Civil Code of the People’s Republic of China
(Adopted at the Third Session of the Thirteenth National People’s Congress on May 28, 2020)
Book Three Contracts
Part One General Provisions
Chapter I General Rules
Article 463 This Book regulates the civil-law relations arising from contracts.
Article 464 A contract is an agreement on the establishment, modification, or termination of a civil juristic relationship between persons of the civil law.
An agreement on establishing a marriage, adoption, guardianship, or the like personal relationships shall be governed by the provisions of laws providing for such personal relationships; in the absence of such provisions, the provisions of this Book may be applied mutatis mutandis according to the nature of such agreements.
Article 465 A contract formed in accordance with law is protected by law.
A contract formed in accordance with law is legally binding only on the parties thereto, unless otherwise provided by law.
Article 466 Where the parties have a dispute on the understanding of a contract clause, the meaning of the disputed clause shall be determined according to the provisions in the first paragraph of Article 142 of this Code.
Where a contract is made in two or more languages which are agreed to be equally authentic, the words and sentences used in each text shall be presumed to have the same meaning. Where the words and sentences used in each text are inconsistent, interpretation thereof shall be made in accordance with the related clauses, nature, and purpose of the contract, and the principle of good faith, and the like.
Article 467 For a contract not explicitly provided in this Code or other laws, the General Provisions of this Book shall be applied, and the provisions provided in this Book and other laws on a contract which is most similar to the said contact may be applied mutatis mutandis.
The laws of the People's Republic of China shall apply to the contracts of Sino-foreign equity joint venture, contracts of Sino-foreign contractual joint venture, or contracts of Sino-foreign cooperation in the exploration and exploitation of natural resources that to be performed within the territory of the People's Republic of China.
Article 468 For a creditor-debtor relation not arising from a contract, the provisions of laws relating to such relations shall be applied; in the absence of such provisions, the relevant provisions of the General Provisions of this Book shall be applied, unless they shall not be applied based on the nature of the creditor-debtor relation.
Chapter II Conclusion of Contracts
Article 469 The parties may conclude a contract in writing, orally, or in other forms. A writing refers to any form that renders the content contained therein capable of being represented in a tangible form, such as a written agreement, letter, telegram, telex, or facsimile.
A data message in any form, such as electronic data interchange and e-mails, that renders the content contained therein capable of being represented in a tangible form and accessible for reference and use at any time shall be deemed as a writing.
Article 470 The content of a contract shall be agreed by the parties and generally includes the following clauses:
(1) name or designation and domicile of each party;
(2) objects;
(3) quantity;
(4) quality;
(5) price or remuneration;
(6) time period, place, and manner of performance;
(7) default liability; and
(8) dispute resolution.
The parties may conclude a contract with reference to the various types of model contracts.
Article 471 The parties may conclude a contract by making an offer and acceptance or other means.
Article 472 An offer is an expression of intent to conclude a contract with another person, and the expression of intent shall conform to the following conditions:
(1) the content shall be specific and definite; and
(2) it is indicated therein that the offeror is to be bound by his expression of intent upon acceptance thereof by an offeree.
Article 473 An invitation to offer is a manifestation that a person expects another person to make an offer to him. Auction announcements, bidding announcements, stock prospectuses, bond prospectuses, fund prospectuses, commercial advertisements and promotions, and mailed price catalogs, and the like, are invitations to offer.
A commercial advertisement and promotion shall constitute an offer if its content conforms to the conditions for an offer.
Article 474 The time when an offer becomes effective shall be governed by the provisions of Article 137 of this Code.
Article 475 An offer may be withdrawn. The withdrawal of an offer shall be governed by the provisions of Article 141 of this Code.
Article 476 An offer may be revoked, unless under any of the following circumstances:
(1) the offeror has explicitly indicated that the offer is irrevocable by specifying a time limit for acceptance or in any other manner; or
(2) the offeree has reasons to believe that the offer is irrevocable and the offeree has made reasonable preparations to perform the contract.
Article 477 Where an expression of intent to revoke an offer is made in a real-time communication, the content of such expression of intent shall be known to the offeree before the offeree makes an acceptance; where an expression of intent to revoke an offer is not made in a real-time communication, it shall reach the offeree before the offeree makes an acceptance.
Article 478 An offer becomes invalid under any of the following circumstances:
(1) the offer is rejected;
(2) the offer is revoked in accordance with law;
(3) the offeree makes no acceptance prior to expiration of the time limit for acceptance; or
(4) the offeree materially alters the content of the offer.
Article 479 An acceptance is an expression of intent of the offeree to accept an offer.
Article 480 An acceptance shall be made by means of notice, except that an acceptance may be made by performing an act according to the parties’ course of dealing or as indicated in the offer.
Article 481 An acceptance shall reach the offeror within the time limit specified in the offer.
Where no time limit for acceptance is specified in the offer, an acceptance shall reach the offeror in accordance with the following provisions:
(1) where an offer is made in a real-time communication, acceptance shall be made promptly; or
(2) where an offer is not made in a real-time communication, the acceptance notice shall reach the offeror within a reasonable period of time.
Article 482 Where an offer is made through a letter or a telegram, the time limit for acceptance shall be counted from the date shown on the letter or the date the telegram is handed in for dispatch or, if no such a date is shown on the letter, from the mailing date shown by the postmark of the letter. Where an offer is made by means of instantaneous communications such as telephone calls, facsimiles, or e-mails, the time limit for acceptance shall be counted from the moment the offer reaches the offeree.
Article 483 A contract is formed at the time when an acceptance becomes effective, unless otherwise provided by law or agreed by the parties.
Article 484 Where an acceptance is made by means of notice, the time when the acceptance becomes effective shall be governed by the provisions of Article 137 of this Code.
Where an acceptance notice is not required, the acceptance becomes effective when an act of acceptance is performed according to the parties’ course of dealing or as indicated by the offer.
Article 485 An acceptance may be withdrawn. The provisions of Article 141 of this Code shall apply to the withdrawal of an acceptance.
Article 486 Where an offeree makes an acceptance beyond the time limit for acceptance, or where the acceptance is made within the time limit for acceptance but it cannot reach the offeror in time under normal circumstances, such an acceptance constitutes a new offer unless the offeror timely notifies the offeree that the acceptance is effective.
Article 487 Where an offeree makes an acceptance notice within the time limit for acceptance, if the notice would have reached the offeror in time under normal circumstances but reaches the offeror beyond the time limit for other reasons, the acceptance shall be effective unless the offeror timely notifies the offeree that the acceptance is not accepted as it exceeds the time limit for acceptance.
Article 488 The content of an acceptance shall be consistent with the content of the offer. Where the offeree proposes in the acceptance any material alteration to the content of the offer, it shall constitute a new offer. An alteration concerning the object of the contract, the quantity, quality, price or remuneration, time period of performance, place and manner of performance, default liability, the methods of dispute resolution, or the like is a material alteration to the content of an offer.
Article 489 Where an acceptance makes a non-material alteration to the offer, the acceptance shall be effective and the content of the contract shall be as altered by the acceptance, unless the offeror objects in time, or the offer indicates that an acceptance may not make any alteration to the content of the offer.
Article 490 Where the parties conclude a contract in the form of a written agreement, the contract is formed at the time when the parties all sign, stamp, or put their fingerprints on the memorandum. Prior to signing, stamping, or putting their fingerprints thereon, where one of the parties has already performed the principal obligation and the other party has accepted the performance, the contract is formed at the time of such acceptance.
Where a contract is required to be concluded in writing in accordance with laws or administrative regulations or agreed by the parties and the parties fail to make the contract in writing, if one of the parties has already performed the principal obligation and the other party has accepted the performance, the contract is formed at the time of such acceptance.
Article 491 Where the parties conclude a contract in the form of a letter, data message, or the like, and a confirmation letter is required to be signed, the contract is formed when the confirmation letter is signed.
Where the information about goods or services published by a party via information network, such as internet, conforms to the conditions for an offer, unless otherwise agreed by the parties, a contract is formed at the time when the other party chooses such product or service and successfully submits the order.
Article 492 The place where an acceptance becomes effective is the place where the contract is formed.
Where a contract is concluded in the form of data message, unless otherwise agreed by the parties, the recipient’s principal place of business is the place where the contract is formed; in the absence of a principal place of business, the recipient’s domicile is the place where the contract is formed.
Article 493 Where the parties conclude a contract in the form of a memorandum of contract, unless otherwise agreed by them, the place where the contract is finally signed, stemped, or fingerprinted is the place where the contract is formed.
Article 494 Where the State issues a State purchase order or a mandatory assignment in accordance with the needs such as emergency and disaster relief, pandemic prevention and control, or the like, the persons of the civil law concerned shall conclude a contract in accordance with the rights and obligations provided by the relevant laws and administrative regulations.
The party that has an obligation to make an offer in accordance with the provisions of laws and administrative regulations shall make a reasonable offer in a timely manner.
The party that has an obligation to make an acceptance in accordance with the provisions of laws and administrative regulations shall not reject the reasonable request of the other party to conclude a contract.
Article 495 A letter of subscription, letter of order, and letter of reservation, and the like, in which the parties agree to conclude a contract within a certain period of time in the future, constitutes a preliminary contract.
Where one of the parties fails to perform the obligation to conclude a contract agreed in the preliminary contract, the other party may request such party to bear the liability for breach of the preliminary contract.
Article 496 A standard clause refers to a clause formulated in advance by a party for the purpose of repeated use which has not been negotiated with the other party when concluding the contract.
Upon concluding a contract, where a standard clause is used, the party providing the standard clause shall determine the parties’ rights and obligations in accordance with the principle of fairness, and shall, in a reasonable manner, call the other party's attention to the clause concerning the other party’s major interests and concerns, such as a clause that exempts or alleviates the liability of the party providing the standard clause, and give explanations of such clause upon request of the other party. Where the party providing the standard clause fails to perform the aforementioned obligation of calling attention or giving explanations, thus resulting in the other party’s failure to pay attention to or understand the clause concerning his major interests and concerns, the other party may claim that such clause does not become part of the contract.
Article 497 A standard clause is void under any of the following circumstances:
(1) existence of a circumstance under which the clause is void as provided in Section 3 of Chapter VI of Book One and Article 506 of this Code;
(2) the party providing the standard clause unreasonably exempts or alleviates himself from the liability, imposes heavier liability on the other party, or restricts the main rights of the other party; or
(3) the party providing the standard clause deprives the other party of his main rights.
Article 498 Where a dispute arises over the understanding of a standard clause, the clause shall be interpreted in accordance with its common understanding.
Where there are two or more interpretations of a standard clause, the clause shall be interpreted in a manner unfavorable to the party providing the standard clause. Where a standard clause is inconsistent with a non-standard clause, the non-standard clause shall prevail.
Article 499 Where a rewarder through making a public announcement promises to pay a reward to anyone who has completed a particular act, the person who has completed the act may request the rewarder to pay.
Article 500 During the course of concluding a contract, the party that falls under any of the following circumstances and causes loss to the other party shall bear the liability for compensation:
(1) under the guise of concluding a contract, engaging in consultation with malicious intention;
(2) intentionally concealing material facts or providing false information concerning the conclusion of the contract; or
(3) conducting any other acts contrary to the principle of good faith.
Article 501 The parties shall not disclose or improperly use the trade secrets or other confidential information that are obtained in the course of concluding a contract, regardless of whether the contract is formed or not. The party that discloses or improperly uses such trade secrets or information and thus causes losses to the other party shall bear the liability for compensation.
Chapter III Effect of Contracts
Article 502 A contract formed in accordance with law becomes effective upon its formation, unless otherwise provided by law or agreed by the parties.
Where there are laws or administrative regulations providing that a contract shall be subject to the approval and other procedures, such provisions shall be followed. Where failure to complete the approval or other procedures is to affect the validity of the contract, the validity of the clauses concerning the performance of an obligation of filing for approval, and the like, and the other relevant clauses in the contract shall not be affected. Where the party obligated to complete application for approval or other procedures fails to do so, the other party may request the former party to bear the liability for breach of such obligation.
Where there are laws or administrative regulations providing that modification, assignment, or rescission of a contract shall be subject to approval or other procedures, such provisions shall be followed.
Article 503 Where a person without authority concludes a contract in the name of a principal, and if the principal has already started performing the contractual obligations or accepted the performance of the other party, the contract is deemed ratified.
Article 504 Where the legal representative of a legal person or the responsible person of an unincorporated organization concludes a contract ultra vires, such an act is effective and the contract is binding on the legal person or the unincorporated organization unless the other party knows or should have known that the legal representative or the responsible person acts ultra vires.
Article 505 Where the parties conclude a contract beyond their scope of business, the validity of the contract shall be determined according to the provisions in Section 3 of Chapter VI of Book One of this Code and this Book, and the contract shall not be determined as invalid solely on the ground that it is beyond their scope of business.
Article 506 An exculpatory clause in a contract exempting the liability on the following acts are void:
(1) causing physical injury to the other party; or
(2) causing losses to the other party’s property intentionally or due to gross negligence.
Article 507 Where a contract does not take effect, or is void, revoked, or terminated, the validity of a clause concerning dispute resolution shall not be affected.
Article 508 The validity of a contract which is not covered by the provisions in this Book shall be governed by the relevant provisions in Chapter VI of Book One of this Code.
Chapter IV Performance of Contracts
Article 509 The parties shall fully perform their respective obligations as contracted.
The parties shall comply with the principle of good faith, and perform such obligations as sending notices, rendering assistances, and keeping confidentiality in accordance with the nature and purpose of the contract and the course of dealing .
The parties shall avoid wasting the resources, polluting the environment, or damaging the ecology in the course of performance of the contract.
Article 510 Where the parties have not agreed on such content as the quality, price or remuneration, or the place of performance, and the like, or the agreement is unclear, after the contract becomes effective, the parties may make a supplementary agreement; where the parties fail to reach a supplementary agreement, such content shall be determined according to the relevant clauses of the contract or the course of dealing.
Article 511 Where an agreement between the parties concerning the content of their contract is unclear and such content cannot be determined according to the provisions of the preceding Article, the following provisions shall be applied:
(1) where the quality requirements are not clearly stipulated, the contract shall be performed in accordance with a mandatory national standard, or a recommendatory national standard in the absence of a mandatory national standard, or the standard of the industry in the absence of a recommendatory national standard. In the absence of any national or industrial standards, the contract shall be performed in accordance with the general standard or a specific standard conforming to the purpose of the contract.
(2) where the price or remuneration is not clearly stipulated, the contract shall be performed in accordance with the market price in the place of performance at the time the contract is concluded. Where the government-set or government-guided price shall be applied as required by law, the contract shall be performed on such a price.
(3) where the place of performance is not clearly stipulated, the contract shall be performed at the place of the party receiving money where payment of money is involved, or, where real estate is to be delivered, at the place where the real estate is located. For other subject matters, the contract shall be performed at the place where the party performing the obligation is located.
(4) where the period of performance is not clearly stipulated, the debtor may perform his obligations at any time, and the creditor may request the debtor to perform at any time, provided that he shall give the debtor necessary time for preparation;
(5) where the mode of performance is not clearly stipulated, the contract shall be performed in a manner conducive to realizing the purpose of the contract; and
(6) where the allocation of expenses for performance is not clearly stipulated, the expenses shall be borne by the party performing the obligation; where the expenses for performance are increased owing to the creditor’s reason, the creditor shall bear the increased part of the expenses.
Article 512 Where the object of an electronic contract concluded through internet or other information network is the delivery of goods and the goods are to be delivered by express delivery services, the time of delivery is the time of acknowledging receipt of the goods by the recipient. Where the object of the said electronic contract is the provision of services, the time for provision of the service is the time stated in the automatic generated electronic certificate or physical certificate. Where there is no time stated in such a certificate or the time stated therein is inconsistent with the actual time for provision of the service, the actual time for provision of the service shall prevail.
Where the subject matter of the said electronic contract is delivered by online transmission, the time of delivery is the time when the subject matter of the contract enters the specific system designated by the other party and can be searched and identified.
Where the parties to the said electronic contract agree otherwise on the mode and time of delivery of goods or provision of services, such agreement shall be complied with.
Article 513 Where a government-set or government-guided price is adopted in a contract, if the said price is adjusted within the delivery period stipulated in the contract, the contract price shall be the price as adjusted at the time of delivery. Where an overdue delivery of the subject matter occurs, the contract price shall be the original price if the price rises at the time of delivery, or the price as adjusted if the price falls at the time of delivery. Where a delayed delivery of the subject matter or an overdue payment occurs, the contract price shall be the price as adjusted if the price rises, or the original price if the price falls.
Article 514 Where an obligation is payment of money, unless otherwise provided by law or agreed by the parties, the creditor may request the debtor to perform the obligation by the lawful currency of the place of actual performance.
Article 515 Where a contract has multiple objects and the debtor is required to perform only one of them, the debtor has the right of choice to choose the object to perform, unless otherwise provided by law or agreed by the parties, or otherwise determined by the course of dealing.
Where the party with the right of choice fails to make the choice within the agreed period or upon expiration of the period of performance, and still fails to make the choice within a reasonable period of time after being demanded, the right of choice shall be shifted to the other party.
Article 516 A party shall promptly notify the other party when exercising the right of choice, and the object of the contract to be performed shall be ascertained at the time when such notice reaches the other party. The ascertained object shall not be changed, unless otherwise consented to by the other party.
Where one of the objects available for choice becomes impossible to perform, the party with the right of choice shall not choose such object to perform, unless the impossibility to perform is caused by the other party.
Article 517 Where there are two or more creditors, if the object is divisible and each creditor is entitled to the claim in proportion to his own share, then the claim is a claim by share; where there are two or more debtors, if the object is divisible and each debtor assumes the obligation in proportion to his own share, then the obligation is an obligation by share.
Where it is difficult to determine the share among the creditors with a claim by share or the debtors with an obligation by share, each is deemed to have or assume an equal share.
Article 518 Where there are two or more creditors, and any or all of the creditors may request the debtor to perform the obligation, their claim is a joint and several claim; where there are two or more debtors, and the creditor can request any or all of the debtors to perform the full obligation, the obligation is a joint and several obligation.
A joint and several claim or a joint and several obligation shall be provided by law or agreed by the parties.
Article 519 Where it is difficult to determine the share of obligation among the debtors assuming joint and several liabilities, each debtor is deemed to owe an equal share.
A debtor assuming joint and several liabilities who has assumed obligation in excess of his own share has the right to contribution against the other debtors assuming joint and several liabilities to the extent of the share not performed by the other debtors, and accordingly shall be entitled to the rights of a creditor, provided that the other creditors’ interests shall not be harmed. The defenses of the other debtors assuming joint and several liabilities against the creditor may be asserted against such a debtor.
Where a debtor assuming joint and several liabilities against whom the right to contribution is claimed is unable to perform the share he is liable to assume, the other debtors assuming joint and several liabilities shall be liable for the relevant part of the obligation on a pro rata basis.
