• Document Number：Judicial Interpretation No. 19 [1999]
• Area of Law： Contract
• Level of Authority： Judicial Interpretation
• Date issued：12-19-1999
• Effective Date：12-29-1999
• Issuing Authority： Supreme People's Court
• Status： Effective

Announcement of the Supreme People's Court
The Interpretation I of the Supreme People's Court of Several Issues concerning the Application of the Contract Law of the People's Republic of China, which was adopted at the 1090th meeting of the Judicial Committee of the Supreme People's Court on December 1, 1999, is hereby promulgated and shall come into force on December 29, 1999.
December 19, 1999
Interpretation I of the Supreme People's Court of Several Issues concerning the Application of the Contract Law of the People's Republic of China
(Adopted at the 1090th meeting of the Judicial Committee of the Supreme People's Court on December 1, 1999; Judicial Interpretation No. 19 [1999])
In order to correctly try the cases of disputes over contracts, in accordance with the provisions of the Contract Law of the People's Republic of China (hereinafter referred to as the Contract Law), we hereby interpret several issues concerning the application of the Contract Law by the people's courts as follows:
I. Applicable Scope of the Law
Article 1 Where a case is brought before the people's court for disputes over a contract formed after the implementation of the Contract Law, the provisions of the Contract Law shall apply to such a case. Where a case is brought before the people's court for disputes over a contract formed before the implementation of the Contract Law, unless it is otherwise provided for by this Interpretation, the legal provisions at that time shall apply to such a case, and if the legal provisions at that time are silent, the relevant provisions of the Contract Law may apply.
Article 2 Where a contract is formed before the implementation of the Contract Law, but the period of performance as agreed on in the contract strides across the date of implementation of the Contract Law or the period of performance is after the date of implementation of the Contract Law, the relevant provisions of Chapter IV of the Contract Law shall apply to the disputes arising from the performance of such a contract.
Article 3 The people's court shall, when confirming the validity of a contract, apply the Contract Law if the contract formed before the implementation of the Contract Law is void under the law at that time but valid under the Contract Law.
Article 4 After the implementation of the Contract Law, the people's court shall, when confirming the invalidity of a contract, base it on the laws enacted by the National People's Congress and its Standing Committee and the administrative regulations formulated by the State Council, rather than local regulations or administrative rules.
Article 5 Where the people's court retries a case for which a final judgment has been made before the implementation of the Contract Law, the Contract Law shall not apply to such a case.
II. Limitations of Actions
Article 6 Where the fact of infringement upon the rights of a party to disputes over a technology contract occurs before the implementation of the Contract Law, if more than one year has elapsed from the date when the party knows or should have known that his rights are infringed upon to the date of implementation of the Contract Law, the people's court shall not protect such rights of the party; if the aforesaid period does not exceed one year, the limitation of action shall be two years.
Article 7 Where the fact of infringement upon the rights of a party to disputes over a technology import and export contract occurs before the implementation of the Contract Law, if more than two years have elapsed from the date when the party knows or should have known that his rights are infringed upon to the date of implementation of the Contract Law, the people's court shall not protect such rights of the party; if the aforesaid period does not exceed two years, the limitation of action shall be four years.
Article 8 The “one year” as prescribed in Article 55 and the “five years” as prescribed in Article 75 and paragraph 2 of Article 104 of the Contract Law shall be fixed periods, to which the provisions on the suspension, interruption or extension of limitations of actions shall not apply.
III. Validity of Contracts
Article 9 Where, in accordance with paragraph 2 of Article 44 of the Contract Law, a contract does not become effective until the formalities of approval or the formalities of approval, registration etc. are handled under the relevant laws or administrative regulations, and the parties fail to handle the formalities of approval or the formalities of approval, registration etc. of the contract before the end of court debate in the trial of the first instance, the people's court shall determine such a contract as having not become effective; if the law or administrative regulation provides that the formalities of registration of a contract shall be handled but does not provide that the contract shall become effective upon registration, the parties' failure to handle the formalities of registration shall not affect the validity of the contract, but the ownership and other property rights to the subject matter of the contract cannot be transferred.
The circumstances of modification, transfer, rescission, etc. of contracts as prescribed in paragraph 2 of Article 77, Article 87 and paragraph 2 of Article 96 of the Contract Law shall be handled in accordance with the provisions of the preceding paragraph.
Article 10 Where a party concludes a contract beyond its business scope, the people's court shall not determine the contract as void for this reason, unless such a contract violates the provisions of the state on restricted business operations or franchise operations or the provisions of laws and administrative regulations on prohibited business operations.
IV. Subrogation
Article 11 Where a creditor lodges a subrogation lawsuit in accordance with Article 73 of the Contract Law, the following conditions shall be met:
(1) The creditor's claim against the debtor is lawful;
(2) The debtor goes slow to exercise its due claim, which causes damage to the creditor;
(3) The debtor's claim is due; and
(4) The debtor's claim is not a claim exclusive to the debtor.
Article 12 The phrase “claim exclusive to the debtor” as mentioned in paragraph 1 of Article 73 of the Contract Law refers to a right to claim payment arising from such relationships as care, support, maintenance or inheritance, a right to claim remunerations, retirement pension, old-age pension, survivor's pension, relocation costs, life insurance or personal injury compensation, or any other such right.
Article 13 The phrase “where the debtor goes slow to exercise its due claim, which causes damage to the creditor” as mentioned in Article 73 of the Contract Law means that the debtor neither performs its due obligations to the creditor nor claims its due rights to monetary payment against its debtor through litigation or arbitration, as a result of which the creditor's due claim cannot be realized.
