(Adopted at the Fourth Session of the Fifth National Peoples Congress and promulgated by Order No.12 of the Chairman of the Standing Committee of the National Peoples Congress on December 13, 1981, and effective as of July 1,1982)

CHAPTER I GENERAL PROVISIONS
Article 1. This Law is formulated with a view to protecting the lawful rights and interests of the parties to economic contracts, maintaining the economic order of society, increasing economic effectiveness, ensuring the fulfillment of state plans and promoting the development of socialist modernization.

Article 2. Economic contracts are agreements between legal entities for the purpose of realizing certain economic goals and clarifying each others rights and obligations.

Article 3. Economic contracts, except for those in which accounts are settled immediately, shall be in written form. Documents, telegrams and charts that relate to the modification of a contract and that are agreed upon by the parties through consultation shall also be integral parts of the contract.

Article 4. In concluding an economic contract, the parties must comply with the laws of the state and meet the requirements of state policies and plans. No unit or individual may use a contract to engage in illegal activities, disrupt economic order, undermine state plans or damage the interests of the state or the public interest, seeking illegitimate income.

Article 5. In concluding an economic contract, the parties must follow the principles of equality and mutual benefit, achieving agreement through consultation and making compensation for equal value. No party may impose its own will on the other party, and no unit or individual may illegally interfere.

Article 6. As soon as an economic contract is established in accordance with the law, it shall have legally binding force, and the parties must fully perform their obligations as stipulated in the contract. Neither party may unilaterally modify or rescind the contract.

Article 7. The following economic contracts shall be void:

(1) contracts violating the law or state policies and plans;

(2) contracts signed through the use of fraud, coercion or similar means;

(3) contracts signed by an agent beyond the scope of his power of agency, or contracts signed by an agent in the name of his principal with himself or with another person whom he represents; and

(4) economic contracts violating the interests of the state or the public interest.

Economic contracts that are void from the time they are concluded shall have no legally binding force. If a part of an economic contract is confirmed to be void, without affecting the validity of the remainder, the remainder shall still be valid.

The power to confirm that an economic contract is void shall be vested in the contract administration authorities and the peoples courts.

Article 8. The provisions of this Law shall apply to all contracts for purchase and sale, construction projects, processing, transportation of goods, supply and use of electricity, warehousing, lease of property, loans, property insurance, scientific and technological cooperation and other economic contracts.

CHAPTER II THE CONCLUSION AND PERFORMANCE OF ECONOMIC CONTRACTS

Article 9. An economic contract is established once both parties have, in accordance with the law, reached agreement through consultation on the principal clauses of the contract.

Article 10. When an economic contract is to be concluded by an agent, the agent must first obtain an authorization from the authorizing unit and sign the contract in the name of the authorizing unit within the scope of his power of agency, before the contract directly gives rise to rights and obligations on the part of the authorizing unit.

Article 11. Economic contracts that concern economic dealings in products or projects under a mandatory state plan must be concluded in accordance with state-issued targets; if at the time of signing the parties cannot reach an agreement, the matter shall be handled by both parties superior authorities in charge of planning. Economic contracts that concern economic dealings in products or projects under an indicative state plan shall be concluded after taking account of state-issued targets and the actual conditions of the units involved.

Article 12. An economic contract shall contain the following principal clauses:

(1) the object (referring to goods, labour services, construction projects, etc.);

(2) the quantity and quality;

(3) the price or remuneration;

(4) the time limit, place and method of performance; and

(5) the liability for breach of contract.

An economic contract shall also include as its principal clauses those whose inclusion is stipulated by law or by virtue of the nature of the economic contract, or whose inclusion is considered as indispensable by either party to the contract.

Article 13. When currency is used to fulfil obligations under an economic contract, except as otherwise provided by law, Renminbi must be used for purposes of computation and payment.

Except for cases in which the state permits the use of cash to fulfil obligations, settlements must be made by means of transfers between bank accounts.

Article 14. One party may pay a deposit to the other party. After the economic contract is performed, the deposit shall be returned or set off against the price.

If the party that pays the deposit fails to perform the contract, it shall have no right to reclaim the deposit. If the party that receives the deposit fails to perform the contract, it shall return twice the amount of the deposit.