Article 520 Where one of the debtors assuming joint and several liabilities has performed his obligation, offset his obligation, or placed the subject matter of the obligation in escrow, the obligation of the other debtors owed to the creditor is extinguished to the corresponding extent, and such a debtor has the right to contribution against the other debtors in accordance with the provisions of the preceding Article.
Where the obligation of one of the debtors assuming joint and several liabilities is discharged by the creditor, the obligation of the other debtors assuming joint and several liabilities owed to the creditor is extinguished to the extent of the share that such a debtor assumes.
Where the obligation of one of the debtors assuming joint and several liabilities has merged with the claim of the creditor to be held by the same person, after deducting such share of obligation, the creditor’s claim against the other debtors assuming joint and several liabilities continues to exist.
Where a creditor delays in accepting the performance of one of the debtors assuming joint and several liabilities, such delay takes effect on the other debtors assuming joint and several liabilities.
Article 521 Where it is difficult to determine the share among the creditors with joint and several claims, each creditor is deemed to have an equal share.
A creditor who has accepted the performance of obligation in excess of his own share shall reimburse the other creditors with joint and several claims with him on a pro rata basis.
The relevant provisions on a joint and several obligation in this Chapter may be applied to a joint and several claim mutatis mutandis.
Article 522 Where the parties agree that the debtor shall perform the obligation to a third person, if the debtor fails to perform the obligation to the third person or the performance does not conform to the agreement, the debtor shall bear default liability to the creditor.
Where it is provided by law or agreed by the parties that a third person may directly request the debtor to perform the obligation to him, and the third person does not explicitly reject it within a reasonable period of time, if the debtor fails to perform the obligation to the third person or the performance does not conform to the agreement, the third person may request the debtor to bear default liability. The defenses that the debtor has against the creditor may be asserted against the third person.
Article 523 Where the parties agree that the obligation shall be performed by a third person to the creditor, if the third person fails to perform the obligation or the performance does not conform to the agreement, the debtor shall bear default liability to the creditor.
Article 524 Where a debtor fails to perform an obligation, and a third person has an lawful interest in the performance of the obligation, the third person is entitled to perform it to the creditor on behalf of the debtor, unless the obligation may only be performed by the debtor based on the nature of the obligation, as agreed by the parties, or as provided by law.
After the creditor accepts the performance of such obligation by the third person, his claim against the debtor shall be assigned to the third person, unless otherwise agreed by the debtor and the third person.
Article 525 Where the parties have mutual obligations to each other and there is an order of performance of the obligations, the parties shall perform the obligations at the same time. Any party has the right to reject the other party's request for performance before the other party performs. Any party has the right to reject the other party's request for the corresponding performance if the other party’s performance does not conform to the agreement.
Article 526 Where the parties have mutual obligations to each other and there is an order of performance of the obligations, if the party obligated to perform first fails to perform the obligation, the party obligated to perform later has the right to reject the request for performance made by that party. Where the performance of the party obligated to perform first does not conform to the agreement, the party obligated to perform later has the right to reject the request made by the former party for performance of the corresponding obligation.
Article 527 A party obligated to perform the obligation first may suspend his performance if there is definite evidence proving that the other party falls under any of the following situations:
(1) its operating conditions are seriously deteriorated;
(2) it transfers property or withdraws capital to evade debts;
(3) the good will of its business has been lost; or
(4) there’s another circumstance under which it has lost or is losing its ability to perform the obligation.
A party that suspends the performance with no such definite evidence shall bear default liability.
Article 528 A party who suspends performance in accordance with the provisions of the preceding Article shall notify the other party in a timely manner. The performance shall be resumed if the other party provides an appropriate bond. After a party suspends its performance, where the other party fails to restore his ability to perform the obligation and fails to provide an appropriate bond within a reasonable period of time, it shall be deemed to be an indication through his act that the party will not perform his principal obligation, and the party that suspends the performance may cancel the contract and may request the other party to bear default liability.
Article 529 Where a debtor’s performance of an obligation has become difficult owing to the reason that the creditor fails to notify the debtor that it has split into two or more entities, merges with another entity, or changed its domicile, the debtor may suspend performance or place the subject matter in escrow.
Article 530 A creditor may reject the debtor’s early performance of the obligation, unless the early performance is not detrimental to the interests of the creditor.
Any additional expenses incurred to the creditor due to the debtor’s early performance of the obligation shall be borne by the debtor.
Article 531 A creditor may reject the debtor’s partial performance of the obligation, unless the partial performance is not detrimental to the interests of the creditor.
Any additional expenses incurred to the creditor due to the debtor’s partial performance of the obligation shall be borne by the debtor.
Article 532 After a contract becomes effective, any party shall not fail to perform its contractual obligations on the ground that either party’s name or entity name, legal representative, the responsible person, or the person handling the contract has been changed.
Article 533 After a contract is formed, where a fundamental condition upon which the contract is concluded is significantly changed which are unforeseeable by the parties upon conclusion of the contract and which is not one of the commercial risks, if continuing performance of the contract is obviously unfair to one of the parties, the party that is adversely affected may re-negotiate with the other party; where such an agreement cannot be reached within a reasonable period of time, the parties may request the people’s court or an arbitration institution to rectify or rescind the contract.
The people’s court or an arbitration institution shall rectify or rescind the contract in compliance with the principle of fairness, taking into account the actual circumstances of the case.
Article 534 Where the parties take advantage of the contract to commit an act that endangers the State’s interests and public interests, the market regulatory authority and other relevant administrative authorities shall be responsible for supervising and handling it in accordance with the provisions of laws and administrative regulations.
Chapter V Preservation of Contracts
Article 535 Where a debtor’s right against a counterparty, or an accessory right related thereto, has not been claimed against the counterparty owing to the debtor’s indolence, and the enforcement of the creditor’s due claim is thus adversely affected, the creditor may request the people's court to allow him to exercise by subrogation the debtor's claim against the counterparty of the debtor in his own name, unless such claim belongs exclusively to the debtor himself.
The scope of the right of subrogation is limited to the creditor's due claim. The necessary expenses for the creditor to exercise the right of subrogation shall be borne by the debtor.
The counterparty’s defenses against the debtor may be asserted against the creditor.
Article 536 Prior to the due date of the creditor’s claim, where there exists a circumstance under which the limitation period for the debtor’s principal claim or an accessory claim related thereto is to expire, or the debtor fails to timely declare his claim in a bankruptcy proceeding, and the enforcement of the creditor’s claim is thus adversely affected, the creditor may, by subrogation, request the counterparty of the debtor to perform his obligation to the debtor, declare the debtor’s claim to the bankruptcy administrator, or take other necessary acts.
Article 537Where the people’s court determines that the right of subrogation has been established, the counterparty of the debtor shall perform the obligation to the creditor. After the performance is accepted by the creditor, the corresponding rights and obligations between the creditor and the debtor, and those between the debtor and the counterparty, are terminated. Where the debtor’s claim or an accessory claim related thereto against the counterparty is subject to preservation or enforcement measures, or where the debtor becomes bankrupt, it shall be dealt with in accordance with the provisions of the relevant laws.
Article 538 Where a debtor gratuitously disposes of his proprietory rights and interests by waiving his claims, waiving the security for his claims, or transferring his properties without consideration, and the like, or maliciously extends the period of performance of his due claim, and the enforcement of the creditor’s claim is thus adversely affected, the creditor may request the people's court to revoke the debtor's act.
Article 539 Where a debtor transfers his property at an obviously unreasonably low price, takes anothers’ property or provides security for anothers’ obligation at an obviously unreasonable high price, and the enforcement of the creditor’s claim is thus adversely affected, the creditor may request the people’s court to revoke the debtor’s act if the counterparty of the debtor knows or should have known such circumstance.
Article 540 The scope of the right to revocation shall be limited to the creditor’s claim. The necessary expenses for the creditor to exercise the right to revocation shall be borne by the debtor.
Article 541 The right to revocation shall be exercised within one year from the date on which the creditor knows or should have known the cause for the revocation. The right to revocation shall be extinguished where a creditor does not exercise such right within five years since the date on which the act of the debtor occurs.
Article 542 Where an act of the debtor adversely affecting the enforcement of the creditor’s claim is revoked, such act does not have legal effect ab initio.
Chapter VI Modification and Assignment of Contracts
Article 543 The parties may modify the contract upon agreement through consultation.
Article 544 Where the content of the contract that the parties agree to modify is not clear, it is presumed that the contract has not been modified.
Article 545 A creditor may assign his claim in whole or in part to a third person, except that:
(1) a claim is not assignable by virtue of its nature;
(2) a claim is not assignable as agreed by the parties; or
(3) a claim is not assignable in accordance with law.
Where the parties agree that a non-pecuniary claim may not be assigned, such agreement shall not be asserted against a bona fide third person. Where the parties agree that a pecuniary claim may not be assigned, such agreement shall not be asserted against a third person.
Article 546 Where a creditor assigns his claim but fails to notify the debtor thereof, the assignment is not effective against the debtor.
The notice of the assignment of a claim may not be revoked, unless consented to by the assignee.
Article 547 Where a creditor assigns his claim, the assignee shall acquire the accessory right related to the claim, unless the accessory right belongs exclusively to the creditor.
Failure to register the assignment of the accessory right or failure to change the possession thereof shall not affect the acquisition of the accessory right by the assignee.
Article 548 After a debtor receives a notice of assignment of a claim, the debtor’s defenses against the assignor may be asserted against the assignee.
Article 549 A debtor may claim a set-off against the assignee under any of the following circumstances:
(1) when the debtor receives the notice of assignment of a claim, the debtor has a claim against the assignor which becomes due prior to or at the same time of the due date of the assigned claim; or
(2) the debtor’s claim and the assigned claim are generated on the basis of the same contract.
Article 550 The expenses for performance increased due to the assignment of a claim shall be borne by the assignor.
Article 551 Where a debtor delegates his obligation in whole or in part to a third person, the consent of the creditor shall be obtained.
The debtor or the third person may demand the creditor to give his consent within a reasonable period of time. Where the creditor makes no indication, it shall be deemed as no consent given.
Article 552 Where a third person agrees with the debtor to join in the obligation and notifies the creditor thereof, or a third person indicates to the creditor his willingness to join in the obligation, if the creditor fails to explicitly make a rejection within a reasonable period of time, the creditor may request the third person to assume the joint and several obligation with the debtor to the extent of the obligation the third person is willing to assume.
Article 553 Where a debtor delegates his obligation, the new debtor may assert a defense of the original debtor against the creditor; where the original debtor has a claim against the creditor, the new debtor may not claim a set-off against the creditor.
Article 554 Where a debtor delegates his obligation, the new debtor shall assume the accessory obligation related to the principal obligation, unless the accessory obligation belongs exclusively to the original debtor.
Article 555 A party may assign his rights and delegate his obligations under a contract to a third person with the consent of the other party.
Article 556 Where the rights and obligations under a contract are assigned and delegated together, the provisions on assignment of claims and delegation of obligations shall be applied.
Chapter VII Termination of Rights and Obligations under a Contract
Article 557 A claim or obligation shall be terminated under any of the following circumstances:
(1) the obligation has been performed;
(2) the obligations are offset against each other;
(3) the debtor has placed the subject matter in escrow in accordance with law;
(4) the creditor has exempted the obligation;
(5) the claim and obligation are merged to be held by the same person; or
(6) any other circumstance under which the parties’ agreement is terminated as provided by law or agreed by the parties.
The relationship of rights and obligations under a contract shall be terminated upon rescission of the contract.
Article 558 After the parties’ claims and obligations are terminated, the parties shall, in compliance with the principle of good faith and the like, perform such obligations as sending notification, rendering assistance, keeping confidentiality, and retrieving the used items according to the course of dealing.
Article 559 Upon termination of a claim and an obligation, a right accessory to the claim shall be extinguished concomitantly, unless otherwise provided by law or agreed by the parties.
Article 560 Where a debtor owes to a creditor multiple obligations of the same kind, and the debtor’s performance is not sufficient to discharge all of the obligations, upon making performance, the debtor shall designate which obligation is to be discharged, unless otherwise agreed by the parties.
Where the debtor fails to make such a designation, the due obligation shall be performed first. Where multiple obligations are all due, the obligation not secured or with the least security shall be performed firs. Where none of the obligations are secured or the obligations are equally secured, the obligation with which the debtor assumes the heaviest burden shall be performed first. Where the burdens are the same, the obligations shall be performed in the order of their due dates. Where the due dates are the same, the obligations shall be performed on a pro rata basis.
Article 561 In addition to performing the principal obligation, a debtor shall pay to the creditor interests and other expenses related to the enforcement of the obligation. Where the payment is not sufficient to discharge all of the obligations, unless otherwise agreed by the parties, he shall perform the obligation in accordance with the following order:
(1) the relevant expenses incurred by the creditor for enforcing his claim;
(2) the interests; and
(3) the principal obligation.
Article 562 The parties may rescind the contract upon agreement through consultation.
The parties may agree on the causes for rescission of the contract by a party. When a cause for rescission of contract arises, the party with the right to rescission may rescind the contract.
Article 563 The parties may rescind the contract under any of the following circumstances:
(1) the purpose of a contract is not able to be achieved due to force majeure;
(2) prior to expiration of the period of performance, one of the parties explicitly expresses or indicates by his act that he will not perform the principal obligation;
(3) one of the parties delays his performance of the principal obligation and still fails to perform it within a reasonable period of time after being demanded;
(4) one of the parties delays his performance of the obligation or has otherwise acted in breach of the contract, thus makes it impossible for the purpose of the contract to be achieved; or
(5)any other circumstance as provided by law.
For a contract under which the debtor is required to continuously perform an obligation for an indefinite period of time, the parties thereto may rescind the contract at any time, provided that the other party shall be notified within a reasonable period of time.
Article 564 Where a time limit for exercising the right to rescind the contract is provided by law or agreed by the parties, if the parties have not exercised such right upon expiration of the period, such a right shall be extinguished.
Where no time limit for exercising the right to rescind the contract is provided by law or agreed by the parties, such a right shall be extinguished if the party with the right to rescission does not exercise such right within one year after he knows or should have known the causes for rescission, or within a reasonable period of time after being demanded by the other party.
Article 565 Where one of the parties requests to rescind the contract in accordance with law, the other party shall be duly notified. The contract shall be rescinded at the time the notice reaches the other party, or, where the notice states that the contract shall be automatically rescinded if the debtor fails to perform his obligation within a specified period of time, the contrct shall be rescinded when the debtor fails to perform the obligation upon expiration of such specified period of time. Where the other party has objections to the rescission of the contract, either party may request the people's court or an arbitration institution to determine the validity of the rescission.
Where one of the parties, without notifying the other party, requests the rescission of the contract by directly filing a lawsuit or applying for arbitration in accordance with law, and the people’s court or arbitration institution confirms such request, the contract shall be rescinded when a duplicated copy of the complaint or the application letter for arbitration is served on the other party.
Article 566 After a contract is rescinded, where the obligations have not yet been performed, the performance shall cease; where the obligations have already been performed, the parties may, taking into account the performance status and the nature of the contract, request restoration to the original status or other remedial measures taken, and have the right to request for compensation for losses.
Where a contract is rescinded due to a default, the party with the right to rescind the contract may request the breaching party to bear default liability, unless otherwise agreed by the parties.
After the principal contract is rescinded, a security provider shall still be obligated to secure the debtor’s liability, unless otherwise agreed in the security contract.
Article 567 Termination of the relationship of rights and obligations under a contract does not affect the validity of the contract clauses regarding settlement and liquidation.
Article 568 Where the parties mutually owe obligations to each other, and the subject matter of the obligations are of the same kind and quality, any party may offset his obligation against the due obligation of the other party, unless the obligation cannot be offset by virture of the nature of the obligations, or in accordance with the agreements by the parties or the provisions of law.
A party who claims a set-off shall notify the other party. The notice shall become effective when it reaches the other party. No conditions or time limit may be attached to the set-off.
Article 569 Where the parties mutually owe obligations to each other and the subject matter of the obligations are not of the same kind or quality, the obligations may also be offset upon agreement by the parties through consultation.
Article 570 Where it is difficult to perform an obligation under any of the following circumstances, a debtor may place the subject matter in escrow:
(1) the creditor refuses to accept the performance without just course;
(2) the creditor cannot be located;
(3) the creditor dies with his heirs or estate administrator not determined, or the creditor loses his capacity for performing civil juristic acts with no guardian determined; or
(4) any other circumstance as provided by law.
Where the subject matter is not suitable for being placed in escrew or the expenses therefor are too high, the debtor may sell the subject matter through auction or sale and place the proceeds thus obtained in escrow in accordance with law.
Article 571 A subject matter or the proceeds obtained from auction or sale of the subject matter is placed in escrow where the debtor delivers the subject matter or proceeds thereof to the escrow agency in accordance with law.
Where a subject matter or its proceeds has been placed in escrow, the debtor is deemed to have delivered the subject matter to such extent.
Article 572 After a subject matter is placed in escrow, the debtor shall promptly notify the creditor or the creditor’s heir, estate administrator, guardian, or custodian for his property.
Article 573 After a subject matter is placed in escrow, the risk of destruction, damage, or loss thereof shall be assumed by the creditor. During the period the subject matter is placed in escrow, the accrued proceeds of the subject matter shall belong to the creditor. The expenses thus incurred shall be borne by the creditor.
Article 574 The creditor may collect the subject matter placed in escrow at any time, except that where the creditor owes due obligation to the debtor, the escrow agency shall reject the creditor’s request for collecting it before the creditor performs such obligation or providing security therefor.
The creditor’s right to collect the subject matter placed in escrow is extinguished if such right is not exercised within five years from the date the subject matter is delivered to the escrow agency, and such subject matter shall be escheated to the State after the escrow agency’s expenses are deducted. However, where a creditor fails to perform his due obligation to the debtor, or where the creditor waives his right to collect the subject matter placed in escrow in writing to the escrow agency, the debtor has the right to take back the subject matter after paying the escrow agency’s expenses.
Article 575 Where a creditor exempts part or all of the debtor’s obligations, the claims and obligations shall be terminated in part or in whole, unless the debtor objects within a reasonable period of time.
Article 576 Where a claim and an obligation are merged to be held by the same person, the claim and obligation shall be terminated, unless it is detrimental to the interests of a third person.
Chapter VIII Default Liability
Article 577 Where a party fails to perform his contractual obligation or his performance does not conform to the agreement, he shall bear default liability such as continuing to perform his obligations, taking remedial measures, or compensating for losses.
Article 578 Where a party explicitly expresses or indicates by his act that he will not perform his contractual obligation, the other party may request the former party to bear default liability before expiration of the time period of performance.
Article 579 Where a party fails to pay the price, remuneration, rent, or interests, or fails to perform another pecuniary obligation, the other party may request for such payment or performance.
