Civil Code of the People's Republic of China (2020) 有效

[Chinese version](/法律/ff808081729d1efe01729d50b5c500bf/)

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Civil Code of the People’s Republic of China

> (Adopted at the Third Session of the Thirteenth National People’s Congress on May 28, 2020)

**Book One** General Part

**Chapter I** General Provisions

- Article 1

This Law is formulated in accordance with the Constitution of the People’sRepublic of China for the purposes of protecting the lawful rights and interests of thepersons of the civil law, regulating civil-law relations, maintaining social andeconomic order, meet the needs for developing socialism with Chinese characteristics,and carrying forward the core socialist values.

- Article 2

The civil law regulates personal and proprietary relationships among the personsof the civil law, namely, natural persons, legal persons, and unincorporatedorganizations that are equal in status.

- Article 3

The personal rights, proprietary rights, and other lawful rights and interests of thepersons of the civil law are protected by law and free from infringement by anyorganization or individual.

- Article 4

All persons of the civil law are equal in legal status when conducting civilactivities.

- Article 5

When conducting a civil activity, a person of the civil law shall, in compliancewith the principle of voluntariness, create, alter, or terminate a civil juristicrelationship according to his own will.

- Article 6

When conducting a civil activity, a person of the civil law shall, in compliancewith the principle of fairness, reasonably clarify the rights and obligations of eachparty.

- Article 7

When conducting a civil activity, a person of the civil law shall, in compliancewith the principle of good faith, uphold honesty and honor commitments.

- Article 8

When conducting a civil activity, no person of the civil law shall violate the law,or offend public order or good morals.

- Article 9

When conducting a civil activity, a person of the civil law shall act in a mannerthat facilitates conservation of resources and protection of the ecological environment.

- Article 10

Civil disputes shall be resolved in accordance with law. Where the law does notspecify, custom may be applied, provided that public order and good morals may notbe offended.

- Article 11

Where there are other laws providing special provisions regulating civil-law

relations, such provisions shall be followed.

- Article 12

The laws of the People’s Republic of China shall apply to the civil activitiestaking place within the territory of the People’s Republic of China, except asotherwise provided by law.

**Chapter II** Natural Persons

**Section 1** Capacity for Enjoying Civil-law Rights and Capacity for Performing Civil Juristic Acts

- Article 13

A natural person shall, from the time of birth until the time of death, have thecapacity for enjoying civil-law rights, and may enjoy civil-law rights and assumecivil-law duties in accordance with law.

- Article 14

All natural persons are equal in their capacity for enjoying civil-law rights.

- Article 15

The time of birth and time of death of a natural person are determined by thetime recorded on his birth or death certificate as applied, or, if there is no birth ordeath certificate, by the time recorded in the natural person’s household registration orother valid identity certificate. If there is sufficient evidence overturning the timerecorded in the aforementioned documents, the time that is established by suchevidence shall prevail.

- Article 16

A fetus is deemed as having the capacity for enjoying civil-law rights in estatesuccession, acceptance of gift, and other situations where protection of a fetus’interests is involved. However, a stillborn fetus does not have such capacity ab initio.

- Article 17

A natural person aged 18 or above is an adult. A natural person under the age of

18 is a minor.

- Article 18

An adult has full capacity for performing civil juristic acts and mayindependently perform civil juristic acts.

A minor aged 16 or above whose main source of support is the income from hisown labor is deemed as a person with full capacity for performing civil juristic acts.

- Article 19

A minor aged 8 or above has limited capacity for performing civil juristic acts,and may perform a civil juristic act through or upon consent or ratification of his legalrepresentative, provided that such a minor may independently perform a civil juristicact that is purely beneficial to him or that is appropriate to his age and intelligence.

- Article 20

A minor under the age of 8 has no capacity for performing civil juristic acts, andmay perform a civil juristic act only through his legal representative.

- Article 21

An adult unable to comprehend his own conduct has no capacity for performingcivil juristic acts, and may perform a civil juristic act only through his legalrepresentative.

The preceding paragraph is applicable to a minor aged 8 or above who is unableto comprehend his own conduct.

- Article 22

An adult unable to fully comprehend his own conduct has limited capacity forperforming civil juristic acts, and may perform a civil juristic act through or uponconsent or ratification of his legal representative, provided that such an adult mayindependently perform a civil juristic act that is purely beneficial to him or that isappropriate to his intelligence and mental status.

- Article 23

The guardian of a person who has no or limited capacity for performing civiljuristic acts is the legal representative of the person.

- Article 24

Where an adult is unable to comprehend or fully comprehend his conduct, anyinterested person of such an adult or a relevant organization may request the people’scourt to declare that the said adult be identified as a person with no or limited capacityfor performing civil juristic acts.

Where a person has been identified by a people’s court as a person with no orlimited capacity for performing civil juristic acts, the people’s court may, uponrequest of the person, an interested person thereof, or a relevant organization, andbased on the recovery of his intelligence and mental health, declare that the saidperson becomes a person with limited or full capacity for performing civil juristicacts.

A relevant organization referred to in this Article includes a residents’ committee,a villagers’ committee, a school, a medical institution, the women’s federation, thedisabled person’s federation, a legally established organization for senior people, thecivil affairs department, and the like.

- Article 25

The domicile of a natural person is the residence recorded in the household orother valid identification registration system; if a natural person’s habitual residence isdifferent from his domicile, the habitual residence is deemed as his domicile.

**Section 2** Guardianship

- Article 26

Parents have the duty to raise, educate, and protect their minor children.

Adult children have the duty to support, assist, and protect their parents.

- Article 27

The parents of a minor are his guardians.

Where the parents of a minor are deceased or incompetent to be his guardians,the following persons, if competent, shall act as his guardians in the following order:

- (1) his paternal grandparents and maternal grandparents;

- (2) his elder brothers and sisters; or

- (3) any other individual or organization that is willing to act as his guardian,provided that consent must be obtained from the residents’ committee, the villagers’committee, or the civil affairs department in the place where the minor’s domicile islocated.

- Article 28

For an adult who has no or limited capacity for performing civil juristic acts, thefollowing persons, if competent, shall act as his guardians in the following order:

- (1) his spouse;

- (2) his parents and his children;

- (3) any other close relatives of him; or

- (4) any other individual or organization that is willing to act as his guardian,provided that consent must be obtained from the residents’ committee, the villagers’committee, or the civil affairs department in the place where the adult’s domicile islocated.

- Article 29

A parent who is the guardian of his child may, in his will, designate a succeedingguardian for his child.

- Article 30

A guardian may be determined through agreement among the persons who arelegally qualified to be guardians. The true will of the ward shall be respected indetermining the guardian through agreement.

- Article 31

Where a dispute arises over the determination of a guardian, the guardian shallbe appointed by the residents’ committee, the villagers’ committee, or the civil affairsdepartment in the place where the ward’s domicile is located, and a party not satisfiedwith such an appointment may request the people’s court to appoint a guardian; therelevant parties may also directly request the people’s court to make such anappointment.

When appointing a guardian, the residents’ committee, the villagers’ committee,the civil affairs department, or the people’s court shall respect the true will of the wardand appoint a guardian in the best interest of the ward from among the legallyqualified persons.

Where the personal, proprietary, and other lawful rights and interests of a wardare not under any protection before a guardian is appointed in accordance with thefirst paragraph of this Article, the residents’ committee, the villager’s committee, arelevant organization designated by law, or the civil affairs department in the placewhere the ward’s domicile is located shall act as a temporary guardian.

Once appointed, a guardian shall not be replaced without authorization; where aguardian has been replaced without authorization, the responsibility of the originallyappointed guardian is not discharged.

- Article 32

Where there is no person legally qualified as a guardian, the civil affairsdepartment shall act as the guardian, and the residents’ committee or villagers’committee in the place where the ward’s domicile is located may also act as theguardian if they are competent in performing the duties of guardian.

- Article 33

An adult with full capacity for performing civil juristic acts may, in anticipationof incapacity in the future, consult his close relatives, or other individuals ororganizations willing to be his guardian, and appoint in writing a guardian for himself,who shall perform the duties of guardian when the adult loses all or part of thecapacity for performing civil juristic acts.

- Article 34

The duties of a guardian are to represent the ward to perform civil juristic actsand to protect the personal, proprietary, and other lawful rights and interests of theward.

A guardian’s rights arising from performance of his duties as required by law areprotected by law.

A guardian who fails to perform his duties or infringes upon the lawful rights orinterests of the ward shall bear legal liability.

Where a guardian is temporarily unable to perform his duties owing to anemergency such as an unexpected incident, thus leaving the ward in an unattendedsituation, the residents’ committee, the villagers’ committee, or the civil affairsdepartment in the place where the ward’s domicile is located shall make arrangementas a temporary measure to provide necessary life care for the ward.

- Article 35

A guardian shall perform his duties in the best interest of the ward. A guardianshall not dispose of the ward’s property unless it is for protecting the interests of theward.

When performing his duties and making decisions relating to a minor’s interests,a guardian of a minor shall respect the true will of the minor based on the latter’s ageand intelligence.

When performing his duties, a guardian of an adult shall respect the true will ofthe adult to the greatest extent possible, and ensure and aid the ward in performingcivil juristic acts appropriate to his intelligence and mental status. The guardian shallnot interfere with the matters that the ward is capable of independently managing.

- Article 36

Where a guardian has performed any of the following acts, the people’s courtshall, upon request of a relevant individual or organization, disqualify the guardian,adopt necessary temporary measures, and appoint a new guardian in the best interestof the ward in accordance with law:

- (1) engaging in any acts which severely harm the physical or mental health of theward;

- (2) failing to perform the duties of guardian, or being unable to perform suchduties but refusing to delegate all or part of the duties to others, thus placing the wardin a desperate situation; or

- (3) engaging in other acts which severely infringe upon the lawful rights andinterests of the ward.

The relevant individual and organization referred to in this Article include anyother person legally qualified to be a guardian, the residents’ committee, the villagers’committee, a school, a medical institution, the women’s federation, the disabledpersons’ federation, a child protection organization, a legally established organizationfor senior people, the civil affairs department, and the like.

Where the aforementioned individual and organization other than the civil affairsdepartment, as stated in the preceding paragraph, fail to request the people’s court todisqualify the guardian in a timely manner, the civil affairs department shall initiatesuch a request to the people’s court.

- Article 37

A parent, child, or spouse legally obligated to pay for his ward’s support shall

continue to perform such obligations after being disqualified as a guardian by thepeople’s court.

- Article 38

Where a ward’s parent or child, who has been disqualified as a guardian by thepeople’s court for reasons other than having committed an intentional crime againstthe ward, and who has truly repented and mended his ways, applies to the people’scourt for being reinstated, the people’s court may, upon considering the actualsituation and upon the satisfaction of the prerequisite that the true will of the ward isrespected, reinstate the guardian, and the guardianship between the ward and theguardian subsequently appointed by the people’s court after the disqualification of theoriginal guardian shall thus be terminated simultaneously.

- Article 39

A guardianship is terminated under any of the following circumstances:

- (1) the ward has obtained or regained full capacity for performing civil juristicacts;

- (2) the guardian has become incompetent to be a guardian;

- (3) the ward or the guardian deceases; or

- (4) Any other circumstance in which the people’s court determines to terminatethe guardianship.

Where a ward is still in need of a guardian after the termination of theguardianship, a new guardian shall be appointed in accordance with law.

Declaration of A Missing Person and Declaration of Death

**Section 3**

- Article 40

If a natural person’s whereabouts have been unknown for two years, aninterested person may request the people’s court to declare the natural person as amissing person.

- Article 41

The period of time during which a natural person’s whereabouts is unknownshall be counted from the date when the natural person has not been heard of eversince. If a person is missing during a war, the time of his whereabouts becomingunknown shall be counted from the date the war is ended or from the date asdetermined by the relevant authority.

- Article 42

A missing person’s property shall be placed in the custody of his spouse, adultchildren, parents, or any other persons willing to take such custody.

Where a dispute arises over the custody of a missing person’s property, or thepersons provided in the preceding paragraph are unavailable or incompetent for such apurpose, the property shall be placed in the custody of a person appointed by thepeople’s court.

- Article 43

A custodian shall properly manage the missing person’s property and safeguardhis proprietary interests.

The taxes, debts, and other due payment obligations owed by a missing person, ifany, shall be paid by the custodian out of the missing person’s property.

A custodian who, intentionally or due to gross negligence, causes damage to theproperty of the missing person shall be liable for compensation.

- Article 44

Where a custodian fails to perform his duties of custodian, infringes upon theproprietary rights or interests of the missing person, or if the custodian becomesincompetent to be a custodian, an interested person of the missing person may requestthe people’s court to replace the custodian.

A custodian may, with just cause, request the people’s court to appoint a newcustodian to replace himself.

Where the people’s court appoints a new custodian, the new custodian is entitledto request the former custodian to deliver the relevant property and a propertymanagement report in a timely manner.

- Article 45

Where a missing person reappears, the people’s court shall, upon request of thesaid person or an interested person thereof, revoke the declaration of his beingmissing.

A missing person who reappears is entitled to request the custodian to deliver therelevant property and a property management report in a timely manner.

- Article 46

An interested person may request the people’s court to make a declaration of the

death of a natural person under either of the following circumstances:

- (1) the natural person’s whereabouts have been unknown for four years; or

- (2) the natural person’s whereabouts have been unknown for two years as a resultof an accident.

The two-year requirement for a natural person to be declared dead does not applywhere the person’s whereabouts have been unknown as a result of an accident and if arelevant authority certifies that it is impossible for the said natural person to still be

alive.

- Article 47

Where an interested person requests the people’s court to declare the death of anatural person, while another interested person requests to declare the person beingmissing, the people’s court shall declare that the person is dead if the conditions fordeclaration of death as prescribed in this Code are satisfied.

- Article 48

For a person declared dead, the date when the people’s court makes a judgmentdeclaring his death is deemed as the date of his death; for a person declared deadbecause his whereabouts is unknown as a result of an accident, the date of theoccurrence of the accident is deemed as the date of his death.

- Article 49

The declaration of the death of a natural person who is still alive does not affectthe effects of the civil juristic acts performed by the person during the period thedeath declaration is effective.

- Article 50

Where a person declared dead reappears, the people’s court shall, upon request ofthe person or an interested person thereof, revoke the declaration of his death.

- Article 51

The marital relationship with a person declared dead ceases to exist from the datethe declaration of his death is made. Where the declaration of death is revoked, theaforementioned marital relationship shall be automatically resumed from the date thedeclaration of death is revoked, except where the spouse has married to someone elseor states in writing to the marriage registration authority the unwillingness to resumethe marriage.

- Article 52

Where a child of a person declared dead has been legally adopted by othersduring the period when the declaration of death is effective, the person declared deadshall not, after the declaration of his death is revoked, claim that the adoption isinvalid on the ground that his child is adopted without his consent.

- Article 53

Where a declaration of the death of a person is revoked, the person is entitled torequest those who have obtained his property under Book VI of this Code to returnthe property, or make appropriate compensation if the property cannot be returned.

Where an interested person conceals the true information and causes a naturalperson to be declared dead so as to obtain the latter’s property, the interested personshall, in addition to returning the wrongfully obtained property, make compensationfor any loss thus caused.

**Section 4** Individual-Run Industrial and Commercial Households and Rural-land Contractual Management Households

- Article 54

A natural person who operates an industrial or commercial business may registerit, in accordance with law, as an individual-run industrial and commercial household.An industrial and commercial household may have a trade name.

- Article 55

Members of a rural economic collective who, in accordance with law, have beengranted an original contract to operate a parcel of rural land and engages in theoperation of the land on a household basis are rural-land contractual managementhouseholds.

- Article 56

The debts of an individual-run industrial and commercial household shall be paidfrom the assets of the individual who operates the business in his own name or fromthe individual’s family assets if the business is operated in the name of the household,or, if it is impossible to determine whether the business is operated in the name of theindividual or in the name of the individual’s household, from the individual’s familyassets.

The debts of a rural-land contractual management household shall be paid fromthe assets of the household that is engaged in the operation on the contracted ruralland, or from the portion of the assets of the family members who actually engage insuch operation.

**Chapter III** Legal Persons

**Section 1** General Rules

- Article 57

A legal person is an organization that has the capacity for enjoying civil-lawrights and the capacity for performing civil juristic acts, and that independently enjoyscivil-law rights and assumes civil-law obligations in accordance with law.

- Article 58

A legal person shall be established in accordance with law.

A legal person shall have its own name, governance structure, domicile, andassets or funds. The specific conditions and procedures for the establishment of alegal person shall be in accordance with laws and administrative regulations.

Where

there are laws or administrative regulations providingtheestablishment of a legal person shall be subject to the approval of a relevant authority,such provisions shall be followed.

that

- Article 59

A legal person’s capacity for enjoying civil-law rights and capacity forperforming civil juristic acts are acquired when the legal person is established, andcease when the legal person is terminated.

- Article 60

A legal person independently assumes civil liability to the extent of all of itsassets.

- Article 61

The person with the responsibility of representing a legal person in conductingcivil activities in accordance with law or the legal person’s articles of association isthe legal representative of the legal person.

The legal consequences of the civil activities conducted by the legalrepresentative in the legal person’s name shall be assumed by the legal person.

Any restrictions on the legal representative’s power to represent the legal personwhich is stipulated in the articles of association or imposed by the governing body ofthe legal person shall not be asserted against a bona fide third person.

- Article 62

Where a legal representative of a legal person causes damage to others whileperforming his responsibilities, the civil liability thus incurred shall be assumed by thelegal person.

After assuming the aforementioned civil liability, the legal person has the right toindemnification, in accordance with law or its articles of association, against its legalrepresentative who is at fault.

- Article 63

The domicile of a legal person is the place where its principal administrativeoffice is located. Where a legal person is required by law to be registered, the place of

its principal administrative office shall be registered as its domicile.

- Article 64

Where there is any change in any matter that has been registered during the termof existence of a legal person, the legal person shall apply to the registration authorityfor modification of its registration in accordance with law.

- Article 65

The actual situation of a legal person, which is inconsistent with what is recordedupon registration, shall not be asserted against a bona fide third person.

- Article 66

The registration authority shall, in accordance with law, post in a timely mannera public notice of the information recorded by a legal person upon registration.

- Article 67

In case of a merger between or among legal persons, the rights and obligations ofsuch legal persons shall be enjoyed and assumed by the surviving legal person.

In case of a division of a legal person, the rights and obligations of the legalperson shall be enjoyed and assumed jointly and severally by the legal personsestablished after division, unless otherwise agreed by its creditors and debtors.

- Article 68

If any of the following causes exists, a legal person is terminated after it has

completed liquidation and de-registration in accordance with law:

- (1) the legal person is dissolved;

- (2) the legal person is declared bankrupt; or

- (3) another cause as provided by law exists.

Where there are laws or administrative regulations providing that the terminationof a legal person shall be subject to the approval of the relevant authority, suchprovisions shall be followed.

- Article 69

A legal person is dissolved under any of the following circumstances:

- (1) the term stipulated in its articles of association expires, or any other cause fordissolution as is stipulated in the articles of association exists;

- (2) the governing body of the legal person makes a resolution to dissolve thelegal person;

- (3) the legal person has to be dissolved because of a merger or division;

- (4) the legal person’s business license or registration certificate is legallywithdrawn, or the legal person has received an order of closure or been dissolved; or

- (5) another circumstance as provided by law exists.

- Article 70

Where a legal person is dissolved for reasons other than a merger or division, aliquidation committee shall be formed in a timely manner by the persons with the dutyof liquidation to liquidate the legal person.

Unless otherwise provided by laws or administrative regulations, members of thelegal person’s executive or decision-making body such as the directors or councilors,are the persons with the duty to liquidate the legal person.

The persons with the duty to liquidate the legal person who fail to perform theirduties in time and cause damage to others shall bear civil liability; the competentauthority or an interested person may request the people’s court to appoint therelevant persons to form a liquidation committee to liquidate the legal person.

- Article 71

The procedure for liquidating a legal person and the authorities of a liquidationcommittee shall be in compliance with the provisions of relevant laws; in the absenceof such a provision, the relevant rules provided in corporate laws shall be appliedmutatis mutandis.

- Article 72

During the period of liquidation, a legal person continues to exist but may notengage in any activity unrelated to the liquidation.

Unless otherwise provided by law, upon completion of liquidation, any residualassets of a liquidated legal person shall be distributed in accordance with its articles ofassociation or the resolution made by its governing body.

A legal person is terminated after liquidation and de-registration is completed; alegal person that is not required by law to be registered ceases to exist uponcompletion of the liquidation.

- Article 73

A legal person declared bankrupt is terminated upon completion of the

bankruptcy liquidation and de-registration in accordance with law.

- Article 74

A legal person may establish branches in accordance with law. Where there arelaws or administrative regulations providing that such a branch shall be registered,such provisions shall be followed.

Where a branch of a legal person engages in civil activities in its own name, thecivil liability thus incurred shall be assumed by the legal person; the civil liability maybe paid first from the assets managed by the branch, and any deficiency shall besatisfied by the legal person.

- Article 75

The legal consequences of the civil activities conducted by an incorporator forthe purpose of establishing a legal person shall be assumed by the legal person; or, inthe event that no legal person is successfully established, by the incorporator, or the

incorporators jointly and severally if there are two or more of them.

Where an incorporator engages in civil activities in his own name for the purposeof establishing a legal person and thus incurs civil liability, a third person creditormay elect to request either the legal person or the incorporator to bear the liability.

**Section 2** For-profit Legal Persons

- Article 76

A for-profit legal person is a legal person established for the purpose of makingprofits and distributing the profits among its shareholders and other capitalcontributors.

For-profit legal persons include limited liability companies, join stock companies

limited by shares, and other enterprises that have the legal person status.

- Article 77

A for-profit legal person is established upon registration in accordance with law.

- Article 78

The registration authority shall issue a business license to a legally establishedfor-profit legal person. The date of issuance of the business license is the date ofestablishment of the for-profit legal person.

- Article 79

To establish a for-profit legal person, there shall be articles of association

formulated in accordance with law.

- Article 80

A for-profit legal person shall establish a governing body.

The governing body has the authority to revise the articles of association of thelegal person, elect or replace members of the executive or supervisory body, andperform other responsibilities stipulated in the articles of association.

- Article 81

A for-profit legal person shall establish an executive body.

The executive body has the authority to convene meetings of the governing body,decide on business and investment plans, establish internal management structure, andperform other responsibilities stipulated in the articles of association of the legalperson.

Where the executive body of a legal person is the board of directors or theexecutive director, the legal representative shall be the chairman of the board ofdirectors, the executive director, or the manager, as is stipulated in the articles ofassociation. Where there is no board of directors or executive director established, theperson with principal responsibilities as stipulated in the articles of association shallbe the executive body and the legal representative of the legal person.

- Article 82

Where a for-profit legal person establishes a supervisory body such as a board ofsupervisors or a supervisor, the supervisory body has, in accordance with law, theauthority to inspect the financial matters of the legal person, supervise theperformance of duty by the members of the executive body and the seniormanagement officers of the legal person, and perform other responsibilities stipulatedin the articles of association.

- Article 83

A capital contributor of a for-profit legal person shall not abuse his rights as suchto harm the interests of the legal person or any other capital contributor. A capitalcontributor abusing such rights and causing harm to the legal person or any othercapital contributor shall bear civil liability in accordance with law.

A capital contributor of a for-profit legal person shall not abuse the legal person’sindependent status and his own limited liability status to harm the interests of the legalperson’s creditors. A capital contributor abusing the legal person’s independent statusor its own limited liability status to evade repayment of debts and thus severelyharming the interests of the legal person’s creditors shall be jointly and severallyliable for the legal person’s obligations.

- Article 84

The controlling capital contributors, actual controllers, directors, supervisors, andsenior management officers of a for-profit legal person shall not harm the legalperson’s interests by taking advantage of any affiliated relations, and shallcompensate for any loss thus caused to the legal person.

- Article 85

A capital contributor of a for-profit legal person may request the people’s courtto revoke a resolution which is made at a meeting of the governing body or executivebody of the legal person if the procedure for convening the meeting or the votingmethod thereof is in violation of the laws, administrative regulations, or the legalperson’s articles of association, or, if the content of the resolution violates the articlesof association, provided that any civil juristic relationship already formed between thelegal person and a bona fide third person based on such a resolution shall not beaffected.

- Article 86

A for-profit legal person shall, when engaging in operational activities, observecommercial ethics, maintain the security of transactions, subject itself to thesupervision of the government and the public, and assume social responsibilities.

**Section 3** Non-profit Legal Persons

- Article 87

A non-profit legal person is a legal person established for public welfare or othernon-profit purposes which shall not distribute any profit to its capital contributors,incorporators, or members.

Non-profit legal persons include public institutions, social organizations,

foundations, social service institutions, and the like.

- Article 88

A public institution established for the purpose of providing public services tomeet the needs for economic and social development attains the status of apublic-institution legal person if it satisfies the requirements for being a legal personand is legally registered as such; where the law does not require such a publicinstitution to be registered, it attains the status of a public-institution legal person fromthe date of its establishment.

- Article 89

Where a public-institution legal person establishes a council, the council is itsdecision-making body unless otherwise provided by law. The legal representative of apublic-institution legal person is elected in accordance with the provisions of laws,administrative regulations, or the legal person’s articles of association.

- Article 90

A social organization established upon the common will of its members for anon-profit purpose, such as public welfare or the common interest of all members,attains the status of a social-organization legal person if it satisfies the requirementsfor being a legal person and is legally registered as such. Where the law does notrequire such a social organization to be registered, it attains the status of asocial-organization legal person from the date of its establishment.

- Article 91

To establish a social-organization legal person, there shall be articles of

association formulated in accordance with law.

A social-organization legal person shall establish a governing body such as a

members’ assembly or a meeting of the members’ representatives.

A social-organization legal person shall establish an executive body such as acouncil. The chairman of the council, the president, or an individual with similar

responsibilities shall, in accordance with the articles of association, act as the legalrepresentative of the legal person.

- Article 92

A foundation or a social service institution established with donated property forthe purpose of public welfare attains the status of an endowed legal person if it meetsthe requirements for being a legal person and is legally registered as such.

A site legally established to hold religious activities may be registered as a legalperson and attains the status of an endowed legal person if it meets the requirementsfor being a legal person. Where there are laws or administrative regulations providingfor the religious sites, such provisions shall be followed.

- Article 93

To establish an endowed legal person, there shall be articles of associationformulated in accordance with law.

An endowed legal person shall establish a decision-making body such as acouncil or any other form of democratic management body, and an executive body.The chairman of the council or an individual with similar responsibilities shall, inaccordance with the articles of association, act as the legal representative of the legalperson.

An endowed legal person shall establish a supervisory body such as a board ofsupervisors.

- Article 94

A donor has the right to inquire into and provide comments and suggestions onthe expenditure and management of the property he has donated to an endowed legalperson, and the endowed legal person shall respond honestly and in a timely manner.

Where a decision is made by the decision-making body, executive body, or thelegal representative of an endowed legal person, if the decision-making procedure isin violation of the laws, administrative regulations, or the legal person’s articles ofassociation, or, if the content of the decision violates the articles of association, adonor or any other interested person, or the competent authority may request thepeople’s court to revoke the decision, provided that any civil juristic relationshipalready formed between the endowed legal person and a bona fide third person basedon such a decision shall not be affected.

- Article 95

When a non-profit legal person established for the purpose of public welfareterminates, it shall not distribute the residual assets among its capital contributors,incorporators, or members. The residual assets shall continue to be used for thepurpose of public welfare, as is stipulated in the articles of association or theresolution made by the governing body; where it is not possible to dispose of suchresidual assets in accordance with the articles of association or the resolution made bythe governing body, the competent authority shall take the charge transferring theassets to another legal person with the same or similar purposes and then make apublic notice.

**Section 4** Special Legal Persons

- Article 96

For the purposes of this Section, State-organ legal persons, rural economiccollective legal persons, urban and rural cooperative economic organization legalpersons, and primary-level self-governing organization legal persons are special typesof legal persons.

- Article 97

A State organ with independent budgets or a legally chartered institutionassuming administrative functions is qualified as a State-organ legal person from thedate of its establishment and may engage in civil activities that are necessary for theperformance of its responsibilities.

- Article 98

A State-organ legal person terminates when the State organ is closed, and itscivil-law rights and obligations are enjoyed and assumed by the succeedingState-organ legal person; in the absence of a succeeding State organ, the said rightsand obligations shall be enjoyed and assumed by the State-organ legal person that hasmade the decision to close it.

- Article 99

A rural economic collective attains the status of a legal person in accordancewith law.

Where there are laws or administrative regulations providing for rural economiccollectives, such provisions shall be followed.

- Article 100

An urban or rural economic cooperative attains the status of a legal person inaccordance with law.

Where there are laws or administrative regulations providing for urban and ruraleconomic cooperatives, such provisions shall be followed.

- Article 101

An urban residents’ committee or a villagers’ committee, as a primary-levelself-governing organization, attains the status of a legal person, and may engage incivil activities necessary for the performance of their responsibilities.

Where there is no village economic collective established, the villagers’

committee may, in accordance with law, perform the responsibilities of a villageeconomic collective.

**Chapter IV** Unincorporated Organizations

- Article 102

An unincorporated organization is an organization which does not have the legalperson status but may engage in civil activities in its own name in accordance withlaw.

Unincorporated organizationsinclude sole proprietorships, partnerships,professional service institutions that do not have the legal person status, and the like.

- Article 103

Unincorporated organizations shall be registered in accordance with law.

Where laws or administrative regulations provide that establishment of anunincorporated organization shall be subject to approval by the relevant authority,such provisions shall be followed.

- Article 104

Where an unincorporated organization becomes insolvent, its capital contributorsor promotors shall assume unlimited liability for the debts of the organization, unlessotherwise provided by law.

- Article 105

An unincorporated organization may designate one or more members torepresent the organization to engage in civil activities.

- Article 106

An unincorporated organization shall be dissolved under any of the following

circumstances:

- (1) where the term stipulated in its articles of association expires or any othercause for dissolution as is stipulated in the articles of association exists;

- (2) where its capital contributors or promotors decide to dissolve it; or

- (3) where dissolution is required under any other circumstances as provided bylaw.

- Article 107

Upon dissolution, an unincorporated organization shall be liquidated inaccordance with law.

- Article 108

In addition to the provisions in this Chapter, the provisions in Section 1 ofChapter III of this Book shall be applied to unincorporated organizations mutatismutandis.

**Chapter V** Civil-law Rights

- Article 109

The personal liberty and dignity of a natural person is protected by law.

- Article 110

A natural person enjoys the right to life, the right to corporeal integrity, the rightto health, the right to name, the right to likeness, the right to reputation, the right tohonor, the right to privacy, and the right to freedom of marriage.

A legal person or an unincorporated organization enjoys the right to entity name,the right to reputation, and the right to honor.

- Article 111

A natural person’s personal information is protected by law. Any organization orindividual that needs to access other’s personal information must do so in accordancewith law and guarantee the safety of such information, and may not illegally collect,use, process, or transmit other’s personal information, or illegally trade, provide, orpublicize such information.

- Article 112

The personal rights of a natural person arising from a marital or familialrelationship are protected by law.

- Article 113

The proprietary rights of the persons of the civil law are equally protected bylaw.

- Article 114

Persons of the civil law enjoy real rights in accordance with law.

Real rights are the rights to directly and exclusively control a specific thing bythe right holder in accordance with law, which consists of the ownership, right tousufruct, and security interests in the property.

- Article 115

Property consists of immovable and movable property. Where the law providesthat a right shall be treated as property over which a real right lies, such provisionsshall be followed.

- Article 116

The categories and content of the real rights are provided by law.

- Article 117

Where, for the purpose of public interests, an immovable or movable property isexpropriated or requisitioned according to the scope of authority and the procedureprovided by law, fair and reasonable compensation shall be paid.

- Article 118

Persons of the civil law have rights in personam in accordance with law.

A right in personam is the right of an obligee to request a specific obligor to door not to do a certain act, as arising from a contract, a tortious act, a negotiorum gestio,or unjust enrichment, or otherwise arising by operation of law.

- Article 119

A contract formed in accordance with law is legally binding on the parties to thecontract.

- Article 120

Where a person’s civil-law rights and interests are infringed upon due to a

tortious act, the person is entitled to request the tortfeasor to bear tort liability.

- Article 121

A person who, without a statutory or contractual obligation, engages inmanagement activities to prevent another person from suffering loss of interests, isentitled to request the said other person who receives benefit therefrom to reimbursethe necessary expenses thus incurred.

- Article 122

Where a person obtains unjust interests at the expense of another person’s losswithout a legal cause, the person thus harmed is entitled to request the enrichedperson to make restitution.

- Article 123

The persons of the civil law enjoy intellectual property rights in accordance withlaw.

Intellectual property rights are the exclusive rights enjoyed by the right holders

in accordance with law over the following subject matters:

- (1) works;

- (2) inventions, new utility models, or designs;

- (3) trademarks;

- (4) geographical indications;

- (5) trade secrets;

- (6) layout designs of integrated circuits;

- (7) new plant varieties; and

- (8) the other subject matters as provided by law.- Article 124

A natural person has the right to succession in accordance with law.

Private property lawfully owned by a natural person may be transferred throughinheritance in accordance with law.

- Article 125

The persons of the civil law enjoy shareholder rights and other investor rights inaccordance with law.

- Article 126

The persons of the civil law enjoy other civil-law rights and interests as provided

by law.

- Article 127

Where there are laws particularly providing for the protection of data and onlinevirtual assets, such provisions shall be followed.

- Article 128

Where there are laws particularly providing for the protection of the civil-lawrights of the minors, the elderly, the disabled, women, or the consumers, suchprovisions shall be followed.

- Article 129

Civil-law rights may be acquired through the performance of a civil juristic act,the occurrence of an act de facto, the occurrence of an event as prescribed by law, orby other means provided by law.

- Article 130

The persons of the civil law enjoy their civil-law rights according to their own

will and in accordance with law free from any interference.

- Article 131

While exercising civil-law rights, the persons of the civil law shall perform their

obligations which are provided by law and agreed with the other parties.

- Article 132

No person of the civil law shall abuse his civil-law rights and harm the interests

of the state, the public interests, or the lawful rights and interests of others.

**Chapter VI** Civil Juristic Acts

**Section 1** General Rules

- Article 133

A civil juristic act is an act through which a person of the civil law, by expressionof intent, creates, alters, or terminates a civil juristic relationship.

- Article 134

A civil juristic act may be accomplished through unanimous consent of two ormore parties, or through one party’s unilateral expression of intent.

Where a legal person or an unincorporated organization makes a resolution inaccordance with the procedure and voting method provided by law or stipulated in itsarticles of association, such a resolution is accomplished as a civil juristic act.

- Article 135

A civil juristic act may be done in writing, orally, or in any other form; where aspecific form is required by laws or administrative regulations, or agreed by theparties, it shall be done in such a form.

- Article 136

Unless otherwise provided by law or agreed by the parties, a civil juristic acttakes effect at the time it is accomplished.

A person that performs a civil juristic act may not change or revoke the actwithout authorization, unless doing so is in compliance with law or as consented to bythe other party.

**Section 2** Expression of Intent

- Article 137

An expression of intent made in a real-time communication becomes effective

from the time the person to whom the intent is expressed is aware of its content.

An expression of intent made in a form other than a real-time communicationbecomes effective from the time it reaches the person to whom the intent is expressed.Where such an expression of intent is made through an electronic data message andthe person to whom the intent is expressed has designated a specific data-receivingsystem, it becomes effective from the time such a data message enters that system;where no data-receiving system is specifically designated, it becomes effective fromthe time the person to whom the intent is expressed knows or should have known thatthe data message has entered the system. Where the parties have agreed otherwise onthe effective time of the expression of intent made in the form of an electronic datamessage, such an agreement shall prevail.

- Article 138

Where an expression of intent is not made to any specific person, it becomeseffective when the expression is completed, unless otherwise provided by law.

- Article 139

An expression of intent made through public notice becomes effective upon thetime the public notice is posted.

- Article 140

A person performing a civil juristic act may make an expression of intent eitherexpressly or implicitly.

Silence is deemed as an expression of intent only when it is so provided by law,agreed by the parties, or accords with the course of dealing between the parties.

- Article 141

A person performing a civil juristic act may withdraw an expression of intent.The notice of withdrawal of the expression of intent shall reach the counterparty priorto or at the same time with the counterparty’s receipt of the expression of intent.

- Article 142

Where an expression of intent is made to another person, the meaning of theexpression shall be interpreted according to the words and sentences used, with

reference to the relevant terms, the nature and purpose of the civil juristic act, thecustom, and the principle of good faith.

Where an expression of intent is not made to any specific person, the true intentof the person performing a civil juristic act shall not be interpreted solely on thewords and sentences used, but along with the relevant terms, the nature and purposeof the civil juristic act, custom, and the principle of good faith.

**Section 3** Effect of a Civil Juristic Act

- Article 143

A civil juristic act is valid if the following conditions are satisfied:

- (1) the person performing the act has the required capacity for performing civiljuristic acts;

- (2) the intent expressed by the person is true; and

- (3) the act does not violate any mandatory provisions of laws or administrativeregulations, nor offend public order or good morals.

- Article 144

A civil juristic act performed by a person who has no capacity for performingcivil juristic acts is void.

- Article 145

A civil juristic act, performed by a person with limited capacity for performingcivil juristic acts that is purely beneficial to the person or is appropriate to the age,intelligence, or mental status of the person is valid; any other civil juristic actperformed by such a person is valid if a consent or ratification is obtained from hislegal representative.

A third person involved in the act performed by a person with limited capacityfor performing civil juristic acts may request the legal representative of the latter toratify the act within 30 days from receipt of the notification. Inaction of the legalrepresentative is deemed as refusal of ratification. Before such an act is ratified, abona fide third person is entitled to revoke the act. The Revocation shall be made bynotice.

- Article 146

A civil juristic act performed by a person and another person based on a falseexpression of intent is void.

Where an expression of intent deliberately conceals a civil juristic act, thevalidity of the concealed act shall be determined in accordance with the relevant laws.

- Article 147

Where a civil juristic act is performed based on serious misunderstanding, theperson who performs the act has the right to request the people’s court or anarbitration institution to revoke the act.

- Article 148

Where a party by fraudulent means induces the other party to perform a civiljuristic act against the latter’s true intention, the defrauded party has the right torequest the people’s court or an arbitration institution to revoke the act.

- Article 149

Where a party knows or should have known that a civil juristic act performed bythe other party is based on a third person’s fraudulent act and is against the otherparty’s true intention, the defrauded party has the right to request the people’s court oran arbitration institution to revoke the civil juristic act.

- Article 150

Where a party performs a civil juristic act against its true intention owing toduress of the other party or a third person, the coerced party has the right to requestthe people’s court or an arbitration institution to revoke the civil juristic act.

- Article 151

In situations such as where one party takes advantage of the other party that is ina desperate situation or lacks the ability of making judgment, and as a result the civiljuristic act thus performed is obviously unfair, the damaged party is entitled to requestthe people’s court or an arbitration institution to revoke the act.

- Article 152

A party’s right to revoke a civil juristic act is extinguished under any of the

following circumstances:

- (1) the party has failed to exercise the right to revocation within one year fromthe date when it knows or should have known of the cause for revocation, or within90 days from the date when the party who has performed the act with seriousmisunderstanding knows or should have known of the cause for revocation;

- (2) the party acting under duress has failed to exercise the right to revocationwithin one year from the date when the duress ceases; or

- (3) the party who becomes aware of the cause for revocation waives the right torevocation expressly or through its own conduct.

The right to revocation is extinguished if the party fails to exercise it within fiveyears from the date when the civil juristic act has been performed.

- Article 153

A civil juristic act in violation of the mandatory provisions of laws oradministrative regulations is void, unless such mandatory provisions do not lead toinvalidity of such a civil juristic act.

A civil juristic act that offends the public order or good morals is void.

- Article 154

A civil juristic act is void if it is conducted through malicious collusion betweena person who performs the act and a counterparty thereof and thus harms the lawfulrights and interests of another person.

- Article 155

A void or revoked civil juristic act does not have any legal force ab initio.

- Article 156

If invalidation of a part of a civil juristic act does not affect the validity of theother part, the other part of the act remains valid.

- Article 157

Where a civil juristic act is void, revoked, or is determined to have no legaleffect, the property thus obtained by a person as a result of the act shall be returned, orcompensation be made based on the appraised value of the property if it is impossibleor unnecessary to return the property. Unless otherwise provided by law, the loss thusincurred upon the other party shall be compensated by the party at fault, or, if bothparties are at fault, by the parties proportionally.

**Section 4** A Civil Juristic Act Subject to a Condition or a Term

- Article 158

A condition may be attached to a civil juristic act unless the nature of the actdenies such an attachment. A civil juristic act subject to a condition precedentbecomes effective when the condition is fulfilled. A civil juristic act subject to acondition subsequent becomes invalid when the condition is fulfilled.

- Article 159

Where a condition is attached to a civil juristic act, if a party, for the sake of itsown interests, improperly obstructs the fulfillment of the condition, the condition isdeemed as having been fulfilled; if a party improperly facilitates the fulfillment of thecondition, the condition is deemed as not having been fulfilled.

- Article 160

A term may be attached to a civil juristic act, unless the nature of such act deniessuch an attachment. A civil juristic act subject to a term of effectiveness becomeseffective when the term begins. A civil juristic act subject to a term of terminationbecomes ineffective upon expiration of the term.

**Chapter VII** Agency

**Section 1** General Rules

- Article 161

A person of the civil law may perform a civil juristic act through his agent.

A civil juristic act shall not be performed through an agent if the act must beperformed by the principal himself in accordance with law, as agreed by the parties, orbased on the nature of the act.

- Article 162

A civil juristic act performed by an agent in the principal’s name within the scopeof authority is binding on the principal.

- Article 163

Agency consists of agency by agreement and agency by operation of law.

An agent under agreement shall act in accordance with the principal’s

authorization. An agent by operation of law shall act in accordance with law.

- Article 164

An agent who fails to perform or fully perform his duty and thus causes harm tothe principal shall bear civil liability.

Where an agent maliciously collides with a third person, thus harming the lawfulrights and interests of the principal, the agent and the third person shall bear joint andseveral liability.

**Section 2** Agency by Agreement

- Article 165

In an agency by agreement, if authority is conferred in writing, it shall clearlystate in the letter of authorization the name of the agent, the authorized matters, aswell as the scope and duration of the authority, and it shall be signed or sealed by theprincipal.

- Article 166

Where two or more agents are authorized to deal with the same matter for theprincipal, the agents shall collectively exercise the authority unless otherwise agreedby the parties.

- Article 167

Where an agent knows or should have known that doing the authorized matter isin violation of law but still acts as authorized, or, if a principal knows or should haveknown that an act of the agent is in violation of law but raises no objection thereto, theprincipal and the agent shall bear joint and several liability.

- Article 168

An agent shall not, in the principal’s name, perform a civil juristic act withhimself, unless it is consented to or ratified by the principal.

An agent who has been designated by two or more principals shall not in thename of one principal perform a civil juristic act with another principal whom heconcurrently represents, unless it is consented to or ratified by both principals.

- Article 169

Where an agent needs to re-delegate his authority to a third person, he shall

obtain consent or ratification from the principal.

If the re-delegation of authority to a third person is consented to or ratified by theprincipal, the principal may directly instruct the third person to do the authorized task,and the agent shall be liable only for the selection of such a third person and theinstructions given to the third person by the agent himself.

If re-delegation of authority to a third person is not consented to or ratified by theprincipal, the agent shall be liable for the acts performed by the third person, unlessthe agent re-delegates his authority to a third person in an emergency situation inorder to protect the interests of the principal.

- Article 170

A civil juristic act performed by a person for fulfilling his responsibilitiesassigned by a legal person or an unincorporated organization, within the scope ofauthority and in the name of the legal person or the unincorporated organization, isbinding on the legal person or unincorporated organization.

Restrictions imposed by a legal person or an unincorporated organization on thescope of authority of a person who performs the responsibilities assigned by the legalperson or unincorporated organization are not effective against a bona fide thirdperson.

- Article 171

An act performed by a person without authority, beyond the authority, or afterthe authority is terminated is not effective against the principal who has not ratified it.

A counterparty may urge the principal to ratify such an act within 30 days afterreceipt of the notification. Inaction of the principal is deemed as a refusal ofratification. Before such an act is ratified, a bona fide counterparty has the right torevoke the act. Revocation shall be made by notice.

