Understanding and Application of Articles 143 and 153 of the Civil Code

 

Summary

 

The Civil Code of the People's Republic of China (hereinafter referred to as the "Civil Code"), which came into force on January 1, 2021, has been launched for five times and lasted five years. It is even more significant in the same year as the 100th anniversary of the founding of the CPC and the year when the first century goal was achieved. The Civil Code, also known as the "Encyclopedia of Social Life," consists of 7 parts and 1260 articles, each of which includes General Provisions, Property Rights, Contracts, Personality Rights, Marriage and Family, Inheritance, Tort Liability, and Supplementary Provisions. In addition to significant innovations in the system of civil subjects and civil rights in the General Provisions, as well as the system of differentiated ownership of buildings and residential rights in the Property Rights, the Civil Code also made significant adjustments to the recognition of contract effectiveness in the original Contract Law. This article will rely on Articles 143 and 153 of the Civil Code, guided by the "Minutes of the National Conference on Civil and Commercial Trial Work of Courts", and combine the mainstream judgment viewpoints of people's courts to conduct in-depth research on the understanding and application of the effectiveness of civil legal acts.

 

Contract is an agreement between equal civil subjects to establish, modify, and terminate civil legal relationships. It is an important manifestation of commodity economy and an important means of achieving resource allocation. Respect for autonomy of the will is an important manifestation of the modern concept of freedom of contract, and it is also an important factor that people's courts should fully consider when trying contract disputes. In particular, the "Overall Plan for the Construction of Hainan Free Trade Port" issued by the Central Committee of the Communist Party of China and the State Council on June 1, 2020 also explicitly mentions the basic construction of trade and investment rules characterized by freedom, fairness, rule of law, and high-level process supervision, in order to achieve free and convenient trade, investment, cross-border capital flow, personnel entry and exit, transportation, and data security and orderly flow, It further demonstrates that only under equal status, full and free negotiation, respect for the autonomy of all parties, and compliance with rules can a high-level free trade port with strong international influence be fully built, and the important carrier of these manifestations is contracts.

 

But the Civil Code is different from the original Contract Law. Article 52 and Article 54 of the original Contract Law clearly provided for situations such as invalidity, modifiability, and revocability of contracts, while the Civil Code did not provide specific provisions on the validity of contracts. It only stipulated in Article 508 of Chapter 3 of the Contract Law that "if there are no provisions on the validity of contracts in this Part, the relevant provisions of Chapter 6 of Part 1 of this Law shall apply". This also means that starting from January 1, 2021, when the people's court determines the validity of a contract, it must refer to the provisions on the determination of the validity of civil legal acts in the General Provisions of the Civil Code. Below, the author will focus on Articles 143 and 153 of the Civil Code, deepen their understanding and application of the validity and invalidity of civil legal acts, in order to reduce conflicts in judicial practice.

 

 

1、 Article 143 of the Civil Code states that civil legal acts are valid

 

Article 143, Section 3, Chapter 6 of the General Provisions of the Civil Code: Civil legal acts that meet the following conditions are valid: (1) the actor has corresponding civil capacity; （2） Authentic expression of intention; （3） Do not violate the mandatory provisions of laws and administrative regulations, and do not violate public order and good customs.

 

This provision is consistent with Article 143 of the original General Principles of the Civil Law, which states that except for special circumstances such as conditional civil legal acts and limited civil legal acts, the above three elements are the general and necessary conditions for the validity of civil legal acts.

 

（1） Regarding the actor having corresponding civil capacity

 

Civil capacity refers to the ability of a civil subject to obtain civil rights and assume civil obligations through their independent actions. According to their civil capacity, they can be divided into full civil capacity, limited civil capacity, and no civil capacity. A person with full capacity for civil conduct can constitute a qualified subject for civil legal acts, while a person without capacity for civil conduct cannot become a qualified subject for civil legal acts. A person with limited capacity for civil conduct whose civil legal acts are consistent with their capacity for civil conduct constitutes a qualified subject, and vice versa does not constitute a qualified subject, such as a purely beneficial act.