Article 15. If one party to an economic contract requests a guaranty, a guarantor unit may provide the guaranty. A guarantor unit is a concerned entity that guarantees the performance of the contract by one party. When the guaranteed party fails to perform the contract, the guarantor unit shall be held jointly and severally liable for compensating for the losses.

Article 16. After an economic contract has been confirmed to be void, the parties shall return to each other any property that they have acquired pursuant to the contract. If one party is at fault, it shall compensate the other party for losses incurred as a result thereof. If both parties are at fault, each party shall be commensurately liable.

In the case of an economic contract which violates the interest of the state and the public interest, if both parties have acted wilfully, the property that they have acquired or are due to acquire by mutual agreement shall be recovered and turned over to the State Treasury. If only one party has acted wilfully, the wilful party shall restore to the other party the property it has acquired from the latter; the party that has not acted wilfully shall turn over to the State Treasury any property it has acquired from the other party or is due to acquire by mutual agreement.

Article 17. The terms regarding the quantity, quality, packaging quality and prices of products and the time limit for their delivery in purchase and sale contracts (including contracts for supply, procurement, forward purchase, combination and coordination in purchases and sales, and adjustment) shall be implemented in accordance with the following provisions:

(1) The product quantity term shall be concluded in accordance with the plans approved by the state or the higher-level department in charge; in the absence of such a plan, it shall be concluded between the supplying and purchasing parties through consultation. The method of measuring product quantity shall be implemented in accordance with provisions made by the state or the department in charge; in the absence of such provisions, a method agreed upon by the supplying and purchasing parties shall be used.

(2) The product quality and packaging quality terms shall be concluded in conformity with state or specialized standards if such standards exist; in the absence of such standards, the terms shall be concluded in conformity with the standards prescribed by the departments in charge. If either party has special requirements, the terms shall be concluded between the parties through consultation.

The supplying party must be responsible for the product quality and packaging quality and provide the technical data or samples necessary for inspection.

The methods of ascertaining product quality through inspection and quarantine shall be carried out in accordance with the relevant provisions approved by the State Council; in the absence of such provisions, the parties shall determine the methods through consultation.

(3) The product price term shall be concluded in accordance with the prices prescribed by the price administration departments at various levels (including state-fixed prices and floating prices). Where negotiated prices are permitted by government policy, the prices shall be determined by the parties through consultation.

In cases where a product is to be supplied on the basis of the state-fixed price, if the said price is adjusted before the time limit for delivery provided in the contract, the payment shall be calculated according to the price at the time of delivery. If the delivery is delayed and the price has risen, the original price shall be adopted; if the price has dropped, the new price shall be adopted. In the event of delay in taking delivery of goods or late payment, if the price has risen, the new price shall be adopted; if the price has dropped, the original price shall be adopted. In cases where products are to be supplied according to floating or negotiated prices, the payment shall be calculated according to the price provided in the contract.

(4) The time limit for delivery (or taking delivery) of the goods shall be carried out in accordance with the stipulations in the contract. If any party requests advancement or extension of the time limit for delivery (or taking delivery) of the goods, it shall reach an agreement with the other party beforehand, and implement it accordingly.

Article 18. Contracts for construction projects must be concluded in accordance with procedures prescribed by the state and investment plans, planned project descriptions and other documents approved by the state.

In contracting for construction projects, including survey, design, building and installation, one general contractor may sign a general contract with the construction client, or several contractors may separately sign contracts with the construction client.

Survey and design contracts shall provide the time for delivery of the basic survey or design data and design documents (including an estimated budget) by both parties, the quality requirements of the design, other conditions for coordination and other similar provisions.

Building and installation contracts shall expressly provide the scope of the project, the construction work period, the time for beginning and completing intermediate construction projects, the quality of the work, the costs of construction, the time for delivery of technical data, the responsibilities for the supply of materials and equipment, the allocations of funds and settlement of accounts, the inspection and acceptance of the projects upon completion, the mutual cooperation by the parties and other similar terms.

The inspection and acceptance of construction projects upon completion shall be carried out according to the blueprints and written instructions, and to the work testing norms and quality inspection standards issued by the state.