Where the aforementioned act is not ratified, a bona fide counterparty has theright to request the person who has performed the act to fulfill the obligations orcompensate for the loss thus incurred, provided that the amount of compensation shallnot exceed the amount of benefit the counterparty would have received had theprincipal ratified the act.

Where a counterparty knows or should have known that the person performingthe act has no authority, the counterparty and the said person shall bear the liability inproportion to their fault.

- Article 172

An act performed by a person without authority, beyond the authority, or afterthe authority is terminated is effective if the counterparty has reasons to believe thatthe said person has authority.

**Section 3** Termination of Agency

- Article 173

An agency by agreement is terminated under any of the following circumstances:

- (1) the term of agency expires or the authorized tasks have been completed;

- (2) the principal revokes the agency or the agent resigns;

- (3) the agent loses his capacity for performing civil juristic acts;

- (4) the agent or the principal deceases; or

- (5) the legal person or unincorporated organization who is the agent or theprincipal is terminated.

- Article 174

An act performed by an agent under agreement after the principal deceases

remains valid under any of the following circumstances:

- (1) the agent does not know or should not have known of the death of theprincipal;

- (2) the act is ratified by the heirs of the principal;

- (3) it is clearly stated in the letter of authorization that the agency ceases onlyupon completion of the authorized tasks; or

- (4) the agent has started the act before the principal deceases and continues to actin the interests of the heirs of the principal.

The preceding paragraph shall be applied mutatis mutandis where the principalwho is a legal person or an unincorporated organization is terminated.

- Article 175

An agency by operation of law is terminated under any of the followingcircumstances:

- (1) the principal obtains or regains full capacity for performing civil juristic acts;

- (2) the agent loses the capacity for performing civil juristic acts;

- (3) the agent or the principal deceases; or

- (4) any other circumstance as provided by law exists.

**Chapter VIII** Civil Liability

- Article 176

The persons of the civil law shall perform civil-law obligations and bear civil

liability in accordance with law or the agreement of the parties.

- Article 177

Where two or more persons assume shared liability in accordance with law, each

person shall bear the liability in proportion to their respective share of fault if suchshare can be determined, or in equal share if such share cannot be determined.

- Article 178

Where two or more persons assume joint and several liability in accordance withlaw, the right holder has the right to request some or all of them to bear the liability.

The persons subjected to joint and several liability shall each bear the liability inproportion to their respective share of fault, or in equal share if such share cannot bedetermined. A person who has assumed the liability more than his share of fault hasthe right to contribution against the other person(s) subjected to the joint and severalliability.

Joint and several liability shall be either imposed by law or stipulated in theagreement of the parties.

- Article 179

The main forms of civil liability include:

- (1) cessation of the infringement;

- (2) removal of the nuisance;

- (3) elimination of the danger;

- (4) restitution;

- (5) restoration;

- (6) repair, redoing or replacement;

- (7) continuance of performance;

- (8) compensation for losses;

- (9) payment of liquidated damages;

- (10) elimination of adverse effects and rehabilitation of reputation; and

- (11) extension of apologies.

Where punitive damages are provided by law, such provisions shall be followed.

The forms of civil liability provided in this Article may be applied separately orconcurrently.

- Article 180

A person who is unable to perform his civil-law obligations due to force majeure

bears no civil liability, unless otherwise provided by law.

“Force majeure” means objective conditions which are unforeseeable,

unavoidable, and insurmountable.

- Article 181

A person who causes harm to the tortfeasor out of a justifiable defense bears nocivil liability.

A person who, when acting out of justifiable defense, exceeds the necessary limitand thus causes undue harm to the tortfeasor shall bear appropriate civil liability.

- Article 182

Where a person, when seeking to avoid a peril in response to an emergency,causes harm to others, the person who creates the peril shall bear civil liability.

Where the peril is caused by natural forces, the person who causes harm to othersby seeking to avoid the peril bears no civil liability, provided that he may makeappropriate compensation.

Where the measures adopted by a person seeking to avoid a peril in response toan emergency are improper or exceed the necessary limit and thus cause undue harmto others, the person shall bear appropriate civil liability.

- Article 183

Where a party is injured for protecting the civil-law rights and interests ofanother person, the tortfeasor shall bear civil liability, and the beneficiary may makeappropriate compensation to the injured person. In the absence of a tortfeasor, or if thetortfeasor flees or is incapable of assuming civil liability, upon request of the injuredperson, the beneficiary shall make appropriate compensation.

- Article 184

A person who voluntarily engages in rescuing another person in an emergencysituation and thus causes harm to the latter person bears no civil liability.

- Article 185

A person who infringes upon the name, likeness, reputation, or honor of a hero ora martyr and thus harms the social public interests shall bear civil liability.

- Article 186

Where a party’s breach of contract causes harm to the other party’s personal orproprietary rights and interests, the latter party may elect to request the former to bearliability either for breach of contract or for commission of tort.

- Article 187

Where a person of the civil law has to concurrently bear civil, administrative,and criminal liabilities as a result of the same act performed by him, the assumption ofadministrative or criminal liabilities by the person shall not affect the civil liability heshould bear. If the assets of the person are insufficient to pay for all the liabilities, thecivil liability shall be paid first.

**Chapter IX** Limitation of Action

- Article 188

The limitation period for a person to request the people’s court to protect his

civil-law rights is three years, unless otherwise provided by law.

Unless otherwise provided by law, the limitation period begins from the datewhen the right holder knows or should have known that his right has been harmed andthat who is the obligor. However, no protection to a right is to be granted by thepeople’s court if 20 years have lapsed since the date when the injury occurs, exceptthat the people’s court may, upon request of the right holder, extend the limitationperiod under special circumstances.

- Article 189

Where the parties agree on payment of a debt by installment, the limitationperiod begins from the date when the last installment is due.

- Article 190

The limitation period for a person with no or limited capacity for performingcivil juristic acts to bring a claim against his legal representative begins from the datewhen the agency by operation of law is terminated.

- Article 191

The limitation period for a minor to bring a sexual molestation claim against theoffender begins from the date when the minor reaches the age of 18.

- Article 192

Expiration of the limitation period may be used by an obligor as a defense

against a claim of non-performance.

An obligor who agrees to perform a prior obligation after the limitation periodexpires may not later on use the expiration of the limitation period as a defense, andan obligor who has voluntarily performed such a prior obligation may not later ondemand for restitution.

- Article 193

The people’s court shall not apply the provisions on limitation periods on its owninitiative.

- Article 194

The limitation period is suspended if, within the last six months of the limitationperiod, a right holder is unable to exercise the right to claim owing to the existence ofone of the following obstacles:

- (1) where there is force majeure;

- (2) where the right holder with no or limited capacity for performing civil juristicacts has no legal representative, or his legal representative deceases or loses thecapacity for performing civil juristic acts or the right to representation;

- (3) where no heir or administrator of estate has been determined after theopening of succession;

- (4) where the right holder is controlled by the obligor or another person; or

- (5) where there are other obstacles that cause the right holder unable to exercisethe right to claim.

The limitation period shall expire six months after the date when the cause forsuspension is removed.

- Article 195

A limitation period is interrupted under any of the following circumstances, andthe limitation period shall run anew from the time of interruption or the time when therelevant proceeding is completed:

- (1) the right holder requests the obligor to perform the obligation;

- (2) the obligor agrees to perform the obligation;

- (3) the right holder initiates a lawsuit or arbitration proceeding against theobligor; or

- (4) there exists any other circumstance that has the same effect as initiating alawsuit or arbitration proceeding by the right holder.

- Article 196

The limitation period does not apply to the following rights to claim:

- (1) a claim for cessation of the infringement, removal of the nuisance, orelimination of the danger;

- (2) a claim for return of property of a person who has a real right in animmovable or a registered movable property;

- (3) a claim for payment of child support or support for other family members; or

- (4) any other claims to which the limitation period is not applicable inaccordance with law.

- Article 197

The time period, counting methods, and the grounds for suspension andinterruption of the limitation period are provided by law, and any arrangementotherwise agreed by the parties is void.

An anticipatory waiver of one’s interests in the limitation period made by theparties is void.

- Article 198

Any provisions of law regulating the limitation period for arbitration shall befollowed; in the absence of such provisions, the provisions on limitation period forlitigation provided herein shall be applied mutatis mutandis.

- Article 199

The time period within which a right holder may exercise certain rights, such asthe right to revocation and the right to rescission, which are provided by law or agreedby the parties shall begin, unless otherwise provided by law, from the date when theright holder knows or should have known that he has such a right, and the provisionson the suspension, interruption, or extension of the limitation period shall not beapplicable. Upon expiration of the time period, the right to revocation, the right torescission, and the like rights are extinguished.

**Chapter X** Counting of Periods of Time

- Article 200

Time periods referred to in the civil law are counted by year, month, day, andhour according to the Gregorian calendar.

- Article 201

Where a time period is counted by year, month, and day, the day on which thetime period begins shall not be counted in and the period runs from the following day.

Where a time period is counted by hour, the period begins to run from the houras provided by law or agreed by the parties.

- Article 202

Where a time period is counted by year and month, the corresponding date of thedue month is the last day of the time period; in the absence of such a correspondingdate, the last day of that month is the last day of the time period.

- Article 203

Where the last day of a time period falls on a legal holiday, the day after theholiday is deemed as the last day of the period.

The last day shall end at 24:00 hours; where a business hour is applied, the lastday shall end at the time the business is closed.

- Article 204

The counting of a time period shall be governed by the provisions of this Code,unless otherwise provided by law or agreed by the parties.

**Book Two** Real Rights

**Part One** General Provisions

**Chapter I** General Rules

- Article 205

This Book regulates the civil-law relations arising from the attribution and

utilization of things.

- Article 206

The State upholds and improves the fundamental socialist economic systems,such as the ownership system under which diverse forms of ownership co-developwith public ownership as the mainstay, the distribution system under which multipleforms of distribution co-exist with distribution according to work as the mainstay, aswell as the system of socialist market economy.

The State consolidates and develops the public sector of the economy, andencourages, supports, and guides the development of the non-public sector of theeconomy.

The State implements a socialist market economy and protects the equal legalstatus and development rights of all market participants.

- Article 207

The real rights of the State, collectives, private individuals, and the other right

holders are equally protected by law and free from infringement by any organizationor individual.

- Article 208

The creation, alteration, alienation, or extinguishment of the real rights inimmovable property shall be registered in accordance with law. The creation andalienation of real rights in movable property shall be subject to the delivery of themovable property in accordance with law.

Creation, Alteration, Alienation, and Extinguishment of Real Rights

**Chapter II** Section 1

Registration of Immovable property

- Article 209

The creation, alteration, alienation, or extinguishment of a real right inimmovable property shall become effective upon registration in accordance with law,and shall not take effect without registration, unless otherwise provided by law.

Ownership registration is not required for natural resources that are owned by theState in accordance with law.

- Article 210

The registration of immovable property shall be handled by the registrationauthority at the place where the immovable property is located.

The State implements a unified registration system with respect to immovableproperty. The scope, authorities, and measures for the unified registration shall bespecified by laws and administrative regulations.

- Article 211

When applying for registration of immoveable property, an applicant shall, inlight of the different items to be registered, provide necessary materials such as theproof of real rights, metes and bounds, and area of the immovable property.

- Article 212

The registration authority shall perform the following responsibilities:

- (1) to examine the proof of real rights and other necessary materials provided bythe applicant;

- (2) to inquire the relevant registration items of the applicant;

- (3) to register the relevant items truthfully and in a timely manner; and

- (4) to perform other responsibilities as provided by laws and administrativeregulations.

Where further proof is required for the relevant information of the immovableproperty to be registered, the registration authority may require the applicant toprovide supplementary materials, and may conduct onsite inspection where necessary.

- Article 213

A registration authority may not engage in the following acts:

- (1) to require an appraisal of the immovable property;

- (2) to carry out repeated registration in the name of annual inspection, and thelike; or

- (3) to engage in other acts that exceed the scope of its responsibilities forregistration.

- Article 214

The creation, alteration, alienation, or extinguishment of a real right of theimmovable property that is required by law to be registered becomes effective at thetime when it is recorded in the register of immovable property.

- Article 215

A contract concluded by the parties on the creation, alteration, alienation, orextinguishment of a real right becomes effective upon its formation, unless it isotherwise provided by law or agreed upon by the parties, and the validity of thecontract is not affected by the fact that the real right is not registered.

- Article 216

The register of immovable property is the basis for determining the attributionand contents of the real rights in immovable property.

The register of immovable property shall be kept by the registration authority.

- Article 217

The real right certificate for immovable property is a proof of a right holder’sentitlement to the real right in the immovable property. The items recorded in the realright certificate for immovable property shall be consistent with what are recorded inthe register of immovable property; in case of inconsistency between the two, what isrecorded in the register of immovable property shall prevail, unless there is evidenceestablishing a clear error in the register of immovable property.

- Article 218

A right holder or an interested person may apply for retrieving and makingcopies of the information of the registered immovable property, and the registrationauthority shall provide the information.

- Article 219

An interested person may not disclose or illegally use the registered informationof a right holder’s immovable property.

- Article 220

A right holder or an interested person may apply for rectification of theregistration if he believes that an item is incorrectly recorded in the register ofimmovable property. Where the right holder as recorded in the register of immovableproperty agrees in writing to make rectification, or where there is evidenceestablishing a clear error in the register, the registration authority shall rectify it.

Where the right holder as recorded in the register of immovable property doesnot agree to make rectification, an interested person may apply for registration of ademurrer. Where the registration authority registers the demurrer but the applicantfails to file a lawsuit within 15 days from the date of such a registration, theregistration of demurrer becomes ineffective. Where a demurrer is improperlyregistered and damage is thus caused to the right holder, the right holder may requestthe applicant to pay damages.

- Article 221

Where the parties enter into an agreement for the sale of a house or on any otherreal right in immovable property, they may apply for registration of a priority noticeto a registration authority in accordance with the agreement so as to ensure therealization of the real right in the future. Where, after the priority notice is registered,the immovable property is disposed of without the consent of the right holder asregistered in the priority notice, the disposition is not effective in terms of the realright.

Where, after the priority notice is registered, no application for registration of thereal right of immovable property has been made within 90 days from the date onwhich the creditor’s claim extinguishes or the immovable property is eligible forregistration, the registration of the priority notice becomes ineffective.

- Article 222

A party who provides false materials upon application for registration and thuscauses damage to another person shall be liable for compensation.

Where damage is caused to another person due to a clerical error uponregistration, the registration authority shall be liable for compensation. After havingmade such compensation, the registration authority has the right to indemnificationagainst the person who has made the error.

- Article 223

The fee for the registration of immovable property shall be collected on a

piece-by-piece basis and may not be collected in proportion to the area, size, orpurchase price of the immovable property.

**Section 2** Delivery of Movable Property

- Article 224

The creation or alienation of a real right in movable property shall take effectupon delivery, unless otherwise provided by law.

- Article 225

The creation, alteration, alienation, or extinguishment of the real rights in vessels,aircrafts, motor vehicles, and the like, that have not been registered is not effectiveagainst a bona fide third person.

- Article 226

Where a right holder is already in possession of a movable property before a realright in the movable property is created or alienated, the real right in the movableproperty becomes effective at the time when the civil juristic act is effected.

- Article 227

Where a third person is in possession of a movable property before a real right inthe movable property is created or alienated, the person obligated to deliver themovable property may transfer his right to restitution against the third person assubstitute for delivery.

- Article 228

Where, upon alienation of a real right in movable property, the parties agree thatthe transferor continues to be in possession of the movable property, the real right inthe movable property becomes effective at the time when such an agreement entersinto effect.

**Section 3** Other Rules

- Article 229

Where a real right is created, altered, alienated, or extinguished as a result of alegal document issued by the people’s court or an arbitration institution, or based onan expropriation decision made by the people’s government, the creation, alteration,alienation, or extinguishment of the real right becomes effective at the time when thelegal document or expropriation decision enters into effect.

- Article 230

Where a real right is acquired through succession, the real right as inheritedbecomes effective at the time when the succession opens.

- Article 231

Where a real right is created or extinguished as a result of a de facto act such aslawful construction or demolition of a house, the creation or extinguishment of thereal right becomes effective when the de facto act is accomplished.

- Article 232

Where disposition of a real right in immovable property as provided in thisSection is required by law to be registered, the disposition of the real right, if not soregistered, is not effective.

**Chapter III** Protection of Real Rights

- Article 233

Where a real right is infringed upon, the right holder may have the problemsolved by means of settlement, mediation, arbitration, litigation, and the like.

- Article 234

Where a dispute arises over the attribution or contents of a real right, aninterested person may request for confirmation of the right.

- Article 235

Where an immovable or movable property is possessed by a person not entitledto do so, the right holder may request for restitution.

- Article 236

Where there is a nuisance or a potential nuisance against a real right, the rightholder may request for removal of the nuisance or elimination of the danger.

- Article 237

Where an immovable or movable property is destructed or damaged, the rightholder may request for the repair, redoing, replacement, or restoration to the originalcondition in accordance with law.

- Article 238

Where a real right is infringed upon and damage is thus caused, the right holdermay, in accordance with law, request the infringing person to pay damages or bearother civil liabilities.

- Article 239

The forms of real right protection provided in this Chapter may be applied eitherseparately or concurrently according to the circumstances of the infringement of aright.

**Part Two** Ownership

**Chapter IV** General Rules

- Article 240

An owner is entitled to possess, use, benefit from, and dispose of his ownimmovable or movable property in accordance with law.

- Article 241

An owner of immovable or movable property is entitled to create a right tousufruct and a security interest on his own immovable or movable property. Ausufructuary or security interest holder, when exercising their rights, shall not harmthe rights and interests of the owner.

- Article 242

Where an immovable or movable property is provided by law to be exclusivelyowned by the State, no organization or individual may acquire ownership of it.

- Article 243

For the need of the public interest, the collectively-owned land and the houses

and other immovable property of an organization or individual may be expropriatedwithin the scope of authority and pursuant to the procedures provided by law.

In the case of expropriation of collectively-owned land, land compensation fees,resettlement subsidies, and compensation fees for rural villagers’ dwellings and otherground attachments as well as young crops shall be paid in full in a timely manner inaccordance with law, and social security premiums of the farmers whose land hasbeen expropriated shall be arranged, their lives secured, and their lawful rights andinterests safeguarded.

In the case of expropriation of houses or other immovable property oforganizations or individuals, compensation for the expropriation shall be made inaccordance with law in order to safeguard the lawful rights and interests of the personwhose immovable property has been expropriated. In the case of expropriation ofindividuals’ dwelling houses, the housing conditions of such individuals shall also beguaranteed.

No organization or individual may embezzle, misappropriate, secretly distribute,intercept, default on the payment of the expropriation compensation fees, or the like.

- Article 244

The State provides special protection to cultivated land, strictly restricts theconversion of agricultural land into land used for construction purposes, and controlsthe overall volume of the land used for construction purposes. Collectively-ownedland may not be expropriated exceeding the scope of authority or in violation of theprocedures provided by law.

- Article 245

An immovable or movable property of an organization or individual may, inresponse to an emergency such as providing disaster relief and preventing andcontrolling pandemics, be requisitioned within the scope of authority and pursuant tothe procedures provided by law. The requisitioned immovable or movable propertyshall be returned to the aforementioned organization or individual after use. Where theimmovable or movable property of an organization or individual is requisitioned, orwhere it is destructed, damaged, or lost after being requisitioned, compensation shallbe made.

State Ownership, Collective Ownership and Private Ownership

**Chapter V** Article 246

Where a property is provided by law to be owned by the State, the propertybelongs to the State, namely, to the whole people.

The ownership rights over the State-owned property shall be exercised by the

State Council on behalf of the State, unless otherwise provided by law.

- Article 247

Mineral deposits, waters, and sea areas are owned by the State.

- Article 248

Uninhabited islands are owned by the State, and the State Council exercises theownership rights over the uninhabited islands on behalf of the State.

- Article 249

Urban land is owned by the State. Land in rural and urban suburbs that is

provided by law to be owned by the State is owned by the State.

- Article 250

Natural resources, such as forests, mountain ridges, grasslands, unreclaimedlands, and mudflats, other than those provided by law to be collectively-owned, areowned by the State．

- Article 251

The wild animal and plant resources that are provided by law to be owned by theState are owned by the State.

- Article 252

Radio-frequency spectrum resources are owned by the State.

- Article 253

The cultural relics that are provided by law to be owned by the State are ownedby the State.

- Article 254

The assets for national defense are owned by the State.

Infrastructuresfacilities,telecommunication facilities, as well as oil and gas pipelines that are provided by lawto be owned by the State are owned by the State.

railways,

electric

power

roads,

such

as

- Article 255

A State organ has the right to possess and use the immovable and movableproperty directly under its control and to dispose of such property in accordance withlaw and the relevant regulations made by the State Council.

- Article 256

A public institution established by the State has the right to possess and use theimmovable and movable property directly under its control, and to benefit from anddispose of such property in accordance with law and the relevant regulations made bythe State Council.

- Article 257

With respect to enterprises invested by the State, the State Council and the localpeople’s governments shall, on behalf of the State, perform the investor’s duties andenjoy the investor’s rights and interests respectively in accordance with laws andadministrative regulations.

- Article 258

The State-owned property is protected by law, and no organization or individual

may misappropriate, loot, secretly distribute, intercept, or destroy such property.

- Article 259

Institutions and their staff with the duties of administration and supervision overthe State-owned property shall strengthen the administration and supervision of theState-owned property in accordance with law, strive to preserve and increase the valueof such property and prevent any loss thereof; they shall assume legal liabilities inaccordance with law if losses are caused to the State-owned property as a result oftheir abuse of powers or dereliction of duties.

A person, who causes losses to the State-owned property by transferring it at lowprices, secretly distributing it in conspiracy with other persons, creating a securityinterest on it without authorization, or by other means in the course of enterpriserestructuring, merger or division, affiliated transactions, and the like, in violation ofthe provisions on the administration of the State-owned property, shall bear legalliability in accordance with law.

- Article 260

The collectively-owned immovable and movable property include:

- (1) the land, forests, mountain ridges, grasslands, unreclaimed land and mudflatsthat are provided by law to be owned by collectives;

- (2) the buildings, production facilities, and farmland water conservancy facilitiesthat are owned by collectives;

- (3) the educational, scientific, cultural, public health, sports, and other facilitiesthat are owned by collectives; and

- (4) any other immovable and movable property that are owned by collectives.

- Article 261

The immovable and movable property of a farmer collective are collectivelyowned by the members of this collective.

The following matters shall be decided by the collective’s members in

accordance with statutory procedures:

- (1) land contracting schemes, and the subcontracting of land to any organizationor individual outside this collective;

- (2) adjustment to the contracted land among the persons who have the right tocontractual management of land;

- (3) methods for the use and distribution of funds such as land compensation fees;

- (4) matters such as changes in the ownership of enterprises invested by thecollective; and

- (5) other matters as provided by law.

- Article 262

With respect to the collectively-owned land, forests, mountain ridges, grasslands,unreclaimed land, mudflats, and the like, the ownership thereof shall be exercised inaccordance with the following provisions:

- (1) where they are owned by the farmer collective of a village, the ownershipshall be exercised collectively by the collective economic organization of the villageor the villagers’ committee on behalf of the collective in accordance with law;

- (2) where they are owned by two or more farmer collectives within a village, theownership shall be exercised by the respective collective economic organizations orthe villagers’ groups on behalf of the collectives in accordance with law; and

- (3) where they are owned collectively by the farmer collective of a rural-town,the ownership shall be exercised by the economic organizations of the town on behalfof the collective.

- Article 263

With respect to the immovable and movable property owned by an urban-towncollective, the collective is entitled to possess, use, benefit from, and dispose of suchproperty in accordance with laws and administrative regulations.

- Article 264

Rural collective economic organizations, villagers’ committees, and villagers’groups shall make the situation of the collectively-owned property known to themembers of this collective in accordance with laws, administrative regulations, andtheir articles of association, as well as the local covenants. Members of the collectivehave the right to retrieve and make copies of the relevant materials.

- Article 265

The property owned by a collective is protected by law, and no organization orindividual may misappropriate, loot, secretly distribute, or destruct such property.

Where a decision made by a rural collective economic organization, a villagers’committee, or the person in charge thereof infringes upon the lawful rights andinterests of a member of the collective, the infringed member may request thepeople’s court to revoke the decision.

- Article 266

A private individual has the right to own his lawful income, houses, articles fordaily use, production tools, raw materials, as well as other immovable and movableproperty.

- Article 267

The property lawfully owned by a private individual is protected by law, and noorganization or individual may misappropriate, loot, or destruct such property.

- Article 268

The State, collectives, and private individuals may establish companies withlimited liabilities, joint stock companies limited by shares, or other enterprisesthrough making capital contributions in accordance with law. Where the immovableor movable property of the State, collectives, and private individuals are invested inan enterprise, the investors are, in accordance with their agreement or in proportion totheir investment, entitled to receive returns on the assets, make major decisions, andselect business managers, and obligated to perform their duties.

- Article 269

A for-profit legal person has the right to possess, use, benefit from, and disposeof its immovable and movable property in accordance with laws, administrativeregulations, and its articles of association.

The provisions of the relevant laws, administrative regulations, and articles ofassociation shall apply to the rights of a legal person other than a for-profit legalperson with respect to its immovable and movable property.

- Article 270

The

immovable and movable property

that

is

lawfully owned by a

social-organization legal person or an endowed legal person is protected by law.

**Chapter VI** Ownership of a Building’s Units

- Article 271

A unit owner has the ownership over an exclusive unit of a building, such as adwelling space or a space used for operating businesses, and has the right to co-ownand jointly manage the common space other than the unit.

- Article 272

A unit owner has the right to possess, use, benefit from, and dispose of hisexclusive unit of a building. The unit owner may not, when exercising his rights,endanger the safety of the building or impair the lawful rights and interests of otherunit owners.

- Article 273

A unit owner has rights and assumes duties with respect to the common spaceoutside his exclusive unit of a building，and may not refuse to perform such duties onthe ground that he has waived such rights.

While a unit owner transfers a dwelling space or the space used for businessoperations owned by him in a building, his rights to co-own and jointly manage thecommon space therein shall be transferred concomitantly.

- Article 274

Roads within the construction zone are co-owned by all unit owners, except forthose that are part of the urban public roads. Green spaces within the constructionzone are co-owned by all unit owners, except for those that are part of the urbanpublic green spaces and those expressly indicated to be owned by private individuals.Other public places, public facilities, and spaces used for property managementservice within the construction zone are co-owned by all unit owners.

- Article 275

The ownership of the parking spaces and garages planned for parking vehicleswithin the construction zone shall be agreed upon by the parties by way of selling,giving away as gifts, leasing, and the like.

The parking spaces for parking vehicles that occupy the roads or other spaces

co-owned by all unit owners are co-owned by all unit owners.

- Article 276

The parking spaces and garages planned for parking vehicles within theconstruction zone shall first meet the needs of the unit owners.

- Article 277

The unit owners may establish the owners’ assembly and elect the members ofthe owners’ committee. The specific conditions of and procedures for theestablishment of the owners’ assembly and the owners’ committee shall be inaccordance with laws and regulations.

The relevant department of the local people’s government and the residents’committee shall provide guidance to and assistance in the establishment of the owners’assembly and the election of the members of the owners’ committee.

- Article 278

The following matters shall be jointly decided by the unit owners:

- (1) to formulate and amend the procedural rules of the owners’ assembly;

- (2) to formulate and amend the stipulations on management;

- (3) to elect or replace members of the owners’ committee;

- (4) to employ and remove the property management service enterprise or othermanagers;

- (5) to use maintenance funds for buildings and auxiliary facilities thereof;

- (6) to raise maintenance funds for buildings and auxiliary facilities thereof;

- (7) to renovate and reconstruct buildings and auxiliary facilities thereof;

- (8) to change the intended use of the co-owned space or making use of theco-owned space to engage in business activities; and

- (9) to handle other major matters relating to co-ownership and the right to jointmanagement.

The quorum for matters subject to the unit owners’ joint decision shall be twothirds or more of the exclusive units both by area and by number of unit owners.Decisions of matters provided in Subparagraphs (6) through (8) shall be subject to theconsent of the unit owners representing three quarters or more of the participatingexclusive units both by area and by number of unit owners. Decisions of other mattersprovided in the preceding Paragraph shall be subject to the consent of the unit ownersrepresenting more than half of the participating exclusive units both by area and bynumber of unit owners.

- Article 279

No unit owner may turn a dwelling space into a space used for operatingbusinesses in violation of laws, regulations, or the stipulations on management. A unitowner who intends to turn a dwelling space into a space used for operating businessesshall, in addition to abiding by laws, regulations, and the stipulations on management,obtain unanimous consent from all interested unit owners.

- Article 280

Decisions of the owners’ assembly or the owners’ committee are legally bindingon unit owners.

Where a decision made by the owners’ assembly or the owners’ committeeinfringes upon the lawful rights and interests of a unit owner, the infringed owner mayrequest the people’s court to revoke it.

- Article 281

The maintenance funds for buildings and their auxiliary facilities are co-ownedby the unit owners. The funds may, upon joint decision of the unit owners, be used forthe maintenance, renewal, and renovation of the co-owned spaces, such as elevators,roofs, exterior walls, and barrier-free facilities. Information on raising and using themaintenance funds for buildings and their auxiliary facilities shall be publicized on aregular basis.

Where a building and its auxiliary facilities need to be maintained in anemergency situation, the owners’ assembly or the owners’ committee may, inaccordance with law, apply for the use of the maintenance funds for the building andits auxiliary facilities.

- Article 282

The income generated from the space co-owned by the unit owners that is

received by the developer, the property management service enterprise, or othermanagers are co-owned by all unit owners after reasonable costs are deducted.

- Article 283

Where there is an agreement on matters such as allocation of expenses on anddistribution of income gained from a building and its auxiliary facilities, such mattersshall be determined in accordance with the agreement; where there is no agreement orthe agreement is unclear, such matters shall be determined in proportion to the area ofeach unit owner’s exclusive unit to the total area.

- Article 284

The unit owners may either manage the buildings and the auxiliary facilities ontheir own, or entrust a property management service enterprise or another manager forsuch a purpose.

The unit owners have the right to replace, in accordance with law, the propertymanagement service enterprise or the other managers employed by the developer.

- Article 285

The property management service enterprise or otherwise a manager shall, asentrusted by the unit owners, manage the buildings and their auxiliary facilities withinthe construction zone in accordance with the provisions of Book Three of this Coderelating to contracts for property management service, subject itself to the supervisionof the unit owners, and respond to the unit owners’ inquiries about propertymanagement services in a timely manner.

The property management service enterprise or other managers shall carry outemergency measures and other management measuresthegovernment in accordance with law and actively cooperate in the performance of therelevant work.

implemented by

- Article 286

The unit owners shall abide by laws, regulations, and the stipulations onmanagement, and their relevant acts shall meet the requirements of conservingresources and protecting the ecological environment. With respect to the emergencymeasures and other management measures implemented by the government inaccordance with law that are carried out by the property management serviceenterprise or other managers, the unit owners shall, in accordance with law, becooperative.

With respect to an act impairing the lawful rights and interests of others, such asarbitrarily discarding garbage, discharging pollutants or noises, feeding and keepinganimals in violation of the stipulations, constructing structures against rules andregulations, encroaching on passages, and refusing to pay property management fees,the owners’ assembly or the owners’ committee has the right to request the actor todiscontinue such infringements, remove the nuisance, eliminate the danger, restore tothe original condition, and compensate for the losses entailed.

Where a unit owner or an actor refuses to perform the relevant duties, the partyconcerned may make a report to, or lodge a complaint with the competent

administrative department, which shall handle the case in accordance with law.

- Article 287

A unit owner has the right to request the developer, the property managementservice enterprise or other managers, and other unit owners to bear civil liability forany act done by them that infringes upon his lawful rights and interests.

**Chapter VII** Adjacent Relationships

- Article 288

The persons entitled to adjacent rights in immovable property shall properly dealwith adjacent relationships in accordance with the principles of facilitation toproduction, convenience for daily lives, solidarity and mutual assistance, and fairnessand reasonableness.

- Article 289

Where there are laws and regulations providing for adjacent relationships, thoseprovisions shall be applied. Where there are no such provisions, local customs may befollowed.

- Article 290

A person entitled to the real rights in immovable property shall provide a personentitled to an adjacent right the necessary convenience for the use of water ordrainage.

The right to utilization of natural flowing water shall be reasonably allocatedamong the persons entitled to the adjacent rights of the immovable property. Whendischarging the water, the direction of the natural water flow shall be respected.

- Article 291

A person entitled to the real rights in immovable property shall provide necessaryconvenience to the persons entitled to an adjacent right who have to utilize his landfor passage, and the like.

- Article 292

Where a person entitled to the real rights in immovable property has to utilize theadjacent land or building for constructing or maintaining a building, or for layingelectrical wires, cables, or the pipelines for water, heating, gas, or the like, the personentitled to the real rights in the adjacent land or building shall provide the necessary

convenience.

- Article 293

The construction of a building may not violate the relevant constructionstandards of the State or obstruct the ventilation, lighting, or sunlight of the adjacentbuildings.

- Article 294

A person entitled to the real rights in immovable property may not, in violationof the regulations of the State, discard solid wastes or emit harmful substances such asatmospheric pollutants, water pollutants, soil pollutants, noises, light radiation, andelectromagnetic radiation.

- Article 295

A person entitled to the real rights in immovable property may not endanger thesafety of the adjacent immovable property when excavating land, constructingbuildings, laying pipelines, installing facilities, or the like.

- Article 296

A person entitled to the real rights in immovable property who utilizes theadjacent immovable property for the purpose of using water, drainage, passage, layingpipelines, and the like, shall spare no effort to avoid causing damage to the personentitled to the real rights in the adjacent immovable property.

**Chapter VIII** Co-ownership

- Article 297

Immovable or movable property may be co-owned by two or more organizationsor individuals. Co-ownership consists of co-ownership by shares and jointco-ownership.

- Article 298

Co-owners by shares have the ownership of the co-owned immovable or

movable property according to their shares.

- Article 299

Joint co-owners jointly have the ownership of the co-owned immovable or

movable property.

- Article 300

The co-owners shall manage the co-owned immovable or movable property inaccordance with their agreement. Where there is no agreement or the agreement isunclear, each co-owner is entitled and obligated to manage it.

- Article 301

Unless otherwise agreed by the co-owners, any disposition of the co-ownedimmovable or movable property, or any major repair or change of the nature orintended use of the co-owned immovable or movable property shall be subject to theconsent of the co-owners by shares whose shares account for two thirds or more of thetotal shares, or to the consent of all joint co-owners.

- Article 302

The management expenses of and other burdens on a thing co-owned by theco-owners shall be borne according to the agreement among the co-owners wherethere is such an agreement; where there is no agreement or the agreement is unclear,these expenses shall be borne by the co-owners by shares proportionally, and by thejoint co-owners jointly.

- Article 303

Where the co-owners have agreed not to partition the co-owned immovable ormovable property in order to maintain the co-ownership, the agreement shall befollowed, provided that a co-owner may request partition if there is a compellingreason for partition. Where there is no agreement or the agreement is unclear, aco-owner by shares may request partition at any time, whereas a joint co-owner mayrequest partition in case the basis for the joint ownership ceases to exist or there is acompelling reason for partition. Compensation shall be made if partition causesdamage to the other co-owners.

- Article 304

The co-owners may determine through negotiation the way of partition of theco-owned thing. Where they fail to reach an agreement, and where the co-ownedimmovable or movable property is divisible and its value is not diminished upondivision, partition in kind shall be effected; where it is difficult to divide the co-ownedthing or where its value would be impaired upon division, partition shall be carriedout through dividing the proceeds based on appraisal or obtained from auction or asale of it.

Where the immovable or movable property acquired by a co-owner by means of

partition is defective, the other co-owners shall share the losses.

- Article 305

A co-owner by shares may transfer the portion of shares he owned in theco-owned immovable or movable property. The other co-owners have the right ofpre-emption to buy the shares under equivalent conditions.

- Article 306

Where a co-owner by shares transfers the portion of shares he owned in the

co-owned immovable or movable property, he shall notify the other co-owners of theconditions of transfer in a timely manner. The other co-owners shall exercise theirright of pre-emption within a reasonable period of time.

Where two or more co-owners assert their rights of pre-emption, they shalldetermine through negotiation the proportion of shares each may purchase; where noagreement is reached, they shall exercise their right of pre-emption in proportion tothe shares they each own at the time of transfer.

- Article 307

In terms of external relations, the co-owners are jointly and severally entitled toclaims and are jointly and severally obligated to perform obligations arising from theco-owned immovable or movable property, unless it is otherwise provided by law orwhere the third person is aware that the co-owners are not in a relationship of jointand several claims and obligations. In terms of internal relations, unless otherwiseagreed by the co-owners, the co-owners by shares are entitled to claims and obligatedto perform obligations in proportion to the shares they each own, and the jointco-owners are jointly entitled to claims and obligated to perform obligations. Aco-owner by shares who has performed the obligation in excess of his shares has theright of contribution against the other co-owners.

- Article 308

Where there is no agreement among the co-owners or the agreement is unclear asto whether the co-owned immovable or movable property is under co-ownership byshares or under joint co-ownership, the immovable or movable property shall bedeemed to be under co-ownership by shares, unless the co-owners are in a relationshipsuch as familial relationship and the like.

- Article 309

The share of a co-owner by shares in the immovable or movable property shallbe determined according to his capital contribution where there is no agreement or theagreement is unclear. Where it is impossible to determine the amount of capitalcontribution, each co-owner by shares shall be entitled to an equal share.

- Article 310

Where two or more organizations or individuals are jointly entitled to a right tousufruct or a security interest, the relevant provisions of this Chapter shall be appliedmutatis mutandis.

**Chapter IX** Special Provisions on the Acquisition of

Ownership

- Article 311

Where a person with no right to dispose of an immovable or movable propertytransfers it to another person, the owner has the right to recover it; unless otherwiseprovided by law, the transferee acquires the ownership of the immovable or movableproperty under the following circumstances:

- (1) the transferee is in good faith at the time when the immovable or movableproperty is transferred to him;

- (2) the transfer is made at a reasonable price; and

- (3) the transferred immovable or movable property has been registered asrequired by law, or has been delivered to the transferee where registration is notrequired.

Where a transferee acquires the ownership of the immovable or movableproperty in accordance with the provisions of the preceding paragraph, the originalowner has the right to claim damages against the person who disposes of the propertywithout a right.

Where a party acquires, in good faith, a real right other than ownership, theprovisions of the preceding two paragraphs shall be applied mutatis mutandis.

- Article 312

An owner or any other right holder has the right to recover a lost thing. Wherethe lost thing is possessed by another person by way of transfer, the right holder hasthe right to claim damages against the person who disposes of the thing without theright to disposition, or to request the transferee to return the original thing within twoyears from the date on which the right holder knows or should have known of thetransferee, provided that where the transferee has acquired the lost thing at auction orfrom a qualified business operator, the right holder shall, at the time of requesting thereturn of the original thing, reimburse the expenses that have been paid by thetransferee. The right holder has, after having reimbursed the expenses paid by thetransferee, the right to indemnification against the person who disposes of the thingwithout the right to disposition.

- Article 313

After a bona fide transferee acquires the movable property, the original rights inthe movable property is extinguished, unless the bona fide transferee knows or shouldhave known of such rights at the time of the transfer.

- Article 314

Where a lost thing is found, it shall be returned to its right holder. The findershall, in a timely manner, notify its right holder or hand it over to the relevantdepartments such as the department for public security.

- Article 315

Where the relevant department receives a lost thing and knows who is its right

holder, the department shall, in a timely manner, notify him to collect the lost thing;where the department does not know who is the right holder, it shall issue alost-and-found notice in a timely manner.

- Article 316

A finder shall well keep a lost thing before it is delivered to the relevantdepartment, and the relevant department shall well keep it before it is collected. Aperson who, intentionally or by gross negligence, causes the lost thing in his custodyto be destructed, damaged, or lost shall bear civil liability.

- Article 317

The right holder of a lost thing shall, at the time of collecting it, pay to the finderor the relevant department the necessary expenses, such as the expense forsafekeeping the lost thing.

Where a right holder has offered a reward for finding the lost thing, he shall, atthe time of collecting the lost thing, perform his obligations as promised.

Where a finder misappropriates the lost thing, he is neither entitled to requestreimbursement of expenses such as the expense for safekeeping the lost thing, norentitled to request the right holder to perform the obligations as promised.

- Article 318

Where a lost thing has not been claimed by anybody within one year from thedate the lost-and-found notice is publicized, the lost thing is to be escheated to theState.

- Article 319

Where a drifting thing is found or a thing buried underground or hidden isdiscovered, the provisions relating to the finding of lost things shall be applied mutatismutandis, unless otherwise provided by law.

- Article 320

Where a principal thing is transferred, the accessary thereof shall be transferredconcomitantly, unless otherwise agreed by the parties.

- Article 321

Unless otherwise agreed by the parties, the natural fruits of a thing shall beacquired by the owner of the thing, or by a usufructuary if there are both an owner anda usufructuary of the thing.

The legal proceeds of a thing shall be acquired as agreed by the parties if there issuch an agreement, or, where there is no agreement or the agreement is unclear, inaccordance with the course of dealing.

- Article 322

A thing, that is created as a result of processing, or combining or mixing withanother thing or things, shall be owned as agreed if there is such an agreement, or inaccordance with law if there is no agreement or the agreement is unclear, or, in the

absence of any provisions in law, be determined in compliance with the principles ofmaking full use of the thing and protecting the party without fault. Where damage iscaused to another party owing to one party’s fault or owing to the determination of theattribution of the thing, indemnity or compensation shall be paid.

**Part Three** Rights of Usufruct

**Chapter X** General Rules

- Article 323

A usufructuary has the right to possess, use, and benefit from the immovable ormovable property owned by another person in accordance with law.

- Article 324

Organizations and individuals may, in accordance with law, possess, use, andbenefit from the natural resources owned by the State, the State-owned naturalresources that are used by collectives, and the natural resources that are owned bycollectives as provided by law.

- Article 325

The State implements a system of compensation for the use of natural resources,unless otherwise provided by law.

- Article 326

A usufructuary shall, when exercising his right, abide by the provisions of lawson the protection, rational exploitation, and utilization of resources and the protectionof the ecological environment. The owner may not interfere with the exercise of suchrights by the usufructuary.

- Article 327

Where a right to usufruct is extinguished or adversely affected due toexpropriation or requisition of the immovable or movable property, the usufructuaryhas the right to compensation according to the provisions of Articles 243 and 245 ofthis Code.

- Article 328

The right to use the sea areas that is acquired in accordance with law is protectedby law.

- Article 329

The right to explore and mine minerals, to draw water, and to use waters andmudflats to engage in aquaculture or fishing that are acquired in accordance with lawis protected by law.

**Chapter XI** Right to Contractual Management of Land

- Article 330

Rural collective economic organizations shall adopt a two-tier managementsystem, with household contractual management as the basis and integrated with thecollective management.

A system of contractual management of land is adopted in accordance with lawfor cultivated land, forestland, grassland, and other land used for agricultural purposeswhich are owned by farmers collectively, or owned by the State and used by farmerscollectively.

- Article 331

A person who has the right to contractual management of land is, in accordancewith law, entitled to possess, use, and benefit from the cultivated land, forestland, andgrassland contracted and managed by him, and to engage in agricultural productionsuch as crop cultivation, forestry, and animal husbandry.

- Article 332

The term of a contract for cultivated land is 30 years. The term of a contract forgrassland ranges from 30 to 50 years. The term of a contract for forestland rangesfrom 30 to 70 years.

Upon expiration of the term of contract as provided in the preceding paragraph,the person with the right to contractual management of land is entitled to renew thecontract in accordance with the provisions of laws on rural land contracting.

- Article 333

A right to contractual management of land is created at the time when thecontract on the right to contractual management of land enters into effect.

The registration authority shall issue a certificate, such as a certificate of the rightto contractual management of land, a certificate of the right to forestry, and the like, tothe person entitled to the respective right to contractual management of land, andestablish a register for this purpose to record and confirm such rights.

- Article 334

The persons with the rights to contractual management of land are entitled toexchange or transfer such rights in accordance with law. The contracted land may notbe used for non-agricultural construction purposes without being approved inaccordance with law.