 

Therefore, the author believes that the actor has corresponding civil capacity, which means that their capacity should be compatible with the legal act they are taking, and can all constitute the qualified subject of civil legal acts, thereby constituting the effective subject requirements of civil legal acts.

 

（2） Regarding the authenticity of the expression of intention

 

The authenticity of the expression of intention refers to the consistency between the actor's expressed behavior and their inner intention, which is also an important component of the effectiveness of a contract. Traditional civil law distinguishes between the authenticity and freedom of expression of will, which are also two factors in determining the validity of expression of will. The Civil Code does not provide for "freedom of expression of will" here, only for "truthfulness of expression of will", which does not negate the value and significance of freedom. According to a widely accepted view, a true expression of meaning implies freedom of expression, while a non free expression of meaning implies an untrue expression. The author believes that the lack of freedom in the expression of intention is only one of the situations where the expression of intention is not true. In the case of freedom in the expression of intention, there are still situations where the expression of intention is not true, such as hidden acts, false representations, and so on. According to Article 146 of the Civil Code, this hidden act or false representation is deemed invalid.

 

For example, in the case No. 1068 of the Supreme People's Court of China (2020), the Supreme People's Court held that according to Article 146 of the General Principles of the Civil Law, "a civil legal act performed by the actor and the other party with a false expression of intent is invalid. The validity of a civil legal act hidden with a false expression of intent shall be dealt with in accordance with relevant legal provisions, The invalidity of a civil legal act executed with false intent does not necessarily result in the invalidity of a hidden civil legal act. The "Maximum Guarantee Letter" issued by the Machinery Construction Company states: "Our company confirms that from the date of signing this guarantee letter, even if your company (Minmetals Company) and the main debtor (Cloud Chain Company, Fushen Company) The content of the main contract has been changed and other documents have been signed. Our company hereby agrees in advance, and there is no need to obtain our company's separate consent at that time; From the date of signing by your company, these documents shall be directly binding on our company, and our guarantee liability shall not be invalidated, reduced, exempted or exempted as a result. Therefore, the claim of the mechanical construction company that the steel procurement contract involved in the case is invalid due to a false expression of intention, and the contract shall also be deemed invalid. Therefore, the claim that the mechanical construction company does not need to bear guarantee liability cannot be established.

 

As in the case No. 365 of the Supreme People's Court in 2020, the Supreme People's Court held that the two separate "Construction Engineering Construction Contracts" signed by Huarui Company and Baoye Company on June 18, 2013 were aimed at improving the construction procedures of the project involved, and both parties agreed that they would only use them for filing purposes. The actual performance would still be carried out according to the general contracting contract signed on March 23, 2012. Therefore, these two construction contracts are false expressions of intent conspired by both parties to the contract, and according to Article 146 of the General Principles of the Civil Law of the People's Republic of China, they should be deemed invalid contracts.

 

A civil legal act cannot have and only has one expression of intention, and only when all the expressions of intention in the civil legal act are true can it constitute the elements of effective expression of intention in the civil legal act. As long as there is an untrue expression of intention in the civil legal act, it cannot constitute the necessary condition for the effective expression of intention in the civil legal act. Especially in the current judicial practice, the socialist market economy has entered a deep stage, and various forms of transactions are complex and complex. However, the untrue expression of meaning ultimately manifests as "being called A but actually being called B. This unreality greatly increases the risk of contract invalidity, and puts forward higher standards for judges to implement the trial concept of "penetrating review" in the trial process of cases. Strict implementation of the trial concept of "penetrating review" helps to achieve the goal of "piercing the veil" and "revealing the truth".

 

（3） Mandatory provisions on not violating laws and administrative regulations, and not violating public order and good customs

 

The mandatory provisions of laws and administrative regulations, in terms of hierarchy, are only invalid when civil legal acts violate laws and administrative regulations. If the violation of departmental regulations, local regulations, autonomous regulations, separate regulations, local regulations, etc. does not affect the effectiveness of civil legal acts. In terms of the nature of the violation, it only affects the effectiveness of civil legal acts when the mandatory provisions are violated. If any arbitrary provision is violated, it shall not affect the validity of the civil legal act.