Article 19. Processing contracts shall be concluded on the basis of the ordering partys requirements as to the description of goods, the items and quality, and of the contractors capacity to process, make to order or repair. Except as otherwise provided in the contract, the contractor must use its own equipment, technology and labour force to complete the principal part of the tasks of processing, making to order and repairing and may not, without the consent of the ordering party, assign the accepted tasks to a third party. The ordering party shall accept the products and articles completed by the contractor and shall pay remuneration therefor.

The contractor shall promptly inspect the raw and processed materials supplied by the ordering party and, if it discovers that they do not conform to the stipulations of the contract, it shall immediately notify the ordering party to replace them or supply what is lacking. The contractor may not, without permission, replace any raw and processed materials supplied by the ordering party and may not covertly exchange components of articles being repaired, and violators shall be liable for making compensation.

When the contractor repairs a building or processes a batch of non-standardized articles, it shall accept necessary inspection and supervision by the ordering party, but the latter may not obstruct the contractors normal work. The contractor shall strictly comply with the ordering partys request to keep confidential the duplications, designs, translations, tests and inspections of the performance of certain articles, and other tasks contracted for by the contractor.

If the ordering party does not take delivery of the ordered products within six months of the time limit for taking delivery, the contractor shall have the right to sell the ordered products and shall, after deducting its remuneration and storage fees from the money obtained from such sales, deposit the remainder in a bank in the name of the ordering party.

Article 20. Contracts for the transportation of goods shall be concluded in accordance with the planned distribution of goods, transportation capacity and transportation plans. Contracts for the shipment of odd-lot goods shall be concluded in accordance with the state provisions relevant to transportation.

Any contract involving transshipment shall expressly provide the responsibilities of both or all parties and the freight delivery methods.

If consigned goods, in accordance with stipulations, require packaging, the consignor must package the goods in accordance with the standards prescribed by the state authorities in charge; in the absence of uniform packaging standards, packaging shall be carried out in accordance with the principle of securing the safe transport of the goods, or else the shipper shall have the right to refuse to undertake the shipment.

Article 21. Contracts for the supply and use of electricity shall be concluded in accordance with the needs of the electricity user and the electrical supply capacity. The contract shall expressly provide the electrical power, the amount of electricity, the period of use of electricity, the liability for breach of contract and other similar terms.

Article 22. Warehousing contracts shall be concluded through consultation between the parties in accordance with the storing partys plan for storage on consignment and the warehousing capacity of the safekeeping party. The storage of odd-lot goods shall be contracted in accordance with the relevant provisions on storage.

Warehousing and safekeeping contracts shall expressly provide the type, specifications and quantity of goods to be stored, and the method of safekeeping, the items to be inspected, the inspection methods, the procedures for depositing and withdrawing the goods from storage, the standards of loss and damage and the handling of loss or damage, the responsibility for expenses and the method of settling accounts, the liability for breach of contract and other similar terms.

The safekeeping party shall inspect the goods to be put into storage in accordance with the provisions of the contract concerning the packaging exterior and the type, quantity and quality of the goods, and, if it discovers that the goods to be put into storage do not conform to the provisions of the contract, it shall promptly notify the storing party. If, after the safekeeping party has inspected the goods, a non-conformity between the type, quantity or quality of the goods and the provisions of the contract occurs, the safekeeping party shall be liable for making compensation.

The storing party shall provide the safekeeping party with necessary data for inspection of the goods, or else the safekeeping party shall not be liable for making compensation should any non-conformity between the type, quantity or quality of the goods and the provisions of the contract occur.

Article 23. Contracts for the lease of property shall expressly provide the name, quantity and use of the leased property, the term of the lease, the rent and the time limit for payment of the rent, the responsibility for maintenance and keeping the property in good repair during the term of the lease, the liability for breach of contract and other similar terms.

The lessor shall, in accordance with the time and standards provided in the contract, turn over the leased property for the use of the lessee. If the lessor transfers the ownership of the property to a third party, the lease contract shall continue to be effective with respect to the new owner of the property.

The lessee may, because of work requirements, assign the use of the leased property to a third party, but it must first obtain the consent of the lessor.