- Article 335

Where the rights to contractual management of land are exchanged or transferred,the parties may apply to the registration authority for registration; without registration,such exchange or transfer may not be asserted against a bona fide third person.

- Article 336

Within the term of contract, the party offering the contract may not adjust thecontracted land.

Under special circumstances such as severe deterioration on the contracted landcaused by natural disasters, appropriate adjustments shall be made in accordance withthe provisions of laws on rural land contracting where necessary.

- Article 337

Within the term of contract, the party offering the contract may not take back thecontracted land, unless otherwise provided by law.

- Article 338

Where the contracted land is expropriated, the affected person with the right tocontractual management of land is entitled to the corresponding compensationaccording to the provisions of Article 243 of this Code.

- Article 339

A person with the right to contractual management of land may decide on hisown to transfer the right to management of land to others by leasing, contributing it asshares, or other means in accordance with law.

- Article 340

Within the time limit as agreed in the contract, the person with the right tomanagement of land is entitled to possess the rural land, to carry out agriculturalproduction and operation on his own, and to benefit therefrom.

- Article 341

The right to management of land which is transferred for a term of five years orlonger is created when the contract for the transfer enters into force. The parties mayapply to the registration authority for registration of the right to management of land;without registration, such a right may not be asserted against a bona fide third person.

- Article 342

Where rural land is contracted by means including bidding, auction, or opennegotiation, for which a title certificate is obtained through registration in accordancewith law, the right to manage such land may, in accordance with law, be transferred bymeans of leasing, contributing it as shares, mortgaging, or by other means.

- Article 343

Where contractual management is adopted for the State-owned land that is usedfor agricultural purposes, the relevant provisions of this Book shall be applied mutatismutandis.

**Chapter XII** Right to Use Land for Construction Purposes

- Article 344

With respect to the State-owned land zoned for construction purposes, a personwith the right to use a lot of such land is entitled to possess, use, and benefit from thelot, and to use it to construct buildings, structures, and auxiliary facilities.

- Article 345

The right to use a lot of land for construction purposes may be created separatelyon the surface of, above, or below the lot of land.

- Article 346

The right to use a lot of land for construction purposes shall be created inconformity with the requirements for conservation of resources and protection of theecological environment, and in compliance with the provisions of laws andadministrative regulations on the planned use of the lot, and may not impair the rightsto usufruct already created thereon.

- Article 347

The right to use a lot of land for construction purposes may be created by way oftransfer or gratuitous grant.

The bidding, auction, or other means of public bidding shall be adopted intransferring a lot of land used for business purposes, such as for industrial,commercial, tourism, recreational, and commercial residential purposes, or wherethere are two or more intended users competing for the right to use the same lot ofland .

The creation of a right to use a lot of land for construction purposes by way of

gratuitous grant is strictly restricted.

- Article 348

Where a right to use a lot of land for construction purposes is created throughbidding, auction, agreement, or other means of transfer, the parties shall enter into acontract in writing for the transfer of the right to use the lot of land for constructionpurposes.

A contract for the transfer of the right to use a lot of land for construction

purposes generally contains the following clauses:

- (1) the name and address of each party;

- (2) the metes and bounds and area of the lot of land;

- (3) the space occupied by the buildings, structures, and the auxiliary facilitiesthereof;

- (4) the planned use and zoning conditions of the lot;

- (5) the term of the right to use the lot of land for construction purposes;

- (6) the transfer fee and other fees, and the mode of payment thereof; and

- (7) the means of dispute resolution.

- Article 349

To create a right to use a lot of land for construction purposes, application shallbe filed with the registration authority for the registration of the right. The right to usea lot of land for construction purposes is created upon registration. The registrationauthority shall issue a title certificate to the person entitled to the right.

- Article 350

A person who has the right to use a lot of land for construction purposes shallmake reasonable use of the lot and may not change its planned use. Where it isnecessary to change the planned use of the lot, approval shall be obtained from thecompetent administrative department in accordance with law.

- Article 351

A person who has the right to use a lot of land for construction purposes shallpay the transfer fee and other fees in accordance with law and the contract.

- Article 352

The ownership of buildings, structures, and auxiliary facilitiesthereofconstructed by a person with the right to use the lot of land for construction purposesbelongs to the person, unless it is proved by evidence to the contrary.

- Article 353

Unless otherwise provided by law, the persons with a right to use a lot of land forconstruction purposes are entitled to transfer, exchange, offer as capital contribution,give away as a gift, or mortgage their rights.

- Article 354

Where a right to use a lot of land for construction purposes is transferred,exchanged, offered as capital contribution, given away as a gift, or mortgaged, theparties shall enter into a contract thereon in writing. The term of the use shall beagreed upon by the parties, provided that it may not exceed the remaining term of theright to use the lot of land for construction purposes.

- Article 355

Where a right to use a lot of land for construction purposes is transferred,exchanged, offered as capital contribution, or given away as a gift, an application forregistration of the change shall be filed with the registration authority.

- Article 356

Where a right to use a lot of land for construction purposes is transferred,exchanged, offered as capital contribution, or given away as a gift, the buildings,structures, and auxiliary facilities thereof attached to the land shall be disposed ofconcomitantly.

- Article 357

Where a building or structure, and auxiliary facilities thereof are transferred,exchanged, offered as capital contribution, or given away as a gift, the right to use thelot of land for construction purposes in the lot of land occupied by the building,structure, and auxiliary facilities thereof shall be disposed of concomitantly.

- Article 358

Where a right to use a lot of land for construction purposes needs to be takenback prior to expiration of its term for public interest purposes, compensation shall bepaid for the houses and other immovable property on the land according to theprovisions of Article 243 of this Code, and the portion of the unused transfer fee shallbe refunded.

- Article 359

The right to use a lot of land for construction of residential buildings isautomatically renewed upon expiration of the term. The payment, reduction, orexemption of the renewal fees shall be dealt with in accordance with the provisions oflaws and administrative regulations.

The renewal of the right to use a lot of land for construction of buildings otherthan residences, upon expiration of the term, shall be dealt with in accordance withthe provisions of the laws. The ownership of the buildings and other immovableproperty on such lot of land shall be determined in accordance with the agreement, or,where there is no agreement or the agreement is unclear, in accordance with theprovisions of laws and administrative regulations .

- Article 360

Where a right to use a lot of land for construction purposes is extinguished, thetransferor of the right shall deregister the right in a timely manner. The registrationauthority shall withdraw the title certificate thereof.

- Article 361

The using of a lot of collectively-owned land for construction purposes shall be

dealt with in accordance with the provisions of the laws on land administration.

**Chapter XIII** Right to Use a House Site

- Article 362

A person who has the right to use a house site is entitled to possess and use thelot of land owned by the collective, and to utilize such lot of land to build a dwellingand auxiliary facilities in accordance with law.

- Article 363

The acquisition, exercise, and transfer of the right to use a house site aregoverned by the laws on land administration and the relevant regulations of the State.

- Article 364

Where a house site is destroyed due to natural disasters or for other reasons, theright to use the house site is extinguished. A new house site shall be allocated inaccordance with law to the villagers who have lost their house site.

- Article 365

Where a registered right to use a house site is transferred or extinguished,registration of the change or deregistration of the right shall be made in a timelymanner.

**Chapter XIV** Right of Habitation

- Article 366

A person with a right of habitation is entitled to the right to usufruct ofpossessing and using another person’s dwelling as agreed in the contract, so as tomeet his needs of habitation.

- Article 367

To create a right of habitation, the parties shall enter into a contract on such aright in writing.

A contract on a right of habitation generally contains the following clauses:

- (1) the name and address of each party;

- (2) the location of the dwelling;

- (3) the conditions and requirements for the habitation;

- (4) the duration of the right of habitation; and

- (5) the means of dispute resolution.

- Article 368

A right of habitation shall be created free of charge, unless otherwise agreed bythe parties. To create a right of habitation, an application for the registration of theright shall be filed with the registration authority. The right of habitation is createdupon registration.

- Article 369

A right of habitation may not be transferred or inherited. The dwelling in which aright of habitation is created may not be let on lease, unless otherwise agreed by theparties.

- Article 370

A right of habitation is extinguished if the term of the right expires, or if theperson entitled to the right deceases. Where a right of habitation is extinguished,deregistration of the right shall be made in a timely manner.

- Article 371

Where a right of habitation is created by will, the relevant provisions of thisChapter shall be applied mutatis mutandis.

**Chapter XV** Easements

- Article 372

A person who has a right to easement is entitled to utilize the immovableproperty of another person as agreed in a contract so as to enhance the efficiency ofhis own immovable property.

The immovable property of another person referred to in the preceding paragraphis the servient land, and the immovable property of the person entitled to the easementis the dominant land.

- Article 373

To create an easement, the parties shall enter into an easement contract inwriting.

An easement contract generally contains the following clauses:

- (1) the name and address of each party;

- (2) the location of the servient land and the dominant land;

- (3) the purposes and methods of utilizing the servient land;

- (4) the duration of the easement;

- (5) the fees and the mode of payment; and

- (6) the means of dispute resolution.

- Article 374

An easement is created at the time the easement contract enters into effect.Where the parties request for registration, applications may be filed with theregistration authority for the registration of the easement; without registration, such aneasement may not be asserted against a bona fide third person.

- Article 375

A right holder of the immovable property served as the servient land shall allowthe person entitled to an easement to utilize the immovable property as agreed in thecontract and may not interfere with the exercise of the right to easement by suchperson.

- Article 376

A person entitled to an easement shall utilize the servient land in accordance withthe purposes and methods of utilization as agreed in the contract, and minimizerestrictions on the real rights of the right holder in the servient land.

- Article 377

The duration of an easement shall be agreed upon by the parties, provided that itmay not exceed the remaining term of the right to usufruct, such as the right tocontractual management of land or the right to use a lot of land for constructionpurposes.

- Article 378

Where an owner of a lot of land is entitled to or is encumbered with an easement,when a right to usufruct, such as a right to contractual management of land or a rightto use a house site is created on the lot of land, the usufructuary shall continue to beentitled to or be encumbered with the easement thereon that has already been created.

- Article 379

Where a right to usufruct, such as a right to contractual management of land, aright to use a lot of land for construction purposes, and a right to use a house site, hasalready been created on a lot of land, the owner of the lot of land may not create aneasement on the lot without the consent of the usufructuary.

- Article 380

An easement may not be transferred separately. Where a right to contractualmanagement of land, a right to use a lot of land for construction purposes and the likerights are transferred, the easement shall be transferred concomitantly, unlessotherwise agreed in the contract.

- Article 381

An easement may not be mortgaged separately. Where a right to contractualmanagement of land, a right to use a lot of land for construction purposes, and the likerights are mortgaged, the easement shall be transferred concomitantly uponenforcement of the mortgage.

- Article 382

Where a right to easement is involved when the dominant land and a right tocontractual management of land, a right to use a lot of land for construction purposes,and the like rights thereon are partially transferred, the transferee is simultaneouslyentitled to the easement.

- Article 383

Where a right to easement is involved when the servient land and a right tocontractual management of land, a right to use a lot of land for construction purposes,and the like rights thereon are partially transferred, the easement is legally binding onthe transferee.

- Article 384

Where a person entitled to an easement is under any of the followingcircumstances, the person who has the right to the servient land is entitled to rescindthe easement contract to extinguish the easement:

- (1) abusing the right to easement in violation of the provisions of laws or thecontract; or

- (2) in case of paid use of the servient land, failing to pay the relevant fees despiteof receipt of two warning notices within a reasonable period of time after the paymentis due according to the agreement.

- Article 385

Where a registered easement is altered, transferred, or extinguished, theregistration of the change or deregistration shall be made in a timely manner.

**Part Four** Security Interests

**Chapter XVI** General Rules

- Article 386

Where a debtor fails to perform his obligations due, or any event upon which ansecurity interest is to be enforced as agreed upon by the parties occurs, the personentitled to the security interest has priority to be paid from the collateral in accordancewith law, unless otherwise provided by law.

- Article 387

Where a creditor needs to secure his claims in a civil activity such as lending,buying and selling, and the like, he may create a security interest in accordance withthe provisions of this Code and other laws.

Where a third person provides security to the creditor for the debtor, the debtormay be requested to provide a counter-security. Counter-security shall be governed bythe provisions of this Code and other laws.

- Article 388

To create a security interest, a security contract shall be entered into inaccordance with the provisions of this Code and other laws. Security contracts includemortgage contracts, pledge contracts, and other contracts with a function of security.A security contract is a contract secondary to the principal contract with the principalclaims and obligations. Where the principal contract is void, the security contract isalso void, unless otherwise provided by law.

Where a security contract is determined to be void, if the debtor, the securityprovider, and the creditor are at fault, they shall each bear civil liability in proportionto their fault.

- Article 389

Unless otherwise agreed by the parties, the scope covered by a security interestincludes the principal claim and its interests based on the principal contract, liquidateddamages, compensatory damages, and the expenses arising from safekeeping thecollateral and enforcing the security interests.

- Article 390

Where a collateral is destructed, damaged, or lost, or is expropriated during thesecured period, the person entitled to a security interest has priority to be paid fromthe insurance payment, compensation, or indemnity received on the collateral. Wherethe collateral is destructed, damaged, or lost, or is expropriated prior to the due date ofperformance of the secured claim, the insurance payment, compensation, or indemnitymay also be placed in escrow.

- Article 391

Where a third person provides security and the creditor allows the debtor totransfer all or part of the secured obligations without the third person’s writtenconsent, the security provider is no longer liable for securing the part of theobligations so transferred.

- Article 392

Where a claim is secured by both a collateral and a surety, and the debtor fails toperform his obligations due or any event upon which a security interest is to beenforced as agreed upon by the parties occurs, the creditor shall enforce the claim inaccordance with the agreement. Where there is no agreement or the agreement isunclear, if the collateral is provided by the debtor, the creditor shall first enforce theclaim against the collateral, and if the collateral is provided by a third person, thecreditor may elect to enforce the claim against the collateral or request the surety toassume liability. After the third person who provides security has assumed suchliability, he has the right of indemnification against the debtor.

- Article 393

A security interest is extinguished under any of the following circumstances:

- (1) the claim under the principal contract is extinguished;

- (2) the security interest is enforced;

- (3) the creditor waives his security interest; or

- (4) there exists any other circumstance in which security interest is extinguishedas provided by law.

**Chapter XVII** Mortgage

**Section 1** General Mortgage

- Article 394

Where a debtor or a third person, in order to secure the performance of anobligation, mortgages his property to the creditor without relinquishing the possessionof the property, the creditor has priority to be paid from the collateral if the debtorfails to perform his obligation due or an event upon the occurrence of which thesecurity interest in the collateral is to be enforced as agreed by the parties occurs.

The debtor or the third person as specified in the preceding paragraph is themortgagor, the creditor is the mortgagee, and the collateral mortgaged to secure theclaim is the mortgaged property.

- Article 395

The following property, which the debtor or a third person is entitled to dispose

of, may be mortgaged:

- (1) buildings and other things attached to the land;

- (2) the right to use a lot of land for construction purposes;

- (3) the right to use the sea areas;

- (4) production equipment, raw materials, work in process, and finished products;

- (5) buildings, vessels, and aircraft under construction;

- (6) vehicles for transport; and

- (7) other property not prohibited by laws or administrative regulations frombeing mortgaged.

A mortgagor may mortgage the property listed in the preceding paragraphconcurrently.

- Article 396

An enterprise, an individual-run industrial and commercial household, or anagricultural production operator may mortgage their production equipment, rawmaterials, work in process, and finished products that they currently own or thereafteracquired, and if the debtor fails to perform his obligations due or any event uponwhich a security interest in the mortgaged property is to be enforced as agreed by theparties occurs, the creditor has priority to be paid from the movable propertydetermined at the time when the mortgaged property is ascertained.

- Article 397

Where a building is mortgaged, the right to use the lot of land in the areaoccupied by the building for construction purposes shall be mortgaged concomitantly.

Where a right to use a lot of land for construction purposes is mortgaged, any buildingon the lot of land shall be mortgaged concomitantly.

Where a mortgagor fails to concomitantly mortgage the property as provided inthe preceding paragraph, the unmortgaged property in question shall be deemed to beconcomitantly mortgaged.

- Article 398

A right to use a lot of land for construction purposes of a township or villageenterprise may not be mortgaged separately. Where a factory premise or any otherbuilding of a township or village enterprise is mortgaged, the right to use the lot ofland in the area occupied by the building for construction purposes shall beconcomitantly mortgaged.

- Article 399

The following property may not be mortgaged:

- (1) land ownership;

- (2) the right to use the land owned by a collective, such as house sites, land andhills retained for household use, unless it may be mortgaged as provided by law;

- (3) educational facilities, medical and health facilities, and other public welfarefacilities of non-profit legal persons established for public welfare purposes, such asschools, kindergartens, and medical institutions;

- (4) property of which the ownership or right to the use is unclear or disputed;

- (5) property that has been seized, detained, or placed under custody inaccordance with law; and

- (6) other property that may not be mortgaged as provided by laws oradministrative regulations.

- Article 400

To create a mortgage, the parties shall enter into a mortgage contract in writing.

A mortgage contract generally contains the following terms:

- (1) the type and amount of the secured claim;

- (2) the term during which the debtor shall perform obligations;

- (3) such particulars as the name and quantity of the mortgaged property; and

- (4) the scope of the security interest covered.

- Article 401

Where, prior to the due date of performance of an obligation, the mortgageereaches an agreement with the mortgagor under which the mortgaged propertybelongs to the creditor in the event that the debtor fails to perform the obligation due,the mortgagee, regardless, may only have priority to be paid from the mortgagedproperty in accordance with law.

- Article 402

To create a mortgage on the property as specified in Subparagraphs (1) through- (3) of the first paragraph of Article 395, or on the building under construction asspecified in Subparagraph (5) of the first paragraph of this Code, registration shall bemade for the mortgage. The mortgage shall be created upon registration.

- Article 403

A mortgage on movable property shall be created at the time when the mortgagecontract enters into effect; without registration, such a mortgage may not be assertedagainst a bona fide third person.

- Article 404

A mortgage on movable property may not be asserted against a buyer who haspaid a reasonable purchase price and acquired the mortgaged property in the ordinarycourse of business.

- Article 405

Where a mortgaged property has been let to and possessed by another personprior to creation of the mortgage, the lease relationship shall not be affected by themortgage.

- Article 406

A mortgagor may transfer the mortgaged property to another person during theterm of the mortgage unless otherwise agreed by the parties. The transfer of themortgaged property shall not affect the mortgage.

A mortgagor who transfers the mortgaged property to another person shall notifythe mortgagee in a timely manner. The mortgagee may request the mortgagor to applythe proceeds of the transfer to pay off the obligation before it is due, or place suchproceeds in escrow where he may establish that the transfer of the mortgaged propertymay impair his right to the mortgage. The portion of the proceeds obtained from thetransfer in excess of the amount of the obligation owed shall belong to the mortgagor,while any deficiency shall be satisfied by the debtor.

- Article 407

A mortgage may not be transferred separately from the underlying claim or beused as security for another claim. Where a claim is transferred, the mortgagesecuring the claim shall be transferred concomitantly with it, unless otherwiseprovided by law or agreed by the parties.

- Article 408

Where an act of a mortgagor suffices to reduce the value of the mortgagedproperty, the mortgagee is entitled to request the mortgagor to refrain fromperforming such an act. Where the value of the mortgaged property is reduced, themortgagee is entitled to request the mortgagor to restore its value or provideadditional security to the extent of the reduced value. Where the mortgagor neitherrestores the original value of the mortgaged property, nor provides additional securitytherefor, the mortgagee is entitled to request the debtor to pay off the debt before it is

due.

- Article 409

A mortgagee may waive his right to the mortgage, or waive his priority order inthe line of the mortgagees. A mortgagee and the mortgagor may reach an agreement tochange such things as the mortgagee’s priority order in the line of the mortgagees andthe amount of the secured claim, provided that any change to the mortgage may notadversely affect the other mortgagees without their written consent.

Where a debtor creates a mortgage on his own property, and the mortgageewaives his right to the mortgage and his priority order in the line of mortgagees, orchanges the mortgage, the other security providers shall be exempted from thesecurity liability to the extent of the rights and interests of the mortgagee that areforfeited owing to the waiver of his priority to be paid from the mortgaged property,unless the other security providers are committed to still provide security.

- Article 410

Where a debtor fails to perform his obligation due or an event upon which amortgage is to be enforced as agreed upon by the parties occurs, the mortgagee may,upon agreement with the mortgagor, have the priority right to appraise and accept themortgaged property, or apply the proceeds obtained from auction or sale of themortgaged property to satisfy his claim against the mortgagor. Where the agreement isdetrimental to the interests of other creditors, the other creditors may request thepeople’s court to rescind the agreement.

Where a mortgagee and a mortgagor fail to reach an agreement on the methodsof enforcing the mortgage, the mortgagee may request the people’s court to have themortgaged property sold at auction or in a sale.

The appraisal or sale of the mortgaged property shall be based on the marketprice thereof.

- Article 411

Where a mortgage is created in accordance with the provisions of Article 396 ofthis Code, the mortgaged property shall be ascertained at the time when one of thefollowing circumstances occurs:

- (1) the claim is not satisfied upon expiration of the term of performance of theobligation;

- (2) the mortgagor is declared bankrupt or dissolved;

- (3) an event upon which the mortgage is to be enforced as agreed upon by theparties occurs; or

- (4) any other circumstance that seriously affects the enforcement of the claim.

- Article 412

Where a debtor fails to perform his obligation due or an event upon theoccurrence of which the mortgage is to be enforced as agreed upon by the partiesoccurs, resulting in the seizure of the mortgaged property by the people’s court in

accordance with law, the mortgagee is entitled to collect the natural fruits or legalproceeds accrued from the mortgaged property as of the date of the seizure, unless themortgagee fails to notify the person who is obligated to pay off the legal proceeds.

The fruits or proceeds as specified in the preceding paragraph shall first beapplied to offset the expenses of collecting them.

- Article 413

Where the appraised value of a mortgaged property or the proceeds obtainedfrom auction or sale of it is in excess of the amount of the obligation owed, theexcessive portion shall belong to the mortgagor, while any deficiency shall besatisfied by the debtor.

- Article 414

Where a property is mortgaged to two or more creditors, the proceeds obtainedfrom auction or sale of the mortgaged property shall be applied in accordance with thefollowing provisions:

- (1) where the mortgages have all been registered, the order of payment is basedon the priority in time of registration;

- (2) a registered mortgage has priority over an unregistered mortgage to be paid;and

- (3) where none of the mortgages are registered, payment shall be made on a prorata basis against the claims.

The preceding paragraph shall be applied mutatis mutandis with regard to thepriority order of payment for other security interests that are registrable.

- Article 415

Where both a mortgage and a pledge are created on the same property, thepriority order of payment with the proceeds obtained from auction or sale of theproperty shall be based on the priority in time of registration and delivery of theproperty.

- Article 416

Where a principal claim secured by a mortgage on movable property is thepurchase price of the mortgaged property, and registration for the mortgage is madewithin 10 days after delivery of the property, the mortgagee has the priority to be paidover the other persons, other than a lienholder, who have security interests thereon inrelation to the purchaser of the mortgaged property.

- Article 417

Where a right to use a lot of land for construction purposes is mortgaged, anynewly added buildings on the lot of land are not part of the mortgaged property. Uponenforcement of the mortgage on the right to use the lot of land for constructionpurposes, the newly added buildings on such land shall be disposed of concomitantlywith the right to use such land for construction purposes, provided that the mortgageehas no priority to be paid from the proceeds obtained from disposition of the newly

added buildings.

- Article 418

Where a right to use a lot of land owned by a collective is mortgaged inaccordance with law, the nature of the ownership and the purpose of use of the landmay not be altered without going through statutory procedures after the mortgage isenforced.

- Article 419

A mortgagee shall exercise his right to mortgage within the limitation period forclaiming against the principal obligation; otherwise no protection may be provided bythe people’s court.

**Section 2** Maximum Mortgage for Floating Claims

- Article 420

Where a debtor or a third person provides a collateral for future claims that willarise consecutively within a certain period of time to secure performance of theobligations, if the debtor fails to perform an obligation due or an event upon whichsuch a mortgage is to be enforced as agreed upon by the parties occurs, the mortgageehas the priority to be paid from the mortgaged property up to the maximum amount ofhis claim.

A claim that exists prior to the creation of the maximum mortgage for floatingclaims may, upon consent of the parties, be included in the claims secured by such amortgage.

- Article 421

Before the claims secured by the maximum mortgage for floating claims areascertained, where part of the claims is transferred, the mortgage may not betransferred unless otherwise agreed by the parties.

- Article 422

Before the claims secured by a maximum mortgage for floating claims areascertained, the mortgagee and the mortgagor may change by agreement the period oftime for the ascertainment of the claims, the scope of the claims, and the maximumamount of the claims, provided that such changes may not adversely affect othermortgagees.

- Article 423

The claims of the mortgagee are ascertained under one of the following

circumstances:

- (1) where the agreed period of time for the claims to be ascertained expires;

- (2) where there is no agreement on the period of time for the claims to beascertained or the agreement is unclear , and the mortgagee or the mortgagor requestsfor ascertainment of the claims after the lapse of two years from the date of thecreation of the mortgage;

- (3) where it is impossible for a new claim to arise;

- (4) where the mortgagee knows or should have known that the mortgagedproperty has been seized or detained;

- (5) where the debtor or the mortgagor is declared bankrupt or dissolved; or

- (6) any other circumstance under which the claims are to be ascertained asprovided by law.

- Article 424

In addition to the provisions of this Section, the relevant provisions of Section 1of this Chapter shall be applied to the maximum mortgage for floating claims.

**Chapter XVIII** Pledge

**Section 1** Pledge in Movable Property

- Article 425

Where a debtor or a third person pledges his movable property to the creditor forpossession in order to secure the performance of an obligation, if the debtor fails toperform the obligation due or an event upon the occurrence of which the pledge is tobe enforced as agreed upon by the parties occurs, the creditor has priority to be paidfrom the movable property.

The debtor or third person as specified in the preceding paragraph is the pledgor,the creditor is the pledgee, and the movable property delivered is the pledged

property .

- Article 426

Movable property may not be pledged where its transfer is prohibited by laws oradministrative regulations.

- Article 427

To create a pledge, the parties shall enter into a pledge contract in writing.

A pledge contract generally contains the following clauses:

- (1) the type and amount of the secured claim;

- (2) the term for the debtor to perform the obligation;

- (3) such particulars as the name and quantity of the pledged property;

- (4) the scope of the security covered; and

- (5) the time for and the mode of the delivery of the pledged property.

- Article 428

Where, prior to the due date of performance of an obligation, the pledgee reachesan agreement with the pledgor under which the pledged property belongs to thecreditor in the event that the debtor fails to perform the obligation due, the pledgee,regardless, may only have priority to be paid from the pledged property in accordancewith law.

- Article 429

A pledge is created upon delivery of the pledged property by the pledgor.

- Article 430

A pledgee has the right to collect the fruits and proceeds accrued from thepledged property unless otherwise agreed in the contract.

The fruits and proceeds as specified in the preceding paragraph shall first beapplied to offset the expenses of collection of them.

- Article 431

A pledgee who, during the effective period of the pledge, uses or disposes of thepledged property without the consent of the pledgor and thus causes damage to thelatter shall be liable for compensation.

- Article 432

A pledgee is obligated to well keep the pledged property, and shall be liable forcompensation where the pledged property is destructed, damaged, or lost due to hisimproper custody.

Where the pledgee’s act is likely to cause the pledged property to be destructed,damaged, or lost, the pledgor may request the pledgee to place the pledged property inescrow, or request the pledgee to discharge the obligation before it is due and return

the pledged property.

- Article 433

Where, due to a cause the pledgee is not responsible for, the pledged property islikely to be damaged or significantly diminished in value which suffices to jeopardizethe pledgee’s rights, the pledgee has the right to request the pledgor to provideadditional security; where the pledgor fails to do so, the pledgee may have thepledged property sold at auction or in a sale and may, by agreement with the pledgor,apply the proceeds obtained from the auction or sale to discharge the obligationbefore it is due or place such proceeds in escrow.

- Article 434

A pledgee shall be liable for compensation where he, during the effective periodof the pledge, repledges the pledged property without the consent of the pledgor to athird person and thus causes destruction, damage, or loss to the pledged property.

- Article 435

A pledgee may waive his right to the pledge. Where a debtor creates a pledge onhis own property and the pledgee waives his right to the pledge, the other securityproviders shall be exempted from the security liability to the extent of the rights andinterests of the pledgee that are forfeited owing to the waiver of his priority to be paidfrom the collateral, unless the other security providers are committed to still providesecurity.

- Article 436

A pledgee shall return the pledged property after the debtor has performed hisobligation or the pledgor has paid the secured claim before it is due.

Where a debtor fails to perform an obligation due or an event upon theoccurrence of which the pledge is to be enforced as agreed upon by the parties occurs,the pledgee may, by agreement with the pledgor, appraise and accept the pledgedproperty as satisfaction of his claim, or have priority to be paid from the proceedsobtained from auction or sale of the pledged property.

The appraisal or sale of the pledged property shall be based on the market price.

- Article 437

A pledgor may request the pledgee to enforce the pledge in a timely manner afterexpiration of the period for the performance of the obligation; where the pledgee failsto do so, the pledgor may request the people’s court to have the pledged property soldat auction or in a sale.

Where a pledgor requests the pledgee to enforce the pledge in a timely manner,and damage is caused to the pledgor owing to the pledgee’s indolence in doing so, thepledgee shall be liable for compensation.

- Article 438

After a pledged property is appraised and accepted by the pledgee as full orpartial satisfaction of his claim, or is sold at auction or in a sale, where the value of

the pledged property as appraised or the proceeds obtained from auction or sale is inexcess of the amount of the obligation owed, the excessive portion shall belong to thepledgor, while any deficiency shall be satisfied by the debtor.

- Article 439

A pledgor and a pledgee may create a maximum pledge for floating claims uponagreement.

In addition to the relevant provisions of this Section, the relevant provisions of

**Section 2** of Chapter 17 of this Book shall be applied mutatis mutandis to the

maximum pledge for floating claims.

**Section 2** Pledge on a Right

- Article 440

The following rights, which a debtor or a third person is entitled to dispose of,

may be pledged:

- (1) bills of exchange, promissory notes, and checks;

- (2) bonds and certificates of deposits;

- (3) warehouse receipts and bills of lading;

- (4) transferable fund shares and equity;

- (5) transferable proprietary rights consisted in intellectual property such as theright to the exclusive use of registered trademarks, patent rights, and copyrights;

- (6) existing and after-acquired accounts receivables; and

- (7) other proprietary rights that may be pledged in accordance with the

provisions of laws and administrative regulations.

- Article 441

Unless otherwise provided by law, a pledge on a bill of exchange, promissorynote, check, bond, certificate of deposits, warehouse receipt, or bill of lading iscreated at the time when the certificate of such a right is delivered to the pledgee, or,in the absence of such a certificate, at the time when the pledge is registered.

- Article 442

Where the maturity date for the payment or the delivery of goods against apledged bill of exchange, promissory note, check, bond, certificate of deposits,

warehouse receipt, or bill of lading precedes the due date of the principal claim, thepledgee may cash the certificate or take delivery of the goods, and, upon agreementwith the pledgor, apply the purchase price or the goods accepted to discharge theobligation before it is due or place it in escrow.

- Article 443

A pledge on fund shares or equity is created upon registration of the pledge.

The fund shares or equity, after being pledged, may not be transferred unlessotherwise agreed by the pledgor and the pledgee through consultation. The proceedsobtained by the pledgor from the transfer of the pledged fund shares or equity shall beapplied to pay to the pledgee to discharge the obligation before it is due or be placedin escrow.

- Article 444

A pledge on a proprietary right in intellectual property, such as the right to theexclusive use of a registered trademark, a patent right, or copyright, is created uponregistration.

A proprietary right in intellectual property, after being pledged, may not betransferred or licensed by the pledgor to another person, unless otherwise agreed bythe pledgor and the pledgee through consultation. The proceeds obtained by thepledgor from the transfer or licensing of the proprietary right in the pledgedintellectual property shall be applied to pay to the pledgee to discharge the obligationbefore it is due or be placed in escrow.

- Article 445

A pledge on an account receivable is created upon registration.

An account receivable, after being pledged, may not be transferred unlessotherwise agreed by the pledgor and the pledgee through consultation. The proceedsobtained by the pledgor from the transfer of the account receivable shall be applied topay to the pledgee to discharge the obligation before it is due or be placed in escrow.

- Article 446

In addition to the provisions of this Section, the relevant provisions of Section 1of this Chapter shall be applied to the pledge on rights.

**Chapter XIX** Lien

- Article 447

Where a debtor fails to perform his obligation due, the creditor may retain thedebtor’s movable property which is already in the lawful possession of the creditorand has priority to be paid from the movable property.

The creditor as specified in the preceding paragraph is the lienholder, themovable property in his possession for this purpose is the property under lien.

- Article 448

The movable property retained under a lien by the creditor shall be in the samelegal relationship as the underlying claim, unless the lienholder and the debtor areboth enterprises.

- Article 449

The movable property that may not be retained under a lien as provided by lawor agreed by the parties may not be so retained.

- Article 450

Where the property retained under a lien is a divisible thing, the value of theretained property shall be equivalent to the amount of the obligation.

- Article 451

A lienholder is obligated to well keep the retained property and shall be liable forcompensation where the retained property is destructed, damaged, or lost due toimproper custody.

- Article 452

A lienholder has the right to collect the fruits and proceeds accrued from theproperty retained under a lien.

The fruits and proceeds as specified in the preceding paragraph shall first beapplied to offset the expenses for collecting them.

- Article 453

A lienholder and the debtor shall reach an agreement on the term of performanceof the obligation after the property is retained under the lien; where there is noagreement or the agreement is unclear, the lienholder shall give the debtor a period of60 or more days as the term of performance, unless the retained movable property isfresh, living, or perishable so that it is hard to keep it for long. Where a debtordefaults upon expiration of the term of performance, the lienholder may, uponagreement with the debtor, appraise and accept the retained property to fully orpartially satisfy the obligation, or be paid with priority from the proceeds obtainedfrom auction or sale of the retained property.

The appraisal or sale of the retained property shall be based on the market price.

- Article 454

A debtor may request the lienholder to enforce the lien after expiration of the

term of performance of the obligation; where the lienholder fails to do so, the debtormay request the people’s court to have the retained property sold at auction or in asale.

- Article 455

After the property retained under a lien is appraised and accepted by thelienholder as full or partial satisfaction of his claim, or is sold at auction or in a sale,where the value of the retained property or the proceeds obtained from auction or saleof the retained property is in excess of the amount of the obligation owed, theexcessive portion shall belong to the debtor, while any deficiency shall be satisfied bythe debtor.

- Article 456

Where a lien is created on a movable property on which a mortgage or pledgehas already been created, the lienholder has priority to be paid.

- Article 457

A lien is extinguished where the lienholder loses possession of the retainedproperty or accepts another form of security provided by the debtor.

**Part Five** Possession

**Chapter XX** Possession

- Article 458

In the case of possession of immovable or movable property based on acontractual relationship, matters such as the use of the immovable or movableproperty, the benefits therefrom, and the default liability shall be subject to theagreement in the contract; where there is no agreement thereon in the contract or theagreement is unclear, the relevant provisions of laws shall be applied.

- Article 459

Where damage is caused to the immovable or movable property by its possessoras a result of use of the property, a mala fide possessor shall be liable forcompensation.

- Article 460

Where an immovable or movable property is in the possession of another person,a person holding a right in the property may request the possessor to return theoriginal property and its fruits and proceeds, provided that the necessary expensesincurred by a bona fide possessor for the maintenance of the immovable or movableproperty shall be paid.

- Article 461

Where the immovable or movable property in another person’s possession isdestructed, damaged, or lost, and a person holding a right in the property requests forcompensation, the possessor shall return to the right holder the amount of insurancepayment, compensation or indemnity he has received for the property destructed,damaged, or lost; where the right holder has not been fully compensated, a possessormala fide shall also compensate for the loss.

- Article 462

Where an immovable or movable property is trespassed or converted, itspossessor is entitled to request restitution. Where there is a nuisance against thepossession, the possessor has the right to request the removal of the nuisance or theelimination of the danger. Where damage is caused as a result of the trespass,conversion, or nuisance, the possessor has the right to request compensatory damagesin accordance with law.

The possessor’s right to request for restitution is extinguished if such a right hasnot been exercised within one year from the date the trespass or conversion occurs.

.

**Book Three** Contracts

**Part One** General Provisions

**Chapter I** General Rules

- Article 463

This Book regulates the civil-law relations arising from contracts.

- Article 464

A contract is an agreement on the establishment, modification, or termination of acivil juristic relationship between persons of the civil law.

An agreement on establishing a marriage, adoption, guardianship, or the likepersonal relationships shall be governed by the provisions of laws providing for suchpersonal relationships; in the absence of such provisions, the provisions of this Bookmay be applied mutatis mutandis according to the nature of such agreements.

- Article 465

A contract formed in accordance with law is protected by law.

A contract formed in accordance with law is legally binding only on the partiesthereto, unless otherwise provided by law.

- Article 466

Where the parties have a dispute on the understanding of a contract clause, themeaning of the disputed clause shall be determined according to the provisions in thefirst paragraph of Article 142 of this Code.

Where a contract is made in two or more languages which are agreed to beequally authentic, the words and sentences used in each text shall be presumed tohave the same meaning. Where the words and sentences used in each text areinconsistent, interpretation thereof shall be made in accordance with the relatedclauses, nature, and purpose of the contract, and the principle of good faith, and thelike.

- Article 467

For a contract not explicitly provided in this Code or other laws, the GeneralProvisions of this Book shall be applied, and the provisions provided in this Book andother laws on a contract which is most similar to the said contact may be appliedmutatis mutandis.

The laws of the People's Republic of China shall apply to the contracts ofSino-foreign equity joint venture, contracts of Sino-foreign contractual joint venture,or contracts of Sino-foreign cooperation in the exploration and exploitation ofnatural resources that to be performed within the territory of the People's Republic ofChina.

- Article 468

For a creditor-debtor relation not arising from a contract, the provisions of lawsrelating to such relations shall be applied; in the absence of such provisions, therelevant provisions of the General Provisions of this Book shall be applied, unlessthey shall not be applied based on the nature of the creditor-debtor relation.

**Chapter II** Conclusion of Contracts

- Article 469

The parties may conclude a contract in writing, orally, or in other forms.

A writing refers to any form that renders the content contained therein capable ofbeing represented in a tangible form, such as a written agreement, letter, telegram,telex, or facsimile.

A data message in any form, such as electronic data interchange and e-mails, thatrenders the content contained therein capable of being represented in a tangible formand accessible for reference and use at any time shall be deemed as a writing.

- Article 470

The content of a contract shall be agreed by the parties and generally includes thefollowing clauses:

- (1) name or designation and domicile of each party;

- (2) objects;

- (3) quantity;

- (4) quality;

- (5) price or remuneration;

- (6) time period, place, and manner of performance;

- (7) default liability; and

- (8) dispute resolution.

The parties may conclude a contract with reference to the various types of modelcontracts.

- Article 471

The parties may conclude a contract by making an offer and acceptance or othermeans.

- Article 472

An offer is an expression of intent to conclude a contract with another person, and

the expression of intent shall conform to the following conditions:

- (1) the content shall be specific and definite; and

- (2) it is indicated therein that the offeror is to be bound by his expression of intentupon acceptance thereof by an offeree.

- Article 473

An invitation to offer is a manifestation that a person expects another person tomake an offer to him. Auction announcements, bidding announcements, stockprospectuses, bond prospectuses, fund prospectuses, commercial advertisements andpromotions, and mailed price catalogs, and the like, are invitations to offer.

A commercial advertisement and promotion shall constitute an offer if its contentconforms to the conditions for an offer.

- Article 474

The time when an offer becomes effective shall be governed by the provisions of

- Article 137 of this Code.

- Article 475

An offer may be withdrawn. The withdrawal of an offer shall be governed by the

provisions of Article 141 of this Code.

- Article 476

An offer may be revoked, unless under any of the following circumstances:

- (1) the offeror has explicitly indicated that the offer is irrevocable by specifying atime limit for acceptance or in any other manner; or

- (2) the offeree has reasons to believe that the offer is irrevocable and the offereehas made reasonable preparations to perform the contract.

- Article 477

Where an expression of intent to revoke an offer is made in a real-timecommunication, the content of such expression of intent shall be known to the offereebefore the offeree makes an acceptance; where an expression of intent to revoke anoffer is not made in a real-time communication, it shall reach the offeree before theofferee makes an acceptance.

- Article 478

An offer becomes invalid under any of the following circumstances:

- (1) the offer is rejected;

- (2) the offer is revoked in accordance with law;

- (3) the offeree makes no acceptance prior to expiration of the time limit foracceptance; or

- (4) the offeree materially alters the content of the offer.

- Article 479

An acceptance is an expression of intent of the offeree to accept an offer.

- Article 480

An acceptance shall be made by means of notice, except that an acceptance maybe made by performing an act according to the parties’ course of dealing or asindicated in the offer.

- Article 481

An acceptance shall reach the offeror within the time limit specified in the offer.

Where no time limit for acceptance is specified in the offer, an acceptance shall

reach the offeror in accordance with the following provisions:

- (1) where an offer is made in a real-time communication, acceptance shall bemade promptly; or

- (2) where an offer is not made in a real-time communication, the acceptance

notice shall reach the offeror within a reasonable period of time.

- Article 482

Where an offer is made through a letter or a telegram, the time limit foracceptance shall be counted from the date shown on the letter or the date the telegramis handed in for dispatch or, if no such a date is shown on the letter, from the mailingdate shown by the postmark of the letter. Where an offer is made by means ofinstantaneous communications such as telephone calls, facsimiles, or e-mails, the timelimit for acceptance shall be counted from the moment the offer reaches the offeree.

- Article 483

A contract is formed at the time when an acceptance becomes effective, unlessotherwise provided by law or agreed by the parties.

- Article 484

Where an acceptance is made by means of notice, the time when the acceptancebecomes effective shall be governed by the provisions of Article 137 of this Code.

Where an acceptance notice is not required, the acceptance becomes effectivewhen an act of acceptance is performed according to the parties’ course of dealing oras indicated by the offer.

- Article 485

An acceptance may be withdrawn. The provisions of Article 141 of this Code

shall apply to the withdrawal of an acceptance.

- Article 486

Where an offeree makes an acceptance beyond the time limit for acceptance, orwhere the acceptance is made within the time limit for acceptance but it cannot reach

the offeror in time under normal circumstances, such an acceptance constitutes a newoffer unless the offeror timely notifies the offeree that the acceptance is effective.

- Article 487

Where an offeree makes an acceptance notice within the time limit for acceptance,if the notice would have reached the offeror in time under normal circumstances butreaches the offeror beyond the time limit for other reasons, the acceptance shall beeffective unless the offeror timely notifies the offeree that the acceptance is notaccepted as it exceeds the time limit for acceptance.

- Article 488

The content of an acceptance shall be consistent with the content of the offer.Where the offeree proposes in the acceptance any material alteration to the content ofthe offer, it shall constitute a new offer. An alteration concerning the object of thecontract, the quantity, quality, price or remuneration, time period of performance,place and manner of performance, default liability, the methods of dispute resolution,or the like is a material alteration to the content of an offer.

- Article 489

Where an acceptance makes a non-material alteration to the offer, the acceptanceshall be effective and the content of the contract shall be as altered by the acceptance,unless the offeror objects in time, or the offer indicates that an acceptance may notmake any alteration to the content of the offer.

- Article 490

Where the parties conclude a contract in the form of a written agreement, thecontract is formed at the time when the parties all sign, stamp, or put their fingerprintson the memorandum. Prior to signing, stamping, or putting their fingerprints thereon,where one of the parties has already performed the principal obligation and the otherparty has accepted the performance, the contract is formed at the time of suchacceptance.

Where a contract is required to be concluded in writing in accordance with lawsor administrative regulations or agreed by the parties and the parties fail to make thecontract in writing, if one of the parties has already performed the principal obligationand the other party has accepted the performance, the contract is formed at the time ofsuch acceptance.

