Rights (Contd)

State Enterprise Operational Rights (GPCL, Art 82)
Also governed by the Law of Industrial Enterprises Owned by the

Whole People (1988) The property given to enterprise for management purpose. Now owned by enterprise as a legal person. Right to posses, use, and dispose of such property. Can be jointly owned, inherited, and transferred.

Urban Land Use Rights

Also governed by the Law on the Management of Urban Real Estate

1994 and Property Law 2007 Urban land is owned by the State. Land use rights may be sold to developers for up to 70 years.
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Property Rights (Contd)

Property as security for credits (Art 89)
Also governed by Law of Guarantee ()1995

Five different forms of security

Guarantee (); Deposit (); Mortgage on real property (); Pledge of movable assets or intangible right (); Lien over assets of which the creditor has already taken possession (

).

All mortgages on real property must be registered

At the local land department; Before they can be claimed against third parties.
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Civil Liabilities
Condition: Wrongful act committed, such as Breach of contract; torts (negligence required)

Specific tortious acts (negligence not required): such as product

liability, nuisance, occupiers liability, torts by domesticated animals.

Remedies
For personal rights: public apology; elimination of bad effects;

restoration of reputation; compensation, etc. For property rights: stopping infringement; return of property; repair or replacement; compensation; etc.

Principles for attribution of liability

Contractual damages and common torts are negligence-based. Specific torts (exclusively listed under GPCL) do not require

negligence or fault: strict liability based on law.

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Property Law 2007 (wu quan fa )

Scope
Governing both personal property (movable) and real property

Three kinds of rights

The right of ownership () Rights of use and enjoyment () Rights of security ()

Equal protection for the state, collective and

individual property, but

State ownership plays a dominant role. (Art 3) Peasants do no have ownership over their land, and cannot use the

land as security. They can only lease the land in disposal of their rights of use and enjoyment. CCPs new rural reform plan in 2008: whether possible changes expected, such as endorsing minor property rights housing ( ) ? not likely in immediate future.
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Property Law (Contd)

Protection of urban house owners Right to common areas (corridors, gardens, lift lobbies, etc). Owners right to appoint real estate management companies. Autonomous prolongation of the right to use of land for residential purposes (70+ years: Art 149 of Property Law) Bona fide possession of movable property, i.e. goods (

As long as the third party pays reasonable price and obtains the property

in good faith, he/she gets the property. The original owner can NOT claim back the property. It is commonly seen when bailor who has no property rights over the goods however sells the goods without the permission of the owner. The owner may sue the bailor either by way of breach of the contract of bailment or under property torts actions. Quite similar to the Buyer in Possession, Seller in Possession, nemo dat rule and market overt rule under SOGO (The Sale of Goods Ordinance of Hong Kong (Cap. 26) ) and common law jurisprudences. 18

Problems waiting to be solved

(a) Equal protection of public and private property: whether constitutional?
New law giving equal protection to private, state-owned and collectivelyowned property: constitutionality issue at stake (Gong Xiantian event, ) Art 12 of Con provides that socialist public property inviolable and that the State protects socialist pubic property

(b) Absence of specific legislation to offer citizens a powerful legal weapon to fight back against infringements of property rights
e.g., unfair and under-compensated demolition of urban houses

(c) Absence of property registration system

New law introducing a unified registration system in real estate transactions to protect consumers rights, without specifying how to establish such system.

(d) Increasing disputes between home owners and the realty management agencies

New law introducing the concept of differentiated owners of buildings to help clarify rights of every household in a high-rise residential building over their own space, corridors, greenbelt and car parking lots of the compound but lacking provisions on dispute resolution involving owners and realty management 19 agencies.