The term concerning rent standards shall be concluded in accordance with the state uniform provisions if such provisions exist. In the absence of such provisions, the rent shall be determined through consultation between the parties.

Article 24. Loan contracts shall be concluded in accordance with the credit plan approved by the state and the relevant provisions. The contract shall expressly provide the amount of the loan, the use, the term, the interest rate, the procedures for settling accounts, the liability for breach of contract and other similar terms.

The interest rate on loans shall be set by the state and controlled by the Peoples Bank of China.

Article 25. Property insurance contracts shall be concluded in the form of an insurance policy or an insurance certificate.

An insurance contract shall expressly provide the object of the insurance, the exact location (or the means of transport and voyage), the insured amounts, the insured liability, the excluded liability, the method of paying compensation and insurance premiums, the beginning and end of the insured term and other similar terms.

The policy holder shall protect the safety of the insured property. The insurer may conduct safety inspections of the insured property, and, if it discovers unsafe aspects, it shall promptly notify the policy holder to eliminate them.

When a third person should be responsible for paying compensation for losses with respect to the insured property, if the policy holder submits a claim against the insurer, the insurer may first make compensation in accordance with the provisions of the contract, but the policy holder must assign its right to recover compensation to the insurer and assist him in recovering the compensation from the third person.

Article 26. Contracts for scientific and technological cooperation (including scientific research, trial production, dissemination of research results, transfer of technology and technical consulting services) shall be concluded in accordance with the plans of the higher-level departments in charge or the relevant departments; in the absence of such a plan, the contract shall be concluded through consultation between the parties.

Contracts for scientific and technological cooperation shall expressly specify the project involving scientific or technological cooperation, the technological and economic requirements, the rate of progress, the form of cooperation, an estimated budget of the expenses and materials, the remuneration, the liability for breach of contract and other similar terms.

CHAPTER III THE MODIFICATION AND RESCISSION OF ECONOMIC CONTRACTS

Article 27. It shall be permissible to modify or rescind an economic contract if any of the following situations occurs:

(1) if both parties agree through consultation, and if such modification or rescission would not harm the interests of the state or affect the implementation of the state plan;

(2) if the state plan on the basis of which the economic contract was concluded has been amended or cancelled;

(3) if one party closes down, stops production or changes its line of production and is truly incapable of performing the economic contract;

(4) if force majeure or some other cause that a party, although not negligent, cannot prevent makes it impossible to perform the economic contract; or

(5) if the breach of contract by one party makes performance of the economic contract unnecessary.

When one party requests modification or rescission of an economic contract, it shall promptly notify the other party. If one party suffers losses due to modification or rescission of an economic contract, the party that is responsible, except when it may be exempted from liability according to law, shall be liable for making compensation.

If one party is merged or divided, the party or parties resulting from the change shall assume or severally assume the obligation to perform the contract and shall enjoy its or their due rights under the contract.

Article 28. The notice or agreement regarding the modification or rescission of an economic contract shall be in written form (including a document and telegram). Before agreement has been reached, the original economic contract shall continue to be effective.

Article 29. If the modification or rescission of an economic contract involves products or projects under a mandatory state plan, before the agreement is signed the parties shall report it for approval to the department in change of specialized work that issued the plan.

Article 30. The proposal and reply with respect to the modification or rescission of an economic contract shall be submitted within the time limit agreed to by both parties or within the time limit prescribed by the relevant department in charge of specialized work.

Article 31. After an economic contract is concluded, it may not be modified or rescinded due to replacement of the person who has undertaken to conclude the contract or of the legal representative.

CHAPTER IV LIABILITY FOR BREACH OF AN ECONOMIC CONTRACTS

Article 32. If, due to the fault of one party, an economic contract cannot be performed or cannot be fully performed, the party at fault shall be liable for breach of the contract; if both parties are at fault, in accordance with the actual conditions, each party shall be commensurately liable for breach of the contract that is due to its fault.

If an individual is directly responsible for dereliction of duty, malfeasance or other unlawful conduct that gives rise to a major accident or severe losses, he shall be investigated for economic and administrative responsibility, and even criminal responsibility.