 

Public order and good customs are the general order and morality necessary for the existence and development of a country and society, including the core socialist values. Laws and administrative regulations cannot be comprehensive and have inherent lag. Public order and good customs are universal values that can keep up with the times and serve as powerful supplements to laws and administrative regulations. The author believes that the premise for applying public order and good customs should be that there are no provisions in laws or administrative regulations, so a specific analysis should be conducted from two levels: substantive justice and procedural justice. Especially when determining whether the subordinate rules involve public order and good customs, the people's court should carefully consider regulatory intensity, transaction security protection, and social impact based on the examination of the regulated objects, and provide sufficient reasoning in the judgment documents. six

 

2、 Article 153 of the Civil Code states that civil legal acts are invalid

 

Article 153, Section 3, Chapter 6 of the General Provisions of the Civil Code: Civil legal acts that violate mandatory provisions of laws and administrative regulations are invalid. However, this mandatory provision does not invalidate the civil legal act unless otherwise specified.

 

Civil legal acts that violate public order and good customs are invalid.

 

This article basically continues the provisions of Article 52 (5) of the original Contract Law, Article 14 (7) of the original Interpretation of the Supreme People's Court on Several Issues Concerning the Application of the Contract Law of the People's Republic of China (2), and Article 153 (8) of the original General Principles of the Civil Law, limiting the situations that result in ineffective civil legal acts to mandatory provisions in laws formulated by the National People's Congress and its Standing Committee and administrative regulations formulated by the State Council, However, it did not fully absorb the content of Article 14 "Mandatory Provisions on Validity" of the Interpretation of the Supreme People's Court on Several Issues Concerning the Application of the Contract Law of the People's Republic of China (II). And the use of "public order and good customs" has replaced the original "General Principles of Civil Law" and "Contract Law" with "social public interests", adjusting the punctuation marks of the original "General Principles of Civil Law" to make its expression more coherent, logical, and broader in connotation and extension.

 

（1） Regarding the mandatory provisions on effectiveness and management

 

There are two "mandatory provisions" in Article 153 (1) of Chapter 6, Section 3 of the General Provisions of the Civil Code. The author believes that the consequences of violating the previous "mandatory provisions" are inevitably invalid, and their nature should be the validity of mandatory provisions; The consequences of violating the "mandatory regulations" in the later part are not necessarily invalid, and their nature should be managerial mandatory regulations. The invalidity of civil legal acts that violate mandatory provisions on effectiveness has become a consensus in judicial practice, but courts in different regions have different scales and standards for determining mandatory provisions on effectiveness and management. In the "Minutes of the National Conference on Civil and Commercial Trial Work of Courts", the Supreme People's Court distinguished the mandatory provisions of effectiveness and management through enumeration, providing clear guidance for judicial trials. Contracts that violate mandatory public order and good customs regulations related to financial security, market order, and national macroeconomic policies are invalid, contracts that violate mandatory regulations on the sale of prohibited trading objects are invalid, contracts that violate mandatory regulations on franchising are invalid, and contracts that violate mandatory regulations on trading venues are invalid. However, the validity of contracts that violate mandatory regulations such as business scope, transaction time, or quantity should not be denied. At the same time, attention should also be paid to distinguishing between provisions that require approval procedures in accordance with laws and administrative regulations, as well as provisions that do not have the authority to impose sanctions.

 

1. Attention should be paid to distinguishing between mandatory provisions and provisions requiring approval procedures in laws and administrative regulations

 

Article 502-10 of the Civil Code provides for the effectiveness of ineffective contracts, distinguishing the effectiveness of contracts that have not been registered from contracts that have not been approved. It clarifies that contracts that have not been approved are ineffective contracts, the nature of the approval obligation clause is independent, and the parties who have not fulfilled the obligation to apply for approval should bear the liability for breach of contract. This makes up for the shortcomings of the original Contract Law. This regulation is in line with the contents of Article 37, 38, 39, and 11 of the "Minutes of the National Conference on Civil and Commercial Trial Work of Courts". It should be noted that the Civil Code does not specify the consequences of a court ruling that a party fails to fulfill their approval obligations, but it can be implemented in judicial practice by referring to Article 40, 12 of the Minutes of the National Conference on Civil and Commercial Trials of Courts.