Article 580 Where a party fails to perform a non-pecuniary obligation or his performance does not conform to the agreement, the other party may request for such performance unless:
(1) the performance is impossible either de jure or de facto;
(2) the object of the obligation is not suitable for a compulsory performance or the expenses for the performance are too high; or
(3) the creditor fails to request for performance within a reasonable period of time.
Where one of the situations specified in the preceding paragraph exists so that the purpose of the contract cannot be achieved, the people’s court or an arbitration institution may terminate the contractual relationship of rights and obligations upon request by a party, but the default liability shall still be borne without being affected.
Article 581 Where a party fails to perform his obligation or his performance does not conform to the agreement, if the obligation shall not be enforced by virtue of the nature of the obligation, the other party may request such party to bear the expenses of a substitute performance by a third person.
Article 582 Where the performance does not conform to the agreement, default liability shall be borne in accordance with the contract between the parties. Where the default liability is not stipulated or is not clearly stipulated in the contract, and if it cannot be determined according to the provisions of Article 510 of this Code, the aggrieved party may, by virtue of the nature of the object and according to the degree of the loss, reasonably request the other party to bear the default liability such as repair, redoing, replacement, return of the object, decrease in price or remuneration, and the like.
Article 583 Where a party fails to perform his contractual obligation or his performance does not conform to the agreement, he shall make compensation if, after he has performed his obligation or has taken remedial measures, the other party still suffers loss.
Article 584 Where a party fails to perform his contractual obligation or his performance does not conform to the agreement so that the other party suffers loss, the amount of compensation shall be equivalent to the loss caused by the breach of contract, including the benefits expected to be obtained should the contract had been performed, except that it shall not exceed the loss that may be caused by the breach that the breaching party forsees or should have forseen at the time of conclusion of the contract.
Article 585 The parties may agree that, upon default by a party, a certain amount of liquidated damages shall be paid to the other party according to the circumstance of the breach, or the parties may agree on the method of calculating the compensation for losses arising from the breach.
Where the agreed liquidated damages are lower than the loss caused, the people's court or an arbitration institution may increase the amount upon request of a party. Where the agreed liquidated damages are excessively higher than the loss caused, the people's court or an arbitration institution may make appropriate reduction upon request of a party.
Where the parties agree on the liquidated damages for delayed performance, the breaching party shall continue to perform the obligation after paying the liquidated damages.
Article 586 The parties may agree that one party deposits earnest money to the other party to secure his claim. An earnest money deposit contract becomes effective upon actual delivery of the earnest money.
The amount of the earnest money shall be agreed by the parties, except that it shall not exceed 20% of the value of the object of the principal contract, and any excessive part does not have the effect as earnest money. Where the amount of the earnest money actually delivered is more or less than the agreed amount, the agreed amount of the earnest money shall be deemed to have been changed.
Article 587 After a debtor has performed his obligation, the earnest money shall be calculated as part of the price or be refunded. Where a party paying the earnest money fails to perform his obligation or fails to perform it in conformity with the agreement, so that the purpose of the contract cannot be achieved, he is not entitled to request refund of the earnest money. Where a party receiving the earnest money fails to perform his obligation or fails to perform it in conformity with the agreement, so that the purpose of the contract cannot be achieved, he shall refund twice the amount of the earnest money to the other party.
Article 588 Where the parties agree on both liquidated damages and earnest money, when a party defaults, the other party may choose to apply either the clause on the liquidated damages or the clause on the earnest money.
Where the earnest money is not sufficient to compensate the losses caused by one party’s default, the other party may request compensation for the losses in excess of the amount of the earnest money.
Article 589 Where a debtor performs his obligation in accordance with the agreement, and the creditor refuses to accept the performance without just cause, the debtor may request the creditor to compensate for any additional expenses.
The debtor does not need to pay interests for the period of delay in acceptance by the creditor.
Article 590 Where a party is unable to perform the contract due to force majeure, he shall be exempted from liability in whole or in part according to the impact of the force majeure, unless otherwise provided by law. The party unable to perform the contract due to force majeure shall promptly notify the other party to mitigate the losses that may be caused to the other party, and shall provide proof of the force majeure within a reasonable period of time.
Where the force majeure occurs after a party’s delay in performance, such party’s default liability shall not be exempted.
Article 591 After a party defaults, the other party shall take appropriate measures to prevent further loss. Where the loss is aggravated due to the failure of taking appropriate measures, no compensation shall be claimed for the aggravated part of the losses.
The reasonable expenses incurred by a party in preventing the aggravation of the loss shall be borne by the breaching party.
Article 592 Where both parties default, each shall bear corresponding liabilities.
Where one party’s default causes loss to the other party, and the other party’s fault contributes to the occurrence of such loss, the amount of compensation may be mitigated accordingly.
Article 593 A party who breaches a contract due to a third person’s reason shall bear default liability to the other party in accordance with law. The dispute between the breaching party and the third person shall be handled in accordance with the provisions of law or their agreement.
Article 594 The limitation period for filing a lawsuit or applying for arbitration on a dispute arising from a contract for international sale of goods and a contract for the import and export of technology is four years.
Part Two Typical Contracts
Chapter IX Sales Contracts
Article 595 A sales contract is a contract under which a seller transfers his ownership over the subject matter to a buyer who pays the price in return.
Article 596 A sales contract generally contains clauses specifying the name, quantity, quality, and price of the subject matter, the time period, place, and method of performance, the packaging, the standard and methods for inspection, the mode of settlement, the language used in the contract, the validity thereof, and the like.
Article 597 If the ownership of a subject matter is unable to be transferred owing to the fact that the seller fails to obtain the right of disposal, the buyer may rescind the contract and request the seller to bear default liability.
Where there are laws, administrative regulations prohibiting or restricting the transfer of a subject matter, such provisions shall be followed.
Article 598 A seller shall perform its obligation of delivering the subject matter or the documents for taking delivery thereof, and transferring the ownership over the subject matter to the buyer.
Article 599 A seller shall deliver the relevant certificates and information other than the documents for taking delivery of the subject matter to the buyer in accordance with the contract or the course of dealing.
Article 600 Where a subject matter to be sold involves intellectual property rights, unless otherwise provided by law or agreed by the parties, the intellectual property rights thereof does not belong to the buyer.
Article 601 A seller shall deliver the subject matter at a time as agreed in the contract. Where a time period for delivery is stipulated in the contract, the seller may deliver the subject matter at any time within such period.
Article 602 Where there is no agreement between the parties on the time period for delivery or the agreement is unclear, the provisions of Article 510 and Subparagraph (4) of Article 511 of this Code shall be applied.
Article 603 A seller shall deliver the subject matter at the agreed place of delivery.
Where there is no agreement between the parties on the place of delivery or the agreement is unclear, if it cannot be determined according to the provisions of Article 510 of this Code, the following provisions shall be applied:
(1) where the subject matter needs to be transported, the seller shall consign it to the first carrier for its delivery to the buyer; and
(2) where the subject matter does not need to be transported, if the seller and the buyer know the location of the subject matter when they conclude the contract, the seller shall deliver the subject matter at the said location; if the location of the subject matter is unknown, the seller shall deliver the subject matter at the seller's place of business at the time when the contract is concluded.
Article 604 The risks of destruction, damage, or loss of the subject matter shall be borne by the seller prior to the delivery and by the buyer after the delivery, unless otherwise provided by law or agreed by the parties.
Article 605 Where a subject matter fails to be delivered within the agreed time limit owing to the buyer’s reason, the buyer shall bear the risks of destruction, damage, or loss of the subject matter from the time he breaches the agreement.
Article 606 Where a seller sells a subject matter en route that has been consigned to a carrier for transport, unless otherwise ageed by the parties, the risks of destruction, damage, or loss of the subject matter shall be borne by the buyer from the time when the contract is formed.
Article 607 A buyer shall bear the risks of destruction, damage, or loss of the subject matter when the seller has transported the subject matter to the place designated by the buyer and delivered to the carrier in accordance with the agreement.
Where there is no agreement between the parties on the place of delivery or the agreement is unclear, if the subject matter needs to be transported according to Subparagraph (1) of the second paragraph of Article 603 of this Code, the buyer shall bear the risks of destruction, damage, or loss of the subject matter when the seller consigns the subject matter to the first carrier for transport.
Article 608 Where a seller has placed the subject matter at the place of delivery in accordance with the agreement or the provisions of Subparagraph (2) of the second paragraph of Article 603 of this Code, if the buyer fails to take delivery thereof in default, the risks of destruction, damage, or loss of the subject matter shall be borne by the buyer from the time the buyer defaults.
Article 609 A seller's failure to deliver the documents and information of the subject matter in accordance with the agreement does not affect the shift of the risks of destruction, damage, or loss of the subject matter.
Article 610 Where a subject matter fails to meet the quality requirements so that the purpose of the contract cannot be achieved, the buyer may refuse to accept the subject matter or may rescind the contract. Where the buyer refuses to accept the subject matter or rescind the contract, the risks of destruction, damage, or loss of the subject matter shall be borne by the seller.
Article 611 Where a seller’s performance is not in conformity with the agreement, the assumption of the risks of destruction, damage, or loss of the subject matter by the buyer does not affect the buyer's right to request the seller to bear default liability.
Article 612 A seller has an obligation to guarantee that no third person has any right over the subject matter delivered, unless otherwise provided by law.
Article 613 Where, at the time a contract is concluded, the buyer knows or should have known that a third person has a right over the subject matter of the contract, the seller shall not assume the obligation provided in the preceding Article.
Article 614 Where a buyer has a definite evidence to prove that a third person has a right over the subject matter, he may suspend payment therefor, unless the seller has provided an appropriate bond.
Article 615 A seller shall deliver the subject matter in conformity with the quality requirements as agreed by the parties. Where the seller provides quality specifications of the subject matter, the subject matter delivered shall conform to the specified quality requirements.
Article 616 Where there is no agreement between the parties on the quality requirements of the subject matter or the agreement is unclear, if the quality requirements cannot be determined according to the provisions of Article 510 of this Code, the provisions of Subparagraph (1) of Article 511 of this Code shall be applied.
Article 617 Where a subject matter delivered by the seller fails to meet the quality requirements, the buyer may request the seller to bear default liability in accordance with the provisions of Article 582 to 584 of this Code.
Article 618 Where the parties agree to alleviate or exempt the seller’s liability for the defects of the subject matter, if the seller, intentionally or by gross negligence, fails to inform the buyer about the defect of the subject matter, he has no right to claim alleviation or exemption of the liability.
Article 619 A seller shall deliver the subject matter in compliance with the packaging method as agreed in the contract. Where there is no agreement between the parties on the packaging method or the agreement is unclear, if the packing method cannot be determined according to the provisions of Article 510 of this Code, the subject matter shall be packed in a general way, or, in the absence of a general way, in a manner sufficient to protect the subject matter and conducive to saving resources and protecting the ecological environment.
Article 620 After a buyer receives the subject matter, he shall inspect it within the agreed period for inspection. If there is no agreed period for inspection, the buyer shall inspect it in a timely manner.
Article 621 Where the parties have agreed on a period for inspection, the buyer shall, within the period for inspection, notify the seller of any inconformity of the subject matter with the agreed quantity or quality. If notice is not given to the seller owing to the buyer’s indolence, the subject matter is deemed to be in conformity with the agreed quantity or quality.
Where the parties have not agreed on a period for inspection, the buyer shall notify the seller of any inconformity of the subject matter with the agreed quantity or quality within a reasonable period of time after he discovers or should have discovered the inconformity. Where the buyer fails to notify the seller within a reasonable period of time or within two years after he takes delivery of the subject matter, the subject matter shall be deemed to be in conformity with the agreed quantity or quality, except that where there is a warranty period within which the quality of the subject matter is guaranteed, the warranty period shall be applied.
Where a seller knows or should have known that the subject matter delivered does not conform to the agreement, the buyer is not subject to the time limit for notification as provided in the preceding two paragraphs.
Article 622 Where a period for inspection agreed by the parties is excessively short, and it is difficult for the buyer to complete a comprehensive inspection within such a period by virtue of the nature of the subject matter and in accordance with the course of dealing, such period shall be deemed only as a period for the buyer to raise objections to the patent defects of the subject matter.
Where an agreed period for inspection or a warranty period for quality guarantee is shorter than the period provided by the relevant laws and administrative regulations, the latter shall prevail.
Article 623 Where the parties have not agreed on an inspection period, and the buyer has signed a delivery note, confirmation slip, or the like document on which the quantity, model, and specifications of the subject matter are stated, the buyer shall be presumed to have inspected the quantity and the patent defects of the subject matter, unless there is sufficient evidence to overturn such a presumption.
Article 624 Where a seller delivers a subject matter to a third person according to the instructions given by the buyer, if the inspection standard agreed between the seller and the buyer are inconsistent with that agreed between the buyer and the third person, the inspection standard agreed between the seller and the buyer shall prevail.
Article 625 Where, in accordance with the provisions of laws and administrative regulations or as agreed by the parties, the subject matter shall be recycled after expiration of its valid service life, the seller has the obligation to recycle the subject matter by himself or by an authorized third person.
Article 626 A buyer shall make payment in accordance with the agreed amount and method of payment. where there is no agreement between the parties on the amount of price or the method of payment, or the agreement is unclear, the provisions of Article 510 and Subparagraph (2) and (5) of Article 511 of this Code shall be applied.
Article 627 A buyer shall make payment at the place agreed in the contract. Where there is no agreement between the parties on the place of payment, or the agreement is unclear, if the place cannot be determined in accordance with the provisions of Article 510 of this Code, the buyer shall make the payment at the seller’s place of business, except that payment shall be made at the place where the subject matter or the document for taking delivery thereof is delivered if the payment is conditioned upon the delivery of the subject matter.
Article 628 A buyer shall make payment at the time agreed in the contract. Where there is no agreement between the parties on the time for payment, or the agreement is unclear, if the time for payment cannot be determined according to the provisions of Article 510 of this Code, the buyer shall make payment at the same time as it receives the subject matter or the document for taking delivery thereof.
Article 629 Where the amount of the subject matter delivered by a seller exceeds the agreed amount, the buyer may accept or refuse to accept the excessive part. Where the buyer accepts the excessive part, it shall pay for it at the price agreed in the contract. If the buyer refuses to accept the excessive part, he shall notify the seller in a timely manner.
Article 630 Any proceeds accrued from the subject matter before delivery shall belong to the seller and any proceeds accrued from the subject matter after delivery shall belong to the buyer, unless otherwise agreed by the parties.
Article 631 Where a contract is rescinded due to the inconformity of the principal subject matter with the agreed requirements, the effect of the rescission shall be effective against the accessory subject matter. Where a contract is rescinded due to the inconformity of the accessory subject matter with the agreed requirements, the effect of the rescission shall be effective against the principal subject matter.
Article 632 Where the object of a contract is composed of several subject matters, if one of them fails to conform to the requirements agreed in the contract, the buyer may rescind the part of the contract in connection with that subject matter. However, where separation of the said subject matter from the other subject matters is to markedly harm the value of the subject matters of the contract, the buyer may rescind the contract in connection with the multiple subject matters concerned.
Article 633 Where the subject matters are to be delivered by installment, if a seller fails to deliver one lot of the subject matters, or has delivered the lot in a manner not in conformity with the agreement, so that the purpose of the contract in connection with the said lot cannot be achieved, the buyer may rescind the part of the contract in connection with the said lot.
Where a seller fails to deliver one lot of the subject matters, or delivered the lot in a manner not in conformity with the agreement, so that the subsequent delivery of the remaining lots cannot achieve the purpose of the contract, the buyer may rescind the part of the contract in connection with the said lot and the remaining lots.
Where a buyer has rescinded a part of the contract in connection with one lot of the subject matters, if the said lot and any other lot are interdependent on each other, the buyer may rescind the contract in connection with all the lots disregarding whether they have been delivered or not.
Article 634 Where a buyer under an installment contract fails to make payment and the unpaid amount reaches one-fifth of the total price, if the buyer still fails to pay the due installment amount within a reasonable period of time after being demanded, the seller may request the buyer to pay the total sum or he may rescind the contract.
The seller who rescinds the contract may request the buyer to pay a fee for the use of the subject matter.
Article 635 The parties to a sale by sample shall seal up the sample and may make specifications of its quality. The subject matter delivered by the seller shall be identical in quality with the sample and its specifications.
Article 636 Where a buyer to a sale by sample is unaware of the sample's hidden defects, even if the subject matter delivered is identical with the sample, the quality of the subject matter delivered by the seller shall still conform to the general standard for the same category of goods.
Article 637 The parties to a sale on trial use may agree on a period for trial use of the subject matter. Where there is no agreement between the parties on the period for trial use or the agreement is unclear, if the period for trial use cannot be determined according to the provisions of Article 510 of this Code, it shall be determined by the seller.
Article 638 A buyer to a sale on trial use may purchase or refuse to purchase the subject matter within the period for trial use. Where, upon expiration of the period for trial use, the buyer makes no indication as to whether to purchase it or not, the buyer is deemed to have purchased the subject matter.
If a buyer to a sale on trial use has, within the period for the trial use, already made partial payment or has sold, leased, created a security interest in the subject matter, the buyer is deemed to have agreed to purchase it.
Article 639 Where there is no agreement between the parties to a sale on trial use on the fee for the use of the subject matter, or the agreement is unclear, the seller has no right to request the buyer to pay such fee.
Article 640 The risks of destruction, damage, or loss of the subject matter shall be borne by the seller within the period for the trial use.
Article 641 The parties may agree in a sales contract that the seller retains the ownership of the subject matter if the buyer fails to pay the price or perform other obligations.
The ownership of the subject matter retained by a seller, without being registered, shall not be asserted against a bona fide third.
Article 642 Where the parties agree that the seller shall retain the ownership of the subject matter of the contract, unless otherwise agreed by the parties, the seller has the right to take back the subject matter if the buyer falls under any of the following circumstances before such ownership is transferred and losses are thus caused to the seller:
(1) the buyer fails to make payment in accordance with the contract, and fails to pay it within a reasonable period of time after being demanded;
(2) the buyer fails to fulfill the specific conditions in accordance with the contract; or
(3) the buyer sells, pledges, or otherwise improperly disposes of the subject matter.
The seller may negotiate with the buyer to take back the subject matter. Where such negotiation fails, the procedures for enforcement of security interests may be applied mutatis mutandis.
Article 643 After a seller has taken back the subject matter according to the first paragraph of the preceding Article, the buyer may request to redeem the subject matter if he eliminates the cause for the seller’s retrieving of the subject matter within a reasonable period of redemption agreed by the parties or set by the seller.
Where a buyer does not redeem the subject matter within the redemption period, the seller may sell the subject matter to a third person at a reasonable price. After deducting from the sale proceeds the amount unpaid by the buyer and the necessary expenses, any balance shall be returned to the buyer; if the sale proceeds are insufficient to cover the unpaid amount and the other necessary expenses, the deficiency shall be paid by the buyer.