Article 33. If, due to the fault of higher-level leading authorities or of the department in charge of specialized work, an economic contract cannot be performed or cannot be fully performed, the higher-level leading authorities or the department in charge of specialized work shall bear liability for breach of contract. The breaching party shall, as provided, first pay the other party breach-of-contract damages or compensatory damages, and then the higher-level leading authorities or the department in charge of specialized work that should be liable shall be responsible for dealing with the matter.

Article 34. If a party cannot perform an economic contract due to force majeure, it shall promptly notify the other party of the reason for its inability of performance or for its needs of a deferred performance or partial performance of the economic contract. After it has obtained a certificate from the relevant authorities in charge, it shall be permitted to extend the time for performance, to perform partly or not to perform, and it may, in accordance with the circumstances, be partly or completely exempted from liability for breach of contract.

Article 35. If a party breaches an economic contract, it shall pay damages for the breach to the other party. If the breach of contract has already caused the other party to suffer losses that exceed the amount of the damages, the breaching party shall make compensation for the amount exceeding the breach of contract damages. if the other party demands continued performance of the contract, the breaching party shall continue to perform.

Article 36. An enterprise shall pay breach of contract damages and compensatory damages out of its enterprise fund, retained profits or portion of the surplus that it shares with the state, and its may not record such payment as a cost; an administrative unit or institution shall make such payment out of the surplus funds from its budget.

Article 37. Breach of contract damages and compensatory damages shall be paid within ten days after liability is clearly established, or else the matter shall be handled as an overdue payment. No party may of its own accord withhold delivery of goods or withhold payment for goods as an offset.

Article 38. Liability for breach of a purchase and sale contract.

(1) Liability of the supplying party:

a. If the type, specifications, quantity, quality or packaging of the product does not conform to the provisions of the contract, or if delivery is not make on the date prescribed in the contract, it shall pay breach of contract damages and compensatory damages.

b. If the goods are sent to the wrong destination or receiving unit (or individual), in addition to transporting the goods to the destination or receiving unit (or individual) prescribed in the contract, it shall also be liable for paying any extra freight and miscellaneous charges incurred as a result thereof; if the error causes overdue delivery, it shall pay breach of contract damages for overdue delivery.

(2) Liability of the purchasing party:

a. If it cancels an order during the contract term, it shall pay breach of contract damages and compensatory damages.

b. If it fails to make payment or take delivery on the date prescribed in the contract, it shall pay breach of contract damages.

c. If it erroneously writes out or at the last moment changes the destination of the goods, it shall be liable for any extra expenses incurred as a result thereof.

Article 39. Liability for breach of a construction project contract.

(1) Liability of the contractor:

a. If, due to the inferior quality of survey and design work or because survey and design documents are not submitted in time, the work period is prolonged and losses are caused thereby, the survey and design unit shall continue to complete the designs and shall reduce or forfeit its survey and design fees and shall even make compensation for the losses.

b. If the construction quality does not conform to the stipulations of the contract, the party awarding the contract shall have the right to demand that the project be repaired or remedied and reconstructed within a fixed time and without extra payment, and if such repair or remedy and recon-struction causes overdue delivery of the project, the contractor shall pay breach of contract damages for overdue performance.

c. If the time the project is delivered does not conform to the stipulations of the contract, the contractor shall pay breach of contract damages for overdue performance.

(2) Liability of the party awarding the contract:

a. If the raw and processed materials, equipment, site, funds, technical data, etc., are not supplied according to the time or requirements stipulated in the contract, in addition to accepting a delay in the work deadline, it shall also reimburse the contractor for actual losses from work stoppages and idling of the labour force as a result thereof.

b. If construction is stopped or postponed in the course of the work, it shall adopt measures to offset or reduce the losses and at the same time compensate the contractor for losses and actual expenses incurred as a result thereof due to work stoppages, idling of the labour force, changes in transportation, transfers of machinery and equipment, overstocking of materials and components, etc.

c. If the plans are modified, the data supplied are not accurate or the conditions for survey and design work are not provided in good time and, as a result thereof, the survey and design work has to be redone or stopped, or the design revised, it shall pay additional expenses for the amount of work actually expended by the contractor.

d. If problems of quality are discovered in the project it has put into use without having first examined and accepted, it shall be held solely responsible.

e. If it exceeds the deadline stipulated in the contract for examination and acceptance or for paying the construction fees, it shall pay breach of contract damages for overdue performance.