- Article 491

Where the parties conclude a contract in the form of a letter, data message, or thelike, and a confirmation letter is required to be signed, the contract is formed when theconfirmation letter is signed.

Where the information about goods or services published by a party viainformation network, such as internet, conforms to the conditions for an offer, unlessotherwise agreed by the parties, a contract is formed at the time when the other partychooses such product or service and successfully submits the order.

- Article 492

The place where an acceptance becomes effective is the place where the contractis formed.

Where a contract is concluded in the form of data message, unless otherwiseagreed by the parties, the recipient’s principal place of business is the place where thecontract is formed; in the absence of a principal place of business, the recipient’sdomicile is the place where the contract is formed.

- Article 493

Where the parties conclude a contract in the form of a memorandum of contract,unless otherwise agreed by them, the place where the contract is finally signed,stemped, or fingerprinted is the place where the contract is formed.

- Article 494

Where the State issues a State purchase order or a mandatory assignment inaccordance with the needs such as emergency and disaster relief, pandemic preventionand control, or the like, the persons of the civil law concerned shall conclude acontract in accordance with the rights and obligations provided by the relevant lawsand administrative regulations.

The party that has an obligation to make an offer in accordance with theprovisions of laws and administrative regulations shall make a reasonable offer in atimely manner.

The party that has an obligation to make an acceptance in accordance with theprovisions of laws and administrative regulations shall not reject the reasonablerequest of the other party to conclude a contract.

- Article 495

A letter of subscription, letter of order, and letter of reservation, and the like, inwhich the parties agree to conclude a contract within a certain period of time in thefuture, constitutes a preliminary contract.

Where one of the parties fails to perform the obligation to conclude a contractagreed in the preliminary contract, the other party may request such party to bear theliability for breach of the preliminary contract.

- Article 496

A standard clause refers to a clause formulated in advance by a party for thepurpose of repeated use which has not been negotiated with the other party whenconcluding the contract.

Upon concluding a contract, where a standard clause is used, the party providingthe standard clause shall determine the parties’ rights and obligations in accordancewith the principle of fairness, and shall, in a reasonable manner, call the other party'sattention to the clause concerning the other party’s major interests and concerns, suchas a clause that exempts or alleviates the liability of the party providing the standardclause, and give explanations of such clause upon request of the other party. Wherethe party providing the standard clause fails to perform the aforementioned obligation

of calling attention or giving explanations, thus resulting in the other party’s failure topay attention to or understand the clause concerning his major interests and concerns,the other party may claim that such clause does not become part of the contract.

- Article 497

A standard clause is void under any of the following circumstances:

- (1) existence of a circumstance under which the clause is void as provided in

**Section 3** of Chapter VI of Book One and Article 506 of this Code;

- (2) the party providing the standard clause unreasonably exempts or alleviateshimself from the liability, imposes heavier liability on the other party, or restricts themain rights of the other party; or

- (3) the party providing the standard clause deprives the other party of his mainrights.

- Article 498

Where a dispute arises over the understanding of a standard clause, the clauseshall be interpreted in accordance with its common understanding. Where there aretwo or more interpretations of a standard clause, the clause shall be interpreted in amanner unfavorable to the party providing the standard clause. Where a standardclause is inconsistent with a non-standard clause, the non-standard clause shallprevail.

- Article 499

Where a rewarder through making a public announcement promises to pay areward to anyone who has completed a particular act, the person who has completedthe act may request the rewarder to pay.

- Article 500

During the course of concluding a contract, the party that falls under any of thefollowing circumstances and causes loss to the other party shall bear the liability forcompensation:

- (1) under the guise of concluding a contract, engaging in consultation withmalicious intention;

- (2) intentionally concealing material facts or providing false informationconcerning the conclusion of the contract; or

- (3) conducting any other acts contrary to the principle of good faith.

- Article 501

The parties shall not disclose or improperly use the trade secrets or otherconfidential information that are obtained in the course of concluding a contract,regardless of whether the contract is formed or not. The party that discloses orimproperly uses such trade secrets or information and thus causes losses to the otherparty shall bear the liability for compensation.

**Chapter III** Effect of Contracts

- Article 502

A contract formed in accordance with law becomes effective upon its formation,unless otherwise provided by law or agreed by the parties.

Where there are laws or administrative regulations providing that a contract shallbe subject to the approval and other procedures, such provisions shall be followed.Where failure to complete the approval or other procedures is to affect the validity ofthe contract, the validity of the clauses concerning the performance of an obligation offiling for approval, and the like, and the other relevant clauses in the contract shall notbe affected. Where the party obligated to complete application for approval or otherprocedures fails to do so, the other party may request the former party to bear theliability for breach of such obligation.

Where there are laws or administrative regulations providing that modification,assignment, or rescission of a contract shall be subject to approval or other procedures,such provisions shall be followed.

- Article 503

Where a person without authority concludes a contract in the name of a principal,and if the principal has already started performing the contractual obligations oraccepted the performance of the other party, the contract is deemed ratified.

- Article 504

Where the legal representative of a legal person or the responsible person of anunincorporated organization concludes a contract ultra vires, such an act is effectiveand the contract is binding on the legal person or the unincorporated organizationunless the other party knows or should have known that the legal representative or theresponsible person acts ultra vires,.

- Article 505

Where the parties conclude a contract beyond their scope of business, the validityof the contract shall be determined according to the provisions in Section 3 of ChapterVI of Book One of this Code and this Book, and the contract shall not be determinedas invalid solely on the ground that it is beyond their scope of business.

- Article 506

An exculpatory clause in a contract exempting the liability on the following acts

are void:

- (1) causing physical injury to the other party; or

- (2) causing losses to the other party’s property intentionally or due to grossnegligence.

- Article 507

Where a contract does not take effect, or is void, revoked, or terminated, thevalidity of a clause concerning dispute resolution shall not be affected.

- Article 508

The validity of a contract which is not covered by the provisions in this Bookshall be governed by the relevant provisions in Chapter VI of Book One of this Code.

**Chapter IV** Performance of Contracts

- Article 509

The parties shall fully perform their respective obligations as contracted.

The parties shall comply with the principle of good faith, and perform suchobligations as sending notices, rendering assistances, and keeping confidentiality inaccordance with the nature and purpose of the contract and the course of dealing .

The parties shall avoid wasting the resources, polluting the environment, ordamaging the ecology in the course of performance of the contract.

- Article 510

Where the parties have not agreed on such content as the quality, price orremuneration, or the place of performance, and the like, or the agreement is unclear,after the contract becomes effective, the parties may make a supplementary agreement;where the parties fail to reach a supplementary agreement, such content shall bedetermined according to the relevant clauses of the contract or the course of dealing.

- Article 511

Where an agreement between the parties concerning the content of their contractis unclear and such content cannot be determined according to the provisions of thepreceding Article, the following provisions shall be applied:

- (1) where the quality requirements are not clearly stipulated, the contract shall beperformed in accordance with a mandatory national standard, or a recommendatorynational standard in the absence of a mandatory national standard, or the standard ofthe industry in the absence of a recommendatory national standard. In the absence ofany national or industrial standards, the contract shall be performed in accordancewith the general standard or a specific standard conforming to the purpose of thecontract.

- (2) where the price or remuneration is not clearly stipulated, the contract shall beperformed in accordance with the market price in the place of performance at the timethe contract is concluded. Where the government-set or government-guided price shallbe applied as required by law, the contract shall be performed on such a price.

- (3) where the place of performance is not clearly stipulated, the contract shall beperformed at the place of the party receiving money where payment of money isinvolved, or, where real estate is to be delivered, at the place where the real estate islocated. For other subject matters, the contract shall be performed at the place wherethe party performing the obligation is located.

- (4) where the period of performance is not clearly stipulated, the debtor mayperform his obligations at any time, and the creditor may request the debtor toperform at any time, provided that he shall give the debtor necessary time forpreparation;

- (5) where the mode of performance is not clearly stipulated, the contract shall beperformed in a manner conducive to realizing the purpose of the contract; and

- (6) where the allocation of expenses for performance is not clearly stipulated, theexpenses shall be borne by the party performing the obligation; where the expensesfor performance are increased owing to the creditor’s reason, the creditor shall bearthe increased part of the expenses.

- Article 512

Where the object of an electronic contract concluded through internet or otherinformation network is the delivery of goods and the goods are to be delivered byexpress delivery services, the time of delivery is the time of acknowledging receipt ofthe goods by the recipient. Where the object of the said electronic contract is theprovision of services, the time for provision of the service is the time stated in theautomatic generated electronic certificate or physical certificate. Where there is notime stated in such a certificate or the time stated therein is inconsistent with theactual time for provision of the service, the actual time for provision of the serviceshall prevail.

Where the subject matter of the said electronic contract is delivered by onlinetransmission, the time of delivery is the time when the subject matter of the contractenters the specific system designated by the other party and can be searched andidentified.

Where the parties to the said electronic contract agree otherwise on the mode andtime of delivery of goods or provision of services, such agreement shall be compliedwith.

- Article 513

Where a government-set or government-guided price is adopted in a contract, ifthe said price is adjusted within the delivery period stipulated in the contract, thecontract price shall be the price as adjusted at the time of delivery. Where an overduedelivery of the subject matter occurs, the contract price shall be the original price ifthe price rises at the time of delivery, or the price as adjusted if the price falls at thetime of delivery. Where a delayed delivery of the subject matter or an overdue

payment occurs, the contract price shall be the price as adjusted if the price rises, orthe original price if the price falls.

- Article 514

Where an obligation is payment of money, unless otherwise provided by law oragreed by the parties, the creditor may request the debtor to perform the obligation bythe lawful currency of the place of actual performance.

- Article 515

Where a contract has multiple objects and the debtor is required to perform onlyone of them, the debtor has the right of choice to choose the object to perform, unlessotherwise provided by law or agreed by the parties, or otherwise determined by thecourse of dealing.

Where the party with the right of choice fails to make the choice within theagreed period or upon expiration of the period of performance, and still fails to makethe choice within a reasonable period of time after being demanded, the right ofchoice shall be shifted to the other party.

- Article 516

A party shall promptly notify the other party when exercising the right of choice,and the object of the contract to be performed shall be ascertained at the time whensuch notice reaches the other party. The ascertained object shall not be changed,unless otherwise consented to by the other party.

Where one of the objects available for choice becomes impossible to perform, theparty with the right of choice shall not choose such object to perform, unless theimpossibility to perform is caused by the other party.

- Article 517

Where there are two or more creditors, if the object is divisible and each creditoris entitled to the claim in proportion to his own share, then the claim is a claim byshare; where there are two or more debtors, if the object is divisible and each debtorassumes the obligation in proportion to his own share, then the obligation is anobligation by share.

Where it is difficult to determine the share among the creditors with a claim byshare or the debtors with an obligation by share, each is deemed to have or assume anequal share.

- Article 518

Where there are two or more creditors, and any or all of the creditors may requestthe debtor to perform the obligation, their claim is a joint and several claim; wherethere are two or more debtors, and the creditor can request any or all of the debtors toperform the full obligation, the obligation is a joint and several obligation.

A joint and several claim or a joint and several obligation shall be provided bylaw or agreed by the parties.

- Article 519

Where it is difficult to determine the share of obligation among the debtorsassuming joint and several liabilities, each debtor is deemed to owe an equal share.

A debtor assuming joint and several liabilities who has assumed obligation inexcess of his own share has the right to contribution against the other debtorsassuming joint and several liabilities to the extent of the share not performed by theother debtors, and accordingly shall be entitled to the rights of a creditor, providedthat the other creditors’ interests shall not be harmed. The defenses of the otherdebtors assuming joint and several liabilities against the creditor may be assertedagainst such a debtor.

Where a debtor assuming joint and several liabilities against whom the right tocontribution is claimed is unable to perform the share he is liable to assume, the otherdebtors assuming joint and several liabilities shall be liable for the relevant part of theobligation on a pro rata basis.

- Article 520

Where one of the debtors assuming joint and several liabilities has performed hisobligation, offset his obligation, or placed the subject matter of the obligation inescrow, the obligation of the other debtors owed to the creditor is extinguished to thecorresponding extent, and such a debtor has the right to contribution against the otherdebtors in accordance with the provisions of the preceding Article.

Where the obligation of one of the debtors assuming joint and several liabilities isdischarged by the creditor, the obligation of the other debtors assuming joint andseveral liabilities owed to the creditor is extinguished to the extent of the share thatsuch a debtor assumes.

Where the obligation of one of the debtors assuming joint and several liabilitieshas merged with the claim of the creditor to be held by the same person, afterdeducting such share of obligation, the creditor’s claim against the other debtorsassuming joint and several liabilities continues to exist.

Where a creditor delays in accepting the performance of one of the debtorsassuming joint and several liabilities, such delay takes effect on the other debtorsassuming joint and several liabilities.

- Article 521

Where it is difficult to determine the share among the creditors with joint andseveral claims, each creditor is deemed to have an equal share.

A creditor who has accepted the performance of obligation in excess of his ownshare shall reimburse the other creditors with joint and several claims with him on apro rata basis.

The relevant provisions on a joint and several obligation in this Chapter may beapplied to a joint and several claim mutatis mutandis.

- Article 522

Where the parties agree that the debtor shall perform the obligation to a third

person, if the debtor fails to perform the obligation to the third person or theperformance does not conform to the agreement, the debtor shall bear default liabilityto the creditor.

Where it is provided by law or agreed by the parties that a third person maydirectly request the debtor to perform the obligation to him, and the third person doesnot explicitly reject it within a reasonable period of time, if the debtor fails to performthe obligation to the third person or the performance does not conform to theagreement, the third person may request the debtor to bear default liability. Thedefenses that the debtor has against the creditor may be asserted against the thirdperson.

- Article 523

Where the parties agree that the obligation shall be performed by a third person tothe creditor, if the third person fails to perform the obligation or the performance doesnot conform to the agreement, the debtor shall bear default liability to the creditor.

- Article 524

Where a debtor fails to perform an obligation, and a third person has an lawfulinterest in the performance of the obligation, the third person is entitled to perform itto the creditor on behalf of the debtor, unless the obligation may only be performed bythe debtor based on the nature of the obligation, as agreed by the parties, or asprovided by law.

After the creditor accepts the performance of such obligation by the third person,his claim against the debtor shall be assigned to the third person, unless otherwiseagreed by the debtor and the third person.

- Article 525

Where the parties have mutual obligations to each other and there is an order ofperformance of the obligations, the parties shall perform the obligations at the sametime. Any party has the right to reject the other party's request for performance beforethe other party performs. Any party has the right to reject the other party's request forthe corresponding performance if the other party’s performance does not conform tothe agreement.

- Article 526

Where the parties have mutual obligations to each other and there is an order ofperformance of the obligations, if the party obligated to perform first fails to performthe obligation, the party obligated to perform later has the right to reject the requestfor performance made by that party. Where the performance of the party obligated toperform first does not conform to the agreement, the party obligated to perform laterhas the right to reject the request made by the former party for performance of thecorresponding obligation.

- Article 527

A party obligated to perform the obligation first may suspend his performance ifthere is definite evidence proving that the other party falls under any of the followingsituations:

- (1) its operating conditions are seriously deteriorated;

- (2) it transfers property or withdraws capital to evade debts;

- (3) the good will of its business has been lost; or

- (4) there’s another circumstance under which it has lost or is losing its ability toperform the obligation.

A party that suspends the performance with no such definite evidence shall beardefault liability.

- Article 528

A party who suspends performance in accordance with the provisions of thepreceding Article shall notify the other party in a timely manner. The performanceshall be resumed if the other party provides an appropriate bond. After a partysuspends its performance, where the other party fails to restore his ability to performthe obligation and fails to provide an appropriate bond within a reasonable period oftime, it shall be deemed to be an indication through his act that the party will notperform his principal obligation, and the party that suspends the performance maycancel the contract and may request the other party to bear default liability.

- Article 529

Where a debtor’s performance of an obligation has become difficult owing to thereason that the creditor fails to notify the debtor that it has split into two or moreentities, merges with another entity, or changed its domicile, the debtor may suspendperformance or place the subject matter in escrow.

- Article 530

A creditor may reject the debtor’s early performance of the obligation, unless theearly performance is not detrimental to the interests of the creditor.

Any additional expenses incurred to the creditor due to the debtor’s earlyperformance of the obligation shall be borne by the debtor.

- Article 531

A creditor may reject the debtor’s partial performance of the obligation, unlessthe partial performance is not detrimental to the interests of the creditor.

Any additional expenses incurred to the creditor due to the debtor’s partialperformance of the obligation shall be borne by the debtor.

- Article 532

After a contract becomes effective, any party shall not fail to perform itscontractual obligations on the ground that either party’s name or entity name, legalrepresentative, the responsible person, or the person handling the contract has beenchanged.

- Article 533

After a contract is formed, where a fundamental condition upon which the

contract is concluded is significantly changed which are unforeseeable by the partiesupon conclusion of the contract and which is not one of the commercial risks, ifcontinuing performance of the contract is obviously unfair to one of the parties, theparty that is adversely affected may re-negotiate with the other party; where such anagreement cannot be reached within a reasonable period of time, the parties mayrequest the people’s court or an arbitration institution to rectify or rescind the contract.

The people’s court or an arbitration institution shall rectify or rescind the contractin compliance with the principle of fairness, taking into account the actualcircumstances of the case.

- Article 534

Where the parties take advantage of the contract to commit an act that endangersthe State’s interests and public interests, the market regulatory authority and otherrelevant administrative authorities shall be responsible for supervising and handling itin accordance with the provisions of laws and administrative regulations.

**Chapter V** Preservation of Contracts

- Article 535

Where a debtor’s right against a counterparty, or an accessory right related thereto,has not been claimed against the counterparty owing to the debtor’s indolence, and theenforcement of the creditor’s due claim is thus adversely affected, the creditor mayrequest the people's court to allow him to exercise by subrogation the debtor's claimagainst the counterparty of the debtor in his own name, unless such claim belongsexclusively to the debtor himself.

The scope of the right of subrogation is limited to the creditor's due claim. Thenecessary expenses for the creditor to exercise the right of subrogation shall be borneby the debtor.

The counterparty’s defenses against the debtor may be asserted against thecreditor.

- Article 536

Prior to the due date of the creditor’s claim, where there exists a circumstanceunder which the limitation period for the debtor’s principal claim or an accessoryclaim related thereto is to expire, or the debtor fails to timely declare his claim in abankruptcy proceeding, and the enforcement of the creditor’s claim is thus adverselyaffected, the creditor may, by subrogation, request the counterparty of the debtor toperform his obligation to the debtor, declare the debtor’s claim to the bankruptcyadministrator, or take other necessary acts.

- Article 537

Where the people’s court determines that the right of subrogation has beenestablished, the counterparty of the debtor shall perform the obligation to the creditor.After the performance is accepted by the creditor, the corresponding rights andobligations between the creditor and the debtor, and those between the debtor and thecounterparty, are terminated. Where the debtor’s claim or an accessory claim relatedthereto against the counterparty is subject to preservation or enforcement measures, orwhere the debtor becomes bankrupt, it shall be dealt with in accordance with theprovisions of the relevant laws.

- Article 538

Where a debtor gratuitously disposes of his proprietory rights and interests bywaiving his claims, waiving the security for his claims, or transferring his propertieswithout consideration, and the like, or maliciously extends the period of performanceof his due claim, and the enforcement of the creditor’s claim is thus adversely affected,the creditor may request the people's court to revoke the debtor's act.

- Article 539

Where a debtor transfers his property at an obviously unreasonably low price,takes anothers’ property or provides security for anothers’ obligation at an obviouslyunreasonable high price, and the enforcement of the creditor’s claim is thus adverselyaffected, the creditor may request the people’s court to revoke the debtor’s act if thecounterparty of the debtor knows or should have known such circumstance.

- Article 540

The scope of the right to revocation shall be limited to the creditor’s claim. Thenecessary expenses for the creditor to exercise the right to revocation shall be borneby the debtor.

- Article 541

The right to revocation shall be exercised within one year from the date on whichthe creditor knows or should have known the cause for the revocation. The right torevocation shall be extinguished where a creditor does not exercise such right withinfive years since the date on which the act of the debtor occurs.

- Article 542

Where an act of the debtor adversely affecting the enforcement of the creditor’sclaim is revoked, such act does not have legal effect ab initio.

**Chapter VI** Modification and Assignment of Contracts

- Article 543

The parties may modify the contract upon agreement through consultation.

- Article 544

Where the content of the contract that the parties agree to modify is not clear, it ispresumed that the contract has not been modified.

- Article 545

A creditor may assign his claim in whole or in part to a third person, except that:

- (1) a claim is not assignable by virtue of its nature;

- (2) a claim is not assignable as agreed by the parties; or

- (3) a claim is not assignable in accordance with law.

Where the parties agree that a non-pecuniary claim may not be assigned, suchagreement shall not be asserted against a bona fide third person. Where the partiesagree that a pecuniary claim may not be assigned, such agreement shall not beasserted against a third person.

- Article 546

Where a creditor assigns his claim but fails to notify the debtor thereof, theassignment is not effective against the debtor.

The notice of the assignment of a claim may not be revoked, unless consented toby the assignee.

- Article 547

Where a creditor assigns his claim, the assignee shall acquire the accessory rightrelated to the claim, unless the accessory right belongs exclusively to the creditor.

Failure to register the assignment of the accessory right or failure to change thepossession thereof shall not affect the acquisition of the accessory right by theassignee.

- Article 548

After a debtor receives a notice of assignment of a claim, the debtor’s defensesagainst the assignor may be asserted against the assignee.

- Article 549

A debtor may claim a set-off against the assignee under any of the following

circumstances:

- (1) when the debtor receives the notice of assignment of a claim, the debtor has aclaim against the assignor which becomes due prior to or at the same time of the duedate of the assigned claim; or

- (2) the debtor’s claim and the assigned claim are generated on the basis of thesame contract.

- Article 550

The expenses for performance increased due to the assignment of a claim shall beborne by the assignor.

- Article 551

Where a debtor delegates his obligation in whole or in part to a third person, theconsent of the creditor shall be obtained.

The debtor or the third person may demand the creditor to give his consent withina reasonable period of time. Where the creditor makes no indication, it shall bedeemed as no consent given.

- Article 552

Where a third person agrees with the debtor to join in the obligation and notifiesthe creditor thereof, or a third person indicates to the creditor his willingness to join inthe obligation, if the creditor fails to explicitly make a rejection within a reasonableperiod of time, the creditor may request the third person to assume the joint andseveral obligation with the debtor to the extent of the obligation the third person iswilling to assume.

- Article 553

Where a debtor delegates his obligation, the new debtor may assert a defense ofthe original debtor against the creditor; where the original debtor has a claim againstthe creditor, the new debtor may not claim a set-off against the creditor.

- Article 554

Where a debtor delegates his obligation, the new debtor shall assume theaccessory obligation related to the principal obligation, unless the accessoryobligation belongs exclusively to the original debtor.

- Article 555

A party may assign his rights and delegate his obligations under a contract to athird person with the consent of the other party.

- Article 556

Where the rights and obligations under a contract are assigned and delegatedtogether, the provisions on assignment of claims and delegation of obligations shall beapplied.

**Chapter VII** Termination of Rights and Obligations under a Contract

- Article 557

A claim or obligation shall be terminated under any of the following

circumstances:

- (1) the obligation has been performed;

- (2) the obligations are offset against each other;

- (3) the debtor has placed the subject matter in escrow in accordance with law;

- (4) the creditor has exempted the obligation;

- (5) the claim and obligation are merged to be held by the same person; or

- (6) any other circumstance under which the parties’ agreement is terminated asprovided by law or agreed by the parties.

The relationship of rights and obligations under a contract shall be terminatedupon rescission of the contract.

- Article 558

After the parties’ claims and obligations are terminated, the parties shall, incompliance with the principle of good faith and the like, perform such obligations assending notification, rendering assistance, keeping confidentiality, and retrieving theused items according to the course of dealing.

- Article 559

Upon termination of a claim and an obligation, a right accessory to the claim shallbe extinguished concomitantly, unless otherwise provided by law or agreed by theparties.

- Article 560

Where a debtor owes to a creditor multiple obligations of the same kind, and thedebtor’s performance is not sufficient to discharge all of the obligations, upon makingperformance, the debtor shall designate which obligation is to be discharged, unlessotherwise agreed by the parties.

Where the debtor fails to make such a designation, the due obligation shall beperformed first. Where multiple obligations are all due, the obligation not secured orwith the least security shall be performed firs. Where none of the obligations aresecured or the obligations are equally secured, the obligation with which the debtorassumes the heaviest burden shall be performed first. Where the burdens are the same,the obligations shall be performed in the order of their due dates. Where the due datesare the same, the obligations shall be performed on a pro rata basis.

- Article 561

In addition to performing the principal obligation, a debtor shall pay to thecreditor interests and other expenses related to the enforcement of the obligation.Where the payment is not sufficient to discharge all of the obligations, unlessotherwise agreed by the parties, he shall perform the obligation in accordance with thefollowing order:

- (1) the relevant expenses incurred by the creditor for enforcing his claim;

- (2) the interests; and

- (3) the principal obligation.

- Article 562

The parties may rescind the contract upon agreement through consultation.

The parties may agree on the causes for rescission of the contract by a party.When a cause for rescission of contract arises, the party with the right to rescissionmay rescind the contract.

- Article 563

The parties may rescind the contract under any of the following circumstances:

- (1) the purpose of a contract is not able to be achieved due to force majeure;

- (2) prior to expiration of the period of performance, one of the parties explicitlyexpresses or indicates by his act that he will not perform the principal obligation;

- (3) one of the parties delays his performance of the principal obligation and stillfails to perform it within a reasonable period of time after being demanded;

- (4) one of the parties delays his performance of the obligation or has otherwiseacted in breach of the contract, thus makes it impossible for the purpose of thecontract to be achieved; or

- (5) any other circumstance as provided by law.

For a contract under which the debtor is required to continuously perform anobligation for an indefinite period of time, the parties thereto may rescind the contractat any time, provided that the other party shall be notified within a reasonable periodof time.

- Article 564

Where a time limit for exercising the right to rescind the contract is provided bylaw or agreed by the parties, if the parties have not exercised such right uponexpiration of the period, such a right shall be extinguished.

Where no time limit for exercising the right to rescind the contract is provided bylaw or agreed by the parties, such a right shall be extinguished if the party with theright to rescission does not exercise such right within one year after he knows orshould have known the causes for rescission, or within a reasonable period of timeafter being demanded by the other party.

- Article 565

Where one of the parties requests to rescind the contract in accordance with law,the other party shall be duly notified. The contract shall be rescinded at the time thenotice reaches the other party, or, where the notice states that the contract shall beautomatically rescinded if the debtor fails to perform his obligation within a specifiedperiod of time, the contrct shall be rescinded when the debtor fails to perform theobligation upon expiration of such specified period of time. Where the other party has

objections to the rescission of the contract, either party may request the people's courtor an arbitration institution to determine the validity of the rescission.

Where one of the parties, without notifying the other party, requests the rescissionof the contract by directly filing a lawsuit or applying for arbitration in accordancewith law, and the people’s court or arbitration institution confirms such request, thecontract shall be rescinded when a duplicated copy of the complaint or the applicationletter for arbitration is served on the other party.

- Article 566

After a contract is rescinded, where the obligations have not yet been performed,the performance shall cease; where the obligations have already been performed, theparties may, taking into account the performance status and the nature of the contract,request restoration to the original status or other remedial measures taken, and havethe right to request for compensation for losses.

Where a contract is rescinded due to a default, the party with the right to rescindthe contract may request the breaching party to bear default liability, unless otherwiseagreed by the parties.

After the principal contract is rescinded, a security provider shall still beobligated to secure the debtor’s liability, unless otherwise agreed in the securitycontract.

- Article 567

Termination of the relationship of rights and obligations under a contract does notaffect the validity of the contract clauses regarding settlement and liquidation.

- Article 568

Where the parties mutually owe obligations to each other, and the subject matterof the obligations are of the same kind and quality, any party may offset his obligationagainst the due obligation of the other party, unless the obligation cannot be offset byvirture of the nature of the obligations, or in accordance with the agreements by theparties or the provisions of law.

A party who claims a set-off shall notify the other party. The notice shall becomeeffective when it reaches the other party. No conditions or time limit may be attachedto the set-off.

- Article 569

Where the parties mutually owe obligations to each other and the subject matterof the obligations are not of the same kind or quality, the obligations may also beoffset upon agreement by the parties through consultation.

- Article 570

Where it is difficult to perform an obligation under any of the followingcircumstances, a debtor may place the subject matter in escrow:

- (1) the creditor refuses to accept the performance without just course;

- (2) the creditor cannot be located;

- (3) the creditor dies with his heirs or estate administrator not determined, or thecreditor loses his capacity for performing civil juristic acts with no guardiandetermined; or

- (4) any other circumstance as provided by law.

Where the subject matter is not suitable for being placed in escrew or theexpenses therefor are too high, the debtor may sell the subject matter through auctionor sale and place the proceeds thus obtained in escrow in accordance with law.

- Article 571

A subject matter or the proceeds obtained from auction or sale of the subjectmatter is placed in escrow where the debtor delivers the subject matter or proceedsthereof to the escrow agency in accordance with law.

Where a subject matter or its proceeds has been placed in escrow, the debtor isdeemed to have delivered the subject matter to such extent.

- Article 572

After a subject matter is placed in escrow, the debtor shall promptly notify thecreditor or the creditor’s heir, estate administrator, guardian, or custodian for hisproperty.

- Article 573

After a subject matter is placed in escrow, the risk of destruction, damage, or lossthereof shall be assumed by the creditor. During the period the subject matter isplaced in escrow, the accrued proceeds of the subject matter shall belong to thecreditor. The expenses thus incurred shall be borne by the creditor.

- Article 574

The creditor may collect the subject matter placed in escrow at any time, exceptthat where the creditor owes due obligation to the debtor, the escrow agency shallreject the creditor’s request for collecting it before the creditor performs suchobligation or providing security therefor.

The creditor’s right to collect the subject matter placed in escrow is extinguishedif such right is not exercised within five years from the date the subject matter isdelivered to the escrow agency, and such subject matter shall be escheated to the Stateafter the escrow agency’s expenses are deducted. However, where a creditor fails toperform his due obligation to the debtor, or where the creditor waives his right tocollect the subject matter placed in escrow in writing to the escrow agency, the debtorhas the right to take back the subject matter after paying the escrow agency’sexpenses.

- Article 575

Where a creditor exempts part or all of the debtor’s obligations, the claims andobligations shall be terminated in part or in whole, unless the debtor objects within areasonable period of time.

- Article 576

Where a claim and an obligation are merged to be held by the same person, theclaim and obligation shall be terminated, unless it is detrimental to the interests of athird person.

**Chapter VIII** Default Liability

- Article 577

Where a party fails to perform his contractual obligation or his performance doesnot conform to the agreement, he shall bear default liability such as continuing toperform his obligations, taking remedial measures, or compensating for losses.

- Article 578

Where a party explicitly expresses or indicates by his act that he will not performhis contractual obligation, the other party may request the former party to bear defaultliability before expiration of the time period of performance.

- Article 579

Where a party fails to pay the price, remuneration, rent, or interests, or fails toperform another pecuniary obligation, the other party may request for such paymentor performance.

- Article 580

Where a party fails to perform a non-pecuniary obligation or his performancedoes not conform to the agreement, the other party may request for such performanceunless:

- (1) the performance is impossible either de jure or de facto;

- (2) the object of the obligation is not suitable for a compulsory performance orthe expenses for the performance are too high; or

- (3) the creditor fails to request for performance within a reasonable period oftime.

Where one of the situations specified in the preceding paragraph exists so that thepurpose of the contract cannot be achieved, the people’s court or an arbitrationinstitution may terminate the contractual relationship of rights and obligations uponrequest by a party, but the default liability shall still be borne without being affected.

- Article 581

Where a party fails to perform his obligation or his performance does notconform to the agreement, if the obligation shall not be enforced by virtue of thenature of the obligation, the other party may request such party to bear the expenses ofa substitute performance by a third person.

- Article 582

Where the performance does not conform to the agreement, default liability shallbe borne in accordance with the contract between the parties. Where the defaultliability is not stipulated or is not clearly stipulated in the contract, and if it cannot bedetermined according to the provisions of Article 510 of this Code, the aggrievedparty may, by virtue of the nature of the object and according to the degree of the loss,reasonably request the other party to bear the default liability such as repair, redoing,replacement, return of the object, decrease in price or remuneration, and the like.

- Article 583

Where a party fails to perform his contractual obligation or his performance doesnot conform to the agreement, he shall make compensation if, after he has performedhis obligation or has taken remedial measures, the other party still suffers loss.

- Article 584

Where a party fails to perform his contractual obligation or his performance doesnot conform to the agreement so that the other party suffers loss, the amount ofcompensation shall be equivalent to the loss caused by the breach of contract,including the benefits expected to be obtained should the contract had been performed,except that it shall not exceed the loss that may be caused by the breach that thebreaching party forsees or should have forseen at the time of conclusion of thecontract.

- Article 585

The parties may agree that, upon default by a party, a certain amount of liquidateddamages shall be paid to the other party according to the circumstance of the breach,or the parties may agree on the method of calculating the compensation for lossesarising from the breach.

Where the agreed liquidated damages are lower than the loss caused, the people'scourt or an arbitration institution may increase the amount upon request of a party.Where the agreed liquidated damages are excessively higher than the loss caused, thepeople's court or an arbitration institution may make appropriate reduction uponrequest of a party.

Where the parties agree on the liquidated damages for delayed performance, thebreaching party shall continue to perform the obligation after paying the liquidateddamages.

- Article 586

The parties may agree that one party deposits earnest money to the other party tosecure his claim. An earnest money deposit contract becomes effective upon actual

delivery of the earnest money.

The amount of the earnest money shall be agreed by the parties, except that itshall not exceed 20% of the value of the object of the principal contract, and anyexcessive part does not have the effect as earnest money. Where the amount of theearnest money actually delivered is more or less than the agreed amount, the agreedamount of the earnest money shall be deemed to have been changed.

- Article 587

After a debtor has performed his obligation, the earnest money shall be calculatedas part of the price or be refunded. Where a party paying the earnest money fails toperform his obligation or fails to perform it in conformity with the agreement, so thatthe purpose of the contract cannot be achieved, he is not entitled to request refund ofthe earnest money. Where a party receiving the earnest money fails to perform hisobligation or fails to perform it in conformity with the agreement, so that the purposeof the contract cannot be achieved, he shall refund twice the amount of the earnestmoney to the other party.

- Article 588

Where the parties agree on both liquidated damages and earnest money, when aparty defaults, the other party may choose to apply either the clause on the liquidateddamages or the clause on the earnest money.

Where the earnest money is not sufficient to compensate the losses caused by oneparty’s default, the other party may request compensation for the losses in excess ofthe amount of the earnest money.

- Article 589

Where a debtor performs his obligation in accordance with the agreement, and thecreditor refuses to accept the performance without just cause, the debtor may requestthe creditor to compensate for any additional expenses.

The debtor does not need to pay interests for the period of delay in acceptance bythe creditor.

- Article 590

Where a party is unable to perform the contract due to force majeure, he shall beexempted from liability in whole or in part according to the impact of the forcemajeure, unless otherwise provided by law. The party unable to perform the contractdue to force majeure shall promptly notify the other party to mitigate the losses thatmay be caused to the other party, and shall provide proof of the force majeure within areasonable period of time.

Where the force majeure occurs after a party’s delay in performance, such party’sdefault liability shall not be exempted.

- Article 591

After a party defaults, the other party shall take appropriate measures to preventfurther loss. Where the loss is aggravated due to the failure of taking appropriatemeasures, no compensation shall be claimed for the aggravated part of the losses.

The reasonable expenses incurred by a party in preventing the aggravation of theloss shall be borne by the breaching party.

- Article 592

Where both parties default, each shall bear corresponding liabilities.

Where one party’s default causes loss to the other party, and the other party’s faultcontributes to the occurrence of such loss, the amount of compensation may bemitigated accordingly.

- Article 593

A party who breaches a contract due to a third person’s reason shall bear defaultliability to the other party in accordance with law. The dispute between the breachingparty and the third person shall be handled in accordance with the provisions of law ortheir agreement.

- Article 594

The limitation period for filing a lawsuit or applying for arbitration on a disputearising from a contract for international sale of goods and a contract for the importand export of technology is four years.

**Part Two** Typical Contracts

**Chapter IX** Sales Contracts

- Article 595

A sales contract is a contract under which a seller transfers his ownership overthe subject matter to a buyer who pays the price in return.

- Article 596

A sales contract generally contains clauses specifying the name, quantity, quality,and price of the subject matter, the time period, place, and method of performance, thepackaging, the standard and methods for inspection, the mode of settlement, thelanguage used in the contract, the validity thereof, and the like.

- Article 597

If the ownership of a subject matter is unable to be transferred owing to the factthat the seller fails to obtain the right of disposal, the buyer may rescind the contractand request the seller to bear default liability.

Where there are laws, administrative regulations prohibiting or restricting thetransfer of a subject matter, such provisions shall be followed.

- Article 598

A seller shall perform its obligation of delivering the subject matter or thedocuments for taking delivery thereof, and transferring the ownership over the subjectmatter to the buyer.

- Article 599

A seller shall deliver the relevant certificates and information other than thedocuments for taking delivery of the subject matter to the buyer in accordance withthe contract or the course of dealing.

- Article 600

Where a subject matter to be sold involves intellectual property rights, unlessotherwise provided by law or agreed by the parties, the intellectual property rightsthereof does not belong to the buyer.

- Article 601

A seller shall deliver the subject matter at a time as agreed in the contract. Wherea time period for delivery is stipulated in the contract, the seller may deliver thesubject matter at any time within such period.

- Article 602

Where there is no agreement between the parties on the time period for deliveryor the agreement is unclear, the provisions of Article 510 and Subparagraph (4) of- Article 511 of this Code shall be applied.

- Article 603

A seller shall deliver the subject matter at the agreed place of delivery.

Where there is no agreement between the parties on the place of delivery or theagreement is unclear, if it cannot be determined according to the provisions of Article510 of this Code, the following provisions shall be applied:

- (1) where the subject matter needs to be transported, the seller shall consign it tothe first carrier for its delivery to the buyer; and

- (2) where the subject matter does not need to be transported, if the seller and thebuyer know the location of the subject matter when they conclude the contract, theseller shall deliver the subject matter at the said location; if the location of the subjectmatter is unknown, the seller shall deliver the subject matter at the seller's place ofbusiness at the time when the contract is concluded.

- Article 604

The risks of destruction, damage, or loss of the subject matter shall be borne bythe seller prior to the delivery and by the buyer after the delivery, unless otherwiseprovided by law or agreed by the parties.

- Article 605

Where a subject matter fails to be delivered within the agreed time limit owing tothe buyer’s reason, the buyer shall bear the risks of destruction, damage, or loss of thesubject matter from the time he breaches the agreement.

- Article 606

Where a seller sells a subject matter en route that has been consigned to a carrierfor transport, unless otherwise ageed by the parties, the risks of destruction, damage,or loss of the subject matter shall be borne by the buyer from the time when thecontract is formed.

- Article 607

A buyer shall bear the risks of destruction, damage, or loss of the subject matterwhen the seller has transported the subject matter to the place designated by the buyerand delivered to the carrier in accordance with the agreement.

Where there is no agreement between the parties on the place of delivery or theagreement is unclear, if the subject matter needs to be transported according toSubparagraph (1) of the second paragraph of Article 603 of this Code, the buyer shallbear the risks of destruction, damage, or loss of the subject matter when the sellerconsigns the subject matter to the first carrier for transport.

- Article 608

Where a seller has placed the subject matter at the place of delivery inaccordance with the agreement or the provisions of Subparagraph (2) of the secondparagraph of Article 603 of this Code, if the buyer fails to take delivery thereof indefault, the risks of destruction, damage, or loss of the subject matter shall be borneby the buyer from the time the buyer defaults.

- Article 609

A seller's failure to deliver the documents and information of the subject matterin accordance with the agreement does not affect the shift of the risks of destruction,damage, or loss of the subject matter.

- Article 610

Where a subject matter fails to meet the quality requirements so that the purposeof the contract cannot be achieved, the buyer may refuse to accept the subject matteror may rescind the contract. Where the buyer refuses to accept the subject matter orrescind the contract, the risks of destruction, damage, or loss of the subject mattershall be borne by the seller.

- Article 611

Where a seller’s performance is not in conformity with the agreement, theassumption of the risks of destruction, damage, or loss of the subject matter by thebuyer does not affect the buyer's right to request the seller to bear default liability.

- Article 612

A seller has an obligation to guarantee that no third person has any right over thesubject matter delivered, unless otherwise provided by law.

- Article 613

Where, at the time a contract is concluded, the buyer knows or should haveknown that a third person has a right over the subject matter of the contract, the sellershall not assume the obligation provided in the preceding Article.

- Article 614

Where a buyer has a definite evidence to prove that a third person has a rightover the subject matter, he may suspend payment therefor, unless the seller hasprovided an appropriate bond.

- Article 615

A seller shall deliver the subject matter in conformity with the quality

requirements as agreed by the parties. Where the seller provides quality specificationsof the subject matter, the subject matter delivered shall conform to the specifiedquality requirements.

- Article 616

Where there is no agreement between the parties on the quality requirements ofthe subject matter or the agreement is unclear, if the quality requirements cannot bedetermined according to the provisions of Article 510 of this Code, the provisions ofSubparagraph (1) of Article 511 of this Code shall be applied.

- Article 617

Where a subject matter delivered by the seller fails to meet the qualityrequirements, the buyer may request the seller to bear default liability in accordancewith the provisions of Article 582 to 584 of this Code.

- Article 618

Where the parties agree to alleviate or exempt the seller’s liability for the defectsof the subject matter, if the seller, intentionally or by gross negligence, fails to informthe buyer about the defect of the subject matter, he has no right to claim alleviation orexemption of the liability.

- Article 619

A seller shall deliver the subject matter in compliance with the packaging methodas agreed in the contract. Where there is no agreement between the parties on thepackaging method or the agreement is unclear, if the packing method cannot bedetermined according to the provisions of Article 510 of this Code, the subject matter

shall be packed in a general way, or, in the absence of a general way, in a mannersufficient to protect the subject matter and conducive to saving resources andprotecting the ecological environment.

- Article 620

After a buyer receives the subject matter, he shall inspect it within the agreedperiod for inspection. If there is no agreed period for inspection, the buyer shallinspect it in a timely manner.

- Article 621

Where the parties have agreed on a period for inspection, the buyer shall, withinthe period for inspection, notify the seller of any inconformity of the subject matterwith the agreed quantity or quality. If notice is not given to the seller owing to thebuyer’s indolence, the subject matter is deemed to be in conformity with the agreedquantity or quality.

Where the parties have not agreed on a period for inspection, the buyer shallnotify the seller of any inconformity of the subject matter with the agreed quantity orquality within a reasonable period of time after he discovers or should havediscovered the inconformity. Where the buyer fails to notify the seller within areasonable period of time or within two years after he takes delivery of the subjectmatter, the subject matter shall be deemed to be in conformity with the agreedquantity or quality, except that where there is a warranty period within which thequality of the subject matter is guaranteed, the warranty period shall be applied.

Where a seller knows or should have known that the subject matter delivereddoes not conform to the agreement, the buyer is not subject to the time limit fornotification as provided in the preceding two paragraphs.

- Article 622

Where a period for inspection agreed by the parties is excessively short, and it isdifficult for the buyer to complete a comprehensive inspection within such a period byvirtue of the nature of the subject matter and in accordance with the course of dealing,such period shall be deemed only as a period for the buyer to raise objections to thepatent defects of the subject matter.

Where an agreed period for inspection or a warranty period for quality guaranteeis shorter than the period provided by the relevant laws and administrative regulations,the latter shall prevail.

- Article 623

Where the parties have not agreed on an inspection period, and the buyer hassigned a delivery note, confirmation slip, or the like document on which the quantity,model, and specifications of the subject matter are stated, the buyer shall be presumedto have inspected the quantity and the patent defects of the subject matter, unless thereis sufficient evidence to overturn such a presumption.

- Article 624

Where a seller delivers a subject matter to a third person according to the

instructions given by the buyer, if the inspection standard agreed between the sellerand the buyer are inconsistent with that agreed between the buyer and the third person,the inspection standard agreed between the seller and the buyer shall prevail.