Article 644 The rights and obligations of the parties to a sale through bidding, as well as the procedures for the bidding, shall be governed by the provisions of the relevant laws and administrative regulations.
Article 645 The rights and obligations of the parties to an auction, as well as the procedures of the auction, shall be governed by the provisions of the relevant laws and administrative regulations.
Article 646 Where there are provisions of laws governing other non-gratuitous contracts, such provisions shall be followed. In an absence of such a provision, the relevant provisions on sales contracts shall be applied mutatis mutandis.
Article 647 Where the parties agree to transfer the ownership of the subject matter by barter trade, the relevant provisions on sales contracts shall be applied mutatis mutandis.
Chapter X Contracts for the Supply and Consumption of Electricity, Water, Gas, or Heat
Article 648 A contract for the supply and consumption of electricity is a contract under which a supplier provides electricity to the consumer who pays the price in return.
A supplier providing electricity to the public shall not refuse a reasonable request of a consumer to conclude a contract.
Article 649 A contract for the supply and consumption of electricity generally contains clauses specifying the mode, quality and time of the supply, the volume, address, and nature of the consumption, the measuring method, the price, the settlement method of electricity fees, the responsibility for the maintenance of electricity supply and consumption facilities, and the like.
Article 650 The place of performance of a contract for the supply and consumption of electricity shall be agreed by the parties; if there is no agreement between the parties or the agreement is unclear, the place of demarcation of the property rights in the electricity supply facilities shall be the place of performance.
Article 651 A supplier of electricity shall safely supply electricity in accordance with the quality standard for power supply set by the State and in the agreement. Where a supplier fails to safely supply electricity in accordance with the quality standard for power supply set by the State or in the agreement, thus causing losses to the consumer, the supplier shall bear the liability for compensation.
Article 652 Where a supplier of electricity needs to cut off electricity supply due to scheduled or unscheduled overhauls of the electricity supply facilities, restriction on electricity consumption in accordance with law, or consumer's illegal consumption of the electricity, and the like, he shall notify the consumer in advance in accordance with the relevant regulations of the State. Where a supplier cuts off the electricity supply without notifying the consumer in advance, thus causing losses to the consumer, the supplier shall bear the liability for compensation.
Article 653 A supplier of electricity shall rush to repair without delay in accordance with the relevant regulations of the State whenever the electricity supply is cut off due to such reasons as natural disasters. Where the supplier fails to do so and thus causes losses to the consumer, the supplier shall bear the liability for compensation.
Article 654 A consumer of electricity shall pay the electricity fees in time in accordance with the relevant regulations of the State and the agreement between the parties.
Where a consumer fails to pay the electricity fees due, he shall pay the agreed liquidated damages. Where a consumer, after being demanded, still fails to pay the electricity fees and the liquidated damages within a reasonable period of time, the supplier may stop the supply of electricity in accordance with the procedures provided by the State.
Where a supplier stops the supply of electricity in accordance with the provision of the preceding paragraph, it shall notify the consumer in advance.
Article 655 A consumer shall use the electricity in a safe, economical and planned manner in accordance with the relevant regulations of the State and the agreement between the parties. Where a consumer fails to use the electricity in accordance with the relevant regulations of the State or the agreement between the parties, and thus causes losses to the supplier, the consumer shall bear the liability for compensation.
Article 656 The provisions of the contract for the supply and consumption of electricity shall be applied mutatis mutandis to contracts for the supply and consumption of water, gas, or heat.
Chapter XI Gift Contracts
Article 657 A gift contract is a contract under which a donor gives his own property to a donee gratuitously, and the donee indicates his acceptance of the gift.
Article 658 A donor may revoke the gift prior to the transfer of the rights in the gifted property.
The provisions of the preceding paragraph shall not apply to a notarized gift contract, or a gift contract of a public interest or moral obligation nature that shall, in accordance with law, not be revoked, such as a gift contract for disaster-relief, poverty-relief, disability-relief, or the like purposes.
Article 659 The gifted property shall go through registration or another procedure if the law so requires.
Article 660 For a notarized gift contract or a gift contract of a public interest or moral obligation nature that shall in accordance with law not be revoked, such as a contract for disaster-relief, poverty-relief, disability-relief, or the like purposes, where the donor does not deliver the gifted property, the donee may request such delivery.
Where the gifted property that shall be delivered in accordance with the preceding paragraph is destructed, damaged, or lost due to the donor’s intentional act or by his gross negligence, the donor shall bear the liability for compensation.
Article 661 A gift may be subject to an obligation.
Where a gift is subject to an obligation, the donee shall perform the obligation in accordance with the agreement.
Article 662 A donor is not liable for any defect of the gifted property. Where a gift is subject to an obligation, if the gifted property has defects, the donor shall, to the extent of the attached obligation, bear the same liabilities as a seller.
Where a donor intentionally fails to notify the donee about the defect of the gifted property or has made a warranty therefor, thus causing losses to the donee, the donor shall bear the liability for compensation.
Article 663 A donor may revoke the gift if the donee has done any of the following acts:
(1) severely infringing upon the lawful rights and interests of the donor or any close relative of the donor;
(2) having an obligation to support the donor but failing to perform that obligation; or
(3) failing to perform the obligation as agreed in the gift contract.
The right to revocation of the donor shall be exercised within one year from the date the donor knows or should have known of the cause for revocation.
Article 664 Where a donee's illegal act leads to the death or loss of capacity for performing civil juristic acts of the donor, the donor’s heir or legal representative may revoke the gift.
The right to revocation of the donor's heir or his legal representative shall be exercised within six months from the date the heir or the legal representative knows or should have known of the cause for revocation.
Article 665 Upon revocation of a gift, the person having the right to revocation may request the donee to return the gifted property.
Article 666 Where a donor’s financial situation markedly deteriorates and his production, business, or family life is thus severely affected, he may cease to perform the obligation of delivering the gift.
Chapter XII Loan Contracts
Article 667 A loan contract is a contract under which a borrower borrows a loan from a lender and repays the loan with interests when the loan becomes due.
Article 668 A loan contract shall be made in writing, except for a loan between natural persons who agree otherwise.
A loan contract generally contains clauses specifying the category of the loan, kind of currency, purpose of use, amount, interest rate, term, and the method of repayment, and the like.
Article 669 Upon concluding a loan contract, a borrower shall, as required by the lender, provide true information about its business activities and financial conditions related to the borrowing to the lender.
Article 670 The interest on a loan may not be deducted from the principal in advance. Where the interest is deducted from the principal in advance, the loan shall be repaid and the interest shall be calculated according to the actual amount of the loan provided.
Article 671 A lender who fails to provide the loan at the agreed time and amount and thus causing losses to the borrower shall bear the liability for compensation.
A borrower who fails to take the loan at the agreed time and amount shall pay an interest based on the agreed time and amount.
Article 672 A lender may inspect and supervise the use of the loan in accordance with the agreement. A borrower shall regularly provide the relevant financial and accounting statements or other materials to the lender in accordance with the agreement.
Article 673 Where a borrower fails to use the loan for a purpose in accordance with the contract, the lender may stop providing the loan, recall the loan prior to its due date, or rescind the contract.
Article 674 A borrower shall pay the interest within the agreed time limit. Where there is no agreement between the parties on the time limit for payment of interest or the agreement is unclear, if it cannot be determined according to the provisions of Article 510 of this Code, the interest shall be paid at the time the principal is repaid if the term of the loan is less than one year; the interest shall be paid at the end of each full year if the term of the loan is more than one year, and the interest shall be paid when the principal is repaid if the remaining term is less than one year.
Article 675 A borrower shall repay the loan within the agreed time limit. Where there is no agreement between the parties on the time limist of repayment of the loan, or the agreement is unclear, if it cannot be determined according to the provisions of Article 510 of this Code, the borrower may repay the loan at any time, and the lender may demand the borrower to repay the loan within a reasonable period of time.
Article 676 A borrower who fails to repay the loan within the agreed time limit shall pay an overdue interest in accordance with the agreement or the relevant regulations of the State.
Article 677 Where a borrower makes a prepayment of the loan, unless otherwise agreed by the parties, the interest shall be calculated according to the actual duration of the loan.
Article 678 A borrower may apply to the lender for an extension of the term of the loan before the loan becomes due. The term of the loan may be extended upon consent of the lender.
Article 679 A loan contract between natural persons is formed at the time when the lender provides the loan.
Article 680 Usurious loans are prohibited, and the interest rate for lending shall not violate the relevant regulations of the State.
Where there is no agreement on payment of interest in the loan contract, the loan shall be deemed as bearing no interest.
Where the agreement on the payment of interest in a loan contract is unclear, if the parties are unable to reach a supplementary agreement, the interest shall be determined by taking account of the practices of the local area or between the parties such as the method of transaction, course of dealing, the market interest rate, and the like. Where the loan is between nature persons, the loan shall be deemed as bearing no interest.
Chapter XIII Suretyship Contracts
Section 1 General Rules
Article 681 A suretyship contract is a contract under which a surety and a creditor agree, for the purpose of ensuring the enforcement of an underlying claim, that the surety shall perform the obligation or bear the liability when the debtor fails to perform it when it is due or a circumstance as agreed by the parties occurs.
Article 682 A suretyship contract is an accessary contract subordinated to a principal claim-obligation contract. Where the principal contract is invalid, the suretyship contract is invalid, unless otherwise provided by law.
Where a suretyship contract is determined to be invalid, the debtor, surety, or creditor who are at fault shall each bear civil liability in proportion to their respective fault.
Article 683 No State-organ leagal person may act as a surety, except that a state organ may, upon approval of the State Council, act as a surety in re-lending of the loans granted by a foreign government or an international economic organization.
No non-profit legal person established for public interest purposes or unincorporated organization may act as a surety.
Article 684 A suretyship contract generally contains clauses specifying the kind and amount of the principal claim that is secured, the time limit for the debtor to perform the obligation, the modes, scope, and term of the suretyship, and the like.
Article 685 A suretyship contract may be a contract concluded separately in writing or a guarantee clause in a principal claim-obligation contract.
A suretyship contract is formed when a third person unilaterally makes a guarantee in writing to a creditor who accepts it without making an objection.
Article 686 Suretyship consists of general suretyship and suretyship with joint and several liability.
Where there is no agreement in the surety contract on the form of the suretyship or the agreement is unclear, the surety shall bear the liability as in the form of a general suretyship.
Article 687 Where the parties agree in a suretyship contract that the surety shall undertake suretyship liability if the debtor is unable to perform his obligation, such a suretyship is a general suretyship.
A surety in a general suretyship may refuse to undertake suretyship liability to the creditor before a dispute arising from the principal contract is adjudicated or arbitrated and where the debtor is still unable to fully perform the obligation after his assets have been enforced in accordance with law, unless one of the following circumstances occurs:
(1) the whereabouts of the debtor have been unknown and there is no property available for enforcement;
(2) the people’s court has accepted the debtor’s bankruptcy petition`;
(3) the creditor has evidence to prove that the debtor’s property is insufficient to perform all of the obligations or the debtor loses his capacity to perform the obligation; or
(4) the surety waives his right provided in this paragraph in writing.
Article 688 Where the parties agree in a suretyship contract that the surety and the debtor shall be jointly and severally liable for the obligation, such a suretyship is a suretyship with joint and several liability.
Where a debtor under a suretyship with joint and several liability fails to perform his obligation due or when a circumstance agreed by the parties occurs, the creditor may request the debtor to perform his obligation, or request the surety to undertake the suretyship liability within the scope of his suretyship.
Article 689 A surety may request the debtor to provide a counter-security.
Article 690 A surety and a creditor may, through consultation, conclude a contract of maximum suretyship for floating claims to provide guarantee for the creditor’s claims which will arise consecutively within a certain period of time and the total amount of which is up to the maximum amount of his claims.
In addition to applying the provisions of this Chapter, the relevant provisions of Book Two of this Code on the maximum mortgage for floating claims shall be applied mutatis mutandis.
Section 2 Suretyship Liability
Article 691 The scope of the suretyship covers the principal claims and the interest thereof, the liquidated damages, compensatory damages, and the expenses for enforcing the claim, unless otherwise agreed by the parties.
Article 692 The term of suretyship is the period during which the surety shall undertake suretyship liability, and such period shall not be suspended, interrupted, or extended.
A creditor and a surety may agree on the term of suretyship. However, where the expiration date of the agreed term of suretyship is earlier than or the same as the expiration time for performance of the principal obligation, it is deemed as there is no agreement on the term of suretyship. Where there is no agreement between the parties on the term of suretyship or the agreement is unclear, the term of suretyship shall be six months from the date of expiration of the time limit for performance of the principal obligation.
Where a creditor and a debtor fails to agree on the time limit for performance of the principal obligation or the agreement is unclear, the term of suretyship shall be counted from the date when the grace period for the creditor to request the debtor to perform the obligation expires.
Article 693 Where a creditor of a general suretyship fails to file a lawsuit or apply for arbitration against the debtor within the term of suretyship, the surety no longer bears the suretyship liability.
Where a creditor of a suretyship with joint and several liability fails to request the surety to undertake his suretyship liability within the term of suretyship, the surety no longer bears the suretyship liability.
Article 694 Where a creditor of a general suretyship files a lawsuit or apply for arbitration against the debtor prior to the expiration of the term of suretyship, the limitation period of the suretyship obligation shall be counted from the date when the surety’s right to refuse to undertake the suretyship liability is extinguished.
Where a creditor of a suretyship with joint and several liability requests the surety to undertake his suretyship liability prior to the expiration of the term of suretyship, the limitation period of the suretyship obligation shall be counted from the date when the creditor requests the surety to undertake his suretyship liability.
Article 695 Where a creditor and a debtor, without the surety’s consent in writing, agree to alter the content of the principal claim-obligation contract, if the obligation is reduced, the surety shall continue to bear the suretyship liability for the altered obligation; if the obligation is increased, the surety shall not bear the suretyship liability for the increased part.
Where a creditor and a debtor alter the time limit for performance of the principal claim-obligation contract, the term of suretyship shall not be affected unless upon the surety’s written consent.
Article 696 Where a creditor transfers his claim in whole or part without notifying the surety, such a transfer is not effective against the surety.
Where transfer of a claim is prohibited as agreed between the surety and the creditor, if the creditor transfers its claim without the surety’s written consent, the surety shall no longer bear the suretyship liability.
Article 697 Where a creditor, without the surety’s written consent, allows the debtor to transfer the obligation in whole or part, the surety shall no longer bear the suretyship liability to the extent of the obligation transferred without his consent, unless otherwise agreed by the creditor and the surety.
Where a third person joins to be one of the debtors, the surety’s liability shall not be affected.
Article 698 Upon expiration of the time limit for performance of the principal obligation, if the surety of a general suretyship provides to the creditor true information concerning the debtor’s property available for enforcement, but the creditor waives or fails to exercise his right, and thus causing such property to be unenforceable, the surety shall no longer bear liability to the extent of the value of the said property available for enforcement the information of which is provided by the surety.
Article 699 Where there are two or more sureties guaranteeing one obligation, the sureties shall undertake the suretyship liability in proportion to their share of suretyship in accordance with the suretyship contract. In the absence of such an agreement, the creditor may request any of the sureties to undertake the suretyship liability within the scope of his liability.
Article 700 After a surety has assumed the suretyship liability, unless otherwise agreed by the parties, the surety has the right to indemnification against the debtor within the scope of his suretyship liability, and may enjoy the right of the creditor against the debtor, provided that the creditor’s interests shall not be harmed.
Article 701 A surety may claim a defense that the debtor has against the creditor. Where the debtor waives his right of defense, the surety shall still have the right to claim such defense against the creditor.
Article 702 Where a debtor has the right of offset or revocation against the creditor, the surety may refuse to undertake the suretyship liability within the corresponding scope.
Chapter XIV Lease Contracts
Article 703 A lease contract is a contract under which a lessor delivers the leased object to a lessee for use or for obtaining proceeds, for which the lessee pays the rent.
Article 704 A lease contract generally contains clauses specifying the name, quantity, purpose of use of the leased object, the term of the lease, rent, and the time limit and method of its payment, and the maintenance of the leased object, and the like.
Article 705 The term of a lease may not exceed twenty years. If a lease exceeds twenty years, the part beyond twenty years is invalid.
Upon expiration of the lease term, the parties may renew the lease contract, provided that the agreed term of lease may not exceed twenty years from the date of renewal.
Article 706 The parties’ failure to register the lease contract in accordance with the provisions of laws and administrative regulations does not affect the validity of the contract.
Article 707 A lease contract with a term exceeding six months shall be made in writing. Where the lease contract between the parties is not in writing, if the term can not be determined, the lease shall be deemed as a lease with an indefinite term.
Article 708 A lessor shall deliver the leased object to the lessee in accordance with the agreement and keep the leased object fit for the agreed use during the lease term.
Article 709 A lessee shall use the leased object in a manner as agreed by the parties. Where there is no agreement between the parties on the manner of use or the agreement is unclear, if it cannot be determined according to the provisions of Article 510 of this Code, the leased object shall be used in line with its nature.
Article 710 Where a lessee uses the leased object in a manner as agreed by the parties or in line with its nature, he shall not bear the liability for the wear and tear on the leased object.
Article 711 Where a lessee fails to use the leased object in a manner as agreed by the parties or in line with its nature, thus causing damage to the leased object, the lessor may rescind the contract and request for compensation.
Article 712 A lessor shall perform the duty of maintaining the leased object, unless otherwise agreed by the parties.
Article 713 Where a leased object needs to be maintened or repaired, the lessee may request the lessor to have it maintened and repaired within a reasonable period of time. Where the lessor fails to perform the obligation of maintenance or repair, the lessee may maintain or repair the leased object by himself and the expenses thus incurred shall be borne by the lessor. If the maintenance or repair of the leased object affects the lessee’s use of it, the rent shall be reduced or the term of the lease shall be extended accordingly.
Where a leased object needs to be maintened or repaired due to the lessee’s negligence, the lessor shall not bear the obligation of maintenance or repair as provided in the preceding paragraph.
Article 714 A lessee shall properly keep the leased object and shall bear the liability for compensation if the leased object is destructed, damaged, or lost owing to his failing to properly keep it.
Article 715 A lessee may, upon the lessor’s consent, improve the leased object or install additions thereto.
Where a lessee improves the leased object or install additions thereto without the consent of the lessor, the lessor may request the lessee to restore the leased object to its original status or to compensate for the losses.
Article 716 A lessee may, upon the lessor’s consent, sublease the leased object to a third person. The lease contract between the lessee and the lessor shall continue to be valid despite the sublease by the lessee, and if the third person causes loss to the leased object, the lessee shall bear the liability for compensation.
Where a lessee subleases the leased object without the consent of the lessor, the lessor may rescind the contract.
Article 717 Where a lessee, upon consent of the lessor, subleases the leased object to a third person, if the term of the sublease exceeds the remaining term of the lessee, the sublease in the period in excess of the original term shall not be legally binding on the lessor unless otherwise agreed by the lessor and the lessee.