Article 40. Liability for breach of a processing contract.

(1) Liability of the contracting party:

a. If due to improper storage the materials or articles supplied by the ordering party are damaged, lost or destroyed, it shall be liable for making compensation.

b. If the quality or quantity of work delivered to the ordering party does not conform to the prescriptions of the contract, it shall, without charge, undertake to make repairs or supplement the quantity or, depending on the circumstances, reduce remuneration. If the results of the work have a serious defect, it shall also be liable for making compensation.

(2) Liability of the ordering party:

a. If it does not provide the contracting party with raw and processed materials on time or of the requisite quality or quantity and thereby causes a prolonging of the work period, it shall be liable for making compensation for any losses.

b. If it exceeds the deadline stipulated for taking delivery of the articles ordered or repaired, it shall pay a storage fee to the contracting party for the overdue period.

c. If it exceeds the deadline for making payment stipulated in the contract, it shall pay breach of contract damages for overdue payment.

Article 41. Liability for breach of a freight transportation contract.

(1) Liability of the shipper:

a. If it fails to arrange for a vehicle (or ship) for shipment in accordance with the time or requirements of the transportation contract, it shall pay to the consignor breach of contract damages.

b. If the goods are sent to the wrong destination or receiving person, it shall transport them free of charge to the destination or receiving person stipulated in the contract. If the goods are delivered after the stipulated time, it shall pay breach of contract damages for overdue delivery.

c. If the goods are lost or destroyed, suffer a shortage, deteriorate or are contaminated or damaged in the course of transportation, it shall pay compensation for the actual loss to the goods (including packaging expenses and freight and miscellaneous expenses).

d. If destruction, loss, shortage, deterioration or contamination of or damage to the goods for which the shipper is liable for making compensation occurs during through transshipment, the shipper for the final stage of transport shall make compensation as stipulated and then the shipper for the final stage may pursue reimbursement from any other responsible shipper.

e. If, during transportation that is in conformity with the law and the provisions of the contract, destruction, loss, shortage, deterioration or contamination of or damage to the goods is caused by any of the following reasons, the shipper shall not be held liable for breach of contract:

(i) force majeure;

(ii) the natural characteristics of the goods;

(iii) reasonable loss and damage of the goods; or

(iv) the fault of the consignor or the recipient of the goods.

(2) Liability of the consignor:

a. If it does not provide the consigned goods in accordance with the time and requirements stipulated in the contract, it shall pay to the shipper breach of contract damages.

b. If it smuggles or conceals dangerous goods among ordinary goods or incorrectly declares the weight of heavy goods, etc., thus causing lifting equipment to break, the goods to be broken or damaged, cranes to be overturned, or an explosion, corrosion or other similar accident to occur, it shall be liable for paying compensation.

c. If defective packaging produces damage and thus causes other goods or means of transport, machinery or equipment to be contaminated, corroded or damaged or causes human casualties, it shall be liable for paying compensation.

d. If the goods have been loaded by the consignor at its own special-purpose loading point or at a public special-purpose loading point at a harbour or station or at a special-purpose railway loading point, and if damage or shortage is found upon checking the goods at the unloading point, in circumstances where the vehicle was perfectly sealed or there are no abnormal conditions, the consignor shall compensate the receiving party for the losses.

e. If goods transported in a tank car are not accompanied by the certificate of specifications and quality or the laboratory test report, preventing the recipient of the goods from being able to unload the goods, the consignor shall reimburse the shipper for delayed unloading and storage charges as well as breach of contract damages.

Article 42. Liability for breach of a contract for the supply and use of electricity.

(1) Liability of the supplier of electricity:

The supplier of electricity must supply electricity in a safe manner in accordance with power supply standards stipulated by the state and with the stipulations of the contract. If it has cause to restrict electricity, it shall notify the user in advance. In the absence of a proper reason for restricting the use of electricity or if electricity is cut off due to the fault of the supplier of electricity, it shall compensate the user for the losses caused thereby.