Property Law (Contd)

Strict limitation on the transfer of agriculture land to construction land ( )

Prohibiting expropriation of collectively-owned land in violation of statutory power limit

and procedures (Art 43) and without public interest (Art 42) Problem with residential land () and minor property rights housing ( ): apartments built on collectively-owned land owned by villagers committees and sold to urban buyers

State expropriation of collectively-owned land () and demolition of urban residential houses and premises owned by institutions or individuals ( )
Illegal taking? Can only be justified for public interest (Art 42 of Property Law)

development. Must be justly compensated, e.g., to guarantee normal lives according to Property Law 2007 (Art 42, without exact wording of just and fair compensation) and State Council Regulations on Expropriation and Compensation of Houses on State-owned Land 2011 (ie., SC Zhengshou Regulations, Art 2 explicitly requires fair/just compensation - ) Nail house cases: e.g., the coolest nail house in Chongqing Forced demolition cases: e.g., Pan Rong () in Shanghai; Tang Fuzhen () in Chengdu city of Sichuan province.
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Controversy: expropriation often involves some extent of commercial

Art 42 of Property Law

To meet the needs of public interests, collectively-owned lands, premises owned by entities and individuals or other real properties may be expropriated in accordance with the power scope and procedures provided by laws. As for the expropriation of collectively-owned land, it is necessary to, according to law and in full amount, pay such fees as land compensation fees, placement subsidies, compensations for the above-ground fixtures of the lands and seedlings, arrange for social security fees for the farmers whose land is expropriated, secure their livelihood and safeguard their legitimate rights and interests. As for the expropriation of the premises owned by entities and individuals or other real properties, it is necessary to make compensation for demolishment and relocation according to law and safeguard the legitimate rights and interests of the owners of the real properties expropriated; as for the expropriation of the individuals residential houses, it is necessary to safeguard the housing conditions of the owners of the houses expropriated. No entity or individual may embezzle, misappropriate, privately share, detain or delay in the payment of the compensation fees for expropriation.

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SC Zhengshou Regulations: General Principles & Responsible Agencies

Art 1: This Regulation is formulated for purposes of regulating the expropriation of buildings on state-owned land and corresponding compensation, maintaining public interests and protecting the legitimate rights and interests of owners of the buildings to be expropriated. Art 2: Where a building of any entity or individual on state-owned land is expropriated for public interest, the owner of the expropriated building (the owner) shall be fairly compensated. Art 3: The principle of democratic decision-making, due process and open results shall be followed in the building expropriation and compensation. Art 4: The peoples government at the city or county level shall be responsible for the building expropriation and compensation within its administrative region. The building expropriation department as determined by the peoples government at the city or country level (the building expropriation department) shall organize and implement the building expropriation and compensation within its administrative region. Art 5: The building expropriation department may designate a building expropriation implementing entity to undertake the specific work on building expropriation and compensation. A building expropriation implementing entity shall not operate for profits. The building expropriation department shall oversee the building expropriation and compensation activities of a building expropriation implementing entity within the authorized scope, and assume the legal liabilities for the consequences of such activities. 22

SC Zhengshou Regulations: Expropriation Decisions

Art 8: Where, for public interests such as safeguarding the national security and promoting the national economic and social development, it is necessary to expropriate a building under any of the following circumstances, the peoples government at the city or county level shall make a decision to expropriate the building: (1) necessary for national defense and foreign affairs; (2) necessary for the construction of energy, transportation, water and other infrastructures as organized and implemented by the government; (3) necessary for a public cause such as science and technology, education, culture, health, sports, environment and resource protection, disaster prevention and mitigation, protection of cultural relics, social welfare or municipal utilities as organized and implemented by the government; (4) necessary for the construction of a social security housing project as organized and implemented by the government; (5) necessary for the rebuilding of an old urban area where dilapidated buildings concentrate and infrastructure lags behind as organized and implemented by the government according to the relevant provisions of the Urban and Rural Planning Law; or (6) necessary for any other public interest as prescribed by a law or administrative 23 regulation.

SC Zhengshou Regulations: Compensation Plans

Art 10: The building expropriation department shall draft an expropriation and compensation plan and report it to the peoples government at the city or county level. The peoples government at the city or county level shall organize the relevant departments to demonstrate the expropriation and compensation plan and publish it for public opinions. The period for solicitation of public opinions shall be no less than 30 days. Art 11: The peoples government at the city or county level shall publish in a timely manner the public opinions solicited and the amendments made according to the public opinions. Where buildings need to be expropriated due to the rebuilding of an old urban area, if the majority of the owners consider that the expropriation and compensation plan does not conform to the provisions of this Regulation, the peoples government at the city or county level shall organize a hearing attended by the owners and the representatives of the public, and amend the plan according to the results of the hearing. Art 14: An owner against a building expropriation decision made by the peoples government at the city or county level may apply for administrative reconsideration or file an administrative lawsuit according to law.