- Article 625

Where, in accordance with the provisions of laws and administrative regulationsor as agreed by the parties, the subject matter shall be recycled after expiration of itsvalid service life, the seller has the obligation to recycle the subject matter by himselfor by an authorized third person.

- Article 626

A buyer shall make payment in accordance with the agreed amount and methodof payment. where there is no agreement between the parties on the amount of priceor the method of payment, or the agreement is unclear, the provisions of Article 510and Subparagraph (2) and (5) of Article 511 of this Code shall be applied.

- Article 627

A buyer shall make payment at the place agreed in the contract. Where there isno agreement between the parties on the place of payment, or the agreement is unclear,if the place cannot be determined in accordance with the provisions of Article 510 ofthis Code, the buyer shall make the payment at the seller’s place of business, exceptthat payment shall be made at the place where the subject matter or the document fortaking delivery thereof is delivered if the payment is conditioned upon the delivery ofthe subject matter.

- Article 628

A buyer shall make payment at the time agreed in the contract. Where there is noagreement between the parties on the time for payment, or the agreement is unclear, ifthe time for payment cannot be determined according to the provisions of Article 510of this Code, the buyer shall make payment at the same time as it receives the subjectmatter or the document for taking delivery thereof.

- Article 629

Where the amount of the subject matter delivered by a seller exceeds the agreedamount, the buyer may accept or refuse to accept the excessive part. Where the buyeraccepts the excessive part, it shall pay for it at the price agreed in the contract. If thebuyer refuses to accept the excessive part, he shall notify the seller in a timelymanner.

- Article 630

Any proceeds accrued from the subject matter before delivery shall belong to theseller and any proceeds accrued from the subject matter after delivery shall belong tothe buyer, unless otherwise agreed by the parties.

- Article 631

Where a contract is rescinded due to the inconformity of the principal subjectmatter with the agreed requirements, the effect of the rescission shall be effectiveagainst the accessory subject matter. Where a contract is rescinded due to the

inconformity of the accessory subject matter with the agreed requirements, the effectof the rescission shall be effective against the principal subject matter.

- Article 632

Where the object of a contract is composed of several subject matters, if one ofthem fails to conform to the requirements agreed in the contract, the buyer mayrescind the part of the contract in connection with that subject matter. However, whereseparation of the said subject matter from the other subject matters is to markedlyharm the value of the subject matters of the contract, the buyer may rescind thecontract in connection with the multiple subject matters concerned.

- Article 633

Where the subject matters are to be delivered by installment, if a seller fails todeliver one lot of the subject matters, or has delivered the lot in a manner not inconformity with the agreement, so that the purpose of the contract in connection withthe said lot cannot be achieved, the buyer may rescind the part of the contract inconnection with the said lot.

Where a seller fails to deliver one lot of the subject matters, or delivered the lotin a manner not in conformity with the agreement, so that the subsequent delivery ofthe remaining lots cannot achieve the purpose of the contract, the buyer may rescindthe part of the contract in connection with the said lot and the remaining lots.

Where a buyer has rescinded a part of the contract in connection with one lot ofthe subject matters, if the said lot and any other lot are interdependent on each other,the buyer may rescind the contract in connection with all the lots disregardingwhether they have been delivered or not.

- Article 634

Where a buyer under an installment contract fails to make payment and theunpaid amount reaches one-fifth of the total price, if the buyer still fails to pay the dueinstallment amount within a reasonable period of time after being demanded, theseller may request the buyer to pay the total sum or he may rescind the contract.

The seller who rescinds the contract may request the buyer to pay a fee for theuse of the subject matter.

- Article 635

The parties to a sale by sample shall seal up the sample and may makespecifications of its quality. The subject matter delivered by the seller shall beidentical in quality with the sample and its specifications.

- Article 636

Where a buyer to a sale by sample is unaware of the sample's hidden defects,even if the subject matter delivered is identical with the sample, the quality of thesubject matter delivered by the seller shall still conform to the general standard for thesame category of goods.

- Article 637

The parties to a sale on trial use may agree on a period for trial use of the subjectmatter. Where there is no agreement between the parties on the period for trial use orthe agreement is unclear, if the period for trial use cannot be determined according tothe provisions of Article 510 of this Code, it shall be determined by the seller.

- Article 638

A buyer to a sale on trial use may purchase or refuse to purchase the subjectmatter within the period for trial use. Where, upon expiration of the period for trialuse, the buyer makes no indication as to whether to purchase it or not, the buyer isdeemed to have purchased the subject matter.

If a buyer to a sale on trial use has, within the period for the trial use, alreadymade partial payment or has sold, leased, created a security interest in the subjectmatter, the buyer is deemed to have agreed to purchase it.

- Article 639

Where there is no agreement between the parties to a sale on trial use on the feefor the use of the subject matter, or the agreement is unclear, the seller has no right torequest the buyer to pay such fee.

- Article 640

The risks of destruction, damage, or loss of the subject matter shall be borne bythe seller within the period for the trial use.

- Article 641

The parties may agree in a sales contract that the seller retains the ownership ofthe subject matter if the buyer fails to pay the price or perform other obligations.

The ownership of the subject matter retained by a seller, without being registered,shall not be asserted against a bona fide third.

- Article 642

Where the parties agree that the seller shall retain the ownership of the subjectmatter of the contract, unless otherwise agreed by the parties, the seller has the rightto take back the subject matter if the buyer falls under any of the followingcircumstances before such ownership is transferred and losses are thus caused to theseller:

- (1) the buyer fails to make payment in accordance with the contract, and fails topay it within a reasonable period of time after being demanded;

- (2) the buyer fails to fulfill the specific conditions in accordance with thecontract; or

- (3) the buyer sells, pledges, or otherwise improperly disposes of the subjectmatter.

The seller may negotiate with the buyer to take back the subject matter. Wheresuch negotiation fails, the procedures for enforcement of security interests may be

applied mutatis mutandis.

- Article 643

After a seller has taken back the subject matter according to the first paragraph ofthe preceding Article, the buyer may request to redeem the subject matter if heeliminates the cause for the seller’s retrieving of the subject matter within areasonable period of redemption agreed by the parties or set by the seller.

Where a buyer does not redeem the subject matter within the redemption period,the seller may sell the subject matter to a third person at a reasonable price. Afterdeducting from the sale proceeds the amount unpaid by the buyer and the necessaryexpenses, any balance shall be returned to the buyer; if the sale proceeds areinsufficient to cover the unpaid amount and the other necessary expenses, thedeficiency shall be paid by the buyer.

- Article 644

The rights and obligations of the parties to a sale through bidding, as well as theprocedures for the bidding, shall be governed by the provisions of the relevant lawsand administrative regulations.

- Article 645

The rights and obligations of the parties to an auction, as well as the proceduresof the auction, shall be governed by the provisions of the relevant laws andadministrative regulations.

- Article 646

Where there are provisions of laws governing other non-gratuitous contracts,such provisions shall be followed. In an absence of such a provision, the relevantprovisions on sales contracts shall be applied mutatis mutandis.

- Article 647

Where the parties agree to transfer the ownership of the subject matter by bartertrade, the relevant provisions on sales contracts shall be applied mutatis mutandis.

.

**Chapter X** Contracts for the Supply and Consumption

of Electricity, Water, Gas, or Heat

- Article 648

A contract for the supply and consumption of electricity is a contract underwhich a supplier provides electricity to the consumer who pays the price in return.

A supplier providing electricity to the public shall not refuse a reasonable requestof a consumer to conclude a contract.

- Article 649

A contract for the supply and consumption of electricity generally containsclauses specifying the mode, quality and time of the supply, the volume, address, andnature of the consumption, the measuring method, the price, the settlement method ofelectricity fees, the responsibility for the maintenance of electricity supply andconsumption facilities, and the like.

- Article 650

The place of performance of a contract for the supply and consumption ofelectricity shall be agreed by the parties; if there is no agreement between the partiesor the agreement is unclear, the place of demarcation of the property rights in theelectricity supply facilities shall be the place of performance.

- Article 651

A supplier of electricity shall safely supply electricity in accordance with thequality standard for power supply set by the State and in the agreement. Where asupplier fails to safely supply electricity in accordance with the quality standard forpower supply set by the State or in the agreement, thus causing losses to the consumer,the supplier shall bear the liability for compensation.

- Article 652

Where a supplier of electricity needs to cut off electricity supply due toscheduled or unscheduled overhauls of the electricity supply facilities, restriction onelectricity consumption in accordance with law, or consumer's illegal consumption ofthe electricity, and the like, he shall notify the consumer in advance in accordancewith the relevant regulations of the State. Where a supplier cuts off the electricitysupply without notifying the consumer in advance, thus causing losses to theconsumer, the supplier shall bear the liability for compensation.

- Article 653

A supplier of electricity shall rush to repair without delay in accordance with therelevant regulations of the State whenever the electricity supply is cut off due to suchreasons as natural disasters. Where the supplier fails to do so and thus causes losses tothe consumer, the supplier shall bear the liability for compensation.

- Article 654

A consumer of electricity shall pay the electricity fees in time in accordance withthe relevant regulations of the State and the agreement between the parties. Where aconsumer fails to pay the electricity fees due, he shall pay the agreed liquidateddamages. Where a consumer, after being demanded, still fails to pay the electricityfees and the liquidated damages within a reasonable period of time, the supplier maystop the supply of electricity in accordance with the procedures provided by the State.

Where a supplier stops the supply of electricity in accordance with the provisionof the preceding paragraph, it shall notify the consumer in advance.

- Article 655

A consumer shall use the electricity in a safe, economical and planned manner inaccordance with the relevant regulations of the State and the agreement between theparties. Where a consumer fails to use the electricity in accordance with the relevantregulations of the State or the agreement between the parties, and thus causes losses tothe supplier, the consumer shall bear the liability for compensation.

- Article 656

The provisions of the contract for the supply and consumption of electricity shallbe applied mutatis mutandis to contracts for the supply and consumption of water, gas,or heat.

**Chapter XI** Gift Contracts

- Article 657

A gift contract is a contract under which a donor gives his own property to adonee gratuitously, and the donee indicates his acceptance of the gift.

- Article 658

A donor may revoke the gift prior to the transfer of the rights in the giftedproperty.

The provisions of the preceding paragraph shall not apply to a notarized giftcontract, or a gift contract of a public interest or moral obligation nature that shall, inaccordance with law, not be revoked, such as a gift contract for disaster-relief,poverty-relief, disability-relief, or the like purposes.

- Article 659

The gifted property shall go through registration or another procedure if the lawso requires.

- Article 660

For a notarized gift contract or a gift contract of a public interest or moralobligation nature that shall in accordance with law not be revoked, such as a contractfor disaster-relief, poverty-relief, disability-relief, or the like purposes, where thedonor does not deliver the gifted property, the donee may request such delivery.

Where the gifted property that shall be delivered in accordance with thepreceding paragraph is destructed, damaged, or lost due to the donor’s intentional actor by his gross negligence, the donor shall bear the liability for compensation.

- Article 661

A gift may be subject to an obligation.

Where a gift is subject to an obligation, the donee shall perform the obligation inaccordance with the agreement.

- Article 662

A donor is not liable for any defect of the gifted property. Where a gift is subjectto an obligation, if the gifted property has defects, the donor shall, to the extent of theattached obligation, bear the same liabilities as a seller.

Where a donor intentionally fails to notify the donee about the defect of thegifted property or has made a warranty therefor, thus causing losses to the donee, thedonor shall bear the liability for compensation.

- Article 663

A donor may revoke the gift if the donee has done any of the following acts:

- (1) severely infringing upon the lawful rights and interests of the donor or anyclose relative of the donor;

- (2) having an obligation to support the donor but failing to perform thatobligation; or

- (3) failing to perform the obligation as agreed in the gift contract.

The right to revocation of the donor shall be exercised within one year from thedate the donor knows or should have known of the cause for revocation.

- Article 664

Where a donee's illegal act leads to the death or loss of capacity for performingcivil juristic acts of the donor, the donor’s heir or legal representative may revoke thegift.

The right to revocation of the donor's heir or his legal representative shall beexercised within six months from the date the heir or the legal representative knows orshould have known of the cause for revocation.

- Article 665

Upon revocation of a gift, the person having the right to revocation may requestthe donee to return the gifted property.

- Article 666

Where a donor’s financial situation markedly deteriorates and his production,business, or family life is thus severely affected, he may cease to perform theobligation of delivering the gift.

**Chapter XII** Loan Contracts

- Article 667

A loan contract is a contract under which a borrower borrows a loan from alender and repays the loan with interests when the loan becomes due.

- Article 668

A loan contract shall be made in writing, except for a loan between naturalpersons who agree otherwise.

A loan contract generally contains clauses specifying the category of the loan,kind of currency, purpose of use, amount, interest rate, term, and the method ofrepayment, and the like.

- Article 669

Upon concluding a loan contract, a borrower shall, as required by the lender,provide true information about its business activities and financial conditions relatedto the borrowing to the lender.

- Article 670

The interest on a loan may not be deducted from the principal in advance. Wherethe interest is deducted from the principal in advance, the loan shall be repaid and theinterest shall be calculated according to the actual amount of the loan provided.

- Article 671

A lender who fails to provide the loan at the agreed time and amount and thuscausing losses to the borrower shall bear the liability for compensation.

A borrower who fails to take the loan at the agreed time and amount shall pay aninterest based on the agreed time and amount.

- Article 672

A lender may inspect and supervise the use of the loan in accordance with theagreement. A borrower shall regularly provide the relevant financial and accountingstatements or other materials to the lender in accordance with the agreement.

- Article 673

Where a borrower fails to use the loan for a purpose in accordance with thecontract, the lender may stop providing the loan, recall the loan prior to its due date,or rescind the contract.

- Article 674

A borrower shall pay the interest within the agreed time limit. Where there is noagreement between the parties on the time limit for payment of interest or theagreement is unclear, if it cannot be determined according to the provisions of Article510 of this Code, the interest shall be paid at the time the principal is repaid if theterm of the loan is less than one year; the interest shall be paid at the end of each fullyear if the term of the loan is more than one year, and the interest shall be paid whenthe principal is repaid if the remaining term is less than one year.

- Article 675

A borrower shall repay the loan within the agreed time limit. Where there is noagreement between the parties on the time limist of repayment of the loan, or theagreement is unclear, if it cannot be determined according to the provisions of Article510 of this Code, the borrower may repay the loan at any time, and the lender maydemand the borrower to repay the loan within a reasonable period of time.

- Article 676

A borrower who fails to repay the loan within the agreed time limit shall pay anoverdue interest in accordance with the agreement or the relevant regulations of theState.

- Article 677

Where a borrower makes a prepayment of the loan, unless otherwise agreed bythe parties, the interest shall be calculated according to the actual duration of the loan.

- Article 678

A borrower may apply to the lender for an extension of the term of the loanbefore the loan becomes due. The term of the loan may be extended upon consent ofthe lender.

- Article 679

A loan contract between natural persons is formed at the time when the lenderprovides the loan.

- Article 680

Usurious loans are prohibited, and the interest rate for lending shall not violatethe relevant regulations of the State.

Where there is no agreement on payment of interest in the loan contract, the loanshall be deemed as bearing no interest.

Where the agreement on the payment of interest in a loan contract is unclear, ifthe parties are unable to reach a supplementary agreement, the interest shall bedetermined by taking account of the practices of the local area or between the partiessuch as the method of transaction, course of dealing, the market interest rate, and thelike. Where the loan is between nature persons, the loan shall be deemed as bearingno interest.

**Chapter XIII** Suretyship Contracts

**Section 1** General Rules

- Article 681

A suretyship contract is a contract under which a surety and a creditor agree, forthe purpose of ensuring the enforcement of an underlying claim, that the surety shallperform the obligation or bear the liability when the debtor fails to perform it when itis due or a circumstance as agreed by the parties occurs.

- Article 682

A suretyship contract is an accessary contract subordinated to a principalclaim-obligation contract. Where the principal contract is invalid, the suretyshipcontract is invalid, unless otherwise provided by law.

Where a suretyship contract is determined to be invalid, the debtor, surety, orcreditor who are at fault shall each bear civil liability in proportion to their respectivefault.

- Article 683

No State-organ leagal person may act as a surety, except that a state organ may,upon approval of the State Council, act as a surety in re-lending of the loans grantedby a foreign government or an international economic organization.

No non-profit

legal person established for public

interest purposes orunincorporated organization may act as a surety.

- Article 684

A suretyship contract generally contains clauses specifying the kind and amountof the principal claim that is secured, the time limit for the debtor to perform theobligation, the modes, scope, and term of the suretyship, and the like.

- Article 685

A suretyship contract may be a contract concluded separately in writing or a

guarantee clause in a principal claim-obligation contract.

A suretyship contract is formed when a third person unilaterally makes aguarantee in writing to a creditor who accepts it without making an objection.

- Article 686

Suretyship consists of general suretyship and suretyship with joint and severalliability.

Where there is no agreement in the surety contract on the form of the suretyshipor the agreement is unclear, the surety shall bear the liability as in the form of ageneral suretyship.

- Article 687

Where the parties agree in a suretyship contract that the surety shall undertakesuretyship liability if the debtor is unable to perform his obligation, such a suretyshipis a general suretyship.

A surety in a general suretyship may refuse to undertake suretyship liability tothe creditor before a dispute arising from the principal contract is adjudicated orarbitrated and where the debtor is still unable to fully perform the obligation after hisassets have been enforced in accordance with law, unless one of the followingcircumstances occurs:

- (1) the whereabouts of the debtor have been unknown and there is no propertyavailable for enforcement;

- (2) the people’s court has accepted the debtor’s bankruptcy petition`;

- (3) the creditor has evidence to prove that the debtor’s property is insufficient toperform all of the obligations or the debtor loses his capacity to perform the obligation;or

- (4) the surety waives his right provided in this paragraph in writing.

- Article 688

Where the parties agree in a suretyship contract that the surety and the debtorshall be jointly and severally liable for the obligation, such a suretyship is a suretyshipwith joint and several liability.

Where a debtor under a suretyship with joint and several liability fails to performhis obligation due or when a circumstance agreed by the parties occurs, the creditormay request the debtor to perform his obligation, or request the surety to undertakethe suretyship liability within the scope of his suretyship.

- Article 689

A surety may request the debtor to provide a counter-security.

- Article 690

A surety and a creditor may, through consultation, conclude a contract ofmaximum suretyship for floating claims to provide guarantee for the creditor’s claimswhich will arise consecutively within a certain period of time and the total amount ofwhich is up to the maximum amount of his claims. In addition to applying theprovisions of this Chapter, the relevant provisions of Book Two of this Code on themaximum mortgage for floating claims shall be applied mutatis mutandis.

**Section 2** Suretyship Liability

- Article 691

The scope of the suretyship covers the principal claims and the interest thereof,the liquidated damages, compensatory damages, and the expenses for enforcing theclaim, unless otherwise agreed by the parties.

- Article 692

The term of suretyship is the period during which the surety shall undertakesuretyship liability, and such period shall not be suspended, interrupted, or extended.

A creditor and a surety may agree on the term of suretyship. However, where theexpiration date of the agreed term of suretyship is earlier than or the same as theexpiration time for performance of the principal obligation, it is deemed as there is noagreement on the term of suretyship. Where there is no agreement between the partieson the term of suretyship or the agreement is unclear, the term of suretyship shall besix months from the date of expiration of the time limit for performance of theprincipal obligation.

Where a creditor and a debtor fails to agree on the time limit for performance ofthe principal obligation or the agreement is unclear, the term of suretyship shall becounted from the date when the grace period for the creditor to request the debtor toperform the obligation expires.

- Article 693

Where a creditor of a general suretyship fails to file a lawsuit or apply forarbitration against the debtor within the term of suretyship, the surety no longer bearsthe suretyship liability.

Where a creditor of a suretyship with joint and several liability fails to requestthe surety to undertake his suretyship liability within the term of suretyship, the suretyno longer bears the suretyship liability.

- Article 694

Where a creditor of a general suretyship files a lawsuit or apply for arbitrationagainst the debtor prior to the expiration of the term of suretyship, the limitationperiod of the suretyship obligation shall be counted from the date when the surety’sright to refuse to undertake the suretyship liability is extinguished.

Where a creditor of a suretyship with joint and several liability requests thesurety to undertake his suretyship liability prior to the expiration of the term ofsuretyship, the limitation period of the suretyship obligation shall be counted from the

date when the creditor requests the surety to undertake his suretyship liability.

- Article 695

Where a creditor and a debtor, without the surety’s consent in writing, agree toalter the content of the principal claim-obligation contract, if the obligation is reduced,the surety shall continue to bear the suretyship liability for the altered obligation; ifthe obligation is increased, the surety shall not bear the suretyship liability for theincreased part.

Where a creditor and a debtor alter the time limit for performance of theprincipal claim-obligation contract，the term of suretyship shall not be affected unlessupon the surety’s written consent.

- Article 696

Where a creditor transfers his claim in whole or part without notifying the surety,such a transfer is not effective against the surety.

Where transfer of a claim is prohibited as agreed between the surety and thecreditor, if the creditor transfers its claim without the surety’s written consent, thesurety shall no longer bear the suretyship liability.

- Article 697

Where a creditor, without the surety’s written consent, allows the debtor totransfer the obligation in whole or part, the surety shall no longer bear the suretyshipliability to the extent of the obligation transferred without his consent, unlessotherwise agreed by the creditor and the surety.

Where a third person joins to be one of the debtors, the surety’s liability shall notbe affected.

- Article 698

Upon expiration of the time limit for performance of the principal obligation, ifthe surety of a general suretyship provides to the creditor true information concerningthe debtor’s property available for enforcement, but the creditor waives or fails toexercise his right, and thus causing such property to be unenforceable, the surety shallno longer bear liability to the extent of the value of the said property available forenforcement the information of which is provided by the surety.

- Article 699

Where there are two or more sureties guaranteeing one obligation, the suretiesshall undertake the suretyship liability in proportion to their share of suretyship inaccordance with the suretyship contract. In the absence of such an agreement, thecreditor may request any of the sureties to undertake the suretyship liability within thescope of his liability.

- Article 700

After a surety has assumed the suretyship liability, unless otherwise agreed bythe parties, the surety has the right to indemnification against the debtor within thescope of his suretyship liability, and may enjoy the right of the creditor against the

debtor, provided that the creditor’s interests shall not be harmed.

- Article 701

A surety may claim a defense that the debtor has against the creditor. Where thedebtor waives his right of defense, the surety shall still have the right to claim suchdefense against the creditor.

- Article 702

Where a debtor has the right of offset or revocation against the creditor, thesurety may refuse to undertake the suretyship liability within the corresponding scope.

**Chapter XIV** Lease Contracts

- Article 703

A lease contract is a contract under which a lessor delivers the leased object to alessee for use or for obtaining proceeds, for which the lessee pays the rent.

- Article 704

A lease contract generally contains clauses specifying the name, quantity,purpose of use of the leased object, the term of the lease, rent, and the time limit andmethod of its payment, and the maintenance of the leased object, and the like.

- Article 705

The term of a lease may not exceed twenty years. If a lease exceeds twenty years,

the part beyond twenty years is invalid.

Upon expiration of the lease term, the parties may renew the lease contract,provided that the agreed term of lease may not exceed twenty years from the date ofrenewal.

- Article 706

The parties’ failure to register the lease contract in accordance with theprovisions of laws and administrative regulations does not affect the validity of thecontract.

- Article 707

A lease contract with a term exceeding six months shall be made in writing.Where the lease contract between the parties is not in writing, if the term can not bedetermined, the lease shall be deemed as a lease with an indefinite term.

- Article 708

A lessor shall deliver the leased object to the lessee in accordance with theagreement and keep the leased object fit for the agreed use during the lease term.

- Article 709

A lessee shall use the leased object in a manner as agreed by the parties. Wherethere is no agreement between the parties on the manner of use or the agreement isunclear, if it cannot be determined according to the provisions of Article 510 of thisCode, the leased object shall be used in line with its nature.

- Article 710

Where a lessee uses the leased object in a manner as agreed by the parties or inline with its nature, he shall not bear the liability for the wear and tear on the leasedobject.

- Article 711

Where a lessee fails to use the leased object in a manner as agreed by the partiesor in line with its nature, thus causing damage to the leased object, the lessor mayrescind the contract and request for compensation.

- Article 712

A lessor shall perform the duty of maintaining the leased object, unless otherwiseagreed by the parties.

- Article 713

Where a leased object needs to be maintened or repaired, the lessee may requestthe lessor to have it maintened and repaired within a reasonable period of time. Wherethe lessor fails to perform the obligation of maintenance or repair, the lessee maymaintain or repair the leased object by himself and the expenses thus incurred shall beborne by the lessor. If the maintenance or repair of the leased object affects thelessee’s use of it, the rent shall be reduced or the term of the lease shall be extendedaccordingly.

Where a leased object needs to be maintened or repaired due to the lessee’snegligence, the lessor shall not bear the obligation of maintenance or repair asprovided in the preceding paragraph.

- Article 714

A lessee shall properly keep the leased object and shall bear the liability forcompensation if the leased object is destructed, damaged, or lost owing to his failingto properly keep it.

- Article 715

A lessee may, upon the lessor’s consent, improve the leased object or installadditions thereto.

Where a lessee improves the leased object or install additions thereto without theconsent of the lessor, the lessor may request the lessee to restore the leased object to

its original status or to compensate for the losses.

- Article 716

A lessee may, upon the lessor’s consent, sublease the leased object to a thirdperson. The lease contract between the lessee and the lessor shall continue to be validdespite the sublease by the lessee, and if the third person causes loss to the leasedobject, the lessee shall bear the liability for compensation.

Where a lessee subleases the leased object without the consent of the lessor, thelessor may rescind the contract.

- Article 717

Where a lessee, upon consent of the lessor, subleases the leased object to a thirdperson, if the term of the sublease exceeds the remaining term of the lessee, thesublease in the period in excess of the original term shall not be legally binding on thelessor unless otherwise agreed by the lessor and the lessee.

- Article 718

Where a lessor knows or should have known of the sublease made by a lesseebut fails to raise any objection within six months, the lessor is deemed to haveconsented to the sublease.

- Article 719

Where a lessee defaults on payment of the rent, the sublessee may pay the rent inarrears and the liquidated damages for the lessee, unless the sublease contract is notlegally binding on the lessor.

The rent and liquidated damages paid by the sublessee for the lessee may be usedto offset the rent payable by the sublessee to the lessee. If the amount of rent andliquidated damages thus paid by the sublessee exceeds the rent, the sublessee has theright to indemnification against the lessee.

- Article 720

Any proceeds accrued from the possession or use of the leased object during theterm of the lease shall belong to the lessee, unless otherwise provided by the parties.

- Article 721

A lessee shall pay the rent within the time limit in accordance with the agreement.Where there is no agreement between the parties on the time limit for paying the rentor the agreement is unclear, if it cannot be determined according to the provisions of- Article 510 of this Code, the rent shall be paid at the time the term of the lease expiresif the term is less than one year, or at the end of each full year where the term is morethan one year, provided that the rent shall be paid at the time the term of the leaseexpires if the remaining term is less than one year.

- Article 722

Where a lessee fails to pay the rent or delays a payment of the rent without justcause, the lessor may request the lessee to pay the rent within a reasonable period of

time, and may rescind the contract if the lessee fails to pay the rent within such periodof time.

- Article 723

Where a lessee is unable to use or to receive benefit from the leased object owingto a claim from a third person, the lessee may request for a reduction of or exemptionfrom the rent.

Where a third person claims his right against the leased object, the lessee shallnotify the lessor in a timely manner.

- Article 724

A lessor may rescind the contract under any of the following circumstances if the

leased object cannot be used due to a reason not attributable to the lessee:

- (1) the leased object is seized or detained by the judicial authority oradministrative authority in accordance with law;

- (2) there are disputes over the attribution of rights of the leased object; or

- (3) the leased object violates mandatory provisions of laws and administrativeregulations in respect of the conditions for use thereof.

- Article 725

A change in the ownership of a leased object during the period that a lesseepossesses the leased object in accordance with the lease contract shall not affect thevalidity of the lease contract.

- Article 726

A lessor intending to sell a leased house shall notify the lessee within areasonable period of time prior to the sale, and the lessee shall have the priority rightto purchase the house under equivalent conditions, unless the person who is aco-owner by share exercises his priority right to purchase the house or if the lessorsells it to his close relatives.

Where a lessee fails to explicitly express his intention to purchase the housewithin fifteen days after the lessor has fulfilled his obligation of notification, thelessee shall be deemed to have waived such priority right.

- Article 727

Where a lessor authorizes an auctioneer to sell the leased house through auction,he shall notify the lessee five days prior to the auction. The lessee shall be deemed tohave waived his priority right to purchase it if he fails to participate in the auction.

- Article 728

Where a lessor fails to notify the lessee or otherwise hinders the lessee fromexercising his priority right to purchase the leased house, the lessee may request thelessor to bear the liability for compensation, except that the validity of the contract forsale of the leased house concluded between the lessor and a third person shall not beaffected.

- Article 729

Where a leased object is partially or wholly destructed, damaged, or lost for acause not attributable to the lessee, the lessee may request a reduction or exemption ofthe rent; and the lessee may rescind the contract if the purpose of the contract isunable to be achieved owing to such destruction, damage, or loss.

- Article 730

Where there is no agreement between the parties on the term of the lease, or theagreement is unclear, if it cannot be determined according to the provisions of Article510 of this Code, the lease shall be deemed a lease with an indefinite term. Eitherparty may rescind the contract at any time, provided that the other party shall benotified within a reasonable period of time in advance.

- Article 731

Where a leased object endangers a lessee's safety or health, the lessee mayrescind the contract at any time, even if the lessee is clearly aware of the substandardquality of the leased object upon concluding the contract.

- Article 732

Where a lessee dies within the term of lease of a leased house, a person wholives with or the joint operator of the deceased may lease the house according to theoriginal lease contract.

- Article 733

A lessee shall return the leased object upon expiration of the term of the lease.The leased object returned shall be maintained in its after-use state in accordance withthe agreement or in line with its nature.

- Article 734

Where a lessee continues to use the leased object after the expiration of the termof the lease and the lessor has not raised any objection, the original lease contractshall continue to be valid, except that the lease term shall become unfixed.

Upon expiration of the lease, a lessee of the house has the priority right to lease itunder equivalent conditions.

**Chapter XV** Contracts for Financing Lease

- Article 735

A contract for financing lease is a contract under which a lessee selects a leasedobject and its seller, and a lessor purchases the leased object from the selected sellerand provides it to the lessee for use, who pays the rent in return.

- Article 736

A contract for financing lease generally contains clauses specifiying the name,quantity, specifications, technical performance, and inspection method of the leasedobject, the term of the lease, the composition of rent, the time limit, method, andcurrency for payment of the rent, the ownership over the leased object upon expirationof the term, and the like.

A contract for financing lease shall be made in writing.

- Article 737

A contract for financing lease concluded by the parties on a fictitious leasedobject is void.

- Article 738

Where the operation or use of a leased object requires administrative license inaccordance with the provision of laws and administrative regulations, the failure ofthe lessor to obtain such administrative license does not affect the validity of thecontract for financing lease.

- Article 739

Where a lessor concludes a sales contract based on a lessee’s selection of theseller and the leased object, the seller shall deliver the object to the lessee as agreedby the parties, and the lessee shall enjoy the rights of a buyer with regard to the objectreceived.

- Article 740

A lessee may refuse to accept the subject matter delivered by the seller where aseller breaches his obligation of delivery of the subject matter to the lessee, and one ofthe following circumstances occurs:

- (1) the subject matter is materially inconsistent with the agreement; or

- (2) the seller fails to deliver the subject matter as agreed by the parties, and stillfails to deliver it within a reasonable period of time after being demanded by thelessee or the lessor.

Where a lessee refuses to take delivery of the subject matter, he shall promptlynotify the lessor.

- Article 741

The lessor, the seller, and the lessee may agree that, where the seller fails toperform the obligations under the sales contract, the lessee shall exercise the right toclaim against the seller. Where the lessee exercises such a right, the lessor shall renderassistance.

- Article 742

A lessee’s exercise of the right to claim against the seller shall not affect hisperformance of the obligation to pay the rent. However, where a lessee has reliedupon the lessor's expertise in selecting the leased object or the lessor has intervenedwith the selection of the leased object, the lessee may request reduction or exemptionof the rent accordingly.

- Article 743

Where any of the following circumstances occurs, which causes the failure of thelessee to exercise the right to claim against the seller, the lessee has the right torequest the lessor to bear corresponding liability:

- (1) the lessor clearly knows that the leased object has quality defects but fails tonotify the lessee; or

- (2) when the lessee exercises the right to claim, the lessor fails to providenecessary assistance in a timely manner.

Where a right to claim agaisnt the seller may only be exercised by the lessor butthe lessor fails to exercise such right owing to his indolent, thus causing loss to thelessee, the lessee has the right to request the lessor to bear the liability forcompensation.

- Article 744

Where a lessor concludes a sales contract based on the lessee’s selection of theseller and the leased object, the lessor may not, without the consent of the lessee,modify the content of the contract related to the lessee.

- Article 745

The lessor’s ownership over the leased object shall, without being registered, notbe asserted against a bona fide third person.

- Article 746

The rent under a contract for financing lease shall, unless otherwise agreed bythe parties, be determined according to the whole or major part of the cost forpurchasing the leased object plus reasonable profits to be gained by the lessor.

- Article 747

Where a leased object does not conform to the agreement or the purpose of itsuse, the lessor shall not bear any liability, unless the lessee has relied upon the lessor'sexpertise in selecting the leased object or the lessor has intervened with the selectionof the leased object.

- Article 748

A lessor shall guarantee the possession and use of the leased object by the lessee.

A lessee has the right to request the lessor to bear the liability for compensation

where the lessor falls under any of the following circumstances:

- (1) taking back the leased object without just cause;

- (2) obstructing or interfering with the possession and use of the leased object bythe lessee without just cause;

- (3) a third person claims a right over the leased object due to a reasonattributable to the lessor; or

- (4) the lessor otherwise improperly affects the possession and use of the leasedobject by the lessee.

- Article 749

Where a leased object causes any personal injury or property damage to a thirdperson during the period it is under the lessee’s possession, the lessor shall not bearany liability.

- Article 750

A lessee shall properly maintain and use the leased object.

A lessee shall perform the obligation for the maintenance of the leased objectduring the period the leased object is under his possession.

- Article 751

Where the leased object is destructed, damaged, or lost during the period it isunder the possession of the lessee, the lessor has the right to request the lessee tocontinue to pay the rent, unless otherwise provided by law or agreed by the parties.

- Article 752

A lessee shall pay the rent in accordance with the agreement. Where a lessee failsto pay the rent within a reasonable period of time after being demanded, the lessormay request full payment of the rent, or rescind the contract and take back the leasedobject.

- Article 753

Where a lessee transfers, mortgages, pledges, invests and contributes as share, orotherwise disposes of the leased object without the lessor’s consent, the lessor mayrescind the contract for financing lease.

- Article 754

A lessor or a lessee may rescind the contract for financing lease under any of the

following circumstances:

- (1) the sales contract between the lessor and the seller is rescinded, determined asvoid or revoked, and the parties fail to conclude a sales contract anew;

- (2) the leased object is destructed, damaged, or lost due to a reason notattributable to the parties, and it is impossible to repair the leased object or determinea substitute therefor; or

- (3) the purpose of the contract for financing lease cannot be achieved owing to areason attributable to the seller.

- Article 755

Where a contract for financing lease is rescinded because the sales contract isrescinded, invalidated, or revoked, if the seller and the leased object are selected bythe lessee, the lessor has the right to request the lessee to compensate for thecorresponding losses, unless the sales contract is rescinded, invalidated, or revokedowing to a reason attributable to the lessor.

Where the losses of the lessor have been recovered at the time the sales contractis rescinded, invalidated, or revoked, the lessee no longer bears liability forcompensation.

- Article 756

Where a contract for financing lease is rescinded owing to a reason notattributable to the parties, such as an accidental destruction, damage, or loss of theleased object after it is delivered to the lessee, the lessor may request the lessee tomake compensation based on the depreciation status of the leased object.

- Article 757

A lessor and a lessee may agree on the ownership over the leased object uponexpiration of the term of the lease. Where there is no agreement between the partieson the ownership of the leased object or the agreement is unclear, if it cannot bedetermined according to the provisions of Article 510 of this Code, the ownership ofthe leased object shall belong to the lessor.

- Article 758

Where the parties agree that the lessee shall have the ownership over the leasedobject upon expiration of the term of the lease, if the lessee has paid most of the rentbut is unable to pay the remaining part, and the lessor has therefore rescineded thecontract and taken back the leased object, the lessee may request the correspondingrefund if the value of the leased object taken back exceeds the rent and other expensesin arrears.

Where the parties agree that the lessor shall have the ownership over the leasedobject upon expiration of the term of the lease, and the lessee is unable to return theleased object due to destruction, damage, or loss of the leased object, or because theleased object has attached to or been mixed with another thing, the lessor has the rightto request the lessee to make reasonable compensation.

- Article 759

Where the parties agree that the lessee is only required to pay the lessor asymbolic price upon expiration of the term of the lease, the ownership of the leasedobject shall be deemed as belonging to the lessee after the lessee has fulfilled hisobligation to pay the rent in accordance with the agreement.

- Article 760

Where a contract for financing lease is invalid and the parties have agreed on theownership of the leased object under such a circumstance, such an agreement shall befollowed. Where there is no agreement between the parties on the ownership of the

leased object or the agreement is unclear, the leased object shall be returned to thelessor. However, where the contract becomes invalid owing to a reason attributable tothe lessee, if the lessor does not request the return of the leased object or the return ofthe leased object will significantly reduce the usefulness thereof, the ownership of theleased object shall belong to the lessee, and the lessee shall make reasonablecompensation to the lessor.

**Chapter XVI** Factoring Contracts

- Article 761

A factoring contract is a contract under which a creditor of accounts receivabletransfers the existing or after-acquired accounts receivable to a factor who providesservices such as accommodation of funds, management or collection of the accountsreceivable, guarantee for the payment of a debtor of the accounts receivable, and thelike.

- Article 762

A factoring contract generally contains clauses specifying the business type,scope of service, term of service, information on the underlying transaction contractand the accounts receivable, the financing funds through factoring, the serviceremuneration, the methods of payment thereof, and the like.

A factoring contract shall be in writing.

- Article 763

Where a creditor and a debtor fabricate an account receivable as the object oftransfer and then conclude a factoring contract on it with a factor, the debtor of thefabricated account receivable shall not assert a defense against the factor on theground that the account receivable does not exist, unless the factor clearly knows suchfabrication.

- Article 764

Where a factor notifies a debtor of an account receivable of the assignment of theaccount receivable, he shall disclose his identity as a factor and present necessarycertifying documents.

- Article 765

Where, after a debtor of an account receivable receives the notice of assignmentthereof, the creditor and the debtor of the account receivable agree to modify orterminate the underlying contract without just cause, which has an adverse impact onthe factor, such modification or termination is not effective against the factor.

- Article 766

Where the parties agree that the factoring is one with the right of recourse, thefactor may claim against the creditor of the account receivable for refunding theprincipal and interest of the financing funds or redemption of the claim on the accountreceivable, or claim against the debtor of the account receivable. Where a factorclaims against the debtor of the account receivable after deducting the principal andinterest of the financing funds and the other relevant expenses, any balance shall bereturned to the debtor of the account receivable.

- Article 767

Where the parties agree that the factoring is one without the right of recourse, thefactor shall claim against the debtor of the account receivable, and the factor is notrequired to return to the creditor of the account receivable the amount in excess of theprincipal and interest of the financing funds and the other relevant expenses he hasobtained.

- Article 768

Where a creditor of an account receivable concludes multiple factoring contractswith different factors so that the factors claim their rights against the same accountreceivable, the account receivable shall be obtained by the factor of a registeredfactoring contract in priority over the factors of unregistered factoring contracts, or,where all factoring contracts are registered, by the factors in an order according to thetime of registration, or, where none of the factoring contracts have been registered, bythe factor stated in the transfer notice which has reached the debtor of the accountreceivable first in time. Where none of the factoring contracts have been registeredand no transfer notice has been sent, the account receivable shall be obtained by thefactors on a pro rata basis on the amount of financing funds each has provided, or theservice remuneration each is entitled to.

- Article 769

For matters not provided in this Chapter, the relevant provisions of Chapter Sixof this Book on the assignment of claims shall be applied.

**Chapter XVII** Work Contracts

- Article 770

A work contract is a contract under which a contractor, in accordance with therequirements of a client, completes a work and delivers the work product to the clientwho pays remuneration in return.

A contracted work includes processing, manufacturing on order, repair,reproduction, testing, inspection, and the like.

- Article 771

A work contract generally contains clauses specifying the object, quantity, andquality of the work, remuneration of the work, the mode of the work, supply ofmaterials, the period of performance, the standard and method of inspection, and thelike.

- Article 772

The contractor shall complete the principal part of the work with his ownequipment, technology, and labor force, unless otherwise agreed by the parties.

Where a contractor entrusts the major part of the contracted work with a thirdperson, the contractor shall be accountable to his client concerning the workcompleted by the third person and the client may rescind the contract if he has notconsented thereto.

- Article 773

A contractor may entrust the accesory part of his contracted work with a thirdperson. Where a contractor entrusts an accessory part of the contracted work to a thirdperson, the contractor shall be accountable to the client concerning the work productcompleted by the third person.

- Article 774

Where a contractor is to provide the materials, he shall select and use thematerials in accordance with the agreement and accept the inspection of the client.

- Article 775

Where a client is to provide the materials, he shall provide the materials inaccordance with the agreement. The contractor shall promptly inspect the materialsprovided by the client, and, if any inconformity is found, the contractor shall promptlyrequest the client to make replacement, make up the shortage or take other remedialmeasures.

Without the consent of the client, a contractor may not change the materialsprovided by the client nor change the accessories and parts which do not need repair.

- Article 776

A contractor shall promptly notify the client if he finds that the drawings ortechnical requirements provided by the client are unreasonable. Where losses arecaused to the contractor due to the client's failure to response or the like reasons, theclient shall bear the liability for compensation.

- Article 777

Where, in the course of a contracted work, the client changes his requirements,thus causing loss to the contractor, the client shall bear liability for compensation.

- Article 778

Where a contracted work requires assistance from the client, the client has theobligation to provide such assistance. Where the client fails to perform suchobligation, thus making the completion of the contracted work impossible, thecontractor may demand him to perform his obligation within a reasonable period oftime, and may also extend the term of performance accordingly. If the client still failsto fulfill his obligation within the extend term, the contractor may rescind thecontract.

- Article 779

A contractor shall accept necessary supervision and inspection of the client in thecourse of his work. The client may not disturb the normal work of the contractor bysuch supervision and inspection.

- Article 780

Upon completion of his work, a contractor shall deliver to the client the workproduct and provide the client with the necessary technical materials and relatedquality certificates. The client shall inspect the work product for acceptance.

- Article 781

Where the work product delivered by the contractor fails to meet the qualityrequirements, the client may, in a reasonable manner, request the contractor to beardefaultin forms of repair, reworking, remuneration reduction, orliabilitycompensation for losses.

- Article 782

A client shall pay remuneration within the time limit agreed by the parties.Where there is no agreement between the parties on the time limit for payingremuneration or the agreement is unclear, if it cannot be determined according to theprovisions of Article 510 of this Code, the client shall make payment at the time ofdelivery of the work product; and where part of the work product is delivered, theclient shall pay the corresponding remuneration.

- Article 783

Where a client fails to make such payments as remuneration or materials fees,the contractor has the right to retain the work product under lien or to refuse delivery,unless otherwise agreed by the parties.

- Article 784

A contractor shall properly keep the materials provided by the client and thecompleted work product, and shall bear the liability for compensation if suchmaterials or the work product are destructed, damaged or lost owing to hisinappropriate maintenance thereof.

- Article 785

A contractor shall keep confidential the relevant information in accordance withthe requirements of the client and, without the latter's permission, may not retain

copies or technical data thereof.

- Article 786

Co-contractors shall bear joint and several liabilities to the client, unless

otherwise agreed by the parties.

- Article 787

The client may rescind the work contract at any time before the contractorcompletes his work, provided that he shall bear the liability for compensating any lossthus caused to the contractor.