 

For example, in the 2016 Supreme People's Court case No. 410, the Supreme People's Court cited Article 30 of the Enterprise State owned Assets Law, Article 23 of the Interim Regulations on the Supervision and Administration of Enterprise State owned Assets, and Article 66 of the Company Law, stating that major transactions of state-owned assets must be approved by the state-owned asset management department before the contract can take effect. In this case, Salt Industry Group Company is a state-owned enterprise solely owned by the State owned Assets Supervision and Administration Commission of Jiangsu Province. The equity purchase and sale contract signed by it due to significant foreign investment needs to be approved by the State owned Assets Supervision and Administration Department before the contract can take effect. Due to the failure to complete the above approval procedures, the equity transfer contract involved in the case did not take effect.

 

In the (2013) Min Yi Zhong Zi No. 156 case, the Supreme People's Court cited Article 6 of the Mineral Resources Law of the People's Republic of China and Article 10 of the Management Measures for the Transfer of Exploration and Mining Rights, stating that the transfer of mining rights must be approved. Due to the fact that the "Business Rights Contract" involved in the case has not been approved in accordance with the law, the first instance judgment determined that the contract involved in the case did not take effect and was not inappropriate.

 

Therefore, approval is a condition for the effectiveness of the contract and cannot be equated with determining that the contract is invalid due to a violation of mandatory regulations.

 

2. Attention should be paid to distinguishing between mandatory provisions and provisions on unauthorized disposal

 

Article 597 and 13 of the Civil Code absorbed the provisions of Article 3.14 of the original Interpretation of the Supreme People's Court on the Application of Law in the Trial of Sales Contract Disputes, but did not adopt the provisions of Article 51.15 of the original Contract Law, echoing the system of bona fide acquisition, which is more conducive to protecting bona fide buyers.

 

For example, in the (2021) Wan 07 Min Zhong 177 case, the Intermediate People's Court of Tongling City cited the provisions of Articles 215 and 597 of the Civil Code, stating that unauthorized disposal only affects the performance of the contract and does not affect the occurrence of the contract's validity. Lack of decentralization, inability to transfer ownership of the subject matter, inability to fulfill contractual obligations, and bearing liability for breach of contract. Therefore, it is ruled that the "Sales Contract" signed by Wu Wanbao and Zhu Guigen is valid.

 

In the 2019 Supreme People's Court Case No. 748, the Supreme People's Court cited Article 3 of the Interpretation of the Supreme People's Court on the Application of Law in the Trial of Disputes over Sales Contracts, and found that Li Junming's claim that Yang Xueyi had no right to dispose of the involved property and that the invalidity of the House Purchase and Sale Agreement and his application for retrial could not be established, and ultimately rejected his application for retrial.

 

In the Supreme People's Court's Interpretation on the Application of Law in the Trial of Sales Contract Disputes, Article 3 of the Supreme People's Court's Interpretation was cited in the Supreme People's Court's case No. 4508 (2017), stating that even if Liu Lanxiang and Lin Jincai sign a partnership purchase agreement and a commercial housing purchase and sale contract, Boji Company does not enjoy the ownership of the commercial housing involved in the case, it does not affect the validity of the commercial housing purchase and sale contract between the parties. Huang Wencan claimed that the contract was invalid on the grounds that when Liu Lanxiang and Lin Jincai signed the partnership purchase agreement and the commercial housing sales contract, Boji Company did not enjoy the ownership of the commercial housing involved in the case, and this court does not support it.

 

Therefore, the act of violating unauthorized disposal cannot be equated with the determination of violating mandatory provisions and resulting in the invalidity of the contract.