Where the secondary debtor (i.e. the debtor's debtor) does not think that the debtor is slow to exercise its due claim, the secondary debtor shall bear the burden of proof.
Article 14 Where a creditor lodges a subrogation lawsuit in accordance with Article 73 of the Contract Law, such a case shall be under the jurisdiction of the people's court of the place where the domicile of the defendant is located.
Article 15 Where, after lodging a lawsuit against the debtor in the people's court, a creditor lodges a subrogation lawsuit against the secondary debtor in the same people's court, the people's court shall accept an docket such a case if the provisions of Article 14 of this Interpretation and the conditions for bringing an action as prescribed in Article 108 of the Civil Procedure Law of the People's Republic of China are satisfied; if the provisions of Article 14 of this Interpretation are not satisfied, the people's court shall notify the creditor to lodge a separate lawsuit in the people's court of the place where the domicile of the secondary debtor is located.
The people's court accepting a subrogation lawsuit shall, before the judgment of the lawsuit lodged by the creditor against the debtor becomes effective, suspend the subrogation lawsuit in accordance with Article 136 (5) of the Civil Procedure Law of the People's Republic of China.
Article 16 Where a creditor lodges a subrogation lawsuit against the secondary debtor as the defendant in the people's court but fails to list the debtor as the third party, the people's court may add the debtor as the third party.
Where two or more creditors lodge subrogation lawsuits against the same secondary debtor as the defendant, the people's court may try the lawsuits in a combined way.
Article 17 Where, in a subrogation lawsuit, the creditor requests the people's court to take any measure of preservation of the property of the secondary debtor, the creditor shall provide corresponding property as a guaranty.
Article 18 In a subrogation lawsuit, the secondary debtor may invoke defenses against the debtor to be against the creditor.
Where the objections raised by a debtor in a subrogation lawsuit against the creditor's claim are tenable upon examination, the people's court shall rule to dismiss the lawsuit lodged by the creditor.
Article 19 Where the creditor wins a subrogation lawsuit, the litigation costs shall be borne by the secondary debtor, and be paid in priority from the realized claim.
Article 20 Where, in a subrogation lawsuit lodged by a creditor against the secondary debtor, the right of subrogation is determined as valid upon the trial by the people's court, the secondary debtor shall perform the obligation of payment to the creditor, and after the performance, the corresponding relationship of rights and obligations between the creditor and the debtor and between the debtor and the secondary debtor shall be extinguished.
Article 21 Where, in a subrogation lawsuit, the amount claimed by the creditor in exercising its subrogation right exceeds the amount of debts on the debtor or exceeds the amount of debts on the secondary debtor to the debtor, the people's court shall not support the excess.
Article 22 Where, in a subrogation lawsuit, the debtor lodges a lawsuit against the secondary debtor for its claim to the excess over the amount claimed by the creditor in subrogation, the people's court shall notify the debtor to lodge a separate lawsuit in the people's court having jurisdiction.
Where the lawsuit lodged by the debtor meets the statutory requirements, the people's court shall accept it; the people's court accepting the lawsuit lodged by the debtor shall suspend the lawsuit in accordance with law before the judgment of the subrogation lawsuit becomes effective.
V. Revocation Right
Article 23 Where a creditor lodges a revocation right lawsuit in accordance with Article 74 of the Contract Law, such a case shall be under the jurisdiction of the people's court of the place where the domicile of the defendant is located.
Article 24 Where a creditor lodging a revocation right lawsuit in accordance with Article 74 of the Contract Law only lists the debtor as the defendant and fails to list the beneficiary or transferee as the third party, the people's court may add the beneficiary or transferee as the third party.
Article 25 Where a creditor lodges a revocation right lawsuit in accordance with Article 74 of the Contract Law, requesting the people's court to revoke the debtor's waiver of claim or transfer of property, the people's court shall try the part claimed by the creditor; if the above debtor's act is revoked in accordance with law, such an act shall be void from the beginning.
Where two or more creditors lodge revocation right lawsuits for the same subject matter against the same debtor, the people's court may try the lawsuits in a combined way.
Article 26 The attorney's fees, travel expenses and other necessary fees paid by a creditor in exercising the revocation right shall be borne by the debtor; and shall be borne appropriately by the third party if the third party has fault.
VI. Third Party to the Transfer of Contract
Article 27 Where, after a creditor transfers its contractual rights, a lawsuit is lodged in the people's court for disputes between the debtor and the transferee arising from the performance of the contract, and the debtor invokes defenses against the creditor's rights, the creditor may be listed as the third party.
Article 28 Where, after a debtor transfers its contractual obligations upon the approval of the creditor, a lawsuit is lodged in the people's court for disputes between the transferee and the creditor arising from the performance of the contract, and the transferee invokes defenses regarding the debtor's rights over the creditor, the debtor may be listed as the third party.
Article 29 Where, after a party to a contract transfers both its rights and obligations under the contract to the transferee upon the approval of the other party, a lawsuit is lodged in the people's court for disputes between the other party and the transferee arising from the performance of the contract, and the other party invokes defenses regarding the rights and obligations under the contract, the transferor may be listed as the third party.
VII. Concurrence of Claims
Article 30 Where, after making a choice when lodging a lawsuit in the people's court in accordance with Article 122 of the Contract Law, a creditor modifies its claim before the commencement of the trial of the first instance, the people's court shall permit such a modification. If the other party challenges the court's jurisdiction, and such a challenge is tenable upon examination, the people's court shall dismiss the lawsuit.