**Chapter XVIII** Contracts for Construction Project

- Article 788

A contract for construction project is a contract under which a contractor carriesout the construction of a project and the contract-offering party pays the price inreturn.

Contracts for construction project consist of contracts for project prospecting,designing, and construction.

- Article 789

A contract for construction project shall be made in writing.

- Article 790

Bidding for a construction project shall be carried out in an open, fair, andimpartial manner in accordance with the provisions of the relevant laws.

- Article 791

A contract-offering party may conclude a contract for construction project with ageneral contractor, or conclude separate contracts for prospecting, designing, andconstruction with the prospecting, designing, and construction parties respectively. Acontract-offering party may not break up one construction project that should becompleted by one contractor into several parts and offer them to several contractors.

A general contractor or a prospecting, designing or construction contractor may,upon consent by the contract-offering party, entrust part of the contracted work with athird person. The third person shall assume joint and several liability with the generalcontractor or the prospecting, engineering, or construction contractor to thecontract-offering party on the work product of the third person. A contractor may notdelegate the whole of the contracted construction project to a third person or break up

the contracted construction project into several parts and delegate them separately tothird persons in the name of subcontracting.

A contractor is prohibited from subcontracting the contracted project to anyentity without the corresponding qualifications. A subcontractor is prohibited fromre-subcontracting the contracted project. The main structure of the constructionproject must be completed by the contractor itself.

- Article 792

Contracts for major construction projects of the State shall be concluded inaccordance with the procedures set forth by the State and such documents asinvestment plans and feasibility study reports approved by the State.

- Article 793

Where a contract for construction project is invalid but the construction projecthas passed the inspection for acceptance, the contractor may be compensated withreference to the project price agreed in the contract and based on the appraised priceof the construction project.

Where a contract for construction project is invalid and the construction projectfails to pass the inspection for acceptance, it shall be dealt with in accordance with thefollowing provisions:

- (1) where the construction project after being repaired has passed the inspectionfor acceptance, the contract-offering party may request the contractor to bear therepairing costs; or

- (2) where the construction project after being repaired still fails to pass theinspection for acceptance, the contractor has no right to request for payment withreference to the project price agreed in the contract or based on the appraised price ofthe construction project.

Where a contract-offering party is at fault for the loss caused by the substandard

of the construction project, he shall bear corresponding liabilities.

- Article 794

A prospecting or designing contract generally contains clauses specifying thetime limit for submission of documents relating to the basic materials and budget,quality requirements, expenses and other cooperative conditions, and the like.

- Article 795

A construction contract generally contains clauses specifying the project scope,the period for construction, the time of commencement and completion of the projectto be delivered in midcourse, project quality, costs, delivery time of technicalmaterials, the responsibility for the supply of materials and equipment, fund allocationand settlement, project inspection and acceptance upon its completion, range andperiod of quality warranty, cooperation, and the like.

- Article 796

For any construction project to which a superintendence system is applied, the

contract-offering party shall conclude an entrustment contract of superintendence inwriting with the entrusted superintendent. The rights and obligations as well as thelegal liabilities of the contract-offering party and the superintendent shall be definedin accordance with the provisions on entrustment contracts of this Book as well as therelevant provisions of other laws and administrative regulations.

- Article 797

The contract-offering party may, without disturbing the normal operation of the

contractor, inspect the progress and quality of the work at any time.

- Article 798

Prior to the concealment of a concealed project, the contractor shall notify thecontract-offering party to inspect it. If the contract-offering party fails to conduct aninspection in a timely manner, the contractor may extend the period for thecompletion of the project accordingly, and may request compensation for lossescaused by the work stoppage, the workers' forced idleness, and the like.

- Article 799

Upon completion of a construction project, the contract-offering party shallpromptly undertake the inspection for acceptance in accordance with the constructiondrawings and descriptions, as well as the rules of inspection and acceptance ofconstruction projects and the standards for quality inspection issued by the State.Where the project passes the inspection for acceptance, the contract-offering partyshall pay the agreed price and take over the construction project.

A construction project may be delivered and put into use only after it has passedthe inspection for acceptance upon completion. Without being inspected or failing topass the inspection, the construction project may not be delivered or put into use.

- Article 800

Where losses are caused to a contract-offering party due to the fact that theprospecting or designing does not conform to the quality requirements or that theprospecting or designing documents are not submitted as scheduled, so that the periodfor construction is delayed, the prospecting or designing party shall continue onperfecting the prospecting or designing, reduce or waive the prospecting or designingfees, and make compensation for the losses.

- Article 801

Where the quality of a construction project fails to conform to the contract due toa reason attributable to the constructor, the contract-offering party has the right torequest the constructor to repair, rework, or reconstruct the project without furthercharge within a reasonable period of time. If delivery is delayed because of the repair,reworking, reconstruction, the constructor shall bear default liability.

- Article 802

Where a construction project causes personal injury and property damage due toa reason attributable to the contractor within a reasonable period of use of the project,the contractor shall bear the liability for compensation.

- Article 803

Where a contract-offering party fails to provide raw materials, equipments,premises, funds, or technical materials at the agreed time and pursuant to the agreedrequirements, the contractor may extend the period of construction accordingly andhas the right to request compensation for the losses caused by work stoppage, andworkers' forced idleness, and the like.

- Article 804

If a construction project is stopped or suspended in midcourse due to a reasonattributable to the contract-offering party, the contract-offering party shall takemeasures to make up for the loss or mitigate the loss, and compensate the contractorfor any losses caused and actual expenses incurred by work stoppage, workers' forcedidleness, back transportation, transfer of machinery equipment, the backlog ofmaterials and structural components, and the like.

- Article 805

Where a contract-offering party alters his plan, provides inaccurate materials, orfails to provide necessary working conditions for prospecting or designing asscheduled, thus causing the redoing or stoppage of the prospecting or designing work,or the revision of the design, the contract-offering party shall pay additional feesaccording to the amount of work actually undertaken by the prospecting or designingparty.

- Article 806

Where a contractor delegates or illegally subcontracts the construction project to

others, the contract-offering party may rescind the contract.

Where the main construction materials, construction components and accessories,and equipment provided by the contract-offering party fail to conform to themandatory standard, or the contract-offering party fails to perform his obligations toprovide assistance, so that the contractor cannot undertake the construction work, ifthe contract-offering party still fails to perform the corresponding obligations within areasonable period of time after being demanded, the contractor may rescind thecontract.

Where, after the contract is rescinded, the quality of the completed constructionproject is found to be up to standard, the contract-offering party shall makecorresponding payment for the construction project in accordance with the agreement.If the quality of the completed construction project is found to be substandard, theprovisions of Article 793 of this Code shall be applied mutatis mutandis.

- Article 807

Where a contract-offering party fails to pay the price in accordance with theagreement, the contractor may demand the contract-offering party to make thepayment within a reasonable period of time. Where the contract-offering party stillfails to pay the price upon expiration of the said period, the contractor may negotiatewith the contract-offering party to appraise the construction project to satisfy theobligation, or request the people's court to sell the project through auction in

accordance with law, unless the construction project is by its nature unsuitable forappraisal or auction. The payment for the construction of the project shall be satisfied,in priority, from the proceeds obtained from the appraisal or auction of the saidproject.

- Article 808

For matters not provided in this Chapter, the relevant provisions on workcontracts shall be applied.

**Chapter XIX** Transport Contracts

**Section 1** General Rules

- Article 809

A transport contract is a contract under which a carrier transports a passenger orgoods from the place of dispatch to a destination agreed by the parties, and thepassenger, consignor, or consignee pays the fare or the freight.

- Article 810

A carrier engaging in public transport may not reject an ordinary and reasonabletransport request made by a passenger or consignor.

- Article 811

A carrier shall safely transport a passenger or goods to a destination as agreedwithin the agreed or a reasonable period of time.

- Article 812

A carrier shall transport a passenger or goods to a destination as agreed via anagreed or a usual transport route.

- Article 813

A passenger, consignor, or consignee shall pay the fare or the freight. If a carrierdoes not transport via an agreed route or the usual route, thus increasing the fare orthe freight, the passenger, consignor, or consignee may refuse to pay the extra fare or

freight.

**Section 2** Passenger Transport Contract

- Article 814

A passenger transport contract is formed at the time when the carrier issues aticket to the passenger, unless otherwise provided by the parties or in accordance withthe coure of dealing.

- Article 815

A passenger shall get on board pursuant to the time, the number of runs or flights,and the seat number indicated in the valid ticket. Any passenger who boards without aticket, beyond the paid distance, in a higher class, or with a discounted ticket while heis unqualified therefor shall pay or make up for the difference in the ticket price, andthe carrier may charge an extra fare according to the regulations. Where a passengerrefuses to pay the fare accordingly, the carrier may refuse to transport him.

Where a passenger under a real-name passenger transport contract loses histicket, he may request the carrier to report the loss and reissue a ticket, and the carriershall not re-collect ticket fees or other unreasonable expenses.

- Article 816

A passenger who is unable to get on board at the time indicated in the ticket dueto his own reason shall, within the period of time agreed by the parties, undergo theprocedures for refund or change of the ticket. If the passenger fails to undergo therefund or change procedures within the agreed period of time, the carrier may refuseto refund the ticket, and no longer has the transport obligation.

- Article 817

The carry-on baggages of a passenger shall conform to the quantity limit andcategory requirement in accordance with the agreement. A passenger who carriesbaggages in excess of the quantity limit or in violation of the requirements for thecategory shall have the baggage checked in.

- Article 818

A passenger may not carry with him or secretly carry in his baggage anyinflammable, explosive, toxic, corrosive, or radioactive articles, any other dangerousarticles that might endanger the safety of persons and property aboard, nor anycontraband articles.

Where a passenger violates the provisions of the preceding paragraph, the carrier

may unload or destroy the dangerous or contraband articles or deliver them to therelevant departments. Where a passenger insists on carrying with him the dangerousarticles or the contraband articles or carrying them in his baggage, the carrier shallrefuse to transport him.

- Article 819

A carrier shall strictly fulfill his obligation of safe transport and timely notifypassengers about matters of attention for a safe transport. A passenger shall activelyassist in and be cooperative with the carrier with regard to the reasonablearrangements made for safe transport.

- Article 820

A carrier shall transport passengers at the time and in the number of runs orflights and seat number indicated in the valid ticket. Under circumstances where thetransport is delayed or rendered out of a normal state, the carrier shall inform andremind the passenger in a timely manner, take necessary measures for arrangement,and, upon passengers' requests, arrange them to take other numbers of runs or flightsor refund their tickets. The carrier shall bear the liability for compensation for anyloss thus caused to the passenger, unless such loss is not attributable to the carrier.

- Article 821

A carrier who unilaterally downgrades the service standard shall, uponpassengers' requests, refund their tickets or reduce the fare. A carrier who upgradesthe service standard shall not charge extra fare.

- Article 822

A carrier shall, in the course of transportation, spare no effort to rescue and helpa passenger who suffers an emergent disease, commence childbirth, or otherwise indanger.

- Article 823

A carrier shall bear the liability for compensation arising from the injury or deathof a passenger occurring in the course of transportation, unless the injury or death is aresult of the passenger's own health condition, or the carrier can prove that the injuryor death is caused by the passenger's intentional or grossly negligent act.

The provisions of the preceding paragraph shall apply to any passengerexempted from ticket in accordance with the regulations, holding a complimentaryticket, or permitted by the carrier to travel without a ticket.

- Article 824

Where an article that the passenger carries with him is destructed, damaged, orlost in the course of transportation, the carrier shall bear the liability for compensation,if the carrier is at fault.

Where the passengers' checked-in baggages are destructed, damaged, or lost, the

relevant provisions on the freight transport shall be applied.

**Section 3** Freight Transport Contracts

- Article 825

A consignor, when consigning goods for transport, shall clearly declare to thecarrier the information necessary for freight transport such as the name or entity nameof the consignee or the consignee by order, as well as the name, nature, weight andquantity of the goods, and the place of delivery.

If a loss is caused to the carrier due to the consignor's untrue declaration oromission of substantial information, the consignor shall bear the liability forcompensation.

- Article 826

Where a freight transport is subject to approval or inspection, the consignor shallsubmit to the carrier the documents showing the completion of the relevantformalities.

- Article 827

A consignor shall package the goods in a manner as agreed by the parties. Wherethere is no agreement by the parties on the packaging manner or the agreement isunclear, the provisions of Article 619 of this Code shall be applied.

Where a consignor violates the provisions of the preceding paragraph, the carriermay refuse to conduct the transportation.

- Article 828

Where a consignor consigns for transportation such dangerous goods asinflammable, explosive, toxic, corrosive or radioactive articles, the consignor shall, inaccordance with the regulations of the State on the transport of dangerous goods,properly package the dangerous goods, affix warning signs and labels thereto, andsubmit to the carrier written documents concerning the name, nature, andprecautionary measures relevant to the dangerous goods.

Where a consignor violates the provisions of the preceding paragraph, the carriermay refuse to conduct the transport, or take appropriate measures to prevent losses,and the expenses thus incurred shall be borne by the consignor.

- Article 829

Before a carrier delivers the goods to the consignee, the consignor may ask thecarrier to stop transportation, return the goods, change the place of destination, ordeliver the goods to another consignee, provided that the consignor shall compensatefor the losses thus caused to the carrier.

- Article 830

After the goods are transported to the place of destination, the carrier shallpromptly notify the consignee where the carrier knows who is the consignee, and theconsignee shall promptly take delivery of the goods. Where the consignee delays intaking delivery of the goods, the consignee shall pay storage and other fees to thecarrier.

- Article 831

Upon taking delivery of the goods, a consignee shall inspect the goods within thetime limit as agreed by the parties. Where there is no agreement between the partieson the time limit for inspection of the goods or the agreement is unclear, if it cannotbe determined according to the provisions of Article 510 of this Code, the consigneeshall inspect the goods within a reasonable period of time. Where the consignee doesnot raise any objection on the quantity, destruction, damage, or loss of the goodswithin the agreed time limit or a reasonable period of time, the silence shall bedeemed as a preliminary evidence that the carrier has delivered the goods inaccordance with the transport documents.

- Article 832

A carrier shall bear the liability for compensation for any destruction, damage, orloss of the goods occurring in the course of transport, except that the carrier shall notbear the liability for compensation if the carrier proves that the destruction, damage,or loss of the goods is caused by force majeure, the inherent nature of the goods, orreasonable wear and tear, or is caused by the negligence of the consignor or theconsignee.

- Article 833

The amount of compensation for the destruction, damage, or loss of the goodsshall be in accordance with the agreement between the parties if there is such anagreement. Where the agreement on the amount of compensation is unclear, if itcannot be determined according to the provisions of Article 510 of this Code, theamount of compensation shall be calculated based on the market price of the goods atthe place of delivery at the time when the goods are delivered or should have beendelivered. If there are laws or administrative regulations providing otherwiseconcerning the calculation method and the limit of the compensation amount, suchprovisions shall be followed.

- Article 834

Where two or more carriers engage in a connected transport of the same mode,the carrier who concludes the contract with the consignor shall be responsible for theentire transport. If a loss occurs at one section of the transportation, the carrier whoconcludes the contract with the consignor and the carrier in the said section shallassume joint and several liability.

- Article 835

Where the goods are lost in the course of transport due to force majeure, unlessotherwise provided by law, the carrier may not request the payment of the freight if

the freight has not yet been collected, and the consignor may request for a refund ifthe freight has already been collected.

- Article 836

If a consignor or consignee fails to pay freight, storage fees, or other expenses,the carrier has the right to retain the goods under a lien, unless otherwise agreed bythe parties.

- Article 837

Where a consignee is unknown or the consignee refuses to take delivery of thegoods without just cause, the carrier may have the goods placed in escrow inaccordance with law.

**Section 4** Multi-modal Transport Contracts

- Article 838

An operator of multi-modal transport is responsible for performing or organizingthe performance of a multi-modal transport contract, enjoys the rights and assumesthe obligations of a carrier throughout the entire transport.

- Article 839

An operator of multi-modal transport may agree with the carriers of the differentsections of the multi-modal transport on their respective responsibilities for transportin each section under the multi-modal transport contract, provided that such anagreement shall not affect the obligations of the operator for the entire transport.

- Article 840

An operator of multi-modal transport shall, upon receipt of the goods consignedfor transport by the consignor, issue multi-modal transport documents. Themulti-modal transport documents may be negotiable or non-negotiable, as requestedby the consignor.

- Article 841

Where losses are caused to an operator of multi-modal transport due to the faultof a consignor at the time of consigning the goods for transport, the consignor shallbear the liability for compensation even if the consignor has transferred themulti-modal transport documents.

- Article 842

Where destruction, damage, or loss of goods occurs in one section of the

multi-modal transport, the provisions of the relevant laws regulating the transportmodes of the section shall apply to the liability for compensation to be assumed by theoperator of multi-modal transport and the limits of the liability. Where the section oftransport in which such destruction, damage, or loss has occurred cannot bedetermined, liability for compensation shall be borne in accordance with theprovisions of this Chapter.

**Chapter XX** Technology Contracts

**Section 1** General Rules

- Article 843

A technology contract is a contract concluded by the parties to clarify their rightsand obligations for technology development, transfer, licensing, consultation orservice.

- Article 844

The conclusion of a technology contract shall be conducive to the protection ofintellectual property rights and the advance of science and technology, and shallpromote the research and development, transformation, application, and disseminationof the achievements in science and technology.

- Article 845

A technology contract generally contains clauses specifying the name of theproject, the content, scope, and requirements of the object, the plan, place, andmanner of performance, the confidentiality of technological information and materials,the ownership over the technological achievements and the method of proceedsdistribution, the criteria and method of the inspection for acceptance, interpretation ofterminologies, and the like.

Materials such as technological background information, the feasibility studiesand technological evaluation reports, the project task paper and plans, technologystandards, technology norms, original design and technical documents, as well asother technical documents which are relevant to the performance of the contract may,as agreed by the parties, be component parts of the contract.

Where a technology contract involves a patent, it shall indicate the designation of

the invention, the applicant and the patentee thereof, the date of application, theapplication number, the patent number, and duration of the patent rights.

- Article 846

The method of payment for the price, remuneration, or royalty shall be agreed bythe parties in a technology contract, and the payment may be made in a lump-sum orby installment based on one-time calculation, or based on the method of commissionpayment or such payment plus an upfront fee.

Where the parties agree to adopt a method of commission payment, thecommission may be drawn at a specific percentage from the price of the product, thenewly-increased output value and profits attained from the exploitation of patents andthe utilization of technological know-how, or the sales revenue of the product, or becalculated by other methods as agreed by the parties. The said percentage may be afixed percentage, or one that increases or decreases year by year.

Where the parties agree to adopt commission payment, they may specify themethod for examining the relevant accounting books.

- Article 847

Where a right to use or transfer a work for hire belongs to a legal person or anunincorporated organization, the legal person or unincorporated organization mayconclude a technology contract on the work for hire. Where the legal person orunincorporated organization concludes a technology contract to transfer the work forhire, the creator of the work for hire has right in priority to acquire it on equivalentconditions.

A work for hire is a technological achievement that is accomplished as a result ofperforming the tasks assigned by a legal person or unincorporated organization or thatis accomplished mainly by using the material and technological resources of the saidlegal person or unincorporated organization.

- Article 848

The right to use or transfer of a technological work product other than a work forhire belongs to its creator who may conclude a technology contract on such workproduct.

- Article 849

An individual person who has accomplished a technological work product hasthe right to indicate on the relevant documents of the technological work product thathe is the creator thereof, and to receive certificate of honor and rewards.

- Article 850

A technology contract that illegally monopolies technologies or infringes uponothers technological work product is invalid.

**Section 2** Technology Development Contracts

- Article 851

A technology development contract is a contract concluded by the partiesconcerning the research and development of a new technology, product, technique,variety, or material, as well as the system thereof.

Technology development contracts consist of commissioned developmentcontracts and cooperative development contracts.

A technology development contract shall be in writing.

The relevant provisions on the technology development contracts shall beapplied mutatis mutandis to a contract concluded by the parties on the application andtransformation of a technological product with a value for practical use.

- Article 852

A client of a commissioned development contract shall pay for the research anddevelopment fees and the remunerations in accordance with the agreement, providetechnological materials, make proposals for research and development, complete histasks in the cooperative work, and accept the work product of the research anddevelopment.

- Article 853

A researcher-developer of a commissioned development contract shall work outand implement a research and development plan in accordance with the contract,make reasonable use of the research and development funds, complete the researchand development work as scheduled, deliver the work product of research anddevelopment, provide relevant technological materials and necessary technologicalguidance so as to help the client comprehend the work product of the research anddevelopment.

- Article 854

Where a party to a commissioned development contract defaults, thus causingthe stoppage, delay, or failure of the research and development work, the party shallbear default liability.

- Article 855

The parties to a cooperative development contract shall make investments in aform agreed by the parties, including contribution of the technology in investment,participation in the research and development work by performing their respectiveduties, and cooperation in the research and development.

- Article 856

Where a party to a cooperative development contract defaults, thus causing thestoppage, delay, or failure of the research and development work, the party shall beardefault liability.

- Article 857

Where a technology which is the object of a technology development contract isrevealed to the public by others, thus rendering the performance of the contractmeaningless, the parties may rescind the contract.

- Article 858

The parties to a technology development contract shall agree on the allocation ofrisks of insurmountable technological difficulties arising in the performance of thecontract which causes total or partial failure of the research and development. Wherethere is no such a agreement between the parties or the agreement is unclear, if itcannot be determined according to the provisions of Article 510 of this Code, theparties shall share the risks in a reasonable way.

Where a party finds that a situation specified in the preceding paragraph existswhich may cause total or partial failure of the research and development, he shallpromptly notify the other party and take appropriate measures to mitigate the loss.Where he fails to promptly inform the other party and take appropriate measures sothat the loss is aggravated, he shall be liable for the aggravated part of the loss.

- Article 859

Where an invention is accomplished through commissioned development, theright to apply for patent thereof belongs to the researcher-developer, unless otherwiseprovided by law or agreed by the parties. Where the researcher-developer hasobtained the patent right, the client may exploit the patent in accordance with law.

Where a researcher-developer is to transfer his right to apply for a patent, the

client has a priority right to acquire the right on equivalent conditions.

- Article 860

Where an invention is accomplished through cooperative development, the rightto apply for patent jointly belongs to all parties to the cooperative development.Where one party is to transfer the part of the joint patent application right he owns,the other parties have a priority right to acquire the right on equivalent conditions,unless otherwise agreed by the parties.

Where a party to a cooperative development waives the part of patent applicationright he owns, unless otherwise agreed by the parties, the other party may make theapplication, or the other parties may jointly make the application, as the case may be.Where the applicant(s) acquires the patent right, the party who has waived his rightmay exploit the patent free of charge.

Where one party to a cooperative development does not agree to apply for patent,the other party or parties may not apply therefor.

- Article 861

The right to use and the right to transfer a work product containing technologicalknow-how accomplishedthrough commissioned development or cooperativedevelopment, as well as the method for distributing the proceeds thereof, shall beagreed by the parties. Where there is no such an agreement between the parties or theagreement is unclear, if it cannot be determined according to the provisions of Article510 of this Code, all the parties have the right to use and transfer the said workproduct, as long as no patent right has been granted on a same technological solution,except that a researcher-developer of a commissioned development may not transferthe work product to a third person before he delivers it to the client.

Technology Transfer Contracts and Technology Licensing Contracts

**Section 3**

- Article 862

A technology transfer contract is a contract under which a lawful right holder ofa technology assigns to another person the relevant rights in respect of a specificpatent, application for a patent, or technological know-how.

A technology licensing contract is a contract under which a lawful right holder ofa technology authorizes another person to exercise the relevant rights to apply andexploit a specific patent or technological know-how.

The agreement in a technology transfer contract or a technology licensingcontract on the provision of special equipment and raw materials for application oftechnology or on the provision of the relevant technology consultation and technologyservice is a component part of the contract.

- Article 863

Technology transfer contracts include the contracts for the transfer of patent right,the contracts for transfer of the right to apply for a patent, the contracts for transfer oftechnological know-how, and the like.

Technology licensing contracts include the patent exploitation licensing contracts,

technological know-how licensing contracts, and the like.

Technology transfer contracts and technology licensing contracts shall be inwriting.

- Article 864

A technology transfer contract or a technology licensing contract may specify thescope to exploit the patent or to use the technological know-how, but may not restrictcompetition or development of the technologies.

- Article 865

A patent exploitation licensing contract is valid only within the period duringwhich the patent is valid. Where the term of the patent right expires or the patent rightis declared invalid, the patentee may not conclude a patent exploitation licensingcontract relating to the said patent with another person.

- Article 866

A licensor in a patent exploitation licensing contract shall permit the licensee toexploit the patent, deliver the technological materials related to the patent exploitation,and provide necessary technological guidance in accordance with the agreement.

- Article 867

A licensee in a patent exploitation licensing contract shall exploit the patent inaccordance with the agreement, may not allow a third person outside the contract toexploit the patent, and shall pay the agreed royalties.

- Article 868

A transferor in a technological know-how transfer contract or a licensor in atechnological know-how licensing contract shall, in accordance with the agreement,provide technological materials, give technological guidance, guarantee the practicalapplicability and reliability of the technology, and perform confidentiality obligations.

The confidentiality obligations provided in the preceding paragraph shall notrestrict the licensor from applying for a patent, unless otherwise agreed by the parties.

- Article 869

A transferee in a technological know-how transfer contract or a licensee in atechnological know-how licensing contract shall, in accordance with the agreement,exploit the technology, pay the transfer fee and royalties, and perform confidentialityobligations.

- Article 870

A transferor in a technological transfer contract or a licensor in a technologicalknow-how licensing contract shall guarantee that he is the lawful owner of thetechnology provided therein, and guarantee that the technology provided is complete,errorless, effective, and capable of acheiving the goal as agreed by the parties.

- Article 871

A transferee in a technology transfer contract or a licensee in a technologicalknow-how licensing contract shall, in accordance with the scope and time limit agreedby the parties, perform his confidentiality obligation regarding the part of thetechnology provided by the transferor or licensor that have not been disclosed to thepublic.

- Article 872

A licensor who fails to license the technology in accordance with the agreementshall refund the royalties in part or in full and bear default liability. A licensor who

exploits a patent or technological know-how beyond the agreed scope, or, withoutauthorization, allows a third person to exploit the patent or utilize the technologicalknow-how in breach of the agreement shall stop his breaching act and bear defaultliability. He shall bear default liability if he breaches the confidentiality obligation asagreed.

Where a transferor is liable for breach of contract, the provisions of thepreceding paragraph shall be applied mutatis mutandis.

- Article 873

A licensee who fails to pay royalties in accordance with the agreement shallmake up for the payment of royalties and pay the liquidated damages. Where thelicensee fails to do so, he shall stop exploitation of the patent or utilization of thetechnological know-how, return the technological materials, and bear default liability.Where a licensee who exploits the patent or utilizes the technological know-howbeyond the agreed scope, or allows a third person, without authorization, to exploitthe patent or to utilize the technological know-how, he shall stop his breaching actsand bear default liability. The licensee who breaches the confidentiality obligation asagreed shall bear default liability.

The provisions of the preceding paragraph shall be applied mutatis mutandis to atransferee who shall bear default liability.

- Article 874

Where the exploitation of a patent or utilization of a technological know-how bythe transferee or the licensee in accordance with the agreement infringes upon thelawful rights and interests of another person, the liability therefor shall be borne bythe transferor or the licensor, unless otherwise agreed by the parties.

- Article 875

The parties may, in compliance with the principle of mutual benefit, agree in thecontract the method for sharing any subsequently improved technological productobtained in exploitation of the patent or utilization of the technological know-how.Where there is no agreement on such method or the agreement is unclear, if it cannotbe determined according to the provisions of Article 510 of this Code, thesubsequently improved technological product made by one party may not be sharedby any other party.

- Article 876

The relevant provisions of this Section shall be applied mutatis mutandis to thetransfer and licensing of the exclusive rights to layout-designs of integrated circuits,rights to new plant varieties, computer software copyrights, and other intellectualproperty rights, and the like.

- Article 877

Where there are laws or administrative regulations providing otherwise oncontracts for technology import and export, or on contracts for patents and applicationof patents, the relevant provisions shall be followed.

**Section 4** Technology Consultation Contracts and Technology Service Contracts

- Article 878

A technology consultation contract is a contract under which one party uses histechnological knowledge to provide to the other party the feasibility study,investigation, and analysis andtechnologicaltechnological forecast, specialevaluation report on a specific technological project.

A technology service contract is a contract under which one party uses histechnological knowledge to solve specific technological problems for the other party.Technology service contracts does not include work contracts or construction projectcontracts.

- Article 879

A client in a technology consultation contract shall, in accordance with theagreement, clarify the issues for consultation, provide technological backgroundinformation and the related materials, accept the work product of the entrusted person,and pay remuneration.

- Article 880

The entrusted person in a technology consultation contract shall complete theconsultation report or resolve the issues within the agreed time limit, and theconsultation report submitted shall meet the requirements as agreed by the parties.

- Article 881

Where a client in a technology consultation contract fails to provide thenecessary materials in accordance with the agreement thus affecting the progress andquality of the work, or if the client fails to accept the work product or delays theacceptance, he may not request refund for the paid remuneration and shall pay anyunpaid remuneration.

An entrusted person in a technology consultation contract who fails to submit theconsultation report as scheduled or submits a report failing to meet the requirementsas agreed by the parties shall bear default liability in form of reduction or waiver of itsremuneration, and the like.

Where a client in a technology consultation contract makes a decision in relianceupon the entrusted person’s consultation report and advice that meet the requirementsas agreed by the parties, any losses thus caused shall be borne by the client, unlessotherwise agreed by the parties.

- Article 882

A client in a technology service contract shall, in accordance with the agreement,provide working conditions, perform the cooperative work, accept the work product,and pay remuneration.

- Article 883

An entrusted person in a technology service contract shall, in accordance withthe agreement, complete the services, solve the technological issues, guarantee thequality of the work, and impart the knowledge for solving the technological problems.

- Article 884

Where a client to a technology service contract fails to perform his contractualobligations or performs his obligations in a manner inconsistent with the contract,thus affecting the progress and quality of the work, or fails to accept the work productor delays the acceptance, he may not request for refund of the paid remuneration, andshall pay any unpaid remuneration.

An entrusted person in a technology service contract who fails to complete theservice work in accordance with the agreement shall bear default liability in suchform as waiver of his remuneration, and the like.

- Article 885

Unless otherwise agreed by the parties, in the course of performance of atechnology consultation contract or a technology service contract, the newtechnological product made by the entrusted person with technological materials andworking conditions provided by the client belongs to the entrusted person. The newtechnological products made by the client based on the work product of the entrustedperson belongs to the client.

- Article 886

Where there is no agreement in a technology consultation contract or atechnology service contract on the bearing of the necessary expenses for the entrustedperson to carry out the normal work, or the agreement is unclear, the said expensesshall be borne by the entrusted person.

- Article 887

Where there are laws or administrative regulations providing otherwise ontechnology intermediary contracts and technology training contracts, the relevantprovisions shall be followed.

**Chapter XXI** Contracts for Custody of Property

- Article 888

A contract for custody of property is a contract under which a custodian keepsthe article delivered by a depositor and returns the said article.

Where a depositor conducts shopping, dining, lodging, or other activities in thecustodian’s place and deposits an article at a designated area, the article is deemed tobe placed in the custodian’s custody unless otherwise agreed by the parties or requiredby the course of dealing.

- Article 889

A depositor shall pay the safekeeping fee to the custodian in accordance with theagreement.

Where there is no agreement between the parties on the safekeeping fee or theagreement is unclear, if it cannot be determined according to the provisions of Article510 of this Code, the article is deemed to be placed in a gratuitous custody.

- Article 890

A contract for custody of property is formed upon delivery of the article to bekept under custody, unless otherwise agreed by the parties.

- Article 891

Where a depositor delivers to a custodian an article to be kept under his custodey,the custodian shall issue a safekeeping certificate, unless otherwise required by thecourse of dealing.

- Article 892

A custodian shall properly keep the deposited article.

The parties may agree on the place and method of safekeeping. Except in case ofemergency or in the interests of the depositor, the place and method of sefekeepingmay not be changed without the other party’s consent.

- Article 893

Where a depositor delivers to a custodian an article to be kept under custody thathas defects or needs special safekeeping measures based on its nature, he shall informthe custodian of the relevant information. Where the depositor fails to do so thuscausing damage to the deposited article, the custodian shall not bear the liability forcompensation. Where the custodian suffers a loss therefrom, the depositor shall beliable for compensation unless the custodian knows or should have known thesituation but fails to take remedial measures.

- Article 894

A custodian may not re-deposit an article under his custody to a third person for

safekeeping, unless otherwise agreed by the parties.

A custodian who re-deposits the article under his custody to a third person for

safekeeping in violation of the preceding paragraph thus causing damage to the articleshall bear the liability for compensation.

- Article 895

A custodian may not use or permit a third person to use the article under hiscustody, unless otherwise agreed by the parties.

- Article 896

Where a third person claims against an article under a custodian’s custody, thecustodian shall perform the obligation of returning the article to the depositor, unlessthe said article is put under preservation or enforcement in accordance with law.

Where a third person initiates an action against the custodian or applies fordetention of the article under the latter’s custody, the custodian shall promptly notifythe depositor.

- Article 897

Where an article under custody is destructed, damaged, or lost due to improperkeeping by the custodian during the period the article is under his custody, thecustodian shall bear the liability for compensation, except that a custodian who keepsthe deposited article free of charge shall not bear the liability for compensation if hecan prove that the destruction, damage, or loss is not caused by his intentional orgrossly negligent act.

- Article 898

A depositor shall declare to the custodian if he deposits money, negotiablesecurities, or other valuable articles, and the custodian shall examine them foracception, or seal them; where the depositor fails to make such a declaration, if thesaid article is destructed, damaged, or lost, the custodian may make compensationbased on a rate for ordinary articles.

- Article 899

A depositor may collect the article he deposited in custody at any time.

Where there is no agreement between the parties on the period for the custody orthe agreement is unclear, the custodian may, at any time, request the depositor tocollect the article under his custody. Where there is an agreement on the period for thecustody, without special cause, the custodian may not request the depositor to collectthe article before such period expires.

- Article 900

Upon expiration of the period for custody or where the depositor collects thearticle he deposits in custody before expiration of such period, the custodian shallreturn the article and the proceeds accrued thereof to the depositor.

- Article 901

Where money is deposited in custody, the custodian may return the money in thesame currency and amount. Where other fungible goods are deposited in custody, the

custodian may return the goods of the same kind, quality, and quantity in accordancewith the agreement .

- Article 902

Under a contract for non-gratuitous custody, the depositor shall pay the

safekeeping fee to the custodian at a time agreed by the parties.

Where there is no agreement between the parties on the time limit for payment ofthe safekeeping fee or the agreement is unclear, if it cannot be determined accordingto the provisions of Article 510 of this Code, the payment shall be made at the timethe article under custody is collected.

- Article 903

Where a depositor fails to pay the safekeeping fee or the other expenses, thecustodian has the right to retain the article under custody under a lien, unlessotherwise agreed by the parties.

**Chapter XXII** Warehousing Contracts

- Article 904

A warehousing contract is a contract under which a warehouser stores the goodsdelivered by the depositor for which the depositor pays the warehousing fee.

- Article 905

A warehousing contract is formed when there is a consensus of expression ofintent between the warehouser and the depositor.

- Article 906

Where dangerous goods such as inflammable, explosive, toxic, corrosive,radioactive, or perishable articles are to be stored, the depositor shall state the natureof the said goods and provide relevant information thereof.

Where a depositor violates the provisions of the preceding paragraph, thewarehouser may refuse to accept the goods for storage, or take appropriate measuresto avoid losses, and the expenses thus incurred shall be borne by the depositor.

A warehouser that stores dangerous goods such as inflammable, explosive, toxic,corrosive, and radioactive articles shall have the corresponding warehousingconditions.

- Article 907

A warehouser shall examine the goods before accepting them in accordance withthe agreement. Where a warehouse, upon examining the goods, finds that the goods tobe stored are inconsistent with the agreement, he shall promptly notify the depositor.A warehouser shall bear the liability for compensation if, after he has examined andaccepted the stored goods, the goods are not in conformity with the agreement interms of the types, quantity, or quality.

- Article 908

Upon delivering of the goods for storage by a depositor, the warehouser shallissue a document such as a warehouse receipt or entry.

- Article 909

A warehouser shall sign or stamp on a warehouse receipt. A warehouse receipt

shall contain the following particulars:

- (1) the name or designation and domicile of the depositor;

- (2) the type, quantity, quality, package, the number of pieces, and marks of thestored goods;

- (3) the standard for damage and spoilage of the stored goods;

- (4) the warehousing site;

- (5) the warehousing period;

- (6) the warehousing fee;

- (7) the insured amount, term of insurance, and the designation of the insurer ifthe goods to be stored have been insured; and

- (8) the name of the issuer and the place and date of issuance.

- Article 910

A warehouse receipt is a proof for collecting the stored goods. Where awarehouse receipt is endorsed by the depositor or a holder of the receipt, and is signedor stamped by the warehouser, the right to collect the stored goods may be assigned toanother person.

- Article 911

A warehouser shall, upon request of the depositor or the holder of the warehousereceipt, allow the depositor or the holder to examine the stored goods or to takesamples thereof.

- Article 912

Where a warehouser finds that the stored goods deteriorate or suffer from otherdamages, the warehouser shall promptly notify the depositor or the holder of thewarehouse receipt.

- Article 913

Where a warehouser finds that the stored goods deteriorate or suffer from otherdamages, which endangers the safety and the normal warehousing of the other storedgoods, he shall demand the depositor or the holder of the warehouse receipt todespose of the goods when necessary. In case of emergency, a warehouser may makenecessary disposal, but afterwards shall promptly notify the depositor or the holder ofthe warehouse receipt about the situation.

- Article 914

Where there is no agreement between the parties on the warehousing period orthe agreement is unclear, the depositor or the holder of the warehouse receipt maycollect the stored goods at any time, and the warehouser may, at any time, request thedepositor to collect the stored goods, provided that a reasonable period of timenecessary for preparations shall be given.

- Article 915

Upon expiration of the warehousing period, the depositor or the holder of thewarehouse receipt shall collect the stored goods by presenting the warehouse receipt,warehouse entry, or the like. Where the depositor or the holder of the warehousereceipt delays in collecting the stored goods, additional warehousing fees shall becharged; where the goods are collected before expiration of the warehousing period,the warehousing fees shall not be reduced.

- Article 916

Where a depositor or a holder of the warehouse receipt fails to collect the storedgoods upon expiration of the warehousing period, the warehouser may demand thedepositor or the holder of the warehouse receipt to collect the goods within areasonable period of time; if the depositor or the holder still fails to collect the goodsbeyond the reasonable period, the warehouser may have the warehoused goods placedin escrow.

- Article 917

If within the warehousing period, the stored goods are destructed, damaged, orlost due to improper warehousing by the warehouser, the depository shall bear theliability for compensation.

Where the deterioration or damage of the stored goods is due to the inherentnature of the goods, or because the goods are not packaged in accordance with theagreement, or because they are stored beyond a valid storage period, the warehousershall not be liable for compensation.

- Article 918

For matters not provided in this Chapter, the relevant provisions on the contractsfor custody of property shall be applied.

**Chapter XXIII** Entrustment Contracts

- Article 919

An entrustment contract is a contract under which a principal and an agent agreethat the agent shall handle the matters for the principal.

- Article 920

A principal may specifically entrust an agent to handle one or several matters,and may also generally entrust an agent to handle all matter of his.

- Article 921

A principal shall pay in advance the expenses for handling the entrusted matter.Where an agent pays for the principal necessary expenses in handling an entrustedmatter, the principal shall reimburse the expenses with interest.

- Article 922

An agent shall handle the entrusted matter in accordance with the instructionsgiven by the principal. Where it is necessary to modify such instructions, themodification shall be consented to by the principal; where the situation is emergentand it is difficult to obtain the principal’s consent, the agent shall properly handle theentrusted matter, and shall, afterwards, promptly inform the principal of the situation.

- Article 923

An agent shall handle the entrusted matter in person. With the consent of theprincipal, an agent may sub-entrust it to a third person. Where the sub-entrustment isconsented to or ratified by the principal, the principal may directly instruct thesub-entrusted third person on an entrusted matter, and the agent shall only be liablefor the selection of the third person and for the instructions given by himself to thethird person. If the sub-entrustment is not consented to or ratified by the principal, theagent shall be liable for an act done by the sub-entrusted third person, unless thesub-entrustment is for protecting the interests of the principal in case of emergency.

- Article 924

An agent shall, upon request of the principal, report on the situation of theentrusted matter. Upon termination of the entrustment contract, an agent shall reporton the result of the entrusted matter.

- Article 925

Where an agent, acting within the scope of authority granted by the principal,concludes a contract with a third person in his own name, if the third person is awareof the agency relationship between the agent and the principal, the said contract shalldirectly bind the principal and the third person, unless there is definite evidence

establishing that the said contract binds only the agent and the third person.

- Article 926

Where a contract is concluded by an agent in his own name with a third personwho is not aware of the agency relationship between the agent and the principal, if theagent fails to perform his obligations owed to the principal because of the third person,the agent shall disclose the third person to the principal, and the principal may thenexercise the right of the agent against the third person, unless the third person wouldnot have concluded the contract if he has been aware of the existence of the principalat the time of concluding the contract.

Where an agent fails to perform his obligations owed to a third person because ofthe principal, the agent shall disclose the principal to the third person, and the thirdperson may then claim his rights against either the agent or the principal as acounterparty, except that he may not change the counterparty once he has made theselection.

Where a principal exercises the right of the agent against the third person, thethird person may claim the defense he has against the agent against the principal.Where the third person elects the principal as the counterparty, the principal mayclaim against the third person the defense he has against the agent, as well as theagent's defense against the third person.

- Article 927

An agent shall hand over to the principal any property acquired in handling theentrusted matter.

- Article 928

When an agent has accomplished the entrusted matter, the principal shall payremuneration to the agent in accordance with the agreement.

Where an entrustment contract is rescinded or the entrusted matter cannot beaccomplished due to a cause not attributable to the agent, the principal shall paycorresponding remuneration to the agent, unless otherwise agreed by the parties.

- Article 929

Under a non-gratuitous entrustment contract, where losses are caused to the

principal due to the agent’s fault, the principal may request compensation. Undera gratuitous entrustment contract, where losses are caused to the principal by theagent’s intentional act or by his gross negligence, the principal may request forcompensation.

Where an agent acts beyond authorization thus causing losses to the principal,the agent shall make compensation.

- Article 930

Where an agent suffers a loss in handling the entrusted matter due to a cause notattributable to himself, he may request compensation from the principal.

- Article 931

A principal may, with consent of the agent, authorize a third person other thanthe agent to handle the entrusted matter. If a loss is thus caused to the agent, the agentmay request compensation from the principal.

- Article 932

Where two or more agents jointly handle an entrusted matter, they shall bearjoint and several liabilities to the principal.

- Article 933

A principal or an agent may rescind the entrustment contract at any time. Whererescission of the contract by a party causes losses to the other party, the partyrescinding a gratuitous entrustment contract shall compensate for the direct losscaused by the rescission at an improper time, and the party rescinding anon-gratuitous entrustment contract shall compensate for the direct loss and theexpected profit obtainable if the contract has been performed, unless the loss is causedby a reason not attributable to the rescinding party.

- Article 934

An entrustment contract shall terminate where the principal dies or is terminated,or if the agent dies, loses capacity for performing civi juristic acts, or is terminated,unless otherwise agreed by the parties or it is inappropriate to terminate the contractbased on the nature of the entrusted matter.

- Article 935

Where the termination of an entrustment contract which is resulted from thedeath, declared bankruptcy, or declared dissolution of the principal will harm theinterests of the principal, the agent shall continue to handle the entrusted matter untillthe heir, administrator of estate, or the liquidator of the principal takes it over.

- Article 936

Where an entrustment contract is terminated owing to the death, loss of capacityfor performing civil juristic acts, declared bankruptcy or dissolution of the agent, theheir, administrator of estate, legal representative, or liquidator of the agent shallpromptly notify the principal. Where the termination of the entrustment contract willharm the interests of the principal, the heir, administrator of estate, legalrepresentative, or liquidator of the agent shall take necessary measures before theprincipal takes remedial measures.