 

（2） About Public Order and Good Customs

 

Public order and good customs include two aspects: public order and good customs, with public order referring to legal order and good customs referring to morality beyond legal order. Compared to mandatory regulations, public order and good customs are more abstract and uncertain. To avoid the phenomenon of escaping from more abstract general provisions in judicial practice, before determining the invalidity of civil legal acts, it is necessary to first determine whether they have violated mandatory provisions. That is to say, in cases where it is possible to determine invalidity on the grounds of violating mandatory regulations, efforts should be made to avoid applying public order and good customs to determine invalidity.

 

For example, in the (2018) Hu 74 Min Chu 585 case, the Shanghai Financial Court held that the concept of public order and good customs has greater flexibility and should be applied cautiously in specific cases to avoid excessive derogation from the autonomy of civil subjects. Public order and good customs include public order and good customs. The public order in the securities industry should first be judged based on the laws and regulations in that field. In the absence of clear provisions in the superior law, when determining whether a certain subordinate rule constitutes public order, it should be examined from two levels: substantive justice and procedural justice: the rule should reflect the overall interests of the country and society as stipulated by the laws and administrative regulations in the securities industry; The formulation subject of this rule should have legal authority, comply with legal procedures for formulation and publication, and have a high level of public awareness and recognition. The final case is based on the principle that "securities issuers should truthfully disclose the ownership of their shares, and it is prohibited for issuers to hold their shares anonymously. This is in accordance with the Securities Law and the Measures for the Administration of Initial Public Offering and Listing of Stocks" It is clearly stipulated that the overall legal order of the securities market based on information disclosure and the legitimate rights and interests of the majority of investors are in line with the constitutive requirements of public order at both the physical and procedural levels. Therefore, it belongs to the public order that should be observed and must not be violated in the securities market. "The reason for denying the effectiveness of the equity agreement of the anonymous holding of securities issuers.

 

3、 Conclusion

 

Throughout the Civil Code, the determination of the effectiveness of civil legal acts, whether in terms of written expression or arrangement, is clearer and clearer than the original General Principles of the Civil Code, Contract Law, and General Principles of the Civil Code. However, returning to judicial practice, the debate over the "effectiveness" and "management" of "mandatory provisions" is not the final guide of the "Minutes of the National Conference on Civil and Commercial Trial Work of Courts". But the Civil Code is progressive, and the determination of the effectiveness of civil legal acts is also positive and affirmative. Some of the provisions in it can also be directly used as a basis for determining the invalidity of civil legal acts, such as Article 244, which states that "collective owned land shall not be expropriated in violation of the authority and procedures prescribed by law", Article 334, which states that "without legal approval, contracted land shall not be used for non agricultural construction" Article 680 prohibits high-interest lending, and the interest rate of the loan shall not violate relevant national regulations, and Article 737 stipulates that financial leasing contracts concluded by the parties through fictitious leased property shall be invalid. By establishing a legal system and prospering the country, the Civil Code will provide comprehensive legal protection for the realization of the second centenary goal.

 

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1. First launched in 1954; Second launch in 1962; The third launch in 1979; In 2001, it was launched for the fourth time. The Standing Committee of the Ninth National People's Congress organized the drafting of a draft civil law and conducted a review in December 2002. After discussion and research, it was still decided to continue to adopt the method of formulating separate civil laws to promote the construction of China's civil legal system. After the 10th National People's Congress, the Property Law and Tort Liability Law were successively formulated. In March 2015, the Legislative Affairs Committee of the Standing Committee of the National People's Congress officially launched the compilation of the Civil Code for the fifth time.

 

2. Fifth Compilation: From March 2015 to May 2020, the compilation was completed after ten Standing Committee meetings and two National People's Congress deliberations.

 

3. "Minutes of the National Conference on Civil and Commercial Trial Work of Courts": The minutes of the Civil Administration Professional Committee of the Judicial Committee of the Supreme People's Court were passed at its 319th meeting on September 11, 2019.

 

4. Article 52 of the Contract Law shall render a contract invalid in any of the following circumstances: (1) One party enters into a contract through fraudulent or coercive means, which harms the interests of the state; （2） Malicious collusion to harm the interests of the state, collective, or third parties; （3） Covering up illegal purposes in a legal form; （4） Harming the public interest of society; （5） Violating mandatory provisions of laws and administrative regulations.