Article 718 Where a lessor knows or should have known of the sublease made by a lessee but fails to raise any objection within six months, the lessor is deemed to have consented to the sublease.
Article 719 Where a lessee defaults on payment of the rent, the sublessee may pay the rent in arrears and the liquidated damages for the lessee, unless the sublease contract is not legally binding on the lessor.
The rent and liquidated damages paid by the sublessee for the lessee may be used to offset the rent payable by the sublessee to the lessee. If the amount of rent and liquidated damages thus paid by the sublessee exceeds the rent, the sublessee has the right to indemnification against the lessee.
Article 720 Any proceeds accrued from the possession or use of the leased object during the term of the lease shall belong to the lessee, unless otherwise provided by the parties.
Article 721 A lessee shall pay the rent within the time limit in accordance with the agreement. Where there is no agreement between the parties on the time limit for paying the rent or the agreement is unclear, if it cannot be determined according to the provisions of Article 510 of this Code, the rent shall be paid at the time the term of the lease expires if the term is less than one year, or at the end of each full year where the term is more than one year, provided that the rent shall be paid at the time the term of the lease expires if the remaining term is less than one year.
Article 722 Where a lessee fails to pay the rent or delays a payment of the rent without just cause, the lessor may request the lessee to pay the rent within a reasonable period of time, and may rescind the contract if the lessee fails to pay the rent within such period of time.
Article 723 Where a lessee is unable to use or to receive benefit from the leased object owing to a claim from a third person, the lessee may request for a reduction of or exemption from the rent.
Where a third person claims his right against the leased object, the lessee shall notify the lessor in a timely manner.
Article 724 A lessor may rescind the contract under any of the following circumstances if the leased object cannot be used due to a reason not attributable to the lessee:
(1) the leased object is seized or detained by the judicial authority or administrative authority in accordance with law;
(2) there are disputes over the attribution of rights of the leased object; or
(3) the leased object violates mandatory provisions of laws and administrative regulations in respect of the conditions for use thereof.
Article 725 A change in the ownership of a leased object during the period that a lessee possesses the leased object in accordance with the lease contract shall not affect the validity of the lease contract.
Article 726 A lessor intending to sell a leased house shall notify the lessee within a reasonable period of time prior to the sale, and the lessee shall have the priority right to purchase the house under equivalent conditions, unless the person who is a co-owner by share exercises his priority right to purchase the house or if the lessor sells it to his close relatives.
Where a lessee fails to explicitly express his intention to purchase the house within fifteen days after the lessor has fulfilled his obligation of notification, the lessee shall be deemed to have waived such priority right.
Article 727 Where a lessor authorizes an auctioneer to sell the leased house through auction, he shall notify the lessee five days prior to the auction. The lessee shall be deemed to have waived his priority right to purchase it if he fails to participate in the auction.
Article 728 Where a lessor fails to notify the lessee or otherwise hinders the lessee from exercising his priority right to purchase the leased house, the lessee may request the lessor to bear the liability for compensation, except that the validity of the contract for sale of the leased house concluded between the lessor and a third person shall not be affected.
Article 729 Where a leased object is partially or wholly destructed, damaged, or lost for a cause not attributable to the lessee, the lessee may request a reduction or exemption of the rent; and the lessee may rescind the contract if the purpose of the contract is unable to be achieved owing to such destruction, damage, or loss.
Article 730 Where there is no agreement between the parties on the term of the lease, or the agreement is unclear, if it cannot be determined according to the provisions of Article 510 of this Code, the lease shall be deemed a lease with an indefinite term. Either party may rescind the contract at any time, provided that the other party shall be notified within a reasonable period of time in advance.
Article 731 Where a leased object endangers a lessee's safety or health, the lessee may rescind the contract at any time, even if the lessee is clearly aware of the substandard quality of the leased object upon concluding the contract.
Article 732 Where a lessee dies within the term of lease of a leased house, a person who lives with or the joint operator of the deceased may lease the house according to the original lease contract.
Article 733 A lessee shall return the leased object upon expiration of the term of the lease. The leased object returned shall be maintained in its after-use state in accordance with the agreement or in line with its nature.
Article 734 Where a lessee continues to use the leased object after the expiration of the term of the lease and the lessor has not raised any objection, the original lease contract shall continue to be valid, except that the lease term shall become unfixed.
Upon expiration of the lease, a lessee of the house has the priority right to lease it under equivalent conditions.
Chapter XV Contracts for Financing Lease
Article 735 A contract for financing lease is a contract under which a lessee selects a leased object and its seller, and a lessor purchases the leased object from the selected seller and provides it to the lessee for use, who pays the rent in return.
Article 736 A contract for financing lease generally contains clauses specifiying the name, quantity, specifications, technical performance, and inspection method of the leased object, the term of the lease, the composition of rent, the time limit, method, and currency for payment of the rent, the ownership over the leased object upon expiration of the term, and the like.
A contract for financing lease shall be made in writing.
Article 737 A contract for financing lease concluded by the parties on a fictitious leased object is void.
Article 738 Where the operation or use of a leased object requires administrative license in accordance with the provision of laws and administrative regulations, the failure of the lessor to obtain such administrative license does not affect the validity of the contract for financing lease.
Article 739 Where a lessor concludes a sales contract based on a lessee’s selection of the seller and the leased object, the seller shall deliver the object to the lessee as agreed by the parties, and the lessee shall enjoy the rights of a buyer with regard to the object received.
Article 740 A lessee may refuse to accept the subject matter delivered by the seller where a seller breaches his obligation of delivery of the subject matter to the lessee, and one of the following circumstances occurs:
(1) the subject matter is materially inconsistent with the agreement; or
(2) the seller fails to deliver the subject matter as agreed by the parties, and still fails to deliver it within a reasonable period of time after being demanded by the lessee or the lessor.
Where a lessee refuses to take delivery of the subject matter, he shall promptly notify the lessor.
Article 741 The lessor, the seller, and the lessee may agree that, where the seller fails to perform the obligations under the sales contract, the lessee shall exercise the right to claim against the seller. Where the lessee exercises such a right, the lessor shall render assistance.
Article 742 A lessee’s exercise of the right to claim against the seller shall not affect his performance of the obligation to pay the rent. However, where a lessee has relied upon the lessor's expertise in selecting the leased object or the lessor has intervened with the selection of the leased object, the lessee may request reduction or exemption of the rent accordingly.
Article 743 Where any of the following circumstances occurs, which causes the failure of the lessee to exercise the right to claim against the seller, the lessee has the right to request the lessor to bear corresponding liability:
(1) the lessor clearly knows that the leased object has quality defects but fails to notify the lessee; or
(2) when the lessee exercises the right to claim, the lessor fails to provide necessary assistance in a timely manner.
Where a right to claim agaisnt the seller may only be exercised by the lessor but the lessor fails to exercise such right owing to his indolent, thus causing loss to the lessee, the lessee has the right to request the lessor to bear the liability for compensation.
Article 744 Where a lessor concludes a sales contract based on the lessee’s selection of the seller and the leased object, the lessor may not, without the consent of the lessee, modify the content of the contract related to the lessee.
Article 745 The lessor’s ownership over the leased object shall, without being registered, not be asserted against a bona fide third person.
Article 746 The rent under a contract for financing lease shall, unless otherwise agreed by the parties, be determined according to the whole or major part of the cost for purchasing the leased object plus reasonable profits to be gained by the lessor.
Article 747 Where a leased object does not conform to the agreement or the purpose of its use, the lessor shall not bear any liability, unless the lessee has relied upon the lessor's expertise in selecting the leased object or the lessor has intervened with the selection of the leased object.
Article 748 A lessor shall guarantee the possession and use of the leased object by the lessee.
A lessee has the right to request the lessor to bear the liability for compensation where the lessor falls under any of the following circumstances:
(1) taking back the leased object without just cause;
(2) obstructing or interfering with the possession and use of the leased object by the lessee without just cause;
(3) a third person claims a right over the leased object due to a reason attributable to the lessor; or
(4) the lessor otherwise improperly affects the possession and use of the leased object by the lessee.
Article 749 Where a leased object causes any personal injury or property damage to a third person during the period it is under the lessee’s possession, the lessor shall not bear any liability.
Article 750 A lessee shall properly maintain and use the leased object.
A lessee shall perform the obligation for the maintenance of the leased object during the period the leased object is under his possession.
Article 751 Where the leased object is destructed, damaged, or lost during the period it is under the possession of the lessee, the lessor has the right to request the lessee to continue to pay the rent, unless otherwise provided by law or agreed by the parties.
Article 752 A lessee shall pay the rent in accordance with the agreement. Where a lessee fails to pay the rent within a reasonable period of time after being demanded, the lessor may request full payment of the rent, or rescind the contract and take back the leased object.
Article 753 Where a lessee transfers, mortgages, pledges, invests and contributes as share, or otherwise disposes of the leased object without the lessor’s consent, the lessor may rescind the contract for financing lease.
Article 754 A lessor or a lessee may rescind the contract for financing lease under any of the following circumstances:
(1) the sales contract between the lessor and the seller is rescinded, determined as void or revoked, and the parties fail to conclude a sales contract anew;
(2) the leased object is destructed, damaged, or lost due to a reason not attributable to the parties, and it is impossible to repair the leased object or determine a substitute therefor; or
(3) the purpose of the contract for financing lease cannot be achieved owing to a reason attributable to the seller.
Article 755 Where a contract for financing lease is rescinded because the sales contract is rescinded, invalidated, or revoked, if the seller and the leased object are selected by the lessee, the lessor has the right to request the lessee to compensate for the corresponding losses, unless the sales contract is rescinded, invalidated, or revoked owing to a reason attributable to the lessor.
Where the losses of the lessor have been recovered at the time the sales contract is rescinded, invalidated, or revoked, the lessee no longer bears liability for compensation.
Article 756 Where a contract for financing lease is rescinded owing to a reason not attributable to the parties, such as an accidental destruction, damage, or loss of the leased object after it is delivered to the lessee, the lessor may request the lessee to make compensation based on the depreciation status of the leased object.
Article 757 A lessor and a lessee may agree on the ownership over the leased object upon expiration of the term of the lease. Where there is no agreement between the parties on the ownership of the leased object or the agreement is unclear, if it cannot be determined according to the provisions of Article 510 of this Code, the ownership of the leased object shall belong to the lessor.
Article 758 Where the parties agree that the lessee shall have the ownership over the leased object upon expiration of the term of the lease, if the lessee has paid most of the rent but is unable to pay the remaining part, and the lessor has therefore rescineded the contract and taken back the leased object, the lessee may request the corresponding refund if the value of the leased object taken back exceeds the rent and other expenses in arrears.
Where the parties agree that the lessor shall have the ownership over the leased object upon expiration of the term of the lease, and the lessee is unable to return the leased object due to destruction, damage, or loss of the leased object, or because the leased object has attached to or been mixed with another thing, the lessor has the right to request the lessee to make reasonable compensation.
Article 759 Where the parties agree that the lessee is only required to pay the lessor a symbolic price upon expiration of the term of the lease, the ownership of the leased object shall be deemed as belonging to the lessee after the lessee has fulfilled his obligation to pay the rent in accordance with the agreement.
Article 760 Where a contract for financing lease is invalid and the parties have agreed on the ownership of the leased object under such a circumstance, such an agreement shall be followed. Where there is no agreement between the parties on the ownership of the leased object or the agreement is unclear, the leased object shall be returned to the lessor. However, where the contract becomes invalid owing to a reason attributable to the lessee, if the lessor does not request the return of the leased object or the return of the leased object will significantly reduce the usefulness thereof, the ownership of the leased object shall belong to the lessee, and the lessee shall make reasonable compensation to the lessor.
Chapter XVI Factoring Contracts
Article 761 A factoring contract is a contract under which a creditor of accounts receivable transfers the existing or after-acquired accounts receivable to a factor who provides services such as accommodation of funds, management or collection of the accounts receivable, guarantee for the payment of a debtor of the accounts receivable, and the like.
Article 762 A factoring contract generally contains clauses specifying the business type, scope of service, term of service, information on the underlying transaction contract and the accounts receivable, the financing funds through factoring, the service remuneration, the methods of payment thereof, and the like.
A factoring contract shall be in writing.
Article 763 Where a creditor and a debtor fabricate an account receivable as the object of transfer and then conclude a factoring contract on it with a factor, the debtor of the fabricated account receivable shall not assert a defense against the factor on the ground that the account receivable does not exist, unless the factor clearly knows such fabrication.
Article 764 Where a factor notifies a debtor of an account receivable of the assignment of the account receivable, he shall disclose his identity as a factor and present necessary certifying documents.
Article 765 Where, after a debtor of an account receivable receives the notice of assignment thereof, the creditor and the debtor of the account receivable agree to modify or terminate the underlying contract without just cause, which has an adverse impact on the factor, such modification or termination is not effective against the factor.
Article 766 Where the parties agree that the factoring is one with the right of recourse, the factor may claim against the creditor of the account receivable for refunding the principal and interest of the financing funds or redemption of the claim on the account receivable, or claim against the debtor of the account receivable. Where a factor claims against the debtor of the account receivable after deducting the principal and interest of the financing funds and the other relevant expenses, any balance shall be returned to the debtor of the account receivable.
Article 767 Where the parties agree that the factoring is one without the right of recourse, the factor shall claim against the debtor of the account receivable, and the factor is not required to return to the creditor of the account receivable the amount in excess of the principal and interest of the financing funds and the other relevant expenses he has obtained.
Article 768 Where a creditor of an account receivable concludes multiple factoring contracts with different factors so that the factors claim their rights against the same account receivable, the account receivable shall be obtained by the factor of a registered factoring contract in priority over the factors of unregistered factoring contracts, or, where all factoring contracts are registered, by the factors in an order according to the time of registration, or, where none of the factoring contracts have been registered, by the factor stated in the transfer notice which has reached the debtor of the account receivable first in time. Where none of the factoring contracts have been registered and no transfer notice has been sent, the account receivable shall be obtained by the factors on a pro rata basis on the amount of financing funds each has provided, or the service remuneration each is entitled to.
Article 769 For matters not provided in this Chapter, the relevant provisions of Chapter Six of this Book on the assignment of claims shall be applied.
Chapter XVII Work Contracts
Article 770 A work contract is a contract under which a contractor, in accordance with the requirements of a client, completes a work and delivers the work product to the client who pays remuneration in return.
A contracted work includes processing, manufacturing on order, repair, reproduction, testing, inspection, and the like.
Article 771 A work contract generally contains clauses specifying the object, quantity, and quality of the work, remuneration of the work, the mode of the work, supply of materials, the period of performance, the standard and method of inspection, and the like.
Article 772 The contractor shall complete the principal part of the work with his own equipment, technology, and labor force, unless otherwise agreed by the parties.
Where a contractor entrusts the major part of the contracted work with a third person, the contractor shall be accountable to his client concerning the work completed by the third person and the client may rescind the contract if he has not consented thereto.
Article 773 A contractor may entrust the accesory part of his contracted work with a third person. Where a contractor entrusts an accessory part of the contracted work to a third person, the contractor shall be accountable to the client concerning the work product completed by the third person.
Article 774 Where a contractor is to provide the materials, he shall select and use the materials in accordance with the agreement and accept the inspection of the client.
Article 775 Where a client is to provide the materials, he shall provide the materials in accordance with the agreement. The contractor shall promptly inspect the materials provided by the client, and, if any inconformity is found, the contractor shall promptly request the client to make replacement, make up the shortage or take other remedial measures.
Without the consent of the client, a contractor may not change the materials provided by the client nor change the accessories and parts which do not need repair.
Article 776 A contractor shall promptly notify the client if he finds that the drawings or technical requirements provided by the client are unreasonable. Where losses are caused to the contractor due to the client's failure to response or the like reasons, the client shall bear the liability for compensation.
Article 777 Where, in the course of a contracted work, the client changes his requirements, thus causing loss to the contractor, the client shall bear liability for compensation.
Article 778 Where a contracted work requires assistance from the client, the client has the obligation to provide such assistance. Where the client fails to perform such obligation, thus making the completion of the contracted work impossible, the contractor may demand him to perform his obligation within a reasonable period of time, and may also extend the term of performance accordingly. If the client still fails to fulfill his obligation within the extend term, the contractor may rescind the contract.
Article 779 A contractor shall accept necessary supervision and inspection of the client in the course of his work. The client may not disturb the normal work of the contractor by such supervision and inspection.
Article 780 Upon completion of his work, a contractor shall deliver to the client the work product and provide the client with the necessary technical materials and related quality certificates. The client shall inspect the work product for acceptance.
Article 781 Where the work product delivered by the contractor fails to meet the quality requirements, the client may, in a reasonable manner, request the contractor to bear default liability in forms of repair, reworking, remuneration reduction, or compensation for losses.
Article 782 A client shall pay remuneration within the time limit agreed by the parties. Where there is no agreement between the parties on the time limit for paying remuneration or the agreement is unclear, if it cannot be determined according to the provisions of Article 510 of this Code, the client shall make payment at the time of delivery of the work product; and where part of the work product is delivered, the client shall pay the corresponding remuneration.
Article 783 Where a client fails to make such payments as remuneration or materials fees, the contractor has the right to retain the work product under lien or to refuse delivery, unless otherwise agreed by the parties.
Article 784 A contractor shall properly keep the materials provided by the client and the completed work product, and shall bear the liability for compensation if such materials or the work product are destructed, damaged or lost owing to his inappropriate maintenance thereof.
Article 785 A contractor shall keep confidential the relevant information in accordance with the requirements of the client and, without the latter's permission, may not retain copies or technical data thereof.
Article 786 Co-contractors shall bear joint and several liabilities to the client, unless otherwise agreed by the parties.
Article 787 The client may rescind the work contract at any time before the contractor completes his work, provided that he shall bear the liability for compensating any loss thus caused to the contractor.
Chapter XVIII Contracts for Construction Project
Article 788 A contract for construction project is a contract under which a contractor carries out the construction of a project and the contract-offering party pays the price in return.
Contracts for construction project consist of contracts for project prospecting, designing, and construction.
Article 789 A contract for construction project shall be made in writing.
Article 790 Bidding for a construction project shall be carried out in an open, fair, and impartial manner in accordance with the provisions of the relevant laws.
Article 791 A contract-offering party may conclude a contract for construction project with a general contractor, or conclude separate contracts for prospecting, designing, and construction with the prospecting, designing, and construction parties respectively. A contract-offering party may not break up one construction project that should be completed by one contractor into several parts and offer them to several contractors.
A general contractor or a prospecting, designing or construction contractor may, upon consent by the contract-offering party, entrust part of the contracted work with a third person. The third person shall assume joint and several liability with the general contractor or the prospecting, engineering, or construction contractor to the contract-offering party on the work product of the third person. A contractor may not delegate the whole of the contracted construction project to a third person or break up the contracted construction project into several parts and delegate them separately to third persons in the name of subcontracting.