**Chapter XXIV** Contracts for Property Management Service

- Article 937

A contract for property management service is a contract under which a propertymanagement service provider provides to the property owners with propertymanagement services within the service area, such as repair and maintenance ofbuildings and the auxiliary facilities thereof, the management and maintenance of theenvironmental hygiene, keeping the order, and like, and the property owners payproperty management fees in return.

Property management service providers include property management serviceenterprises and other managers.

- Article 938

A property management service contract generally contains clauses specifyingthe contents of the services, the service quality, the rates and the collection methods ofthe service fee, the use of the maintenance funds, the management and use of theservice premises, the term of service, the service handover, and the like.

A commitment of service made publicly by a property management serviceprovider in favor of the property owners shall be a component part of the propertymanagement service contract.

A property management service contract shall be in writing.

- Article 939

A preliminary property management service contract concluded between adeveloper and a property management service provider in accordance with law, or aproperty management service contract concluded by an owners’ committee and aproperty management service provider selected and hired in the owners’ assembly inaccordance with law are legally binding on the owners.

- Article 940

Where, prior to expiration of the service term as agreed in a preliminary contractfor property management service concluded between a developer and a propertymanagement service provider in accordance with law, a contract for propertymanagement service concluded by the owners’ committee or the owners and a newproperty management service provider becomes effective, and the preliminarycontract for property management service shall be terminated.

- Article 941

Where a property management service provider authorizes a specialized serviceentity or any other third person to handle some specialized services in the propertymanagement service area, the property management service provider shall beresponsible to the owners in terms of the specialized services.

A property management service provider shall not delegate to a third person allthe property management services it is obligated to provide, or divide the propertymanagement services and delegate each to a third person.

- Article 942

A property management service provider shall, in accordance with the contractand the nature of the use of the property, properly repair, maintain, clean, grow plant,and manage the common space of the property management service area co-owned bythe owners, maintain the basic order in the property management service area, andtake reasonable measures to protect the owners’ personal and property safety.

For any violation of the relevant laws and regulations on public security,environmental protection, fire protection, and the like, in the property managementservice area, the property management service provider shall, in a timely manner, takereasonable measures to stop the violation, make a report to the competent departments,and render assistance in its handling.

- Article 943

A property management service provider shall, in a reasonable manner, regularlydisclose to the owners and report to the owners’ assembly and the owners' committeeon its services, the responsible personnel, the quality requirements, the items that a feeis charged, the rate of the fee, the performance of obligations, use of the maintenancefunds, and the management and income generated from using the common spaceco-owned by the owners, and the like.

- Article 944

An owner shall pay property management fees to the property managementservice provider in accordance with the agreement. Where a property managementservice provider has provided services in accordance with the agreement and therelevant regulations, an owner shall not refuse to pay the property management feeson the ground that he has not accepted or need not accept the relevant propertymanagement service.

Where an owner fails to pay the property management fees within the agreedperiod in breach of the agreement, the property management service provider maydemand his payment within a reasonable period of time; if the owner still fails tomake payment within the said period, the property management service provider mayinitiate a legal action or apply for arbitration.

The property management service provider may not collect the propertymanagement fees by such means as shutting off power, water, heat, or gas.

- Article 945

Where an owner decorates or remodels the unit he owns in a building, he shallnotify the property management service provider in advance, follow the reasonablerules provided by the property management service provider, and cooperate with theproperty management service provider in necessary onsite inspection.

If an owner transfers or leases the unit exclusively owned by him within abuilding, creates a right of habitation therein, or changes the use of the common spacein accordance with law, he shall timely inform the property management serviceprovider of the relevant situation.

- Article 946

Where the owners jointly decide to dismiss the property management serviceprovider in accordance with the statutory procedure, the contract for propertymanagement service may be rescinded. In such a case, the property managementservice provider shall be notified in writing 60 days in advance, unless otherwiseagreed by the parties.

If ressission of the contract in accordance with the preceding paragraph causesloss to the property management service provider, the owners shall compensate for theloss, unless the loss is incurred by a cause not attributable to the owners.

- Article 947

Where the owners jointly decide to continue employing a property managementservice provider before expiration of the service term, they shall renew the contractwith the original property management service provider before expiration of the termof the contract.

Before ex;iration of the service term, where a property management serviceprovider does not consent to continued employment, it shall notify the owners or theowners' committee in writing 90 days before expiration of the term of the contract,unless otherwise agreed by the parties.

- Article 948

Where, upon expiration of the property management service term, the ownersfail to make a decision in accordance with law to continue employing the originalservice provider or to employ another service provider, if the property managementservice provider continues to provide property management services, the originalcontract for property management service shall continue to be valid, except that itbecomes one with an indefinite term.

Either party may rescind such a contract for property management service at anytime, provided that the other party shall be notified in writing 60 days in advance.

- Article 949

Upon termination of a contract for property management service, the originalproperty management service provider shall vacate the property management servicearea within the agreed time or a reasonable period of time, surrender the propertyservice premises, the related facilities, and the relevant materials necessary forproperty management service, and the like, to the owners' committee, the owners whodecide to exercise management themselves, or the person designated by them,cooperate with the new property management service provider in effectivelyconducting handover work, and truthfully disclose the information regarding the useand management of the property.

The original property management service provider who violates the provisionsof the preceding paragraph shall not request the owners to pay the propertymanagement fee after the termination of the contract for property management service,and shall bear the liability for compensation if loss is caused to the owners.

- Article 950

After a contract for property management service is terminated and before thehandover to the new property management service provider selected by the owners orthe owners' assembly or to the owners who decide to exercise management bythemselves, the original property management service provider shall continue toprovide property management services, and may request the owners to pay theproperty management fee during this period.

**Chapter XXV** Brokerage Contracts

- Article 951

A brokerage contract is a contract under which a broker in his own name engagesin trade activities for a client who pays remuneration in return.

- Article 952

The expenses incurred by a broker in handling the entrusted matters shall beborne by the broker, unless otherwise agreed by the parties.

- Article 953

Where a broker possesses the commissioned article, the broker shall properlykeep it.

- Article 954

If the commissioned article has a defect at the time when they are delivered to abroker, or if it is perishable, the broker may dispose of the article upon his client’sconsent; if the broker is unable to make prompt contact with the client, the broker maydispose of the article in a proper manner.

- Article 955

Where a broker sells an article at a price lower than the price set by the client, orbuys an article at a price higher than the price set by the client, the broker shall obtainthe consent of the client; where such a deal is made without the consent of the clientand the broker makes up for the price difference, the said deal is binding on the client.

Where a broker sells an article at a price higher than the price set by the client orbuys an article at a price lower than the price set by the client, remuneration may beincreased in accordance with the agreement. Where there is no such an agreement orthe agreement is unclear, if it cannot be determined according to the provisions of- Article 510 of this Code, the benefit shall belong to the client.

Where a client has given a special instruction on the price of an article, thebroker may not sell or buy it contrary to the said instruction.

- Article 956

Where a broker buys or sells a commodity with a market price, unless otherwiseindicated by the client, the broker himself may serve as a buyer or a seller.

Despite the situation provided in the preceding paragraph, the broker may stillrequest the client to pay remuneration.

- Article 957

Where a broker buys a commissioned article in accordance with the contract, theclient shall accept the article in a timely manner. Where, after being demanded by thebroker, the client refuses to accept the article without just cause, the broker may havethe commissioned article placed in escrow in accordance with law.

Where a commissioned article cannot be sold or the client withdraws from thecommissioned sale, if the client, after being demanded by the broker, fails to takeback or dispose of the said article, the broker may have the commissioned articleplaced in escrow in accordance with law.

- Article 958

A broker who concludes a contract with a third person shall directly enjoy therights and assume the obligations under the said contract.

Where a third person fails to fulfill the contractual obligation thus causing lossesto the client, the broker shall bear the liability for compensation, unless otherwiseagreed by the broker and the client.

- Article 959

Where a broker has accomplished the entrusted matter in full or in part, the clientshall pay remuneration accordingly. Where a client fails to pay remuneration asscheduled, the broker has the right to retain the commissioned article under a lienunless otherwise agreed by the parties.

- Article 960

For matters not provided in this Chapter, the relevant provisions on entrustmentcontracts shall be applied mutatis mutandis.

**Chapter XXVI** Intermediary Contracts

- Article 961

An intermediary contract is a contract under which a middleman reports to theclient the opportunity for concluding a contract or provides intermediary services forthe conclusion of a contract, for which the client pays remuneration.

- Article 962

The middleman shall truthfully report to the client matters related to theconclusion of the contract.

Where a middleman intentionally conceals important facts in relation to theconclusion of the contract or provides untrue information thereof, thus harming theinterests of the client, he may not request for remuneration and shall bear the liabilityfor compensation.

- Article 963

Where a middleman contributes to the conclusion of a contract, the client shallpay remuneration in accordance with the agreement. Where there is no agreementbetween the parties on the remuneration for the middleman or the agreement isunclear, if it cannot be determined according to the provisions of Article 510 of thisCode, the remuneration shall be reasonably determined in accordance with themiddleman's services. Where the intermediary services provided by the middlemanfacilitates the conclusion of a contract, the parties to the said contract shall equallyshare the disbursement of the remuneration to the middleman.

In facilitating the conclusion of a contract, the expenses incurred in theintermediary activities shall be borne by the middleman.

- Article 964

Where a middleman fails to facilitate the conclusion of a contract, he may notrequest the payment of remuneration, but may request the client to pay for thenecessary expenses incurred in the intermediary activities in accordance with theagreement.

- Article 965

Where a client, after accepting the services of the middleman, uses the tradingopportunity or intermediary services provided by the middleman to bypass themiddleman and directly concludes a contract with another person, the client shall payremuneration to the middleman.

- Article 966

For matters not provided in this Chapter, the relevant provisions on entrustmentcontracts shall be applied mutatis mutandis.

**Chapter XXVII** Partnership Contracts

- Article 967

A partnership contract is an agreement between two or more partners to sharebenefits and assume risks for a joint enterprise.

- Article 968

A partner shall fulfill his obligation to contribute capital in accordance with themethod, amount, and time limit for payment in accordance with the agreement.

- Article 969

The capital contributions made by the partners and the proceeds therof and otherproperty acquired in accordance with law in the course of the partnership business arepartnership property.

A partner may not request partition of the partnership property prior to thetermination of the partnership contract.

- Article 970

A partner who makes a decision on the partnership businesses shall obtainunanimous consent of all the partners, unless otherwise agreed in the partnershipcontract.

The partnership businesses shall be jointly managed by all partners. One or morepartners may be authorized to manage the partnership business in accordance with thepartnership contract or the decision made by all partners; and the other partners shallcease to manage the partnership business, except that they have the right to supervisethe management.

Where the partners manage the partnership business separately, the managingpartner may raise objections on the matters managed by the other partners, in whichcase, the other partners shall suspend the management of such matter.

- Article 971

A partner may not request remuneration for management of the partnershipbusiness, unless otherwise agreed in the partnership contract.

- Article 972

The sharing of the profits and allocation of losses of a partnership shall be inaccordance with the partnership contract; where there is no such an agreement in thepartnership contract or the agreement is unclear, the partners shall make a decisionthrough consultation. Where such consultation fails, the partners shall share theprofits and assume the losses in proportion to their paid-in capital, or share the profitsand assume the losses in equal share if the proportions of their paid-in capital cannot

be determined.

- Article 973

The partners shall bear joint and several liabilities for the partnership obligations.A partner who has performed the partnership obligations in excess of his share has theright to indemnification against the other partners.

- Article 974

Unless otherwise agreed in the partnership contract, a partner who transfers all orpart of his share of property to a person other than a partner shall obtain unanimousconsent of the other partners.

- Article 975

A creditor of a partner shall not subrogate and exercise any right of the partnerprovided in this Chapter and the partnership contract, except that a creditor maysubrogate and exercise the partner’s claim against the partnership for distribution ofthe benefits.

- Article 976

Where there is no agreement between or among the partners on the term of thepartnership, or the agreement is unclear, if the term cannot be determined according tothe provisions of Article 510 of this Code, the partnership shall be deemed as apartnership with an indefinite term.

If a partner continues to manage the partnership business upon expiration of theterm of the partnership, and the other partners fail to raise any objection, the originalpartnership contract shall continue to be valid, but with an indefinite term.

A partner may dissolve a partnership contract with an indefinite term at any time,but the other partners shall be notified within a reasonable period of time in advance.

- Article 977

Where a partner dies, loses capacity for performing civil juristic acts, or isterminated, the partnership contract is terminated, unless otherwise provided in thepartnership contract, or it is inappropriate to terminate the contract due to the natureof the partnership affairs.

- Article 978

Upon termination of a partnership contract, after paying the expenses fortermination and discharging the partnership debts, the residual assets of thepartnership property, if any, shall be distributed in accordance with the provisions of- Article 972 of this Code.

**Part Three** Quasi-contracts

**Chapter XXVIII** Negotiorum Gestio

- Article 979

Where a person who has neither a statutory nor a contractual obligation acts as acustodian to manage another person’s affair in order to prevent the latter fromsuffering a loss of interests, the said person may request the beneficiary to reimburethe necessary expenses incurred therefrom. Where such a custodian suffers losseswhen managing another person’s affairs, the custodian may request the beneficiary tomake appropriate compensation.

Where the management of another person’s affairs is contrary to the true will ofthe beneficiary, the custodian does not have the right provibed in the precedingparagraph, unless the true will of the beneficiary is in violation of law or against thepublic order or good morals.

- Article 980

Where the management by a custodian of another person’s affairs does not fallwithin the circumstances provided in the preceding Article, but the beneficiary hasenjoyed the benefit of the management, the beneficiary shall be subject to theobligations provided in the first paragraph of the preceding Article to the custodian tothe extent of the benefit he gains therfrom.

- Article 981

A custodian shall manage another person’s affairs in the best interest of thebeneficiary. Where suspension of management is to put the beneficiary at adisadvantage position, the management may not be suspended without just cause.

- Article 982

Where a custodian manages another person’s affairs, he shall promptly notify thebeneficiary if he is able to do so. Where the matter does not need urgent management,the custodian shall wait for the beneficiary’s instruction.

- Article 983

Upon termination of the management, a custodian shall report the managementof the affairs to the beneficiary. The property obtained by the custodian in themanagement of the affairs shall be surrendered to the beneficiary in a timely manner.

- Article 984

Where the management of another person’s affairs by a custodian issubsequently ratified by the beneficiary, the provisions on entrustment contracts shallbe applied to the management from the commencement of the management, unlessthe custodian expresses his intention otherwise.

**Chapter XXIX** Unjust Enrichment

- Article 985

Where a person is unjustly enriched without a legal basis, the person who thussuffers a loss is entitled to request the enriched person to return the benefit, unlessunder any of the following circumstances:

- (1) the payment is made for performing a moral obligation;

- (2) the payment is made to satisfy an obligation not yet due; or

- (3) the payment is made to an obligation knowing that there is no obligation topay.

- Article 986

Where a person enriched does not know or should not have known that theenrichment is without a legal basis, and if the enrichment no longer exists, the personhas no obligation to return the benefit thus received.

- Article 987

Where a person enriched knows or should have known that the enrichment iswithout a legal basis, the aggrieved person may request the enriched person to returnthe benefit thus received and make compensation for the losses in accordance withlaw.

- Article 988

Where a person enriched has gratuitously transfered the benefit received to athird person, the aggrieved person may request the third person to assume theobligation to return the benefit to the corresponding extent.

**Book Four** Personality Rights

**Chapter I** General Rules

- Article 989

This Book regulates the civil-law relations arising from the enjoyment and

protection of personality rights.

- Article 990

Personality rights are the rights enjoyed by persons of the civil law, such as theright to life, the right to corporeal integrity, the right to health, the right to name, theright to trade name, the right to likeness, the right to reputation, the right to honor, theright to privacy, and the like.

In addition to the personality rights provided in the preceding paragraph, anatural person enjoys other personality rights and interests arising from personalliberty and human dignity.

- Article 991

The personality rights of persons of the civil law are protected by law and freefrom infringement by any organization or individual.

- Article 992

Personality rights may not be waived, transferred, or inherited.

- Article 993

The name, entity name, likeness, or the like, of a person of the civil law may beused by others upon authorization, unless the authorization thereof is not allowed bylaw or based on the nature of the right.

- Article 994

Where the name, likeness, reputation, honor, privacy, remains, or the like, of thedeceased is harmed, the spouse, children, and parents of the deceased have the right torequest the actor to bear civil liability in accordance with law. Where the deceased hasno spouse or children, and the parents of the deceased have already died, other closerelatives of the deceased have the right to request the actor to bear civil liability inaccordance with law.

- Article 995

A person whose personality rights are infringed upon has the right to request theactor to bear civil liability in accordance with the provisions of this Code and theother laws. Where the said person exercises his right to request the actor to stop theinfringement, remove the nuisance, eliminate the danger, eliminate the adverse effects,rehabilitate his reputation, or extend apologies, the provisions on limitation periodsshall not apply.

- Article 996

Where the personality rights of a party is harmed by the other party’s breach ofcontract and the injured party is thus suffered severe emotional distress, if the injuredparty elects to request the other party to bear liability based on breach of contract, hisright to claim for compensation for pains and suffering is not be affected.

- Article 997

Where a person of the civil law has evidence to prove that an actor is committingor is about to commit an illegal act that infringes upon his personality rights, and thatfailure to timely stop the act will cause irreparable harm to his lawful rights andinterests, the person has the right, in accordance with law, to request the people’scourt to order the actor to stop the act.

- Article 998

In determining the civil liability an actor is to bear for infringing upon other’spersonality rights, other than the right to life, the right to corporeal integrity, or theright to health, consideration shall be given to the occupations of the actor and theinjured person, the scope of impact of the act, the degree of fault, as well as thefactors such as the purposes, methods, and consequences of the act.

- Article 999

The name, entity name, likeness, personal information, and the like, of a personof the civil law may be reasonably used by those engaged in news reporting,supervision of public opinions, or the like, for public interests, except that civilliability shall be borne in accordance with law where the use unreasonably harms thepersonality rights of the person.

- Article 1000

Where an actor shall bear civil liability such as elimination of adverse effects,rehabilitation of reputation, or extension of apologies for infringing upon other’spersonality rights, the civil liability to be born shall be commensurate with thespecific way the act is done and the scope of its impact.

Where an actor refuses to bear civil liability as provided in the precedingparagraph, the people’s court may take such measures as making an announcement,publishing the final judgment, or the like, through media, such as newspapers,periodicals, or online websites, and any expenses thus incurred shall be borne by theactor.

- Article 1001

The relevant provisions of Book I and Book V of this Code and the other lawsshall apply to the protection of a natural person’s relation-based rights such as a rightarising from a marital and familial relationship; in the absence of such provisions, therelevant provisions of this Book on the protection of personality rights shall, based onthe nature of the right, be applied mutatis mutandis.

Rights to Life, Rights to Corporeal Integrity, and Rights to Health

**Chapter II** Article 1002

A natural person enjoys the right to life. A natural persons’ life safety and dignity

are protected by law and free from infringement by any organization or individual.

- Article 1003

A natural person enjoys the right to corporeal integrity. A natural persons’corporeal integrity and freedom of movement are protected by law and free frominfringement by any organization or individual.

- Article 1004

A natural person enjoys the right to health. A natural persons’ physical andmental health are protected by law and free from infringement by any organization orindividual.

- Article 1005

Where a natural person’s right to life, right to corporeal integrity, or right tohealth is infringed upon or otherwise in peril, the organization or individual who islegally obligated to aid shall promptly extend rescue.

- Article 1006

A person with full capacity for performing civil juristic acts has the right to makea voluntary decision in accordance with law to donate his cells, tissues, organs, andremains. No organization or individual may force, deceive, or induce the person todonate such.

The consent of a person with full capacity for performing civil juristic acts to bea donor thereof in accordance with the provisions of the preceding paragraph shall bemade in writing or through a will.

Where a natural person, during his life, has not disagreed to be a donor thereofafter he dies , his spouse, adult children, and parents may, upon his death, jointlydecide to make the donation, and such a decision shall be made in writing.

- Article 1007

Any form of purchase or sale of human cells, tissues, organs, or remains isprohibited.

Any purchase or sale in violation of the preceding paragraph is void.

- Article 1008

Where a clinical trial is needed for developing new drugs and medical devices ordeveloping new prevention and treatment methods, upon approval of the relevantcompetent authorities and the examination and approval of the ethics committee, theparticipants or the guardians thereof shall be informed of the details including thepurposes, methods, and the possible risks of the trial, and their written consent mustbe obtained.

When conducting a clinical trial, no fees may be collected from the participantsof the trial.

- Article 1009

A medical and scientific research activity related to human genes, embryos, orthe like, shall be done in accordance with the relevant provisions of laws,administrative regulations, and the regulations of the State, and shall not endangerhuman health, offend ethics and morals, or harm public interests.

- Article 1010

A person who has been sexually harassed against his will by another personthrough oral words, written language, images, physical acts, or the like, has the rightto request the actor to bear civil liability in accordance with law.

The State organs, enterprises, schools, and other organizations shall takereasonable precautions, accept and hear complaints, investigate and handle cases, andtake other like measures to prevent and stop sexual harassment conducted by a personthrough taking advantage of his position and power or a superior-subordinaterelationship, and the like.

- Article 1011

A person, whose freedom of movement has been deprived of or restricted byillegal detention or the like measures, or whose body has been illegally searched, hasthe right to request the actor to bear civil liability in accordance with law.

**Chapter III** Rights to Name and Rights to Entity Name

- Article 1012

A natural person enjoys the right to name, and is entitled to determine, use,change, or allow others to use his name in accordance with law, provided that publicorder and good morals are not offended.

- Article 1013

A legal person or an unincorporated organization enjoys the right to entity name,and is entitled to decide, use, change, transfer, or allow others to use its entity name inaccordance with the law.

- Article 1014

No organization or individual may infringe upon other’s rights to name or rightsto entity name by means such as interference, misappropriation, impersonation, or thelike.

- Article 1015

A natural person shall take the surname of either his father or mother, and may

take a surname other than his father’s or mother’s in any of the following situations:

- (1) taking the surname of a senior lineal relative by blood;

- (2) taking the surname of a foster parent, other than the legal care provider, whoprovides care thereto; and

- (3) taking a surname with other legitimate reasons that do not offend public orderand good morals.

Natural persons of ethnic minorities may take surnames in compliance with theircultural traditions and local customs.

- Article 1016

A natural person who decides to take or change his name, or a legal person or anunincorporated organization who decides to take, change, or transfer its entity name,shall file registration with the relevant authorities in accordance with law, unlessotherwise provided by law.

Upon changing the name or entity name by a person of the civil law, the civiljuristic acts performed before the name change is legally binding on the person.

- Article 1017

With regard to a pseudonym, stage name, screen name, translated name, tradename, abbreviation of a name or entity name of a social popularity, where the use ofwhich by others will suffice to cause public confusion, the relevant provisions onprotection of the rights to name and the rights to entity name shall be applied mutatismutandis.

**Chapter IV** Rights to Likeness

- Article 1018

A natural person enjoys the right to likeness, and is entitled to make, use,publicize, or authorize others to use his image in accordance with law.

The likeness is an external image of a specific natural person reflected in videorecordings, sculptures, drawings, or on other media by which the person can beidentified.

- Article 1019

No organization or individual may infringe upon other’s rights to likeness byvilifying or defacing the image thereof, or through other ways such as falsifyingother’s image by utilizing information technology. Unless otherwise provided by law,no one may make, use, or publicize the image of the right holder without the latter’sconsent.

Without the consent of the person holding the right to likeness, a person holdinga right in the works of the image of the former person shall not use or publicize thesaid image by ways such as publishing, duplicating, distributing, leasing, or exhibitingthereof.

- Article 1020

The following acts, if done in a reasonable way, may be performed without the

consent of the person holding the right to likeness:

- (1) using publicly available images of the person holding the right to likeness tothe extent necessary for personal study, art appreciation, classroom teaching, orscientific research;

- (2) making, using, or publicizing the image of the person holding the right tolikeness, which is inevitable for conducting news reporting;

- (3) making, using, or publicizing the image of the person holding the right tolikeness to the extent necessary for a State organ to perform its responsibilities inaccordance with law;

- (4) making, using, or publicizing the image of the person holding the right tolikeness, which is inevitable for demonstrating a specific public environment;

- (5) performing other acts of making, using, or publicizing the image of theperson holding the right to likeness for protecting the public interests and the lawfulrights and interests of the said person.

- Article 1021

Where the parties have a dispute on a clause relating to the use of an image in a

contract authorizing the use of the image, interpretations shall be made in favor of theperson holding the right to likeness over his image.

- Article 1022

Where the parties have not agreed on the term of authorized use of an image, orthe agreement is unclear, either party may rescind the contract authorizing the use ofthe image at any time, provided that the other party shall be notified within areasonable period of time.

Where the parties have expressly agreed on the term of authorized use of theimage, the person holding the right to likeness over the image may rescind thecontract authorizing such use if with just cause, provided that the other party shall benotified within a reasonable period of time. Where rescission of the contract causesloss to the other party, unless the loss is caused by a reason not attributable to theperson holding the right to likeness over the image, compensation shall be paid.

- Article 1023

For an authorized use of another person’s name or the like, the relevantprovisions on the authorized use of other’s images shall be applied mutatis mutandis.

For the protection of a natural person’s voice, the relevant provisions on theprotection of the right to likeness shall be applied mutatis mutandis.

**Chapter V** Rights to Reputation and Rights to Honor

- Article 1024

A person of the civil law enjoys the right to reputation. No organization orindividual may infringe upon other’s right to reputation by insultation, defamation, orthe like.

Reputation is a social evaluation of the moral character, prestige, talent, andcredit of a person of the civil law.

- Article 1025

A person whose act, such as reporting news or supervising public opinions or thelike for public interest purposes, adversely affects the other’s reputation shall not bearcivil liability except where one of the following situations exists:

- (1) he has fabricated or distorted the facts;

- (2) he has failed to fulfill the obligation to reasonably verify the seriouslymisrepresentative information provided by others; or

- (3) he has used insulting words and the like to degrade the other’s reputation.

- Article 1026

To determine whether an actor has fulfilled the obligation to reasonably verifythe information as provided in Subparagraph 2 of the preceding Article, the followingfactors shall be considered:

- (1) the credibility of the source of the information;

- (2) whether the information that is clearly controversial has been fullyinvestigated;

- (3) the timeliness of the information;

- (4) the relevance of the information with public order and good morals;

- (5) the likelihood that the victim’s reputation would be degraded; and

- (6) his ability to verify and the cost for the verification of the information.

- Article 1027

Where a literary or artistic work published by an actor depicts real people andreal events or a specific person, with insulting or defamatory content and thusinfringes upon another persons’s right to reputation, the person whose right isinfringed upon has the right to request the actor to bear civil liability in accordancewith law.

Where a literary or artistic work published by an actor does not depict a specificperson, but only some patterns of the story are similar to the situation of such person,the actor shall not bear civil liability.

- Article 1028

Where a person of the civil law has evidence to prove that the content reportedby a media, such as a newspaper, a periodical, or an online website, is inaccurate andthus infringes upon his reputation, he has the right to request the media to takenecessary measures including making correction of or deleting the content in a timelymanner.

- Article 1029

A person of the civil law may check his own credit report in accordance with law,and has the right to raise an objection and request correction, deletion, or othernecessary measures to be taken where he discovers that the credit report is incorrect.The evaluators of his credit standing shall examine the report and take necessarymeasures in a timely manner if it is verified to be false.

- Article 1030

The provisions of this Book on the protection of personal information and therelevant provisions of other laws and administrative regulations shall be applied to therelationship between persons of the civil law and the credit information processorssuch as a credit reporting agency.

- Article 1031

A person of the civil law enjoys the right to honor. No organization or individualmay unlawfully deprive others of their honorary titles or defame or degrade thehonors thereof.

Where an awarded honorary title of a person of the civil law should have beenrecorded, the person may request that it be so recorded. Where such an awardedhonorary title is incorrectly recorded, the person may request that it be corrected.

**Chapter VI** Rights to Privacy and Protection of Personal Information

- Article 1032

A natural person enjoys the right to privacy. No organization or individual mayinfringe upon the other’s right to privacy by prying into, intruding upon, disclosing, orpublicizing other’s private matters.

Privacy is the undisturbed private life of a natural person and his private space,private activities, and private information that he does not want to be known toothers .

- Article 1033

Unless otherwise provided by law or expressly consented to by the right holder,

no organization or individual shall do the following acts:

- (1) intruding upon another person’s private life through making phone calls,sending text messages, using instant messaging tools, sending emails and flyers, andthe like means;

- (2) entering into, taking photographs of, or peeping into other’s private spacessuch as the residence or hotel room of another person;

- (3) taking photographs of, peeping into, eavesdropping, or disclosing the privateactivities of another person;

- (4) taking photographs of or peeping at the private parts of another person’sbody;

- (5) processing another person’s private information; and

- (6) infringing upon another person’s privacy through other means.- Article 1034

A natural person’s personal information is protected by law.

Personal information is the information recorded electronically or in other waysthat can be used, by itself or in combination with other information, to identify anatural person, including the name, date of birth, identification number, biometricinformation, residential address, telephone number, email address, health information,whereabouts, and the like, of the person.

The provisions on the right to privacy, or, in the absence of which, the provisionson the protection of personal information, shall be applied to the private personalinformation.

- Article 1035

The processing of personal information shall be in compliance with theprinciples of lawfulness, justification, and within a necessary limit, and shall not beexcessively processed; meanwhile, the following conditions shall be satisfied;

- (1) consent has been obtained from the natural person or his guardian, unlessotherwise provided by laws or administrative regulations;

- (2) the rules for processing information are publicized;

- (3) the purpose, method, and scope of the information processing are clearlyindicated; and

- (4) it is not in violation of laws or administrative regulations or against theagreement of both parties.

The processing of personal information includes the collection, storage, use,refinement, transmission, provision, disclosure, and the like, of the personalinformation.

- Article 1036

When processing personal information, an actor shall not bear civil liability in

any of the following situations:

- (1) the actor reasonably performs the act to the extent that the natural person orhis guardian consents to;

- (2) the actor reasonably processes the information disclosed by the naturalperson himself or the other information that has already been legally disclosed, unlessthe said person explicitly refuses or the processing of the information infringes upon asignificant interest of the person; and

- (3) the actor reasonably performs the other acts to protect the public interest orthe lawful rights and interests of the person.

- Article 1037

A natural person may retrieve or make copies of his personal information fromthe information processers in accordance with law. Where the person discovers thatthe information is incorrect, he has the right to raise an objection and requestcorrections or other necessary measures to be taken in a timely manner.

Where a natural person discovers that an information processer has violated theprovisions of laws or administrative regulations, or breached the agreement between

both parties while processing his personal information, he has the right to request theinformation processor to delete it in a timely manner.

- Article 1038

An information processor shall not disclose or tamper with the personalinformation he collects and stores, and shall not illegally provide to others thepersonal information of a natural person without the latter’s consent, unless theinformation, after being processed, cannot be used to identify any specific individualand cannot be restored to its original status.

An information processor shall take technical measures and other necessarymeasures to ensure the security of the personal information he collects and stores, andprevent the information from being leaked, tampered with, or lost. Where a person’spersonal information has been or is likely to be leaked, tampered with, or lost, he shalltake remedial measures in a timely manner, notify the natural persons concerned inaccordance with the regulations, and report to the relevant competent authorities.

- Article 1039

State organs and the chartered institutions assuming administrative functions aswell as their staff shall keep confidential the privacy and the personal information ofnatural persons known to them during the performance of their responsibilities, andshall not disclose or illegally provide it to others.

**Book Five** Marriage and Family

**Chapter I** General Rules

- Article 1040

This Book regulates the civil-law relations arising from marriage or family.

- Article 1041

Marriage and family are protected by the State.

A marriage system based on freedom of marriage, monogamy, and equalitybetween men and women is implemented.

The lawful rights and interests of women, minors, the elderly, and persons withdisabilities are protected.

- Article 1042

Arranged marriages, mercenary marriages, and other acts interfering with thefreedom of marriage are prohibited. The exaction of money or other property by wayof marriage is prohibited.

Bigamy is prohibited. No one who has a spouse may cohabit with another

person.

Domestic violence is prohibited. Maltreatment or desertion of family members is

prohibited.

- Article 1043

Families shall establish good family values, promote family virtues, and enhancefamily civility.

Husband and wife shall be loyal to each other, respect each other, and care foreach other. Family members shall respect the elderly, take care of the young, helpeach other, and maintain a marital and familial relationship of equality, harmony, andcivility.

- Article 1044

Adoption shall be in compliance with the principle of acting in the best interestof the adoptee, and the lawful rights and interests of both the adoptee and the adoptershall be protected.

Trafficking minors in the name of adoption is prohibited.

- Article 1045

Relatives include spouses, relatives by blood, and relatives by marriage.

Spouses, parents, children, siblings, paternal and maternal grandparents, andpaternal and maternal grandchildren are close relatives.

Spouses, parents, children, and other close relatives living together are familymembers.

**Chapter II** Entering into Marriage

- Article 1046

A man and a woman shall enter into marriage freely and voluntarily. Neither

party may compel the other party to enter into marriage against his will, and noorganization or individual may interfere with the freedom of marriage.

- Article 1047

To enter into a marriage, a man shall reach the age of twenty-two, and a woman

shall reach the age of twenty.

- Article 1048

Persons who are lineal relatives by blood, or collateral relatives by blood up tothe third degree of kinship are prohibited from being married.

- Article 1049

Both the man and the woman intending to enter into a marriage shall fileregistration of the marriage in person with a marriage registration authority. If theproposed marriage is found to conform to the provisions of this Code, the marriageshall be registered and a marriage certificate shall be issued. A marital relationshipshall be established upon completion of the marriage registration. The couple who hasfailed to file a marriage registration shall complete the registration.

- Article 1050

After a marriage has been registered, by mutual consent, the woman may becomea member of the man’s family or vice versa.

- Article 1051

A marriage is void in any of the following situations:

- (1) either party to the marriage commits bigamy;

- (2) the parties to the marriage fall within the relative relations prohibited by lawfrom marrying each other; or

- (3) either party to the marriage is under the statutory marriageable age.

- Article 1052

If a marriage is entered into as a result of coercion, the coerced party may applyto the people’s court to annul the marriage.

Such an application to annul the marriage shall be made within one year from thedate of the coercive act ceases.

Where the coerced party whose personal freedom is illegally constrained wishesto annul the marriage, the application to annul the marriage shall be made within oneyear from the date when the party’s personal freedom is restored.

- Article 1053

If one of the parties suffers from a serious disease, he shall truthfully inform theother party of such disease prior to marriage registration; where such information isnot truthfully provided, the other party may apply to the people’s court to annul themarriage.

The application to annul a marriage shall be made within one year from the datewhen the party knows or should have known of the cause for the annulment.

- Article 1054

A void or annulled marriage has no legal effect ab initio, and neither party tosuch a marriage shall have any rights or duties arising from the marital relationship.Properties acquired during the cohabitation period shall be disposed of by mutualagreement. Where the parties fail to reach such an agreement, the people’s court shalladjudicate the case in compliance with the principle of favoring the no-fault party.When disposing of the property acquired during a marriage which has been voideddue to bigamy, the proprietary rights and interests of the parties to the lawful marriageshall not be infringed upon. The provisions of this Code on parents and children shallapply to the children born by the parties to a void or annulled marriage.

Where a marriage is void or annulled, the no-fault party has the right to request

for damages.

**Chapter III** Domestic Relations

**Section 1** Spousal relationship

- Article 1055

Husband and wife are equal in marriage and family.

- Article 1056

Both spouses have the right to use their own surname and given name.

- Article 1057

Both spouses are free to engage in production and other work, and to study andto participate in social activities. Neither party may restrain or interfere with suchfreedom of the other party.

- Article 1058

Both spouses have equal rights and joint duties to raise, educate, and protect theirminor children.

- Article 1059

Both spouses have the duty to support each other.

The party in need of spousal support is entitled to claim such payments againstthe other party who has failed to fulfill the spousal support duty.

- Article 1060

A civil juristic act performed by one of the spouses to meet the daily needs of thefamily is binding on both spouses unless otherwise agreed between the third personand the spouse performing the act.

Restrictions imposed by the spouses on the scope of civil juristic acts that may beperformed by one of the spouses may not be asserted against a bona fide third person.

- Article 1061

Husband and wife have the right to inherit the estates of each other.

- Article 1062

The following property acquired by the spouses during their marriage constitutes

community property and are jointly owned by the spouses:

- (1) salaries and wages as well as bonuses and other remuneration received fromservices rendered;

- (2) proceeds obtained from production, business operation, and investment;

- (3) proceeds arising from intellectual property rights;

- (4) except as otherwise provided in Subparagraph (3) of Article 1063 of thisCode, property acquired from inheritance or given as a gift; and

- (5) other property that shall be jointly owned by the spouses.

Husband and wife have equal rights when disposing of the community property.

- Article 1063

The following property constitutes separate property of one of the spouses:

(1) premarital property of one spouse;

(2) compensation or indemnification received by one spouse for injury inflicted

upon him;

(3) property that belongs to only one spouse as provided in a will or giftcontract;

(4）articles exclusively used by one spouse for daily life; and

(5) other property that shall be owned by one spouse.

- Article 1064

Debts incurred according to the common expression of intent of both spouses,such as a debt jointly signed by both spouses and a debt signed by one spouse andsubsequently ratified by the other spouse, and debts incurred by one of the spouses inhis own name during the marriage to meet the daily needs of the family, constitutecommunity debts.

A debt incurred by one of the spouses in his own name during the marriage inexcess of the daily needs of the family is not a community debt, unless the creditormay prove that such debt is used for both spouses’ daily life or for joint productionand operation of the spouses, or such debt incurs according to the common expressionof intent of both spouses.

- Article 1065

A man and a woman may agree that their premarital property and the property tobe acquired by them during their marriage may be owned by them separately orjointly, or partially owned separately and partially owned jointly. The agreement shallbe in writing. Where there is no agreement or the agreement is unclear, Articles 1062and 1063 of this Code shall apply.

The agreement on their premarital property and the property acquired during themarriage is legally binding on both parties to the marriage.

Where the spouses agree that the property acquired during the marriage is to beowned separately, a debt incurred by one of the spouses shall be paid off with hisseparate property to the extent that the third person concerned is aware of such anagreement.

- Article 1066

During the marriage, one of the spouses may apply to the people’s court forpartition of their community property in one of the following situations:

(1) the other spouse has concealed, transferred, sold, destructed or damaged, orsquandered the community property, created a false community debt, or committedother acts that seriously infringe upon the interests of the community property; or

(2) a person, whom one of the spouses has a statutory obligation to support, issuffering from a serious disease and needs medical treatment, but the other spousedoes not agree to pay the relevant medical expenses.

**Section 2** Relationship between Parents and Children, and Relationship among Other Close Relatives

- Article 1067

Where parents fail to fulfill their duty to raise their children, a minor child or anadult child who is incapable of supporting himself has the right to claim child supportpayments against his parents.

Where an adult child fails to fulfill the duty to support his parents, his parentswho lack the capacity to work or are in financial hardship have the right to claim

support payments against the adult child.

- Article 1068

Parents have the right and duty to educate and protect their minor children.Where a minor causes damage to others, his parents shall bear civil liability inaccordance with law.

- Article 1069

Children shall respect their parents’ right to marriage and shall not interfere withtheir parents' divorce, remarriage, or their marital life thereafter. Children's duty tosupport their parents shall not end with the change of their parents' maritalrelationship.

- Article 1070

Parents have the right to inherit their children’s estates, and vice versa.

- Article 1071

Children born out of wedlock have equal rights as children born in wedlock, andno organization or individual may harm or discriminate against them.

A natural parent who does not have physical custody of his out-of-wedlock childshall pay child support for such child who is a minor or who is an adult but incapableof supporting himself.

- Article 1072

Stepparents shall not maltreat or discriminate against a stepchild, and vice-versa.

Provisions of this Code governing the parents-children relationship shall apply tothe rights and duties between a stepmother or a stepfather and a stepchild who hasbeen raised and educated by such stepfather or stepmother.

- Article 1073

Where a parent challenges maternity or paternity with just cause, the parent mayfile a lawsuit with the people's court for affirmation or denial of such maternity orpaternity.

Where an adult child challenges maternity or paternity with just cause, he mayfile a lawsuit with the people’s court for affirmation of such maternity or paternity.

- Article 1074

Paternal or maternal grandparents, if financially capable, have the duty to raisetheir minor grandchildren whose parents are deceased or are incapable of such raising.

Paternal or maternal grandchildren, if financially capable, have the duty tosupport their grandparents whose children are deceased or are incapable of providingsuch support.

- Article 1075

Elder brothers or sisters, if financially capable, have the duty to raise their minor

siblings whose parents are deceased or are incapable of such raising.

Younger brothers or sisters who have been brought up by their elder siblings andwho are financially capable have the duty to support such elder siblings who lack boththe capacity to work and the means to support themselves.

**Chapter IV** Divorce

- Article 1076

Where the husband and the wife both agree to divorce, they shall enter into adivorce agreement in writing and file divorce registration in person with the marriageregistration authority.

The divorce agreement shall include expression of intent of both parties tovoluntarily divorce and their mutual agreement on such matters as child support,property division, and allocation of debts.

- Article 1077

Where either party is unwilling to divorce, he may withdraw the divorceregistration application within thirty days after such an application is received by themarriage registration authority.

Within thirty days after expiration of the period provided in the precedingparagraph, both parties shall personally visit the marriage registration authority toapply for issuance of a divorce certificate, and failing to do so will cause the divorceregistration application to be deemed as withdrawn.

- Article 1078

Upon ascertaining that the divorce is voluntarily intended and that the two partieshave reached agreement on such matters as child support, property division, andallocation of debts, the marriage registration authority shall register the divorce andissue a divorce certificate.

- Article 1079

Where the husband or the wife unilaterally petitions for divorce, a relevantorganization may offer mediation, or such person may file for divorce directly withthe people’s court.

The people’s court shall, during the divorce trial, offer mediation, and grantdivorce if mutual affection no longer exists between the two parties and mediationfails.

A divorce shall be granted when mediation fails under any of the following

circumstances:

- (1) one spouse commits bigamy or cohabitates with another person; or

- (2) one spouse commits domestic violence or maltreats or deserts a familymember;

- (3) one spouse habitually commits acts such as gambling, drug abuse, or likewise,and refuses to correct such behavior despite of repeated warnings;

- (4) the spouses have been separated for no less than two full years due to maritaldiscord; or

- (5) other circumstances exist under which mutual affection no longer existsbetween the spouses.

Where one spouse is declared to be missing and the other party files for divorce,such divorce shall be granted.

Where, after a judgment has been made against divorce and the spouses havebeen separated for one more year, such divorce shall be granted where one of thespouses files again for divorce with the people’s court.

- Article 1080

A marital relationship is dissolved upon completion of registration of divorce orwhen a judgment of divorce or mediation paper of divorce comes into effect.

- Article 1081

Where the spouse of a military personnel on active service requests for divorce,the consent of the spouse who is a military personnel on active service shall beobtained unless he is at serious fault.

- Article 1082

A husband may not file for divorce during his wife’s pregnancy, within one yearafter his wife delivers, or within six months after termination of her pregnancy, unlessthe wife applies for divorce, or the people’s court deems it necessary to hear thedivorce request made by the husband.

- Article 1083

Where, after divorce, both the man and the woman intend to resume their maritalrelationship, they shall file for re-registration of marriage at a marriage registrationauthority.

- Article 1084

The parents-children relationship shall not be dissolved upon divorce of theparents. Whether a child is under the physical custody of the father or the mother, heremains to be the child of both parents.

After divorce, parents continue to have the rights and duties to raise, educate, andprotect their children.

As a matter of principle, a mother shall, upon divorce, have physical custody of

her child under the age of two. Where parents fail to reach an agreement on thephysical custody of their child over the age of two, the people’s court shall adjudicateit in compliance with the principle of acting in the best interests of the minor child andin light of the actual situations of both parents.

- Article 1085

Upon divorce, where a parent has the physical custody of his child, the otherparent shall pay for the child support in part or in whole. The amount and duration ofsuch payment shall be determined by both parents through agreement, or, where nosuch an agreement is reached, adjudicated by the people’s court through making ajudgment.