 

5. Article 54 of the Contract Law states that one party has the right to request the people's court or arbitration institution to modify or revoke the following contracts: (1) if the contract was concluded due to significant misunderstanding; （2） Obvious unfairness in entering into a contract. If one party uses fraud, coercion, or taking advantage of the other party's situation to cause the other party to enter into a contract that violates its true intention, the aggrieved party has the right to request the people's court or arbitration institution to modify or revoke the contract.

 

6.Article 146 of the Civil Code states that civil legal acts committed by the perpetrator and the other party with false intentions are invalid.

The validity of concealed civil legal acts expressed with false intent shall be dealt with in accordance with relevant legal provisions.

 

 7.Article 31 of the "Minutes of the National Conference on Civil and Commercial Trials of Courts" generally does not affect the validity of contracts in violation of regulations. However, if the content of these regulations involves public order and good customs such as financial security, market order, and national macro policies, the contract shall be deemed invalid. When determining whether regulations involve public order and good customs, the people's court should carefully consider regulatory intensity, transaction security protection, and social impact based on the examination of the regulated objects, and provide sufficient reasoning in the judgment documents.

 

8. Article 14 of the Interpretation of the Supreme People's Court on Several Issues Concerning the Application of the Contract Law of the People's Republic of China (II) stipulates that "mandatory provisions" in Article 52 (5) of the Contract Law refer to mandatory provisions with effectiveness.

 

9. Article 153 of the General Principles of the Civil Law stipulates that civil legal acts that violate mandatory provisions of laws and administrative regulations shall be invalid, except where such mandatory provisions do not render such civil legal acts invalid.

 

Civil legal acts that violate public order and good customs are invalid.

 

 Minutes of the National Conference on Civil and Commercial Trial Work of Courts 30 After the implementation of the Contract Law, in response to situations where some people's courts often determine contracts as invalid and improperly expand the scope of invalid contracts on the grounds of violating mandatory provisions of laws and administrative regulations, Article 14 of the Judicial Interpretation of the Contract Law (II) explicitly limits the "mandatory provisions" stipulated in Article 52 (5) of the Contract Law to "mandatory provisions of validity". Subsequently, the "Guiding Opinions of the Supreme People's Court on Several Issues Concerning the Trial of Civil and Commercial Contract Disputes under the Current Situation" further proposed the concept of "mandatory provisions for management", pointing out that if the mandatory provisions for management are violated, the people's court should determine the effectiveness of the contract based on the specific situation. With the introduction of this concept, another trend has emerged in judicial practice. Some people's courts believe that all mandatory provisions of administrative nature belong to "administrative mandatory provisions" and do not affect the effectiveness of contracts. This kind of literal recognition method should be corrected.

 

When trying contract dispute cases, the people's court should carefully judge the nature of "mandatory provisions" in accordance with Article 153 (1) of the General Principles of the Civil Law and Article 14 of the Judicial Interpretation of the Contract Law (2), especially considering the types of legal interests protected by mandatory provisions, the legal consequences of illegal acts, and transaction security protection, and other factors, and fully explain the reasons in the judgment documents. The following mandatory provisions should be recognized as "effectiveness mandatory provisions": mandatory provisions that involve public order and good customs such as financial security, market order, and national macroeconomic policies; The subject matter of the transaction is prohibited from sale, such as the sale of human organs, drugs, firearms, etc; Violating franchising regulations, such as off site capital allocation contracts; Trading methods that are seriously illegal, such as contracts concluded in violation of competitive contracting methods such as bidding and tendering; Trading venues are illegal, such as conducting futures trading outside approved trading venues. The mandatory regulations on administrative management nature such as business scope, transaction time, and transaction quantity should generally be recognized as "mandatory regulations for management".

 

10. Article 502 of the Civil Code stipulates that contracts established in accordance with the law shall take effect from the time of establishment, except as otherwise provided by law or agreed upon by the parties.

 

According to the provisions of laws and administrative regulations, if a contract should go through approval and other procedures, its provisions shall be followed. If the failure to handle approval and other procedures affects the effectiveness of the contract, it shall not affect the performance of obligations such as approval and the validity of relevant clauses in the contract. If a party who is required to apply for approval fails to fulfill their obligations, the other party may request that they bear the responsibility for violating the obligation.

