The "Minutes of National Courts Work Conference for the Implementation of the Civil Code” (Fa [2021] No. 94) has been implemented on Apr. 6, 2021

The “Civil Code” came into effect on Jan. 1, 2021, and the supporting judicial interpretations of the “General Principles of the Civil Law” and the “Contract Law” were abolished at the same time. It takes time for the Supreme People’s Court to draft and release the new supporting judicial interpretations of the “Civil Code”. However, the articles in the previous supporting judicial interpretations are good references regarding some civil issues. In view of this, the Supreme People’s Court released the “Minutes of National Courts Work Conference for the Implementation of the Civil Code e” (Fa [2021] No. 94) (hereinafter referred to as the “Minutes”) on Apr. 6, 2021. There are some significant articles related to commercial legal issues.

1. The limitation of action

Article 175 of the “Opinions of the Supreme People’s Court on Several Issues Concerning the Implementation of the General Principles of Civil Law of the People’s Republic of China” (repealed) stipulates that the normal statute of limitations could be suspended, interrupted or extended, while for the “20 years” statute of limitations could be extended only. The “Minutes” stipulates that the extension could not be applied to the normal statute of limitations.

2. The establishment of a contract

The “Minutes” stated that courts should hear cases based on the spirit of respecting contract freedom, and encouraging and promoting transactions. No matter the “Civil Code” or the subsequent judicial interpretations, including the “Minutes”, all those laws or judicial interpretations all reflect a tendency of judicial discretion, which is encouraging and promoting transactions in the commercial field.

3. The scope of the exercise of subrogation rights

Article 73 of the “Contract Law” stipulates that the scope within which the right of subrogation may be exercised shall be no greater than the scope of the obligatory right enjoyed by the obligee. However, Article 535 of the “Civil Code” has amended this Article 73 into the scope of subrogation shall be limited to the matured claims of the obligee.    

In addition, Article 13 of the “Interpretation of the Supreme People’s Court on Issues concerning the Application of Contract Law of the People’s Republic of China (I)” prescribed that the matured claims of the obligee should involves money payment, but the “Minutes” has deleted this condition, which means, in the future, the matured claims of the oblige could be extended to other categories of claims.

4. Common issues related to “a price which is manifestly and unreasonably low”, compensation and default liability

Regarding the above topics, the “Minutes” holds the similar opinion with the “Interpretation of the Supreme People’s Court on Several Issues Concerning Application of the “Contract Law of the People’s Republic of China” (II)”. Such as, where the transaction price does not reach 70% of the guidance price of the price regulatory authorities or the market transaction price at the time and at the locality where the transaction took place, then in general it can be regarded as a price which is manifestly and unreasonably low. In relation to a transaction price which exceeds 30% of the guidance price of the local price regulatory authorities or the market transaction price, then in general it can be regarded as a price which is manifestly and unreasonably high. Another example is that where the default liability agreed by the relevant parties exceeds the actual losses by 30%, then in general it may be found that it is “excessively higher than the actual losses”.