(2) Liability of the user of electricity:

The user must use electricity in accordance with the provisions of the contract. If, due to special circumstances, it needs to use more electricity or cannot use electricity at the specified time, it shall notify the supplier in advance. If in the absence of a proper reason for the overload of electricity or for not using electricity at the stipulated time, it shall pay breach of contract damages.

The liability for breach of a contract for the supply and use of water or of a contract for the supply and use of gas may be handled with reference to the provisions of this Article.

Article 43. Liability for breach of a warehousing contract.

(1) Liability of the safekeeping party:

a. If improper safekeeping during the period of storage of the goods causes destruction, shortage, deterioration or contamination of or damage to the goods, it shall be liable for paying compensation for the losses. If the goods are damaged or deteriorate due to the packaging not conforming to the stipulations of the contract or due to the valid storage period being exceeded, it shall not be liable for paying compensation.

b. If dangerous articles or perishable goods are not handled according to stipulations or are not carefully stored, and are thereby damaged, it shall be liable for paying compensation for the losses.

c. If the goods are withdrawn from the warehouse or cannot be deposited in storage due to the fault of the safekeeping party, it shall make compensation for the storing partys transportation expenses and pay breach of contract damages in accordance with the provisions of the contract.

d. In cases where it is the responsibility of the safekeeping party to transport the goods and it fails to ship them on time, it shall compensate the storing party for losses due to overdue delivery; if it sends them to the wrong destination, in addition to transporting the goods without charge to the destination as stipulated in the contract, it shall also compensate the storing party for the actual losses caused thereby.

(2) Liability of the storing party:

a. Flammable, explosive, poisonous and other dangerous articles and perishable articles must be noted in the contract, and the necessary data must be provided. Otherwise, if any damage to goods or human casualties is caused thereby, it shall be liable for paying compensation and may even be subject to criminal liability.

b. If the weight stored exceeds that agreed upon or the goods are not picked up on time, in addition to the payment of storage fees, it shall also pay breach of contract damages.

Article 44. Liability for breach of a contract for the lease of property.

(1) Liability of the lessee:

a. If improper use and safekeeping of the leased property or failure to maintain and keep it in good repair causes damage to or destruction of the property, it shall be responsible for restoration of the property or payment of compensation.

b. If it dismantles or alters a house, equipment, machine tools or other property without permission, it shall be liable for making compensation for the losses caused thereby.

c. If it sublets the leased property without permission or carries out illegal activities, the lessor shall have the right to rescind the contract.

d. If the leased property is not returned at the specified time, in addition to paying the supplemental rent, it shall also pay breach of contract damages.

(2) Liability of the lessor:

a. If it does not provide the leased property at the time stipulated in the contract, it shall pay breach of contract damages.

b. If it does not provide the leased property in accordance with the quality stipulated in the contract, it shall be liable for paying compensation for the losses caused thereby.

c. If it does not supply related equipment, accessories, etc., in accordance with the provisions of the contract and thereby causes the lessee to be unable to make timely and regular use of the leased property, in addition to supplying what is necessary in accordance with stipulations, it shall also pay breach of contract damages.

d. In the leasing of vessels, vehicles and other large-scale instruments, if improper handling by the lessor or the negligence of service personnel causes the period of the lease to be prolonged, it shall pay the lessee breach of contract damages in accordance with the contract or other relevant stipulations.

Article 45. Liability for breach of a loan contract.

(1) Liability of the lender:

If the Peoples Bank, specialized banks or credit cooperatives do not make loans in a timely manner in accordance with the provisions of the contract, they shall pay breach of contract damages.

(2) Liability of the borrower:

If the borrower does not utilize the loan in accordance with the provisions of the contract, it shall pay additional interest in accordance with relevant provisions; the lender shall have the right to recall part or all of the loan ahead of schedule.

Article 46. Liability for breach of a property insurance contract.

(1) Liability of the insurer:

It shall be liable for paying indemnity for the losses and expenses caused by an insured accident within the scope of the insured amount. The reasonable expenses paid by the policy holder in order to avoid or reduce the losses within the scope of the insured liability by means of rescue, protection, repair or litigation shall be reimbursed in accordance with the provisions of the contract. If it does not indemnify the policy holder in a timely manner, it shall be liable for breach of contract.