A contractor is prohibited from subcontracting the contracted project to any entity without the corresponding qualifications. A subcontractor is prohibited from re-subcontracting the contracted project. The main structure of the construction project must be completed by the contractor itself.
Article 792 Contracts for major construction projects of the State shall be concluded in accordance with the procedures set forth by the State and such documents as investment plans and feasibility study reports approved by the State.
Article 793 Where a contract for construction project is invalid but the construction project has passed the inspection for acceptance, the contractor may be compensated with reference to the project price agreed in the contract and based on the appraised price of the construction project.
Where a contract for construction project is invalid and the construction project fails to pass the inspection for acceptance, it shall be dealt with in accordance with the following provisions:
(1) where the construction project after being repaired has passed the inspection for acceptance, the contract-offering party may request the contractor to bear the repairing costs; or
(2) where the construction project after being repaired still fails to pass the inspection for acceptance, the contractor has no right to request for payment with reference to the project price agreed in the contract or based on the appraised price of the construction project.
Where a contract-offering party is at fault for the loss caused by the substandard of the construction project, he shall bear corresponding liabilities.
Article 794 A prospecting or designing contract generally contains clauses specifying the time limit for submission of documents relating to the basic materials and budget, quality requirements, expenses and other cooperative conditions, and the like.
Article 795 A construction contract generally contains clauses specifying the project scope, the period for construction, the time of commencement and completion of the project to be delivered in midcourse, project quality, costs, delivery time of technical materials, the responsibility for the supply of materials and equipment, fund allocation and settlement, project inspection and acceptance upon its completion, range and period of quality warranty, cooperation, and the like.
Article 796 For any construction project to which a superintendence system is applied, the contract-offering party shall conclude an entrustment contract of superintendence in writing with the entrusted superintendent. The rights and obligations as well as the legal liabilities of the contract-offering party and the superintendent shall be defined in accordance with the provisions on entrustment contracts of this Book as well as the relevant provisions of other laws and administrative regulations.
Article 797 The contract-offering party may, without disturbing the normal operation of the contractor, inspect the progress and quality of the work at any time.
Article 798 Prior to the concealment of a concealed project, the contractor shall notify the contract-offering party to inspect it. If the contract-offering party fails to conduct an inspection in a timely manner, the contractor may extend the period for the completion of the project accordingly, and may request compensation for losses caused by the work stoppage, the workers' forced idleness, and the like.
Article 799 Upon completion of a construction project, the contract-offering party shall promptly undertake the inspection for acceptance in accordance with the construction drawings and descriptions, as well as the rules of inspection and acceptance of construction projects and the standards for quality inspection issued by the State. Where the project passes the inspection for acceptance, the contract-offering party shall pay the agreed price and take over the construction project.
A construction project may be delivered and put into use only after it has passed the inspection for acceptance upon completion. Without being inspected or failing to pass the inspection, the construction project may not be delivered or put into use.
Article 800 Where losses are caused to a contract -offering party due to the fact that the prospecting or designing does not conform to the quality requirements or that the prospecting or designing documents are not submitted as scheduled, so that the period for construction is delayed, the prospecting or designing party shall continue on perfecting the prospecting or designing, reduce or waive the prospecting or designing fees, and make compensation for the losses.
Article 801 Where the quality of a construction project fails to conform to the contract due to a reason attributable to the constructor, the contract-offering party has the right to request the constructor to repair, rework, or reconstruct the project without further charge within a reasonable period of time. If delivery is delayed because of the repair, reworking, reconstruction, the constructor shall bear default liability.
Article 802 Where a construction project causes personal injury and property damage due to a reason attributable to the contractor within a reasonable period of use of the project, the contractor shall bear the liability for compensation.
Article 803 Where a contract-offering party fails to provide raw materials, equipments, premises, funds, or technical materials at the agreed time and pursuant to the agreed requirements, the contractor may extend the period of construction accordingly and has the right to request compensation for the losses caused by work stoppage, and workers' forced idleness, and the like.
Article 804 If a construction project is stopped or suspended in midcourse due to a reason attributable to the contract-offering party, the contract-offering party shall take measures to make up for the loss or mitigate the loss, and compensate the contractor for any losses caused and actual expenses incurred by work stoppage, workers' forced idleness, back transportation, transfer of machinery equipment, the backlog of materials and structural components, and the like.
Article 805 Where a contract-offering party alters his plan, provides inaccurate materials, or fails to provide necessary working conditions for prospecting or designing as scheduled, thus causing the redoing or stoppage of the prospecting or designing work, or the revision of the design, the contract-offering party shall pay additional fees according to the amount of work actually undertaken by the prospecting or designing party.
Article 806 Where a contractor delegates or illegally subcontracts the construction project to others, the contract-offering party may rescind the contract.
Where the main construction materials, construction components and accessories, and equipment provided by the contract-offering party fail to conform to the mandatory standard, or the contract-offering party fails to perform his obligations to provide assistance, so that the contractor cannot undertake the construction work, if the contract-offering party still fails to perform the corresponding obligations within a reasonable period of time after being demanded, the contractor may rescind the contract.
Where, after the contract is rescinded, the quality of the completed construction project is found to be up to standard, the contract-offering party shall make corresponding payment for the construction project in accordance with the agreement. If the quality of the completed construction project is found to be substandard, the provisions of Article 793 of this Code shall be applied mutatis mutandis.
Article 807 Where a contract-offering party fails to pay the price in accordance with the agreement, the contractor may demand the contract-offering party to make the payment within a reasonable period of time. Where the contract-offering party still fails to pay the price upon expiration of the said period, the contractor may negotiate with the contract-offering party to appraise the construction project to satisfy the obligation, or request the people's court to sell the project through auction in accordance with law, unless the construction project is by its nature unsuitable for appraisal or auction. The payment for the construction of the project shall be satisfied, in priority, from the proceeds obtained from the appraisal or auction of the said project.
Article 808 For matters not provided in this Chapter, the relevant provisions on work contracts shall be applied.
Chapter XIX Transport Contracts
Section 1 General Rules
Article 809 A transport contract is a contract under which a carrier transports a passenger or goods from the place of dispatch to a destination agreed by the parties, and the passenger, consignor, or consignee pays the fare or the freight.
Article 810 A carrier engaging in public transport may not reject an ordinary and reasonable transport request made by a passenger or consignor.
Article 811 A carrier shall safely transport a passenger or goods to a destination as agreed within the agreed or a reasonable period of time.
Article 812 A carrier shall transport a passenger or goods to a destination as agreed via an agreed or a usual transport route.
Article 813 A passenger, consignor, or consignee shall pay the fare or the freight. If a carrier does not transport via an agreed route or the usual route, thus increasing the fare or the freight, the passenger, consignor, or consignee may refuse to pay the extra fare or freight.
Section 2 Passenger Transport Contract
Article 814 A passenger transport contract is formed at the time when the carrier issues a ticket to the passenger, unless otherwise provided by the parties or in accordance with the coure of dealing.
Article 815 A passenger shall get on board pursuant to the time, the number of runs or flights, and the seat number indicated in the valid ticket. Any passenger who boards without a ticket, beyond the paid distance, in a higher class, or with a discounted ticket while he is unqualified therefor shall pay or make up for the difference in the ticket price, and the carrier may charge an extra fare according to the regulations. Where a passenger refuses to pay the fare accordingly, the carrier may refuse to transport him.
Where a passenger under a real-name passenger transport contract loses his ticket, he may request the carrier to report the loss and reissue a ticket, and the carrier shall not re-collect ticket fees or other unreasonable expenses.
Article 816 A passenger who is unable to get on board at the time indicated in the ticket due to his own reason shall, within the period of time agreed by the parties, undergo the procedures for refund or change of the ticket. If the passenger fails to undergo the refund or change procedures within the agreed period of time, the carrier may refuse to refund the ticket, and no longer has the transport obligation.
Article 817 The carry-on baggages of a passenger shall conform to the quantity limit and category requirement in accordance with the agreement. A passenger who carries baggages in excess of the quantity limit or in violation of the requirements for the category shall have the baggage checked in.
Article 818 A passenger may not carry with him or secretly carry in his baggage any inflammable, explosive, toxic, corrosive, or radioactive articles, any other dangerous articles that might endanger the safety of persons and property aboard, nor any contraband articles.
Where a passenger violates the provisions of the preceding paragraph, the carrier may unload or destroy the dangerous or contraband articles or deliver them to the relevant departments. Where a passenger insists on carrying with him the dangerous articles or the contraband articles or carrying them in his baggage, the carrier shall refuse to transport him.
Article 819 A carrier shall strictly fulfill his obligation of safe transport and timely notify passengers about matters of attention for a safe transport. A passenger shall actively assist in and be cooperative with the carrier with regard to the reasonable arrangements made for safe transport.
Article 820 A carrier shall transport passengers at the time and in the number of runs or flights and seat number indicated in the valid ticket. Under circumstances where the transport is delayed or rendered out of a normal state, the carrier shall inform and remind the passenger in a timely manner, take necessary measures for arrangement, and, upon passengers' requests, arrange them to take other numbers of runs or flights or refund their tickets. The carrier shall bear the liability for compensation for any loss thus caused to the passenger, unless such loss is not attributable to the carrier.
Article 821 A carrier who unilaterally downgrades the service standard shall, upon passengers' requests, refund their tickets or reduce the fare. A carrier who upgrades the service standard shall not charge extra fare.
Article 822 A carrier shall, in the course of transportation, spare no effort to rescue and help a passenger who suffers an emergent disease, commence childbirth, or otherwise in danger.
Article 823 A carrier shall bear the liability for compensation arising from the injury or death of a passenger occurring in the course of transportation, unless the injury or death is a result of the passenger's own health condition, or the carrier can prove that the injury or death is caused by the passenger's intentional or grossly negligent act.
The provisions of the preceding paragraph shall apply to any passenger exempted from ticket in accordance with the regulations, holding a complimentary ticket, or permitted by the carrier to travel without a ticket.
Article 824 Where an article that the passenger carries with him is destructed, damaged, or lost in the course of transportation, the carrier shall bear the liability for compensation, if the carrier is at fault.
Where the passengers' checked-in baggages are destructed, damaged, or lost, the relevant provisions on the freight transport shall be applied.
Section 3 Freight Transport Contracts
Article 825 A consignor, when consigning goods for transport, shall clearly declare to the carrier the information necessary for freight transport such as the name or entity name of the consignee or the consignee by order, as well as the name, nature, weight and quantity of the goods, and the place of delivery.
If a loss is caused to the carrier due to the consignor's untrue declaration or omission of substantial information, the consignor shall bear the liability for compensation.
Article 826 Where a freight transport is subject to approval or inspection, the consignor shall submit to the carrier the documents showing the completion of the relevant formalities.
Article 827 A consignor shall package the goods in a manner as agreed by the parties. Where there is no agreement by the parties on the packaging manner or the agreement is unclear, the provisions of Article 619 of this Code shall be applied.
Where a consignor violates the provisions of the preceding paragraph, the carrier may refuse to conduct the transportation.
Article 828 Where a consignor consigns for transportation such dangerous goods as inflammable, explosive, toxic, corrosive or radioactive articles, the consignor shall, in accordance with the regulations of the State on the transport of dangerous goods, properly package the dangerous goods, affix warning signs and labels thereto, and submit to the carrier written documents concerning the name, nature, and precautionary measures relevant to the dangerous goods.
Where a consignor violates the provisions of the preceding paragraph, the carrier may refuse to conduct the transport, or take appropriate measures to prevent losses, and the expenses thus incurred shall be borne by the consignor.
Article 829 Before a carrier delivers the goods to the consignee, the consignor may ask the carrier to stop transportation, return the goods, change the place of destination, or deliver the goods to another consignee, provided that the consignor shall compensate for the losses thus caused to the carrier.
Article 830 After the goods are transported to the place of destination, the carrier shall promptly notify the consignee where the carrier knows who is the consignee, and the consignee shall promptly take delivery of the goods. Where the consignee delays in taking delivery of the goods, the consignee shall pay storage and other fees to the carrier.
Article 831 Upon taking delivery of the goods, a consignee shall inspect the goods within the time limit as agreed by the parties. Where there is no agreement between the parties on the time limit for inspection of the goods or the agreement is unclear, if it cannot be determined according to the provisions of Article 510 of this Code, the consignee shall inspect the goods within a reasonable period of time. Where the consignee does not raise any objection on the quantity, destruction, damage, or loss of the goods within the agreed time limit or a reasonable period of time, the silence shall be deemed as a preliminary evidence that the carrier has delivered the goods in accordance with the transport documents.
Article 832 A carrier shall bear the liability for compensation for any destruction, damage, or loss of the goods occurring in the course of transport, except that the carrier shall not bear the liability for compensation if the carrier proves that the destruction, damage, or loss of the goods is caused by force majeure, the inherent nature of the goods, or reasonable wear and tear, or is caused by the negligence of the consignor or the consignee.
Article 833 The amount of compensation for the destruction, damage, or loss of the goods shall be in accordance with the agreement between the parties if there is such an agreement. Where the agreement on the amount of compensation is unclear, if it cannot be determined according to the provisions of Article 510 of this Code, the amount of compensation shall be calculated based on the market price of the goods at the place of delivery at the time when the goods are delivered or should have been delivered. If there are laws or administrative regulations providing otherwise concerning the calculation method and the limit of the compensation amount, such provisions shall be followed.
Article 834 Where two or more carriers engage in a connected transport of the same mode, the carrier who concludes the contract with the consignor shall be responsible for the entire transport. If a loss occurs at one section of the transportation, the carrier who concludes the contract with the consignor and the carrier in the said section shall assume joint and several liability.
Article 835 Where the goods are lost in the course of transport due to force majeure, unless otherwise provided by law, the carrier may not request the payment of the freight if the freight has not yet been collected, and the consignor may request for a refund if the freight has already been collected.
Article 836 If a consignor or consignee fails to pay freight, storage fees, or other expenses, the carrier has the right to retain the goods under a lien, unless otherwise agreed by the parties.
Article 837 Where a consignee is unknown or the consignee refuses to take delivery of the goods without just cause, the carrier may have the goods placed in escrow in accordance with law.
Section 4 Multi-modal Transport Contracts
Article 838 An operator of multi-modal transport is responsible for performing or organizing the performance of a multi-modal transport contract, enjoys the rights and assumes the obligations of a carrier throughout the entire transport.
Article 839 An operator of multi-modal transport may agree with the carriers of the different sections of the multi-modal transport on their respective responsibilities for transport in each section under the multi-modal transport contract, provided that such an agreement shall not affect the obligations of the operator for the entire transport.
Article 840 An operator of multi-modal transport shall, upon receipt of the goods consigned for transport by the consignor, issue multi-modal transport documents. The multi-modal transport documents may be negotiable or non-negotiable, as requested by the consignor.
Article 841 Where losses are caused to an operator of multi-modal transport due to the fault of a consignor at the time of consigning the goods for transport, the consignor shall bear the liability for compensation even if the consignor has transferred the multi-modal transport documents.
Article 842 Where destruction, damage, or loss of goods occurs in one section of the multi-modal transport, the provisions of the relevant laws regulating the transport modes of the section shall apply to the liability for compensation to be assumed by the operator of multi-modal transport and the limits of the liability. Where the section of transport in which such destruction, damage, or loss has occurred cannot be determined, liability for compensation shall be borne in accordance with the provisions of this Chapter.
Chapter XX Technology Contracts
Section 1 General Rules
Article 843 A technology contract is a contract concluded by the parties to clarify their rights and obligations for technology development, transfer, licensing, consultation or service.
Article 844 The conclusion of a technology contract shall be conducive to the protection of intellectual property rights and the advance of science and technology, and shall promote the research and development, transformation, application, and dissemination of the achievements in science and technology.
Article 845 A technology contract generally contains clauses specifying the name of the project, the content, scope, and requirements of the object, the plan, place, and manner of performance, the confidentiality of technological information and materials, the ownership over the technological achievements and the method of proceeds distribution, the criteria and method of the inspection for acceptance, interpretation of terminologies, and the like.
Materials such as technological background information, the feasibility studies and technological evaluation reports, the project task paper and plans, technology standards, technology norms, original design and technical documents, as well as other technical documents which are relevant to the performance of the contract may, as agreed by the parties, be component parts of the contract.
Where a technology contract involves a patent, it shall indicate the designation of the invention, the applicant and the patentee thereof, the date of application, the application number, the patent number, and duration of the patent rights.
Article 846 The method of payment for the price, remuneration, or royalty shall be agreed by the parties in a technology contract, and the payment may be made in a lump-sum or by installment based on one-time calculation, or based on the method of commission payment or such payment plus an upfront fee.
Where the parties agree to adopt a method of commission payment, the commission may be drawn at a specific percentage from the price of the product, the newly-increased output value and profits attained from the exploitation of patents and the utilization of technological know-how, or the sales revenue of the product, or be calculated by other methods as agreed by the parties. The said percentage may be a fixed percentage, or one that increases or decreases year by year.
Where the parties agree to adopt commission payment, they may specify the method for examining the relevant accounting books.
Article 847 Where a right to use or transfer a work for hire belongs to a legal person or an unincorporated organization, the legal person or unincorporated organization may conclude a technology contract on the work for hire. Where the legal person or unincorporated organization concludes a technology contract to transfer the work for hire, the creator of the work for hire has right in priority to acquire it on equivalent conditions.
A work for hire is a technological achievement that is accomplished as a result of performing the tasks assigned by a legal person or unincorporated organization or that is accomplished mainly by using the material and technological resources of the said legal person or unincorporated organization.
Article 848 The right to use or transfer of a technological work product other than a work for hire belongs to its creator who may conclude a technology contract on such work product.
Article 849 An individual person who has accomplished a technological work product has the right to indicate on the relevant documents of the technological work product that he is the creator thereof, and to receive certificate of honor and rewards.
Article 850 A technology contract that illegally monopolies technologies or infringes upon others technological work product is invalid.
Section 2 Technology Development Contracts
Article 851 A technology development contract is a contract concluded by the parties concerning the research and development of a new technology, product, technique, variety, or material, as well as the system thereof.
Technology development contracts consist of commissioned development contracts and cooperative development contracts.
A technology development contract shall be in writing.
The relevant provisions on the technology development contracts shall be applied mutatis mutandis to a contract concluded by the parties on the application and transformation of a technological product with a value for practical use.
Article 852 A client of a commissioned development contract shall pay for the research and development fees and the remunerations in accordance with the agreement, provide technological materials, make proposals for research and development, complete his tasks in the cooperative work, and accept the work product of the research and development.
Article 853 A researcher-developer of a commissioned development contract shall work out and implement a research and development plan in accordance with the contract, make reasonable use of the research and development funds, complete the research and development work as scheduled, deliver the work product of research and development, provide relevant technological materials and necessary technological guidance so as to help the client comprehend the work product of the research and development.