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SC Zhengshou Regulations: Contents & Types of Compensation

Art 17: The compensation granted to an owner by the peoples government at the city or county level which makes a building expropriation decision shall include: (1) compensation for the value of the building expropriated; (2) compensation for the relocation or temporary settlement resulting from the building expropriation; and (3) compensation for the production or business interruption losses resulting from the building expropriation. The peoples government at the city or county level shall formulate subsidization and incentive measures to give subsidies and incentives to the owners. Art 19: The compensation for the value of the building expropriated shall not be less than the market price of real estate similar to the building expropriated on the date of announcement of the building expropriation decision. The value of the building expropriated shall be assessed by an eligible real estate price assessment institution according to the assessment measures for building expropriation. An owner who opposes to the assessed value of the building to be expropriated may apply to the real estate price assessment institution for reassessment. An owner who opposes to the reassessment result may apply to the real estate price assessment expert committee for appraisal Art 21: An owner may choose either monetary compensation or exchange of 25 titles.

SC Zhengshou Regulations: Compensation Agreement and Decision

Art 25: The building expropriation department and an owner shall, according to this Regulation, enter into a compensation agreement on the method, amount and time of payment of compensation, location and area of the building provided for exchange of titles, relocation fees, temporary settlement fees or temporary dwelling, production or business interruption losses, time limit for relocation, transition manner, transition period and other matters. After a compensation agreement is signed, if one party fails to perform any obligation under the compensation agreement, the other party may file a lawsuit according to law. Art 26: If a compensation agreement cannot be reached by the building expropriation department and an owner within the contracting period as determined in the expropriation and compensation plan, or the owner of the building to be expropriated is unclear, the building expropriation department shall report it to the peoples government at the city or county level which makes the building expropriation decision for making a compensation decision under the expropriation and compensation plan in accordance with this Regulation, which shall be announced within the scope of expropriation. A compensation decision shall be fair, and include the relevant matters in a compensation agreement as prescribed in paragraph 1 of Article 25 of this Regulation. An owner who disagrees on a compensation decision may apply for administrative reconsideration or file 26 an administrative lawsuit according to law.

Nail House
Nail house or ding zi hu ()
Meaning: a Chinese word that means a household or person who

refuses to vacate their home to make way for real estate. development. It was translated as nail house because "they stick out like nails in an otherwise modernized environment.

Local Regulations usually provide three solutions

1) provide housing on the same spot; 2) provide housing in another spot; 3) provide a sum of money.

- The developer usually opts for the last one, and the home owner often prefers the first one.
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Examples of Nail House

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Examples of Nail House

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Major Demolition Fatalities

On August 22, 2003, a middle-aged man in Nanjing set

himself on fire at the local demolition office. Covered in burns on 97 percent his body, he later died from his injuries the same evening. In June 2008, a woman named Pan Rong stood on the roof of her home in Minhang District of Shanghai, threatening suicide. She also attempted to use home-made petrol bombs on demolition teams. In April 2008, a homeowner in Quanzhou City of Fujian Province set himself on fire and died of his burns at home. In February 2009, a homeowner set herself on fire with gasoline in Chifeng City of Inner Mongolia, when a local court ordered the demolition of her house. On November 13, 2009, Tang Fuzhen unsuccessfully resisted a demolition in Chengdu City of Sichuan Province after setting herself on fire. She died in the local hospital ten days later.
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Controversies Surrounding Forced Demolition

Videos: China's New Faces Sorrow Behind
Part 1:

Redevelopment (Students may watch after class)

http://www.youtube.com/watch?v=gpVnUzMU5aU Part 2: http://www.youtube.com/watch?v=qj7MZSowgds Part 3: http://www.youtube.com/watch?v=kBkNqvQkLNg Part 4: http://www.youtube.com/watch?v=UgEgQ9UtI_o

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Contract Law: before 1999

Laws governing contracts before 1999 unification
Economic Contract Law (1981)
Mainly applied to contracts signed by state enterprises, but also

applicable to entities registered with the government. Contracts to implement state economic plans. Contracts must be certified by the State Administration of Industry and Commerce, or SAIC ().