 

According to the provisions of laws and administrative regulations, if the modification, transfer, or termination of a contract requires approval and other procedures, the provisions of the preceding paragraph shall apply.

 

11. Minutes of the National Conference on Civil and Commercial Trials of Courts 37. [Effectiveness of Unapproved Contracts] If laws and administrative regulations require a certain type of contract to go through approval procedures and take effect, such as the Commercial Bank Law, Securities Law, Insurance Law, etc., which require approval from relevant competent authorities for purchasing more than 5% of the equity of commercial banks, securities companies, and insurance companies, in accordance with Article 44, Paragraph 2 of the Contract Law, Approval is the legal condition for a contract to take effect, and unapproved contracts fail to take effect due to the lack of special legal conditions for effectiveness. A prominent issue in practice is to consider ineffective contracts as invalid contracts, or to treat them as invalid contracts even though they are deemed ineffective. Essentially, an invalid contract is one that lacks the valid elements of the contract or has a legal cause for contract invalidity, and does not have legal effect from the beginning. However, a contract that has not yet become effective already meets the valid requirements of the contract and has a certain binding force on both parties. Neither party may withdraw, terminate, or modify it without authorization. However, due to the lack of legal, administrative regulations or special effective conditions agreed upon by the parties, it cannot have the legal effect of requesting the other party to fulfill the main rights and obligations of the contract until the effective conditions are met. 38. [Approval obligations and related breach clauses shall take effect independently] For contracts that require approval by administrative authorities to take effect, if there are specific provisions on the approval obligations and breach liabilities for failure to fulfill the approval obligations, such provisions shall take effect independently. If one party requests the termination of the contract due to the other party's failure to fulfill the approval obligation and requests it to bear the corresponding breach of contract responsibilities as stipulated in the contract, the people's court shall support it in accordance with the law. 39. [Explanation of Approval Obligation] For contracts that require approval by administrative authorities to take effect, if one party requests the other party to fulfill the main rights and obligations of the contract, the people's court shall explain to them and change the litigation request to request the fulfillment of the approval obligation. If one party changes the litigation request, the people's court shall support it in accordance with the law; If the parties refuse to make changes after explanation, their litigation request shall be rejected, but it shall not affect their ability to file a separate lawsuit.

 

12. "Minutes of the National Conference on Civil and Commercial Trial Work of Courts" 40. [Handling after the Judgment Fulfills the Obligation to Submit for Approval] If a party refuses to fulfill the obligation to submit for approval after being judged by a people's court, and still fails to fulfill it after being enforced by the people's court, and the other party requests it to bear the responsibility for breach of contract, the people's court shall support it in accordance with the law. If one party fulfills its obligation to submit for approval based on the judgment, and the administrative authority approves it, the contract shall take full legal effect. If it requests the other party to fulfill the contract, the people's court shall support it in accordance with the law; If one party requests to terminate the contract without approval from the administrative authority and the contract does not have legal enforceability, the people's court shall support it in accordance with the law.

 

13. Article 597 (1) of the Civil Code: If the seller fails to obtain the right of disposition, resulting in the inability to transfer ownership of the subject matter, the buyer may terminate the contract and request the seller to bear the liability for breach of contract.

 

14. Article 3 of the Interpretation of the Supreme People's Court on the Application of Law in the Trial of Disputes over Sales Contracts: If a party claims that the contract is invalid on the grounds that the seller has no ownership or disposal rights over the subject matter at the time of contract signing, the people's court shall not support it.

 

If the seller fails to obtain ownership or disposal rights, resulting in the inability to transfer ownership of the subject matter, and the buyer demands that the seller bear the liability for breach of contract or terminate the contract and claim compensation for damages, the people's court shall support it.

 

15. Article 51 of the Contract Law states that if a person without the right to dispose of another person's property has obtained the right to dispose of it after the right holder has ratified it or the person without the right to dispose of it has signed a contract, the contract shall be valid.