Article 854 Where a party to a commissioned development contract defaults, thus causing the stoppage, delay, or failure of the research and development work, the party shall bear default liability.
Article 855 The parties to a cooperative development contract shall make investments in a form agreed by the parties, including contribution of the technology in investment, participation in the research and development work by performing their respective duties, and cooperation in the research and development.
Article 856 Where a party to a cooperative development contract defaults, thus causing the stoppage, delay, or failure of the research and development work, the party shall bear default liability.
Article 857 Where a technology which is the object of a technology development contract is revealed to the public by others, thus rendering the performance of the contract meaningless, the parties may rescind the contract.
Article 858 The parties to a technology development contract shall agree on the allocation of risks of insurmountable technological difficulties arising in the performance of the contract which causes total or partial failure of the research and development. Where there is no such a agreement between the parties or the agreement is unclear, if it cannot be determined according to the provisions of Article 510 of this Code, the parties shall share the risks in a reasonable way.
Where a party finds that a situation specified in the preceding paragraph exists which may cause total or partial failure of the research and development, he shall promptly notify the other party and take appropriate measures to mitigate the loss. Where he fails to promptly inform the other party and take appropriate measures so that the loss is aggravated, he shall be liable for the aggravated part of the loss.
Article 859 Where an invention is accomplished through commissioned development, the right to apply for patent thereof belongs to the researcher-developer, unless otherwise provided by law or agreed by the parties. Where the researcher-developer has obtained the patent right, the client may exploit the patent in accordance with law.
Where a researcher-developer is to transfer his right to apply for a patent, the client has a priority right to acquire the right on equivalent conditions.
Article 860 Where an invention is accomplished through cooperative development, the right to apply for patent jointly belongs to all parties to the cooperative development. Where one party is to transfer the part of the joint patent application right he owns, the other parties have a priority right to acquire the right on equivalent conditions, unless otherwise agreed by the parties.
Where a party to a cooperative development waives the part of patent application right he owns, unless otherwise agreed by the parties, the other party may make the application, or the other parties may jointly make the application, as the case may be. Where the applicant(s) acquires the patent right, the party who has waived his right may exploit the patent free of charge.
Where one party to a cooperative development does not agree to apply for patent, the other party or parties may not apply therefor.
Article 861 The right to use and the right to transfer a work product containing technological know-how accomplished through commissioned development or cooperative development, as well as the method for distributing the proceeds thereof, shall be agreed by the parties. Where there is no such an agreement between the parties or the agreement is unclear, if it cannot be determined according to the provisions of Article 510 of this Code, all the parties have the right to use and transfer the said work product, as long as no patent right has been granted on a same technological solution, except that a researcher-developer of a commissioned development may not transfer the work product to a third person before he delivers it to the client.
Section 3 Technology Transfer Contracts and Technology Licensing Contracts
Article 862 A technology transfer contract is a contract under which a lawful right holder of a technology assigns to another person the relevant rights in respect of a specific patent, application for a patent, or technological know-how.
A technology licensing contract is a contract under which a lawful right holder of a technology authorizes another person to exercise the relevant rights to apply and exploit a specific patent or technological know-how.
The agreement in a technology transfer contract or a technology licensing contract on the provision of special equipment and raw materials for application of technology or on the provision of the relevant technology consultation and technology service is a component part of the contract.
Article 863 Technology transfer contracts include the contracts for the transfer of patent right, the contracts for transfer of the right to apply for a patent, the contracts for transfer of technological know-how, and the like.
Technology licensing contracts include the patent exploitation licensing contracts, technological know-how licensing contracts, and the like.
Technology transfer contracts and technology licensing contracts shall be in writing.
Article 864 A technology transfer contract or a technology licensing contract may specify the scope to exploit the patent or to use the technological know-how, but may not restrict competition or development of the technologies.
Article 865 A patent exploitation licensing contract is valid only within the period during which the patent is valid. Where the term of the patent right expires or the patent right is declared invalid, the patentee may not conclude a patent exploitation licensing contract relating to the said patent with another person.
Article 866 A licensor in a patent exploitation licensing contract shall permit the licensee to exploit the patent, deliver the technological materials related to the patent exploitation, and provide necessary technological guidance in accordance with the agreement.
Article 867 A licensee in a patent exploitation licensing contract shall exploit the patent in accordance with the agreement, may not allow a third person outside the contract to exploit the patent, and shall pay the agreed royalties.
Article 868 A transferor in a technological know-how transfer contract or a licensor in a technological know-how licensing contract shall, in accordance with the agreement, provide technological materials, give technological guidance, guarantee the practical applicability and reliability of the technology, and perform confidentiality obligations.
The confidentiality obligations provided in the preceding paragraph shall not restrict the licensor from applying for a patent, unless otherwise agreed by the parties.
Article 869 A transferee in a technological know-how transfer contract or a licensee in a technological know-how licensing contract shall, in accordance with the agreement, exploit the technology, pay the transfer fee and royalties, and perform confidentiality obligations.
Article 870 A transferor in a technological transfer contract or a licensor in a technological know-how licensing contract shall guarantee that he is the lawful owner of the technology provided therein, and guarantee that the technology provided is complete, errorless, effective, and capable of acheiving the goal as agreed by the parties.
Article 871 A transferee in a technology transfer contract or a licensee in a technological know-how licensing contract shall, in accordance with the scope and time limit agreed by the parties, perform his confidentiality obligation regarding the part of the technology provided by the transferor or licensor that have not been disclosed to the public.
Article 872 A licensor who fails to license the technology in accordance with the agreement shall refund the royalties in part or in full and bear default liability. A licensor who exploits a patent or technological know-how beyond the agreed scope, or, without authorization, allows a third person to exploit the patent or utilize the technological know-how in breach of the agreement shall stop his breaching act and bear default liability. He shall bear default liability if he breaches the confidentiality obligation as agreed.
Where a transferor is liable for breach of contract, the provisions of the preceding paragraph shall be applied mutatis mutandis.
Article 873 A licensee who fails to pay royalties in accordance with the agreement shall make up for the payment of royalties and pay the liquidated damages. Where the licensee fails to do so, he shall stop exploitation of the patent or utilization of the technological know-how, return the technological materials, and bear default liability. Where a licensee who exploits the patent or utilizes the technological know-how beyond the agreed scope, or allows a third person, without authorization, to exploit the patent or to utilize the technological know-how, he shall stop his breaching acts and bear default liability. The licensee who breaches the confidentiality obligation as agreed shall bear default liability.
The provisions of the preceding paragraph shall be applied mutatis mutandis to a transferee who shall bear default liability.
Article 874 Where the exploitation of a patent or utilization of a technological know-how by the transferee or the licensee in accordance with the agreement infringes upon the lawful rights and interests of another person, the liability therefor shall be borne by the transferor or the licensor, unless otherwise agreed by the parties.
Article 875 The parties may, in compliance with the principle of mutual benefit, agree in the contract the method for sharing any subsequently improved technological product obtained in exploitation of the patent or utilization of the technological know-how. Where there is no agreement on such method or the agreement is unclear, if it cannot be determined according to the provisions of Article 510 of this Code, the subsequently improved technological product made by one party may not be shared by any other party.
Article 876 The relevant provisions of this Section shall be applied mutatis mutandis to the transfer and licensing of the exclusive rights to layout-designs of integrated circuits, rights to new plant varieties, computer software copyrights, and other intellectual property rights, and the like.
Article 877 Where there are laws or administrative regulations providing otherwise on contracts for technology import and export, or on contracts for patents and application of patents, the relevant provisions shall be followed.
Section 4 Technology Consultation Contracts and Technology Service Contracts
Article 878 A technology consultation contract is a contract under which one party uses his technological knowledge to provide to the other party the feasibility study, technological forecast, special technological investigation, and analysis and evaluation report on a specific technological project.
A technology service contract is a contract under which one party uses his technological knowledge to solve specific technological problems for the other party. Technology service contracts does not include work contracts or construction project contracts.
Article 879 A client in a technology consultation contract shall, in accordance with the agreement, clarify the issues for consultation, provide technological background information and the related materials, accept the work product of the entrusted person, and pay remuneration.
Article 880 The entrusted person in a technology consultation contract shall complete the consultation report or resolve the issues within the agreed time limit, and the consultation report submitted shall meet the requirements as agreed by the parties.
Article 881 Where a client in a technology consultation contract fails to provide the necessary materials in accordance with the agreement thus affecting the progress and quality of the work, or if the client fails to accept the work product or delays the acceptance, he may not request refund for the paid remuneration and shall pay any unpaid remuneration.
An entrusted person in a technology consultation contract who fails to submit the consultation report as scheduled or submits a report failing to meet the requirements as agreed by the parties shall bear default liability in form of reduction or waiver of its remuneration, and the like.
Where a client in a technology consultation contract makes a decision in reliance upon the entrusted person’s consultation report and advice that meet the requirements as agreed by the parties, any losses thus caused shall be borne by the client, unless otherwise agreed by the parties.
Article 882 A client in a technology service contract shall, in accordance with the agreement, provide working conditions, perform the cooperative work, accept the work product, and pay remuneration.
Article 883 An entrusted person in a technology service contract shall, in accordance with the agreement, complete the services, solve the technological issues, guarantee the quality of the work, and impart the knowledge for solving the technological problems.
Article 884 Where a client to a technology service contract fails to perform his contractual obligations or performs his obligations in a manner inconsistent with the contract, thus affecting the progress and quality of the work, or fails to accept the work product or delays the acceptance, he may not request for refund of the paid remuneration, and shall pay any unpaid remuneration.
An entrusted person in a technology service contract who fails to complete the service work in accordance with the agreement shall bear default liability in such form as waiver of his remuneration, and the like.
Article 885 Unless otherwise agreed by the parties, in the course of performance of a technology consultation contract or a technology service contract, the new technological product made by the entrusted person with technological materials and working conditions provided by the client belongs to the entrusted person. The new technological products made by the client based on the work product of the entrusted person belongs to the client.
Article 886 Where there is no agreement in a technology consultation contract or a technology service contract on the bearing of the necessary expenses for the entrusted person to carry out the normal work, or the agreement is unclear, the said expenses shall be borne by the entrusted person.
Article 887 Where there are laws or administrative regulations providing otherwise on technology intermediary contracts and technology training contracts, the relevant provisions shall be followed.
Chapter XXI Contracts for Custody of Property
Article 888 A contract for custody of property is a contract under which a custodian keeps the article delivered by a depositor and returns the said article.
Where a depositor conducts shopping, dining, lodging, or other activities in the custodian’s place and deposits an article at a designated area, the article is deemed to be placed in the custodian’s custody unless otherwise agreed by the parties or required by the course of dealing.
Article 889 A depositor shall pay the safekeeping fee to the custodian in accordance with the agreement.
Where there is no agreement between the parties on the safekeeping fee or the agreement is unclear, if it cannot be determined according to the provisions of Article 510 of this Code, the article is deemed to be placed in a gratuitous custody.
Article 890 A contract for custody of property is formed upon delivery of the article to be kept under custody, unless otherwise agreed by the parties.
Article 891 Where a depositor delivers to a custodian an article to be kept under his custodey, the custodian shall issue a safekeeping certificate, unless otherwise required by the course of dealing.
Article 892 A custodian shall properly keep the deposited article.
The parties may agree on the place and method of safekeeping. Except in case of emergency or in the interests of the depositor, the place and method of sefekeeping may not be changed without the other party’s consent.
Article 893 Where a depositor delivers to a custodian an article to be kept under custody that has defects or needs special safekeeping measures based on its nature, he shall inform the custodian of the relevant information. Where the depositor fails to do so thus causing damage to the deposited article, the custodian shall not bear the liability for compensation. Where the custodian suffers a loss therefrom, the depositor shall be liable for compensation unless the custodian knows or should have known the situation but fails to take remedial measures.
Article 894 A custodian may not re-deposit an article under his custody to a third person for safekeeping, unless otherwise agreed by the parties.
A custodian who re-deposits the article under his custody to a third person for safekeeping in violation of the preceding paragraph thus causing damage to the article shall bear the liability for compensation.
Article 895 A custodian may not use or permit a third person to use the article under his custody, unless otherwise agreed by the parties.
Article 896 Where a third person claims against an article under a custodian’s custody, the custodian shall perform the obligation of returning the article to the depositor, unless the said article is put under preservation or enforcement in accordance with law.
Where a third person initiates an action against the custodian or applies for detention of the article under the latter’s custody, the custodian shall promptly notify the depositor.
Article 897 Where an article under custody is destructed, damaged, or lost due to improper keeping by the custodian during the period the article is under his custody, the custodian shall bear the liability for compensation, except that a custodian who keeps the deposited article free of charge shall not bear the liability for compensation if he can prove that the destruction, damage, or loss is not caused by his intentional or grossly negligent act.
Article 898 A depositor shall declare to the custodian if he deposits money, negotiable securities, or other valuable articles, and the custodian shall examine them for acception, or seal them; where the depositor fails to make such a declaration, if the said article is destructed, damaged, or lost, the custodian may make compensation based on a rate for ordinary articles.
Article 899 A depositor may collect the article he deposited in custody at any time.
Where there is no agreement between the parties on the period for the custody or the agreement is unclear, the custodian may, at any time, request the depositor to collect the article under his custody. Where there is an agreement on the period for the custody, without special cause, the custodian may not request the depositor to collect the article before such period expires.
Article 900 Upon expiration of the period for custody or where the depositor collects the article he deposits in custody before expiration of such period, the custodian shall return the article and the proceeds accrued thereof to the depositor.
Article 901 Where money is deposited in custody, the custodian may return the money in the same currency and amount. Where other fungible goods are deposited in custody, the custodian may return the goods of the same kind, quality, and quantity in accordance with the agreement .
Article 902 Under a contract for non-gratuitous custody, the depositor shall pay the safekeeping fee to the custodian at a time agreed by the parties.
Where there is no agreement between the parties on the time limit for payment of the safekeeping fee or the agreement is unclear, if it cannot be determined according to the provisions of Article 510 of this Code, the payment shall be made at the time the article under custody is collected.
Article 903 Where a depositor fails to pay the safekeeping fee or the other expenses, the custodian has the right to retain the article under custody under a lien, unless otherwise agreed by the parties.
Chapter XXII Warehousing Contracts
Article 904 A warehousing contract is a contract under which a warehouser stores the goods delivered by the depositor for which the depositor pays the warehousing fee.
Article 905 A warehousing contract is formed when there is a consensus of expression of intent between the warehouser and the depositor.
Article 906 Where dangerous goods such as inflammable, explosive, toxic, corrosive, radioactive, or perishable articles are to be stored, the depositor shall state the nature of the said goods and provide relevant information thereof.
Where a depositor violates the provisions of the preceding paragraph, the warehouser may refuse to accept the goods for storage, or take appropriate measures to avoid losses, and the expenses thus incurred shall be borne by the depositor.
A warehouser that stores dangerous goods such as inflammable, explosive, toxic, corrosive, and radioactive articles shall have the corresponding warehousing conditions.
Article 907 A warehouser shall examine the goods before accepting them in accordance with the agreement. Where a warehouse, upon examining the goods, finds that the goods to be stored are inconsistent with the agreement, he shall promptly notify the depositor. A warehouser shall bear the liability for compensation if, after he has examined and accepted the stored goods, the goods are not in conformity with the agreement in terms of the types, quantity, or quality.
Article 908 Upon delivering of the goods for storage by a depositor, the warehouser shall issue a document such as a warehouse receipt or entry.
Article 909 A warehouser shall sign or stamp on a warehouse receipt. A warehouse receipt shall contain the following particulars:
(1) the name or designation and domicile of the depositor;
(2) the type, quantity, quality, package, the number of pieces, and marks of the stored goods;
(3) the standard for damage and spoilage of the stored goods;
(4) the warehousing site;
(5) the warehousing period;
(6) the warehousing fee;
(7) the insured amount, term of insurance, and the designation of the insurer if the goods to be stored have been insured; and
(8) the name of the issuer and the place and date of issuance.
Article 910 A warehouse receipt is a proof for collecting the stored goods. Where a warehouse receipt is endorsed by the depositor or a holder of the receipt, and is signed or stamped by the warehouser, the right to collect the stored goods may be assigned to another person.
Article 911 A warehouser shall, upon request of the depositor or the holder of the warehouse receipt, allow the depositor or the holder to examine the stored goods or to take samples thereof.
Article 912 Where a warehouser finds that the stored goods deteriorate or suffer from other damages, the warehouser shall promptly notify the depositor or the holder of the warehouse receipt.
Article 913 Where a warehouser finds that the stored goods deteriorate or suffer from other damages, which endangers the safety and the normal warehousing of the other stored goods, he shall demand the depositor or the holder of the warehouse receipt to despose of the goods when necessary. In case of emergency, a warehouser may make necessary disposal, but afterwards shall promptly notify the depositor or the holder of the warehouse receipt about the situation.
Article 914 Where there is no agreement between the parties on the warehousing period or the agreement is unclear, the depositor or the holder of the warehouse receipt may collect the stored goods at any time, and the warehouser may, at any time, request the depositor to collect the stored goods, provided that a reasonable period of time necessary for preparations shall be given.
Article 915 Upon expiration of the warehousing period, the depositor or the holder of the warehouse receipt shall collect the stored goods by presenting the warehouse receipt, warehouse entry, or the like. Where the depositor or the holder of the warehouse receipt delays in collecting the stored goods, additional warehousing fees shall be charged; where the goods are collected before expiration of the warehousing period, the warehousing fees shall not be reduced.
Article 916 Where a depositor or a holder of the warehouse receipt fails to collect the stored goods upon expiration of the warehousing period, the warehouser may demand the depositor or the holder of the warehouse receipt to collect the goods within a reasonable period of time; if the depositor or the holder still fails to collect the goods beyond the reasonable period, the warehouser may have the warehoused goods placed in escrow.
Article 917 If within the warehousing period, the stored goods are destructed, damaged, or lost due to improper warehousing by the warehouser, the depository shall bear the liability for compensation. Where the deterioration or damage of the stored goods is due to the inherent nature of the goods, or because the goods are not packaged in accordance with the agreement, or because they are stored beyond a valid storage period, the warehouser shall not be liable for compensation.
Article 918 For matters not provided in this Chapter, the relevant provisions on the contracts for custody of property shall be applied.
Chapter XXIII Entrustment Contracts
Article 919 An entrustment contract is a contract under which a principal and an agent agree that the agent shall handle the matters for the principal.
Article 920 A principal may specifically entrust an agent to handle one or several matters, and may also generally entrust an agent to handle all matter of his.
Article 921 A principal shall pay in advance the expenses for handling the entrusted matter. Where an agent pays for the principal necessary expenses in handling an entrusted matter, the principal shall reimburse the expenses with interest.
Article 922 An agent shall handle the entrusted matter in accordance with the instructions given by the principal. Where it is necessary to modify such instructions, the modification shall be consented to by the principal; where the situation is emergent and it is difficult to obtain the principal’s consent, the agent shall properly handle the entrusted matter, and shall, afterwards, promptly inform the principal of the situation.