(2) Liability of the policy holder:

If the policy holder conceals the actual circumstances of the insured property, the insurer shall have the right to rescind the contract or shall not be liable for making indemnity.

If the policy holder discovers dangerous circumstances regarding the insured property and does not adopt measures to eliminate them, it shall be held solely liable for any losses from an accident caused thereby, and the insurer shall not be liable for making indemnity therefor.

Article 47. Liability for breach of a contract for scientific and technological cooperation.

(1) Liability of the commissioned party or transferor of technology.

If the commissioned party or transferor of technology does not perform the contract, it shall, depending on the circumstances, return part or all of the commission or transfer fee paid by the commissioning party or transferee of the technology; if it delays the progress of work, it shall reimburse any extra expenses caused thereby.

(2) Liability of the commissioning party or transferee of technology.

If the commissioning party or transferee of technology does not perform the contract, it may not reclaim the commission or transfer fee and shall in addition reimburse the commissioned party or transferor of technology for all expenses paid in dealing with the consequences of the non-performance.

CHAPTER V MEDIATION AND ARBITRATION OF ECONOMIC CONTRACT DISPUTES

Article 48. If a dispute over an economic contract develops, the parties shall promptly resolve it through consultation. If consultation is not successful, either party may apply to the contract administration authorities specified by the state for mediation or arbitration, and it may also directly bring a suit in the peoples courts.

Article 49. If mediation results in an agreement, the parties shall perform such agreement. In the case of a decision made after arbitration, the contract administration authorities specified by the state shall issue a written arbitration decision. If one party or both parties do not agree with the arbitration decision, it or they may, within 15 days from the date of receiving the written arbitration decision, bring a suit in the peoples courts; if no suit is filed within that period, the arbitration decision shall become legally effective.

Article 50. When a party to an economic contract applies to the contract administration authorities for mediation or arbitration, it shall submit the application within one year from the date it knows or should have known of the infringement of its rights. In general, those cases that exceed the time limit shall not be accepted.

CHAPTER VI ADMINISTRATION OF ECONOMIC CONTRACTS

Article 51. The departments in charge of specialized work and the administrative departments for industry and commerce at all levels shall carry out supervision and examination of relevant economic contracts and establish necessary administrative systems. The departments in charge of specialized work at all levels shall treat the performance of economic contracts by an enterprise as one of the economic indicators by which the enterprises work is assessed.

Article 52. The Peoples Bank, specialized banks and credit cooperatives shall supervise the performance of economic contracts by means of credit administration and administration of settlements.

The Peoples Bank, specialized banks and credit cooperatives shall handle the settling of accounts in accordance with the provisions of the settlement system and handle the acceptance of payments, refusals to pay and debits to cover overdue payments.

If a party to an economic contract has not voluntarily performed, within the stipulated time period, the mediation document, written arbitration decision or court judgment, the Peoples Bank, specialized banks and credit cooperatives shall, upon receipt of a notice from the peoples court requesting assistance in carrying out the relevant award, debit or transfer credits from the partys account in the amount required to make payment.

Article 53. The conclusion of false economic contracts, or selling of economic contracts at a profit, or use of an economic contract for speculation, subcontracting to profit at anothers expense, illegitimate transfers, giving or accepting bribes and other illegal acts that impair the interests of the state and the public interest shall be dealt with by the administrative departments for industry and commerce, and shall be turned over to the judicial organs for handling if it is necessary to investigate criminal liability.

CHAPTER VII SUPPLEMENTARY PROVISIONS

Article 54. Economic contracts concluded between self-employed individuals or rural commune members and legal entities shall be implemented with reference to this Law.

Article 55. Regulations on economic and trade contracts involving foreign interests shall be formulated separately with reference to the principles of this Law and international practice.

Article 56. The relevant departments of the State Council and the peoples governments of the provinces, autonomous regions, and municipalities directly under the Central Government may, in accordance with this Law, formulate implementing regulations, which shall go into effect after being submitted to and approved by the State Council.

Article 57. This Law shall come into force on July 1, 1982.