Foreign Economic Contract Law (1985)

Applied to foreign nationals, entities, or organizations.

Technology Contract Law (1987)

Applied to technology transfer contacts

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Contract Law (1999)

Also called Uniform Contract Law (UCL). Why Unified?
To adapt the contract law to the needs of market economy. To align with international standards, particularly the UN

Convention on International Sale of Goods (CISG, or the Vienna Convention). Providing a bunch of new types of contracts, corresponding to the development of market economy, e.g. donation contracts, loans, financial lease, bailment, agency, etc. To avoid repetitions and eliminate inconsistencies among the three contract laws. More user-friendly. To converge domestic and foreign contractual regimes to the same legal framework.
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UCL: Freedom of Contract

Art 4: Parties enjoy the legal right to voluntarily

enter into contracts, and no work unit or individual may illegally intervene therein.
Freedom as to contracting parties: natural persons,

legal persons or other organizations with equal standing. Freedom as to forms of contract Freedom as to types of damages (Art 107: parties to choose from the following: continuing to perform contractual obligations, taking remedial measures, or compensating for losses.)
NB: State mandatory plans or purchase plans need to be observed: e.g. Five Year plan Public interests or state interests must not be infringed
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UCL: Formation of Contract (Chap. 2)

Writing requirements removed Oral contracts and electronic form now allowed.
Offer-acceptance approach adopted No requirement for consideration as compared with formation of contacts in common law jurisdictions. Pre-contractual liabilities established () Damages for fraudulent and bad faith negotiation. Rules about confidentiality and no-shop clauses in Letter of Intent.

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UCL: Effects of Contract (Chap. 3)

Void contracts (), if:
Harm public interests
Violate mandatory provisions of laws or administrative

regulations For illegal purposes

Voidable contracts (), if:
Duress Serious mistake

Fraudulence
Undue influence
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UCL: Performance
Situations when liabilities can be exempted (or Defenses to non-

performance): Art 94
Force majeure (objective circumstances that cannot be foreseen,

avoided and overcome): e.g., bad weather, war; obligation to notice the other party (Arts 117, 118 ) Express repudiation by the other party; The other party has delayed its performance and the delay exceeds the grace period; The delay in performance has led to frustration of the purpose of the contract. No assurance for performance has been provided after demand.

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UCL: Remedies
Damages available: Art 113
Liquidated damages, not exceeding anticipatory damages

(anticipated or ought to be anticipated by the responsible party at time of forming the contract) Not including punitive damages, nor consequential losses

Specific performance: Art 110

Used very often before, but more limited now. It can be denied if:

It is impossible as a matter of fact or law; The subject matter of the contract can be obtained on the

market; The subject matter is unfit for specific performance; The cost would be excessive; or It has not been requested within a reasonable time.
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UCL: Dispute Resolutions

Three forms: Art 128
(1) Mediation or conciliation; (2) Arbitration, on the basis of a valid arbitration agreement;

parties to foreign-related contracts may choose foreign arbitrations;

Litigation as the back-up method for dispute resolution,

should there be no dispute settlement arrangement in contract.

Limitation to claim contractual rights:

2 years from the date when the party knew or ought to have

known that his/her rights were violated.

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UCL: Contracts on Sale of Goods (chap. 9)

Sellers basic obligations
The seller shall perform the obligations of delivering to the buyer the subject

matter or handing over the documents for the buyer to take possession of the subject matter, as well as of transferring the ownership of subject matter to the buyer. (Art 135)
The seller shall deliver to the buyer the relevant documents and materials in

accordance with the agreement or transaction practices. (Art 136)

Obligations concerning the nature, quality, quantity, ownership, packing of

the subject matter (Arts 148, 149, 150, 151, 153, 154) Warranty clause (Arts 148, 154)

Buyers basic obligations

The buyer should pay the price in due course and in due manner. (Art 159) The buyer should check the subject matter and make due notice to buyer if

unsatisfied with quantity or quality of subject matter. (Arts 157, 158)

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