Article 923 An agent shall handle the entrusted matter in person. With the consent of the principal, an agent may sub-entrust it to a third person. Where the sub-entrustment is consented to or ratified by the principal, the principal may directly instruct the sub-entrusted third person on an entrusted matter, and the agent shall only be liable for the selection of the third person and for the instructions given by himself to the third person. If the sub-entrustment is not consented to or ratified by the principal, the agent shall be liable for an act done by the sub-entrusted third person, unless the sub-entrustment is for protecting the interests of the principal in case of emergency.
Article 924 An agent shall, upon request of the principal, report on the situation of the entrusted matter. Upon termination of the entrustment contract, an agent shall report on the result of the entrusted matter.
Article 925 Where an agent, acting within the scope of authority granted by the principal, concludes a contract with a third person in his own name, if the third person is aware of the agency relationship between the agent and the principal, the said contract shall directly bind the principal and the third person, unless there is definite evidence establishing that the said contract binds only the agent and the third person.
Article 926 Where a contract is concluded by an agent in his own name with a third person who is not aware of the agency relationship between the agent and the principal, if the agent fails to perform his obligations owed to the principal because of the third person, the agent shall disclose the third person to the principal, and the principal may then exercise the right of the agent against the third person, unless the third person would not have concluded the contract if he has been aware of the existence of the principal at the time of concluding the contract.
Where an agent fails to perform his obligations owed to a third person because of the principal, the agent shall disclose the principal to the third person, and the third person may then claim his rights against either the agent or the principal as a counterparty, except that he may not change the counterparty once he has made the selection.
Where a principal exercises the right of the agent against the third person, the third person may claim the defense he has against the agent against the principal. Where the third person elects the principal as the counterparty, the principal may claim against the third person the defense he has against the agent, as well as the agent's defense against the third person.
Article 927 An agent shall hand over to the principal any property acquired in handling the entrusted matter.
Article 928 When an agent has accomplished the entrusted matter, the principal shall pay remuneration to the agent in accordance with the agreement.
Where an entrustment contract is rescinded or the entrusted matter cannot be accomplished due to a cause not attributable to the agent, the principal shall pay corresponding remuneration to the agent, unless otherwise agreed by the parties.
Article 929 Under a non-gratuitous entrustment contract, where losses are caused to the principal due to the agent’s fault, the principal may request compensation. Under a gratuitous entrustment contract, where losses are caused to the principal by the agent’s intentional act or by his gross negligence, the principal may request for compensation.
Where an agent acts beyond authorization thus causing losses to the principal, the agent shall make compensation.
Article 930 Where an agent suffers a loss in handling the entrusted matter due to a cause not attributable to himself, he may request compensation from the principal.
Article 931 A principal may, with consent of the agent, authorize a third person other than the agent to handle the entrusted matter. If a loss is thus caused to the agent, the agent may request compensation from the principal.
Article 932 Where two or more agents jointly handle an entrusted matter, they shall bear joint and several liabilities to the principal.
Article 933 A principal or an agent may rescind the entrustment contract at any time. Where rescission of the contract by a party causes losses to the other party, the party rescinding a gratuitous entrustment contract shall compensate for the direct loss caused by the rescission at an improper time, and the party rescinding a non-gratuitous entrustment contract shall compensate for the direct loss and the expected profit obtainable if the contract has been performed, unless the loss is caused by a reason not attributable to the rescinding party.
Article 934 An entrustment contract shall terminate where the principal dies or is terminated, or if the agent dies, loses capacity for performing civi juristic acts, or is terminated, unless otherwise agreed by the parties or it is inappropriate to terminate the contract based on the nature of the entrusted matter.
Article 935 Where the termination of an entrustment contract which is resulted from the death, declared bankruptcy, or declared dissolution of the principal will harm the interests of the principal, the agent shall continue to handle the entrusted matter untill the heir, administrator of estate, or the liquidator of the principal takes it over.
Article 936 Where an entrustment contract is terminated owing to the death, loss of capacity for performing civil juristic acts, declared bankruptcy or dissolution of the agent, the heir, administrator of estate, legal representative, or liquidator of the agent shall promptly notify the principal. Where the termination of the entrustment contract will harm the interests of the principal, the heir, administrator of estate, legal representative, or liquidator of the agent shall take necessary measures before the principal takes remedial measures.
Chapter XXIV Contracts for Property Management Service
Article 937 A contract for property management service is a contract under which a property management service provider provides to the property owners with property management services within the service area, such as repair and maintenance of buildings and the auxiliary facilities thereof, the management and maintenance of the environmental hygiene, keeping the order, and like, and the property owners pay property management fees in return.
Property management service providers include property management service enterprises and other managers.
Article 938 A property management service contract generally contains clauses specifying the contents of the services, the service quality, the rates and the collection methods of the service fee, the use of the maintenance funds, the management and use of the service premises, the term of service, the service handover, and the like.
A commitment of service made publicly by a property management service provider in favor of the property owners shall be a component part of the property management service contract.
A property management service contract shall be in writing.
Article 939 A preliminary property management service contract concluded between a developer and a property management service provider in accordance with law, or a property management service contract concluded by an owners’ committee and a property management service provider selected and hired in the owners’ assembly in accordance with law are legally binding on the owners.
Article 940 Where, prior to expiration of the service term as agreed in a preliminary contract for property management service concluded between a developer and a property management service provider in accordance with law, a contract for property management service concluded by the owners’ committee or the owners and a new property management service provider becomes effective, and the preliminary contract for property management service shall be terminated.
Article 941 Where a property management service provider authorizes a specialized service entity or any other third person to handle some specialized services in the property management service area, the property management service provider shall be responsible to the owners in terms of the specialized services.
A property management service provider shall not delegate to a third person all the property management services it is obligated to provide, or divide the property management services and delegate each to a third person.
Article 942 A property management service provider shall, in accordance with the contract and the nature of the use of the property, properly repair, maintain, clean, grow plant, and manage the common space of the property management service area co-owned by the owners, maintain the basic order in the property management service area, and take reasonable measures to protect the owners’ personal and property safety.
For any violation of the relevant laws and regulations on public security, environmental protection, fire protection, and the like, in the property management service area, the property management service provider shall, in a timely manner, take reasonable measures to stop the violation, make a report to the competent departments, and render assistance in its handling.
Article 943 A property management service provider shall, in a reasonable manner, regularly disclose to the owners and report to the owners’ assembly and the owners' committee on its services, the responsible personnel, the quality requirements, the items that a fee is charged, the rate of the fee, the performance of obligations, use of the maintenance funds, and the management and income generated from using the common space co-owned by the owners, and the like.
Article 944 An owner shall pay property management fees to the property management service provider in accordance with the agreement. Where a property management service provider has provided services in accordance with the agreement and the relevant regulations, an owner shall not refuse to pay the property management fees on the ground that he has not accepted or need not accept the relevant property management service.
Where an owner fails to pay the property management fees within the agreed period in breach of the agreement, the property management service provider may demand his payment within a reasonable period of time; if the owner still fails to make payment within the said period, the property management service provider may initiate a legal action or apply for arbitration.
The property management service provider may not collect the property management fees by such means as shutting off power, water, heat, or gas.
Article 945 Where an owner decorates or remodels the unit he owns in a building, he shall notify the property management service provider in advance, follow the reasonable rules provided by the property management service provider, and cooperate with the property management service provider in necessary onsite inspection.
If an owner transfers or leases the unit exclusively owned by him within a building, creates a right of habitation therein, or changes the use of the common space in accordance with law, he shall timely inform the property management service provider of the relevant situation.
Article 946 Where the owners jointly decide to dismiss the property management service provider in accordance with the statutory procedure, the contract for property management service may be rescinded. In such a case, the property management service provider shall be notified in writing 60 days in advance, unless otherwise agreed by the parties.
If ressission of the contract in accordance with the preceding paragraph causes loss to the property management service provider, the owners shall compensate for the loss, unless the loss is incurred by a cause not attributable to the owners.
Article 947 Where the owners jointly decide to continue employing a property management service provider before expiration of the service term, they shall renew the contract with the original property management service provider before expiration of the term of the contract.
Before expiration of the service term, where a property management service provider does not consent to continued employment, it shall notify the owners or the owners' committee in writing 90 days before expiration of the term of the contract, unless otherwise agreed by the parties.
Article 948 Where, upon expiration of the property management service term, the owners fail to make a decision in accordance with law to continue employing the original service provider or to employ another service provider, if the property management service provider continues to provide property management services, the original contract for property management service shall continue to be valid, except that it becomes one with an indefinite term.
Either party may rescind such a contract for property management service at any time, provided that the other party shall be notified in writing 60 days in advance.
Article 949 Upon termination of a contract for property management service, the original property management service provider shall vacate the property management service area within the agreed time or a reasonable period of time, surrender the property service premises, the related facilities, and the relevant materials necessary for property management service, and the like, to the owners' committee, the owners who decide to exercise management themselves, or the person designated by them, cooperate with the new property management service provider in effectively conducting handover work, and truthfully disclose the information regarding the use and management of the property.
The original property management service provider who violates the provisions of the preceding paragraph shall not request the owners to pay the property management fee after the termination of the contract for property management service, and shall bear the liability for compensation if loss is caused to the owners.
Article 950 After a contract for property management service is terminated and before the handover to the new property management service provider selected by the owners or the owners' assembly or to the owners who decide to exercise management by themselves, the original property management service provider shall continue to provide property management services, and may request the owners to pay the property management fee during this period.
Chapter XXV Brokerage Contracts
Article 951 A brokerage contract is a contract under which a broker in his own name engages in trade activities for a client who pays remuneration in return.
Article 952 The expenses incurred by a broker in handling the entrusted matters shall be borne by the broker, unless otherwise agreed by the parties.
Article 953 Where a broker possesses the commissioned article, the broker shall properly keep it.
Article 954 If the commissioned article has a defect at the time when they are delivered to a broker, or if it is perishable, the broker may dispose of the article upon his client’s consent; if the broker is unable to make prompt contact with the client, the broker may dispose of the article in a proper manner.
Article 955 Where a broker sells an article at a price lower than the price set by the client, or buys an article at a price higher than the price set by the client, the broker shall obtain the consent of the client; where such a deal is made without the consent of the client and the broker makes up for the price difference, the said deal is binding on the client.
Where a broker sells an article at a price higher than the price set by the client or buys an article at a price lower than the price set by the client, remuneration may be increased in accordance with the agreement. Where there is no such an agreement or the agreement is unclear, if it cannot be determined according to the provisions of Article 510 of this Code, the benefit shall belong to the client.
Where a client has given a special instruction on the price of an article, the broker may not sell or buy it contrary to the said instruction.
Article 956 Where a broker buys or sells a commodity with a market price, unless otherwise indicated by the client, the broker himself may serve as a buyer or a seller.
Despite the situation provided in the preceding paragraph, the broker may still request the client to pay remuneration.
Article 957 Where a broker buys a commissioned article in accordance with the contract, the client shall accept the article in a timely manner. Where, after being demanded by the broker, the client refuses to accept the article without just cause, the broker may have the commissioned article placed in escrow in accordance with law.
Where a commissioned article cannot be sold or the client withdraws from the commissioned sale, if the client, after being demanded by the broker, fails to take back or dispose of the said article, the broker may have the commissioned article placed in escrow in accordance with law.
Article 958 A broker who concludes a contract with a third person shall directly enjoy the rights and assume the obligations under the said contract.
Where a third person fails to fulfill the contractual obligation thus causing losses to the client, the broker shall bear the liability for compensation, unless otherwise agreed by the broker and the client.
Article 959 Where a broker has accomplished the entrusted matter in full or in part, the client shall pay remuneration accordingly. Where a client fails to pay remuneration as scheduled, the broker has the right to retain the commissioned article under a lien unless otherwise agreed by the parties.
Article 960 For matters not provided in this Chapter, the relevant provisions on entrustment contracts shall be applied mutatis mutandis.
Chapter XXVI Intermediary Contracts
Article 961 An intermediary contract is a contract under which a middleman reports to the client the opportunity for concluding a contract or provides intermediary services for the conclusion of a contract, for which the client pays remuneration.
Article 962 The middleman shall truthfully report to the client matters related to the conclusion of the contract.
Where a middleman intentionally conceals important facts in relation to the conclusion of the contract or provides untrue information thereof, thus harming the interests of the client, he may not request for remuneration and shall bear the liability for compensation.
Article 963 Where a middleman contributes to the conclusion of a contract, the client shall pay remuneration in accordance with the agreement. Where there is no agreement between the parties on the remuneration for the middleman or the agreement is unclear, if it cannot be determined according to the provisions of Article 510 of this Code, the remuneration shall be reasonably determined in accordance with the middleman's services. Where the intermediary services provided by the middleman facilitates the conclusion of a contract, the parties to the said contract shall equally share the disbursement of the remuneration to the middleman.
In facilitating the conclusion of a contract, the expenses incurred in the intermediary activities shall be borne by the middleman.
Article 964 Where a middleman fails to facilitate the conclusion of a contract, he may not request the payment of remuneration, but may request the client to pay for the necessary expenses incurred in the intermediary activities in accordance with the agreement.
Article 965 Where a client, after accepting the services of the middleman, uses the trading opportunity or intermediary services provided by the middleman to bypass the middleman and directly concludes a contract with another person, the client shall pay remuneration to the middleman.
Article 966 For matters not provided in this Chapter, the relevant provisions on entrustment contracts shall be applied mutatis mutandis.
Chapter XXVII Partnership Contracts
Article 967 A partnership contract is an agreement between two or more partners to share benefits and assume risks for a joint enterprise.
Article 968 A partner shall fulfill his obligation to contribute capital in accordance with the method, amount, and time limit for payment in accordance with the agreement.
Article 969 The capital contributions made by the partners and the proceeds therof and other property acquired in accordance with law in the course of the partnership business are partnership property.
A partner may not request partition of the partnership property prior to the termination of the partnership contract.
Article 970 A partner who makes a decision on the partnership businesses shall obtain unanimous consent of all the partners, unless otherwise agreed in the partnership contract.
The partnership businesses shall be jointly managed by all partners. One or more partners may be authorized to manage the partnership business in accordance with the partnership contract or the decision made by all partners; and the other partners shall cease to manage the partnership business, except that they have the right to supervise the management.
Where the partners manage the partnership business separately, the managing partner may raise objections on the matters managed by the other partners, in which case, the other partners shall suspend the management of such matter.
Article 971 A partner may not request remuneration for management of the partnership business, unless otherwise agreed in the partnership contract.
Article 972 The sharing of the profits and allocation of losses of a partnership shall be in accordance with the partnership contract; where there is no such an agreement in the partnership contract or the agreement is unclear, the partners shall make a decision through consultation. Where such consultation fails, the partners shall share the profits and assume the losses in proportion to their paid-in capital, or share the profits and assume the losses in equal share if the proportions of their paid-in capital cannot be determined.
Article 973 The partners shall bear joint and several liabilities for the partnership obligations. A partner who has performed the partnership obligations in excess of his share has the right to indemnification against the other partners.
Article 974 Unless otherwise agreed in the partnership contract, a partner who transfers all or part of his share of property to a person other than a partner shall obtain unanimous consent of the other partners.
Article 975 A creditor of a partner shall not subrogate and exercise any right of the partner provided in this Chapter and the partnership contract, except that a creditor may subrogate and exercise the partner’s claim against the partnership for distribution of the benefits.
Article 976 Where there is no agreement between or among the partners on the term of the partnership, or the agreement is unclear, if the term cannot be determined according to the provisions of Article 510 of this Code, the partnership shall be deemed as a partnership with an indefinite term.
If a partner continues to manage the partnership business upon expiration of the term of the partnership, and the other partners fail to raise any objection, the original partnership contract shall continue to be valid, but with an indefinite term.
A partner may dissolve a partnership contract with an indefinite term at any time, but the other partners shall be notified within a reasonable period of time in advance.
Article 977 Where a partner dies, loses capacity for performing civil juristic acts, or is terminated, the partnership contract is terminated, unless otherwise provided in the partnership contract, or it is inappropriate to terminate the contract due to the nature of the partnership affairs.
Article 978 Upon termination of a partnership contract, after paying the expenses for termination and discharging the partnership debts, the residual assets of the partnership property, if any, shall be distributed in accordance with the provisions of Article 972 of this Code.
Part Three Quasi-contracts
Chapter XXVIII Negotiorum Gestio
Article 979 Where a person who has neither a statutory nor a contractual obligation acts as a custodian to manage another person’s affair in order to prevent the latter from suffering a loss of interests, the said person may request the beneficiary to reimbure the necessary expenses incurred therefrom. Where such a custodian suffers losses when managing another person’s affairs, the custodian may request the beneficiary to make appropriate compensation.
Where the management of another person’s affairs is contrary to the true will of the beneficiary, the custodian does not have the right provibed in the preceding paragraph, unless the true will of the beneficiary is in violation of law or against the public order or good morals.
Article 980 Where the management by a custodian of another person’s affairs does not fall within the circumstances provided in the preceding Article, but the beneficiary has enjoyed the benefit of the management, the beneficiary shall be subject to the obligations provided in the first paragraph of the preceding Article to the custodian to the extent of the benefit he gains therfrom.
Article 981 A custodian shall manage another person’s affairs in the best interest of the beneficiary. Where suspension of management is to put the beneficiary at a disadvantage position, the management may not be suspended without just cause.
Article 982 Where a custodian manages another person’s affairs, he shall promptly notify the beneficiary if he is able to do so. Where the matter does not need urgent management, the custodian shall wait for the beneficiary’s instruction.
Article 983 Upon termination of the management, a custodian shall report the management of the affairs to the beneficiary. The property obtained by the custodian in the management of the affairs shall be surrendered to the beneficiary in a timely manner.
Article 984 Where the management of another person’s affairs by a custodian is subsequently ratified by the beneficiary, the provisions on entrustment contracts shall be applied to the management from the commencement of the management, unless the custodian expresses his intention otherwise.
Chapter XXIX Unjust Enrichment
Article 985 Where a person is unjustly enriched without a legal basis, the person who thus suffers a loss is entitled to request the enriched person to return the benefit, unless under any of the following circumstances:
(1) the payment is made for performing a moral obligation;
(2) the payment is made to satisfy an obligation not yet due; or
(3) the payment is made to an obligation knowing that there is no obligation to pay.
Article 986 Where a person enriched does not know or should not have known that the enrichment is without a legal basis, and if the enrichment no longer exists, the person has no obligation to return the benefit thus received.
Article 987 Where a person enriched knows or should have known that the enrichment is without a legal basis, the aggrieved person may request the enriched person to return the benefit thus received and make compensation for the losses in accordance with law.
Article 988 Where a person enriched has gratuitously transfered the benefit received to a third person, the aggrieved person may request the third person to assume the obligation to return the benefit to the corresponding extent.