Comparing European and Chinese Contract Law

* This post originally appeared on the European Private Law News, and is contributed by Ms Laura Macgregor (Edinburgh Law School).

On 16 and 17 February a workshop took place at Tsinghua University School of Law, Beijing.  This was the first meeting of the collaborators in a project which aims to investigate contract law in China and Europe in a comparative and cross-cultural perspective.  The outcome of the project, funded by The China EU School of Law, will be an edited book to be published in 2013.

Under the careful direction of the editors (Professor Dr Jan Smits and Dr Nicole Kornet both of Maastricht University and Professor Dr. Shiyuan Han of Tsinghua University) the participants had prepared draft papers which were presented at the workshop.  The topics span issues such as general principles, formation, contents, avoidance, remedies and the specific contract of sale.  Each chapter is to be jointly authored by one European and one Chinese academic.

Discussions over the two days of the workshop were intensive, and only a few issues can be mentioned here.  One issue is what the group understands by “European Contract Law”?  There are many possibilities.  Although the focus could lie principally on European Directives having a bearing on contract law, this would be to consider, largely, questions of consumer protection only.  There are also the many European soft law instruments, not only the Principles of European Contract Law (PECL) and the Draft Common Frame of Reference (DCFR), but also the UN Convention for the International Sale of Goods (CISG) and the UNIDROIT Principles of International Commercial Contracts.  One could also consider whether, drawing on the national law of the Member States in Europe, a “common core” of law exists on any given contract law topic.  The DCFR does not, after all, always reflect the position in the majority of the Member States.

How was this question answered?  The DCFR and PECL were selected as the starting points for discussion.  They often helpfully focus the mind on all the issues which must be discussed.  The European Directives will be discussed as necessary, which will be the case, for example, in unfair terms and sale.  Participants were encouraged to comment on the national laws of the Member States, noting, for example, a difference of approach throughout Europe.  If they failed to do so, readers not familiar with European Contract Law might gain a misleading picture of uniformity from the DCFR alone.  National law can also be used to illustrate a particular point.

More difficult was the question of how to deal with the proposed Common European Sales Law (CESL).  On the one hand, it can be seen as the latest point in a progression of thought on many issues in contract law.  It is interesting to look at PECL, the DCFR and CESL and chart, for example, the role of good faith.  Is it increasing or reducing in importance in these instruments?  On the other hand, some scepticism was expressed on the chances of CESL becoming law.  If it does not, it might be unhelpful for the chapters to provide it with too much prominence.  It was decided that the group would respond to events as they unfold over the next few months, and take decisions on this point as necessary.

The European members of the group also reflected a difference of approach towards CISG.  It has not been ratified by all the EU Member States.  Many of the States which have not ratified, for example, the UK, Ireland, Cyprus and Malta, are either common law systems or have been subject to the influence of the common law.  It was decided that parties are free to make use of CISG where they feel that this would be helpful.

Chinese contract law comprises broadly the 1986 General Principles of Civil Law and the Uniform Contract Law.  The power to interpret law lies with the Standing Committee of the People’s Congress, not the courts.  Two judicial interpretation instruments, published in 1989 and 2009, directly address contract law.  There are also the “Gazette cases”, i.e. cases selected by the Supreme People’s Court as important, and having persuasive authority for the lower courts in similar cases.  Clearly case law is used in a different way in China compared to the European States.  In China there is a maximum of two hearings of a case: it is not possible to appeal twice.  This too has an impact on the way in which cases can be used.  In fact, 95% of cases appear to be settled at the first hearing.  This participant’s chapter focuses on inter alia the impact of public interest on contract, and so it was interesting to hear that certain contracts in Chinese law require the approval of public authorities (Article 41).

A particular highlight was the combined papers of Dr Gary Low, Maastricht University, and Professor Shiyuan Han, Tsinghua University, on Remedies (performance and damages for breach).  More than any other pairing, their papers illustrated to the group exactly where comparison was likely to be most fruitful.  Specific performance is governed by Article 107 in Chinese Law.  The way in which this provision is expressed appears to illustrate the choice open to the “innocent” party to choose either specific performance or damages.  There appears to be no obvious hierarchy between the two.  Specific performance cannot be awarded (1) where the party in breach is unable to perform in law or in fact; (2) where the subject matter is unfit for compelling performance, or expenses are high; and (3) the oblige does not request performance within a reasonable time.  It seems that these are not the only categories in which specific performance might be refused.  Professor Shiyuan Han  discussed a case the facts of which are useful to contract teachers, of a man whose parents had been killed in an earthquake when he was very young.  Not remembering his parents, a photo which he found of them was extremely precious to him.  He sent the photo to be enlarged at a photo shop and, sadly, the shop lost the photo.  In the ensuing action for damages, the man appears to have been compensated for the non-pecuniary loss he suffered.  This is interesting given that Chinese law in general refuses to compensate a tourist for the non-pecuniary loss suffered when a holiday turns out not as promised (see Jarvis v Swan’s Tours [1973] 1 QB 223 in English law).

Discussions at the workshop were fascinating, and have laid a good foundation upon which collaboration can proceed.  This participant would particularly like to express her sincere thanks for the wonderful hospitality shown to the visitors by Professor Shiyuan Han and his colleagues.  Their warm and easy welcome was much appreciated over the course of the visit.