The agreement or judgment provided in the preceding paragraph shall notpreclude the child, when necessary, from making reasonable demand of payment oneither parent in excess of the amount specified in the agreement or judgment.

- Article 1086

After divorce, a parent who does not have the physical custody of his child hasthe right to visit the child, and the other parent is obligated to facilitate the visit.

The manner and schedule for exercising the right to visitation shall bedetermined by both parents through agreement, or, where no such an agreement isreached, adjudicated by the people’s court.

If a parent's visit to a child is detrimental to the child's physical or mental health,the visit shall be suspended by the people’s court in accordance with law, and the visitshall be resumed when the cause for such suspension no longer exists.

- Article 1087

Upon divorce, the community property of the spouses shall be partitioned bythem through agreement, or, where no such an agreement is reached, adjudicated bythe people's court in light of the actual state of the property and in compliance withthe principle of favoring the rights and interests of their children, the wife, and theno-fault party.

The rights and interests of the husband or wife arising from the contractualmanagement of land based on the household shall be protected in accordance withlaw.

- Article 1088

Where one spouse is burdened with additional duties for raising children, lookingafter the elderly, or assisting the other spouse in his work, the said spouse has the rightto request for compensation upon divorce against the other party, and the other partyshall make due compensation. The specific arrangements for making suchcompensation shall be determined by the spouses through agreement, or adjudicatedby the people’s court where no such an agreement is reached.

- Article 1089

Upon divorce, the husband and wife shall jointly pay off their community debts.Where the community property is insufficient to pay off the debts, or the property is

owned by each spouse separately, such debts shall be paid off by the spouses throughagreement, or adjudicated by the people’s court where no such an agreement isreached.

- Article 1090

Where one party is in financial hardship upon divorce, the other party, iffinancially capable, shall render appropriate assistance. The specific arrangementsshall be determined by the spouses through agreement, or adjudicated by the people’scourt where no such an agreement is reached.

- Article 1091

A no-fault spouse has the right to claim compensation where divorce is caused

by one of the following acts done by the other spouse:

- (1) has committed bigamy;

- (2) has cohabitated with another person;

- (3) has committed domestic violence;

- (4) has maltreated or deserted a family member; or

- (5) has acted with other serious faults.

- Article 1092

Where one spouse conceals, transfers, sells off, destructed or damages, orsquanders the community property, or creates a false community debt in an attempt tounlawfully seize the property of the other spouse, the said spouse may receive less orno property upon partition of the community property in the case of divorce. Whereone of the aforementioned acts committed by one spouse is found after divorce, theother party may file a lawsuit with the people's court for re-partition of the communityproperty.

**Chapter V** Adoption

**Section 1** Establishment of an Adoptive Relationship

- Article 1093

The following minors may be adopted:

- (1) an orphan bereaved of parents;

- (2) a minor whose natural parents cannot be traced; or

- (3) a minor whose natural parents are incapable of raising him due to unusualdifficulties.

- Article 1094

The following individuals and organizations may place a minor for adoption:

- (1) the guardian of an orphan;

- (2) a children’s welfare institution;

- (3) a minor’s natural parents who are incapable of raising him due to unusualdifficulties.

- Article 1095

Where neither of the parents of a minor has full capacity for performing civiljuristic acts, and where they may seriously harm the minor, the guardian of the minormay place such minor for adoption.

- Article 1096

Where a guardian intends to place an orphan under his guardianship for adoption,he shall obtain the consent of the person who has the duty to raise the orphan. Wherethe person with the duty to raise the orphan does not consent to the adoption and theguardian is unwilling to continue exercising guardianship, a successive guardian shallbe appointed in accordance with the provisions of Book One of this Code.

- Article 1097

Where the natural parents intend to place their child for adoption, they shall actin concert. Where one of the natural parents is unknown or cannot be traced, the otherparent may place the child for adoption by himself.

- Article 1098

A prospective adopter shall meet all the following conditions:

- (1) having no child or only one child;

- (2) being capable of raising, educating, and protecting the adoptee;

- (3) not suffering from any disease that is deemed medically unfit to be anadopter;

- (4) having no criminal record unfavorable to the healthy growth of the adoptee;and

- (5) reaching the age of thirty.

- Article 1099

Adoption of a child from one’s collateral relatives by blood of the samegeneration and up to the third degree of kinship may be exempted from therestrictions provided in Subparagraph (3) of Article 1093, Subparagraph (3) of Article1094, and Article 1102 of this Code.

Adoption of a child by an overseas Chinese from his collateral relatives by bloodof the same generation and up to the third degree of kinship may also be exemptedfrom the restrictions prescribed in Subparagraph (1) of Article 1098 of this Code.

- Article 1100

A childless adopter may adopt two children, and an adopter with one child mayadopt only one more child.

Adoption of an orphan, a minor with disabilities, or a minor in a children’swelfare institution whose natural parents cannot be traced may be exempted from therestrictions provided in the preceding paragraph and Subparagraph (1) of Article 1098of this Code.

- Article 1101

Where a person with a spouse intends to adopt a child, the person and his spouseshall jointly adopt the child.

- Article 1102

Where a person without a spouse intends to adopt a child of a different gender,the prospective adopter shall be at least forty years older than the adoptee.

- Article 1103

A stepparent may, with the consent of the natural parents of the stepchild, adoptthe stepchild, and such adoption may be exempted from the restrictions provided inSubparagraph (3) of Article 1093, Subparagraph (3) of Article 1094, Article 1098, andSubparagraph (1) of Article 1100 of this Code.

- Article 1104

Both adoption and placing for adoption shall be based on mutual consent. Where

a minor adoptee is aged eight or above, his consent shall be obtained.

- Article 1105

Adoption shall be registered with the civil affairs department of the people'sgovernment at or above the county level. The adoptive relationship is establishedupon registration.

In the case of adopting a minor whose parents cannot be traced, the civil affairsdepartment for adoption registration shall make public notice prior to the registration.

The parties to an adoptive relationship may enter into an adoption agreement ona voluntary basis.

Upon request of both parties or one of the parties to an adoptive relationship, an

adoption shall be notarized.

- Article 1106

Upon establishment of an adoptive relationship, the public security departmentshall facilitate household registration for the adoptee in accordance with the relevantregulations of the State.

- Article 1107

An orphan or a child whose natural parents are incapable of raising him may beraised by the relatives or friends of his natural parents. The provisions of this Chaptershall not apply to the relationship between two persons one of whom is raised by theother.

- Article 1108

Where one spouse is deceased and the surviving spouse intends to place theirminor child for adoption, the parents of the deceased spouse shall have priority inraising the child.

- Article 1109

Foreign nationals may adopt children in the People's Republic of China inaccordance with law.

The adoption of a child by a foreign national in the People's Republic of Chinashall be subject to the review and approval of the competent authorities of the foreignnational's country of residence in accordance with the law of that country. The foreignadopter shall submit documents issued by the competent authorities of his country ofresidence certifying such personal information as his age, marital status, occupation,financial situation, physical condition, and whether he has criminal record. Theforeign adopter shall conclude a written agreement with the person who places thechild for adoption and register the adoption in person with the civil affairs departmentof the people’s government at the level of provinces, autonomous regions, ormunicipalities directly under the State Council.

The certifying documents provided in the preceding paragraph shall beauthenticated by the diplomatic authorities of the country in which the foreignnational resides or by an agency authorized by the said diplomatic authorities, andthen authenticated by the embassy or consulate of the People's Republic of China inthe said country unless otherwise provided by the State.

- Article 1110

Where an adopter or a party placing a child for adoption requires that theadoption be kept confidential, the other persons shall respect their will and shall notdisclose it.

**Section 2** Effect of Adoption

- Article 1111

Upon establishment of an adoptive relationship, the provisions of this Codegoverning the parents-children relationship shall apply to the rights and dutiesbetween the adoptive parents and the adopted children. The provisions of this Codegoverning the relationship between children and the close relatives of their parentsshall apply to the rights and duties between the adopted children and the closerelatives of their adoptive parents. Upon establishment of an adoptive relationship, therights and duties arising between the adoptee and his natural parents as well as thelatter’s other close relatives shall be terminated.

- Article 1112

An adopted child may take the surname of his adoptive father or mother, or mayretain his original surname upon consent of all the parties to the adoption.

- Article 1113

An adoption shall be void when it constitutes a void civil juristic act as providedin Book One of this Code or violates the provisions provided in this Book. A voidadoption has no legal effect ab initio.

**Section 3** Dissolution of an Adoptive Relationship

- Article 1114

No adopter may dissolve an adoptive relationship before the adoptee has reachedthe majority age unless there is an agreement between the adopter and the party whoplaces the child for adoption to dissolve such relationship. Where an adoptee is agedeight or above, his own consent thereto shall be obtained. Where an adopter fails toperform the duty to raise the adoptee or commits maltreatment, desertion, or otheracts infringing upon the lawful rights and interests of the minor adoptee, the personwho has placed the child for adoption has the right to request that the adoptiverelationship be dissolved. Where an adopter and a party who has placed a child foradoption fail to reach an agreement for dissolution of the adoptive relationship, eitherparty may file a lawsuit with the people’s court.

- Article 1115

Where the relationship between the adoptive parents and the adopted child whohas become an adult so deteriorates that they are unable to live together, the adoptionmay be dissolved by agreement. Where the parties fail to reach such an agreement,either party may file a lawsuit with the people's court.

- Article 1116

Where the parties agree to dissolve an adoptive relationship, they shall registerthe dissolution with the civil affairs department.

- Article 1117

Upon dissolution of an adoptive relationship, the rights and duties between anadoptee and his adoptive parents as well as the latter’s other close relatives shall beterminated, and the rights and duties between the adoptee and his natural parents aswell as the latter’s other close relatives shall be automatically restored. However,while an adopted child has become an adult, whether the rights and duties betweensuch an adoptee and his natural parents as well as the latter’s other close relatives areto be restored may be decided through consultation.

- Article 1118

After dissolution of an adoptive relationship, an adoptee who has been raised upby the adoptive parents and now become an adult shall provide living expenses to hisadoptive parents who lack both the capacity to work and the means to supportthemselves. Where an adoptive relationship is dissolved because the adopted childmaltreats or deserts his adoptive parents after the adopted child has become an adult,the adoptive parents may request the adoptee to compensate for the expenses incurredto raise the adoptee during the adoption period.

Where dissolution of an adoptive relationship is required by the natural parentsof the adoptee, the adoptive parents may request the natural parents of the adoptee toappropriately compensate for the expenses incurred to raise the adoptee during theadoption period, unless the adoptive relationship is dissolved because the adoptiveparents maltreat or desert the adoptee.

**Book Six** Succession

**Chapter I** General Rules

- Article 1119

This Book regulates the civil-law relations arising from succession.

- Article 1120

The State protects a natural person’s right to inheritance.

- Article 1121

Succession begins upon the death of a decedent.

Where two or more persons with the right to inherit each other’s estate die in thesame incident and it is difficult to determine the time of each person’s death, theperson without any other successor is presumed to have predeceased those with othersuccessor(s). Where the aforementioned deceased persons are from differentgenerations and all of them have other successor(s), the person of the elder generationis presumed to have predeceased those of the younger generation; or, where thedeceased are in the same generation, they are presumed to have died simultaneouslyand no succession occurs between or among them.

- Article 1122

An estate refers to the property lawfully owned by a natural person upon death.

An estate not inheritable according to the provisions of law or based on thenature of the estate may not be inherited.

- Article 1123

After succession opens, it shall be processed as an intestate succession, or wherethere is a will, as a testate succession by the successor(s) or donee(s)-by-will; or beprocessed in accordance with the agreement on testamentary gift for inter vivossupport, where there is such an agreement.

- Article 1124

A successor who, after the opening of succession, disclaims an inheritance shallmanifest his decision in writing before the estate is disposed of. In the absence of sucha manifestation, he is deemed to have accepted the inheritance.

A donee-by-will shall, within 60 days after he learns of the testamentary gift,manifest his decision to accept or disclaim it. In the absence of such a manifestationwithin the specified period, he is deemed to have disclaimed the gift.

- Article 1125

A successor is disinherited if he has committed any one of the following acts:

- (1) intentionally killing the now decedent;

- (2) killing any other successor in fighting over the estate;

- (3) abandoning the now decedent, or maltreating him and the circumstances areserious;

- (4) forging, tampering with, concealing, or destroying the will, and thecircumstances are serious; or

- (5) through fraud or duress, compelling or interfering with the testator to write,alter, or revoke a will, and the circumstances are serious.

A successor who had committed one of the acts listed in Subparagraphs (3)through (5) of the preceding paragraph shall not be disinherited if he truly repentedand amended his ways, and was forgiven by the now decedent or was thereafterappointed as one of the successors in the decedent’s will.

A donee-by-will who has committed the act listed in the first paragraph of this

Article loses his right to receive the testamentary gift.

**Chapter II** Intestate Succession

- Article 1126

Men and women are equal in their right to inheritance.

- Article 1127

The estate of a decedent shall be succeeded in the following order:

- (1) first in order: spouse, children, and parents;

- (2) second in order: siblings, paternal grandparents, and maternal grandparents.

When succession opens, the successor(s) first in order shall inherit to theexclusion of the successor(s) second in order. The successor(s) second in order shallinherit the estate in default of any successor first in order.

“Children” referred to in this Book include children born in or out of wedlock,

and adopted children, as well as stepchildren who were raised up by the decedent.

“Parents” referred to in this Book include blood parents and adoptive parents,

as well as stepparents who raised the decedent.

“Siblings” referred to in this Book include siblings of whole blood and halfblood, and adopted siblings, as well as stepsiblings who supported or were supportedby the decedent.

- Article 1128

Where a decedent is predeceased by a child of his, the lineal descendants of thepredeceased child shall inherit in subrogation.

Where a decedent is predeceased by a sibling of his, the children of thepredeceased sibling shall inherit in subrogation.

Successors who inherit in subrogation generally may only take the share of theestate per stirpes.

- Article 1129

Widowed daughters-in-law or sons-in-law who have made predominantcontributions in supporting their parents-in-law shall, in relationship to theirparents-in-law, be regarded as successors first in order.

- Article 1130

Successors same in order shall, in general, inherit share and share alike.

When distributing an estate, due consideration shall be given to a successor whohas special financial difficulties and is unable to work.

When distributing an estate, a successor who has made predominantcontributions in supporting the now decedent, or who has been living with the nowdecedent may be given a larger share.

When distributing an estate, a successor who had the ability and was in aposition to support the now decedent but failed to fulfill the duty of support shall begiven no or a smaller share.

Successors may take unequal shares upon agreement among them.

- Article 1131

An appropriate share of the estate may be given to a person, other than asuccessor, who has been a dependent of the now decedent, or to a person, other than asuccessor, who has made considerable contributions in supporting the now decedent.

- Article 1132

Any issue arising from succession shall be dealt with through consultation byand among the successors in the spirit of amity, unity, mutual understanding, andaccommodation. The time and mode for partitioning the estate and the shares to bedistributed shall be determined by the successors through consultation. Where noagreement is reached through consultation, they may apply to a people’s mediationcommittee for mediation or institute legal proceedings in the people’s court.

**Chapter III** Testate Succession and Testamentary Gift

- Article 1133

A natural person may, by making a will in accordance with the provisions of thisCode, dispose of his estate and may appoint an executor in the will.

A natural person may, by making a will, designate one or more of his statutorysuccessors to inherit his estate.

A natural person may, by making a will, donate his estate to the State or acollective, or an organization or individual other than his statutory successor.

A natural person may, in accordance with law, create a testamentary trust.

- Article 1134

A holographic will is one written by the testator’s hand and signed by him,specifying the year, month, and day of its making.

- Article 1135

A will written on behalf of the testator shall be attested by two or more witnesses,of whom one writes the will, specifying the year, month, and day of its making, andsigns it along with the other witness(es) and with the testator.

- Article 1136

A will in printed form shall be attested by two or more witnesses. The testator

and the witnesses shall sign and specify the year, month, and day on each page.

- Article 1137

A will made in the form of an audio or video recording shall be attested by twoor more witnesses. The testator and the witnesses shall record their names or likenessin the recording and specify the year, month, and day of its making.

- Article 1138

A testator may, when facing imminent danger, make a nuncupative will. Anuncupative will shall be attested by two or more witnesses. When the imminentdanger is removed and where the testator is able to make a will in writing or in theform of an audio or video recording, the nuncupative will thus made becomes invalid.

- Article 1139

A notarized will is one made by a testator through a notary agency.

- Article 1140

None of the following persons is eligible to act as a witness to a will:

- (1) a person with no or limited capacity for performing civil juristic acts, or aperson otherwise incompetent to attest a will;

- (2) a successor or a donee-by-will; or

- (3) a person having an interest with a successor or a donee-by-will.

- Article 1141

Reservation of a necessary portion of an estate shall be made in a will for asuccessor who has neither the ability to work nor the source of income.

- Article 1142

A testator may revoke or alter a will he has made.

Where a testator who, after making a will, acts inconsistently with the content ofhis will, the pertinent part of the will is deemed to be revoked.

Where several wills have been made and their contents are inconsistent, the willmade last in time shall prevail.

- Article 1143

A will made by a person with no or limited capacity for performing for civiljuristic acts is void.

A will must manifest the genuine intention of the testator, and a will made underfraud or duress is void.

A forged will is void.

Where a will has been tampered with, the affected part of the will is void.

- Article 1144

Where a testate succession or a testamentary gift is conditioned uponperformance of an obligation, the successor or donee-by-will shall perform theobligation. Where a successor or donee-by-will fails to perform such an obligationwithout just cause, the people’s court may, upon request by an interested person or arelevant organization, deprive him of the right to inherit the portion of the estate towhich performance of the obligation is attached.

**Chapter IV** Disposition of Estates

- Article 1145

Upon opening of a succession, the executor of the will is the administrator of the

estate; where no executor is designated in the will, the successors shall elect anadministrator in a timely manner. Where the successors fail to do so, all of thesuccessors are co-administrators. Where there is no successor or where all of thesuccessors disclaim inheritance, the civil affairs department or the villagers’committee in the place where the decedent was domiciled at the time of his deathshall serve as the administrator.

- Article 1146

Where a dispute arises over the determination of an administrator, any interestedperson may request the people’s court to appoint an administrator.

- Article 1147

An estate administrator shall perform the following duties:

- (1) verifying and making an inventory of the estate;

- (2) reporting to the successors about the inventory of the estate;

- (3) taking necessary measures to prevent the estate from being destructed,damaged, or lost;

- (4) clearing the decedent’s claims and debts;

- (5) partitioning the estate in accordance with the will, or in accordance with law;and

- (6) performing any other act necessary for managing the estate.

- Article 1148

An estate administrator shall perform his duties in accordance with law, and shallbear civil liability if any successor, donee-by-will, or creditor of the decedent suffersdamage caused by his intentional act or gross negligence.

- Article 1149

An estate administrator may receive remuneration in accordance with law orbased upon agreement.

- Article 1150

Upon opening of the succession, a successor who has knowledge of the death ofthe decedent shall notify the other successors and the executor of the will in a timelymanner. Where none of the successors knows about the death of the decedent or isable to make the notification upon learning of the death of the decedent, theorganization to which the decedent was employed at the time of his death, or theurban residents’ committee or the villagers’ committee in the place where thedecedent was domiciled at the time of his death shall make the notification.

- Article 1151

Anyone who has in his possession the property of a decedent shall properly keepsuch property, and no organization or individual may misappropriate or contend for it.

- Article 1152

Where, after a succession opens, a successor who has not disclaimed inheritancedies before the estate is partitioned, the share that he should have inherited shall beinherited by his successors, unless otherwise provided in the will.

- Article 1153

When partitioning an estate, where community property of husband and wife isinvolved, unless otherwise agreed upon, half of the community property shall beallocated first to the surviving spouse as separate property, while the remainingproperty shall be part of the decedent’s estate.

When partitioning an estate, where the decedent’s estate is a portion of commonproperty of the family, the portion of the property belonging to the other familymembers shall first be separated from the decedent’s estate.

- Article 1154

Under any of the following circumstances, the affected portion of an estate shall

be disposed of as in an intestate succession:

- (1) where a successor designated in a will or a donee-by-will disclaims theinheritance or gift;

- (2) where a testamentary successor is disinherited or a donee-by-will isdisqualified as such;

- (3) where a testamentary successor predeceases the testator, or a donee-by-willpredeceases the testator or is terminated prior to the decedent’s death;

- (4) where a part of a will affecting a portion of the estate is invalidated; or

- (5) where a portion of the estate is not disposed of by the will.

- Article 1155

When partitioning an estate, a share shall be reserved for a fetus. If the fetus is

stillborn, the reserved share shall be disposed of as in an intestate succession.

- Article 1156

The partitioning of a decedent’s estate shall be conducted in a way beneficial toproduction and people’s livelihood, and without diminishing its efficacy.

If an estate is unsuitable for partitioning, it may be disposed of by such means asappraisal, appropriate compensation, or coownership.

- Article 1157

A surviving spouse who remarries is entitled to disposing of the property he orshe has inherited, free from interference by any organization or individual.

- Article 1158

A natural person may enter into an agreement on testamentary gift for inter vivossupport with an organization or individual other than a successor. Such organization

or individual assumes, in accordance with the agreement, a duty to support the saidperson during his lifetime, and attends to his interment after death, in return for theright to receive the testamentary gift under the agreement.

- Article 1159

Upon partitioning an estate, the taxes and debts payable or owed by the decedentin accordance with law shall be paid out of the estate, provided that a necessaryportion of the estate is preserved for any successor who has neither the ability to worknor the source of income.

- Article 1160

An estate with neither a successor nor a donee-by-will shall be escheated to theState for public interest purposes. Where the decedent was a member of a collectiveorganization at the time of his death, the estate shall be escheated to the collectiveorganization.

- Article 1161

A successor shall pay the taxes and debts legally payable or owed by thedecedent to the extent of the actual value of the portion of the estate he inherits, unlessthe successor pays voluntarily in excess of such limit.

A successor who disclaims inheritance assumes no responsibility for the paymentof taxes and debts legally payable or owed by the decedent.

- Article 1162

The execution of a testamentary gift shall not affect the payment of taxes and

debts legally payable or owed by the donor-by-will.

- Article 1163

Where intestate succession, testate succession, and testamentary gift concurrentlyexist, the taxes and debts legally payable or owed by the decedent shall be paid by theintestate successor(s); such taxes and debts in excess of the actual value of the portionof the estate inherited by the intestate successor(s) shall be paid by the testamentarysuccessor(s) and donee(s)-by-will in proportion to the shares of the estate each ofthem has received.

**Book Seven** Tort Liability

**Chapter I** General Rules

- Article 1164

This Book regulates the civil-law relations arising from the infringement of the

civil-law rights and interests.

- Article 1165

An actor who through his fault infringes upon another person’s civil-law rights

and interests shall bear tort liability.

Where an actor is presumed to be at fault according to the provisions of law andis unable to prove that he is not at fault, the actor shall bear tort liability.

- Article 1166

Where an actor harms the civil-law rights and interests of another person, if thelaw provides that tort liability shall be borne by such an actor disregarding whether ornot the actor is at fault, such provisions shall be followed.

- Article 1167

Where a tortious act endangers another person’s personal or property safety, theinfringed person has the right to request the tortfeasor to bear tort liability such ascessation of the infringement, removal of the nuisance, or elimination of the danger.

- Article 1168

Where two or more persons jointly commit a tortious act causing damage toanother person, they shall bear joint and several liability.

- Article 1169

A person who aids or abets an actor in the commission of a tortious act shallassume joint and several liability with the actor.

A person who aids or abets an actor with no or limited capacity for performingperforming civil juristic acts in the commission of a tortious act shall assume tortliability. The guardian of the actor with no or limited capacity for performing civiljuristic acts shall assume corresponding liability where he fails to fulfill the duties of aguardian.

- Article 1170

Where two or more persons commit an act that endangers another person’spersonal or property safety and the damage is caused only by one or several of them,if the specific tortfeasor(s) can be identified, the tortfeasor(s) shall bear liability, and ifthe specific tortfeasor(s) cannot be identified, all of the actors shall assume joint andseveral liability.

- Article 1171

Where the tortious acts committed by two or more persons respectively cause thesame damage to another person, and each act is sufficient to cause the entire damageindependently, the actors shall assume joint and several liability.

- Article 1172

Where the tortious acts committed by two or more persons respectively cause thesame damage to another person, each of them shall bear the liability in proportion totheir respective share of fault if it can be determined, or in equal share if it cannot bedetermined.

- Article 1173

Where an infringed person is also at fault for the occurrence or aggravation ofthe same damage to himself, the liability of the tortfeasor may be mitigated.

- Article 1174

An actor shall not assume liability for any damage intentionally caused by thevictim.

- Article 1175

Where a damage is caused by a third person, the third person shall bear tortliability.

- Article 1176

Where a person voluntarily participates in a recreational or sports activity withcertain inherent risks and thus suffers damage due to another participant’s act, he maynot request the other participant to bear tort liability unless the damage is caused bythe latter’s intentional act or by his gross negligence.

The liability of an organizer of the activity shall be governed by the provisions ofArticles 1198 through 1201 of this Code.

- Article 1177

Where a person’s lawful rights and interests are infringed upon and he maysuffer irreparable harm if actions are not immediately taken because the situation isurgent and no protection from the State organ is immediately available, he may takereasonable measures such as seizing the property of the tortfeasor to the extentnecessary for protecting his lawful rights and interests, provided that he shallimmediately thereafter request the relevant State organ to handle it.

A victim who has taken an improper measure so that damage is caused to anotherperson shall bear tort liability.

- Article 1178

Where this Code or other laws provide otherwise on the circumstances underwhich an actor bears no or mitigated liability, such provisions shall be followed.

**Chapter II** Damages

- Article 1179

Where a person suffers personal injury as a result of an infringement by anotherperson, compensation shall be made for medical expenses, nursing expenses,transportation expenses, nutrition expenses, food allowances for hospitalization, andother reasonable expenses for treatment and rehabilitation, as well as lost earnings dueto missed work. Where a person is disabled as a result of an infringement by anotherperson, compensation shall also include the costs of auxiliary equipment anddisability compensation. Where a person dies as a result of an infringement by anotherperson, compensation shall also include his funeral expenses and death compensation.

- Article 1180

Where the same tortious act causes multiple deaths, the same amount of deathcompensation may be applied to all of them.

- Article 1181

Where an infringed person dies, his close relatives have the right to request thetortfeasor to bear tort liability. Where the infringed is an organization and theorganization is thereafter split into or merged with other organization(s), theorganization succeeding to the right thereof is entitled to request the tortfeasor to beartort liability.

Where an infringed person dies, the person who has paid for his medicalexpenses, funeral expenses, and other reasonable expenses has the right to request thetortfeasor to compensate the expenses, except for those expenses already paid by thetortfeasor.

- Article 1182

Where an infringement upon the personal rights and interests of a person causesproperty damage thereto, compensation shall be made according to the damagesuffered by the infringed person or the interests gained by the tortfeasor. Where it isdifficult to determine the damage suffered by the infringed person and the interestsgained by the tortfeasor, and where the infringed person and the tortfeasor cannotagree on the amount of compensation and thus bring a lawsuit with the people’s court,the people’s court shall determine the amount of compensation according to the actualsituation.

- Article 1183

Where an infringement upon the personal rights and interests of a natural personcauses serious mental distress thereto, the infringed person has the right to requestcompensation for pains and suffering.

Where, owing to an actor’s intentional or grossly negligent act, an object ofpersonal significance of a natural person is infringed upon, which causes seriousmental distress to the person, the infringed person has the right to requestcompensation for pains and suffering.

- Article 1184

In case of an infringement upon another person’s property, property damage shallbe calculated according to the market price at the time the damage occurs or by otherreasonable methods.

- Article 1185

In case of an intentional infringement of another person’s intellectual propertyrights, where the circumstances are serious, the infringed person has the right torequest for corresponding punitive damages.

- Article 1186

Where neither the victim nor the actor is at fault for the occurrence of thedamage, losses shall be shared by both parties in accordance with the provisions oflaw.

- Article 1187

After damage has been caused, the parties may negotiate the method of paymentof the compensation. Where they fail to reach an agreement, compensation shall bepaid in a lump sum, or may be paid in installments where it is truly difficult for thetortfeasor to make a lump-sum payment, provided that the infringed person has theright to request the tortfeasor to provide a corresponding bond.

**Chapter III** Special Provisions on Assumption of Liability

- Article 1188

Where a person with no or limited capacity for performing civil juristic actscauses damage to another person, the guardian of the said person shall assume tortliability. The guardian’s tort liability may be mitigated if the guardian has fulfilled hisduty of guardianship.

Where a person, who has assets but has no or limited capacity for performingcivil juristic acts, causes damage to another person, compensation shall be paid out ofhis own assets and any deficiency shall be satisfied by the guardian.

- Article 1189

Where a person with no or limited capacity for performing civil juristic actscauses damage to another person and his guardian has delegated the duty ofguardianship to someone else, the guardian shall assume tort liability, and thedelegated person who is at fault shall assume corresponding liability.

- Article 1190

Where a person with full capacity for performing civil juristic acts is at fault forcausing damage to another person due to temporary loss of consciousness or loss ofcontrol, he shall bear tort liability. Where he is not at fault, he shall make appropriatecompensation to the victim according to his financial situation.

Where a person with full capacity for performing civil juristic acts causesdamage to another person due to temporary loss of consciousness or loss of control asa result of intoxication or abuse of narcotic or psychotropic drugs, he shall bear tortliability.

- Article 1191

Where an employee causes damage to another person in connection with theperformance of his work, his employer shall assume tort liability. The employer may,after assuming the tort liability, claim indemnification against the employee who actsintentionally or with gross negligence.

Where, during the period of labor dispatch, a dispatched employee causesdamage to another person in connection with the performance of his work, theemployer receiving the dispatched employee shall assume tort liability. The employerdispatching the employee who is at fault shall assume corresponding liability.

- Article 1192

Where, in a labor relationship formed between individuals, the party providinglabor services causes damage to another person in connection with the labor services,the party receiving labor services shall assume tort liability. The service-receivingparty may, after assuming the tort liability, claim indemnification against theservice-providing party who acts intentionally or with gross negligence. Where theservice-providing party suffers damage in connection with the labor services, bothparties shall assume corresponding liabilities according to their respective faults.

Where an act of a third person causes damage to the service-providing partywhen such services are provided, the service-providing party has the right to requestthe third person to bear tort liability, or to request the service-receiving party to makecompensation. The service-receiving party may, after making the compensation, claimindemnification against the third person.

- Article 1193

Where a contractor causes damage to a third person or to himself whilecompleting the contracted work, the ordering party shall not assume tort liability,provided that the ordering party shall assume corresponding liability where he is atfault in placing the order, making the instructions, or selecting the contractor.

- Article 1194

Network users and network service providers who, through the network,infringes upon the civil-law rights and interests of another person shall bear tortliability, unless otherwise provided by law.

- Article 1195

Where a network user commits a tortious act through using the network service,the right holder is entitled to notify the network service provider to take suchnecessary measures as deletion, block, or disconnection. The notice shall include thepreliminary evidence establishing the tort and the real identity information of the rightholder.

After receiving the notice, the network service provider shall timely forward thenotice to the relevant network user and take necessary measures based on thepreliminary evidence establishing the tort and the type of service complained about.Where it fails to take necessary measures in time, it shall assume joint and severalliability for the aggravated part of the damage with the network user.

The right holder who causes damage to the network user or network serviceprovider due to erroneous notification shall bear tort liability, unless otherwiseprovided by law.

- Article 1196

After receiving the forwarded notice, the network user may submit a declarationof non-infringement to the network service provider, which shall include thepreliminary evidence of non-infringement and the real identity information of thenetwork user.

After receiving the declaration, the network service provider shall forward it tothe right holder who issued the notice, and inform him that he may file a complaint tothe relevant department or a lawsuit with the people’s court. The network serviceprovider shall timely terminate the measures taken where, within a reasonable periodof time after the forwarded declaration reaches the right holder, it fails to receivenotice that the right holder has filed a complaint or a lawsuit.

- Article 1197

A network service provider who knows or should have known that a networkuser has infringed upon the civil-law rights and interests of another person by using itsnetwork services but fails to take necessary measures, shall assume joint and severalliability with the network user.

- Article 1198

The operators or managers of business or public premises such as hotels,shopping malls, banks, bus or train stations, airports, stadiums, and places ofentertainment, or the organizers of mass activities shall bear tort liability where theyfail to fulfill the duty of maintaining safety and thus cause damage to another person.

Where the damage to another person is caused by a third person, the third personshall bear tort liability, and the operator, manager, or organizer who fails to fulfill the

duty of maintaining safety shall assume the corresponding supplementary liability.After assuming the supplementary liability, the operator, manager, or organizer mayclaim indemnification against the third person.

- Article 1199

Where a person with no capacity for performing civil juristic acts sufferspersonal injury while studying or living in a kindergarten, school, or any othereducational institution, the said kindergarten, school, or educational institution shallassume tort liability; provided that the kindergarten, school, or educational institutionshall not assume tort liability if it can prove that it has fulfilled its responsibilities ineducation and management.

- Article 1200

Where a person with limited capacity for performing civil juristic acts sufferspersonal injury while studying or living in a school or any other educationalinstitution, the school or educational institution shall assume tort liability if it fails tofulfill its responsibilities in education and management.

- Article 1201

Where a person with no or limited capacity for performing civil juristic acts,while studying or living in a kindergarten, school, or any other educational institution,suffers personal injury caused by a third person other than the kindergarten, school, orthe educational institution, the third person shall bear tort liability, and thekindergarten, school, or the educational institution shall assume the correspondingsupplementary liability if it fails to fulfill its responsibilities in management. Afterassuming the supplementary liability, the kindergarten, school, or the educationalinstitution may claim indemnification against the third person.

**Chapter IV** Product Liability

- Article 1202

Where a defect of a product causes damage to another person, the manufacturershall bear tort liability.

- Article 1203

Where a defect of a product causes damage to another person, the infringedperson may claim compensation against the manufacturer or the seller of the product.

Where a defect is caused by the manufacturer, the seller who has paidcompensation has the right to indemnification against the manufacturer. Where adefect is caused by the fault of the seller, the manufacturer who has paid

compensation has the right to indemnification against the seller.

- Article 1204

Where the damage is caused by a defect of a product due to the fault of a thirdperson, such as a transporter or a warehouser, the manufacturer or seller of theproduct shall, after paying compensation, have the right to indemnification against thethird person.

- Article 1205

Where a defect of a product endangers the personal or property safety of anotherperson, the infringed person has the right to request the manufacturer or seller to beartort liability, such as in forms of cessation of the infringement, removal of thenuisance, or elimination of the danger.

- Article 1206

Where a defect of a product is discovered after the product is put into circulation,the manufacturer or seller shall take remedial measures such as stopping sales,providing warnings, or recalling the product in a timely manner. The manufacturer orseller, who fails to take remedial measures in a timely manner or take ineffectivemeasures so that the damage is aggravated, shall be liable also for the aggravated partof the damage.

Where a product is recalled in accordance with the preceding paragraph, themanufacturer or seller shall bear the necessary expenses incurred by the infringedperson.

- Article 1207

Where a manufacturer or seller manufactures or sells a product knowing that theproduct is defective, or failing to take remedial measures in accordance with theprovisions of the preceding Article, so that death or serious physical harm is caused toanother person, the infringed person has the right to request for the correspondingpunitive damages.

**Chapter V** Liability for Motor Vehicle Accidents

- Article 1208

Where a motor vehicle is involved in a traffic accident which causes damage, theliability for compensation shall be assumed in accordance with the relevant provisionsof the laws on road traffic safety and this Code.

- Article 1209

Where the owner, manager, or user of a motor vehicle are not the same person inleasing, borrowing, or the other like situations, and a traffic accident occurs andcauses damage to another person, the user of the motor vehicle shall bear the liabilityfor compensation where the liability is attributed to the motor vehicle driver, and theowner or manager of the vehicle who is at fault shall assume the correspondingliability for compensation.

- Article 1210

Where a party has transferred and delivered a motor vehicle by way of sale orother means but fails to file for registration, the transferee of the motor vehicle shallbear the liability for compensation if damage is caused as a result of a traffic accidentand the liability is attributed to the motor vehicle driver.

- Article 1211

Where a person uses his motor vehicle in association with an entity to engage inthe business of road transportation, if damage is caused as a result of a traffic accidentand the liability is attributed to the motor vehicle driver, the person and the entityshall assume joint and several liability for compensation.

- Article 1212

Where a person drives another person's motor vehicle without authorization, theuser of the motor vehicle shall bear the liability for compensation if damage is causedas a result of a traffic accident and the liability is attributed to the motor vehicle driver;the owner or manager of the motor vehicle shall bear the liability for compensation ifhe has fault which contributes to the damage, unless otherwise provided in thisChapter.

- Article 1213

Where damage is caused to another person as a result of a traffic accident and theliability is attributed to the motor vehicle driver, the insurer that underwrites thecompulsory motor vehicle insurance shall make compensation within the limit of theinsured liability. The deficiencies shall be paid by the insurer that underwrites thecommercial motor vehicle insurance in accordance with the stipulations of theinsurance contract. Any remaining balance or the part not covered by any commercialmotor vehicle insurance shall be paid by the tortfeasor.

- Article 1214

Where damage is caused as a result of a traffic accident involving a motorvehicle that has been illegally assembled or has reached the end-of-life standardwhich is transferred by way of sale or by other means, the transferor and thetransferee shall assume joint and several liability.

- Article 1215

Where damage is caused as a result of a traffic accident involving a motorvehicle that has been stolen, robbed, or snatched, the thief, robber, or snatcher shallbear the liability for compensation. Where the aforementioned motor vehicle is used

by a person other than the thief, robber, or snatcher and causes damage in a trafficaccident, if the liability is attributed to the motor vehicle driver, the thief, robber, orsnatcher shall assume joint and several liability with the user.

Where an insurer pays the expenses for rescue within the limits of thecompulsory insurance liability for motor vehicles, it has the right to indemnificationagainst the person who is liable for the traffic accident.

- Article 1216

Where a driver of a motor vehicle hits and runs after a traffic accident, if themotor vehicle is insured by a compulsory insurance, compensation shall be paid bythe insurer within the limit of the insured liability. Where the motor vehicle cannotbe located, is not covered by the compulsory insurance, or the rescue expenses exceedthe limit of liability of the compulsory motor vehicle insurance, and payment needs tobe made against the rescue, funeral, and other expenses incurred as a result of thedeath or bodily injury of the infringed person, such payment shall be paid from theSocial Assistance Fund for Road Traffic Accidents. After the Social Assistance Fundfor Road Traffic Accidents makes the payment, its administrative agency has the rightto indemnification against the person who is liable for the traffic accident.

- Article 1217

Where a motor vehicle not engaged in operation of business causes damage in atraffic accident to a guest passenger who is on the ride for free, if the liability isattributed to the motor vehicle driver, the liability of the user of the motor vehicle forcompensation shall be mitigated unless he acts intentionally or with gross negligence.

**Chapter VI** Liability for Medical Malpractice

- Article 1218

Where a patient suffers damage during diagnosis and treatment, and the medicalinstitution or its medical staff is at fault, the medical institution shall assume theliability for compensation.

- Article 1219

The medical staff shall explain the medical conditions and treatment measures tothe patient in diagnosis and treatment thereof. Where a surgery, a special examination,or a special treatment is needed, the medical staff shall explain to the patient themedical risks, alternative treatment plans, and other information in a timely mannerand obtain his express consent. Where it is impossible or inappropriate to do so, themedical staff shall explain it to the patient's close relatives and get their expressconsent.

Where the medical staff fail to fulfill the obligations as provided in the precedingparagraph and thus cause damage to the patient, the medical institution shall assumethe liability for compensation.

- Article 1220

Where consent of a patient or his close relatives cannot be obtained in the case ofrescuing a terminally ill patient or in another emergency situation, upon the approvalof the person in charge of the medical institution or an authorized person in charge,the corresponding medical measures may be taken immediately.

- Article 1221

Where the medical staff fail to fulfill the duty of diagnosing and treating thepatient up to the then current appropriate medical level, and thus causes damage to thepatient, the medical institution shall assume the liability for compensation.

- Article 1222

A medical institution shall be presumed to be at fault where damage is inflictedon a patient during diagnosis and treatment under any of the following circumstances:

(1) there is a violation of the provisions of laws, administrative regulations, rules,

or other relevant guidelines for diagnosis and treatment;

(2) the medical records are concealed or the request for provision thereof isrefused; or

(3) the medical records are lost, forged, tempered with, or illegally destroyed.

- Article 1223

Where damage is caused to a patient due to a defect in a drug, disinfectionproduct, or medical instrument, or due to the transfusion of substandard blood, thepatient may claim compensation against the drug marketing license holder, or themanufacturer of the drug, or the blood supply institution, or against the medicalinstitution. Where the patient claims compensation against a medical institution, themedical institution shall, after paying compensation, have the right to indemnificationagainst the responsible drug marketing license holder, or manufacturer of the drug, orthe blood supplier.

- Article 1224

Under any of the following circumstances, a medical institution shall not assumeliability for compensation for any damage caused to a patient during diagnosis andtreatment:

(1) the patient or his close relative does not cooperate with the medical institutionto go through diagnosis and treatment which is in compliance with the guidelinestherefor;

(2) the medical staff have fulfilled their duty of providing reasonable diagnosis

and treatment in an emergent situation, such as rescuing a terminal patient; or

(3) it is difficult to diagnose and treat a patient due to the restriction of the thencurrent medical level.

Under the circumstance specified in Subparagraph (1) of the preceding paragraph,the medical institution or its medical staff shall assume corresponding liability forcompensation where they are also at fault.

- Article 1225

Medical institutions and their medical staff shall properly enter and maintainmedical records such as hospitalization logs, medical orders, test reports, surgical andanesthesia records, pathological data, and nursing records in accordance with theregulations.

Where a patient requests to examine or make copies of their medical records asprovided in the preceding paragraph, the medical institution shall provide the recordsin a timely manner.

- Article 1226

Medical institutions and their medical staff shall keep their patients’ privateinformation and personal information confidential. Anyone who divulges the privateinformation or personal information of a patient or discloses his medical recordswithout the patient’s consent shall bear tort liability.

- Article 1227

Medical institutions and their medical staff shall not conduct unnecessaryexaminations for their patients in violation of the guidelines for diagnosis andtreatment.

- Article 1228

The lawful rights and interests of a medical institution and its medical staff areprotected by law.

Anyone, who interferes with the order of a medical institution, obstructs thework or life of the medical staff, or infringes upon their lawful rights and interests,shall bear liability in accordance with law.

Liability for Environmental Pollution and Ecological Damage

**Chapter VII** Article 1229

A tortfeasor who has polluted the environment or harmed the ecological systemand thus causes damage to others shall bear tort liability.

- Article 1230

Where any dispute arises from environmental pollution or ecological damage,

the actor shall bear the burden to prove that he should not be liable or that his liabilitycould be mitigated as provided by law, and that there is no causation between his actand the damage.

- Article 1231

Where environmental pollution or ecological damage is caused by two or moretortfeasors, the extent of liability of each tortfeasor shall be determined according tothe factors such as the type, concentration, and quantity of discharge of the pollutants,the way, scope, and degree of damage to the ecological system, and the impact of theact on the consequences of damage.

- Article 1232

Where a tortfeasor intentionally pollutes the environment or harms the ecologicalsystem in violation of the provisions of law, resulting in serious consequences, theinfringed person has the right to request for the corresponding punitive damages.

- Article 1233

Where environmental pollution or ecological damage is caused owing to the faultof a third person, the infringed person may claim compensation against either thetortfeasor or the third person. After making compensation, the tortfeasor has the rightto indemnification against the third person.

- Article 1234

Where a tortfeasor causes damage to the ecological environment in violation ofthe State regulations and restoration is possible, the State authorized agencies or theorganizations authorized by law have the right to request the tortfeasor to bear theresponsibility for restoration within a reasonable period of time. Where the tortfeasorfails to restore it within the time limit, the State authorized agencies or theorganizations authorized by law may initiate the restoration on its own or entrust itwith others, provided that any expenses thus incurred shall be borne by the tortfeasor.

- Article 1235

Where ecological damage is caused in violation of the State regulations, the Stateauthorized agencies or the organizations authorized by law have the right to requestthe tortfeasor to compensate the following losses and expenses:

(1) losses caused by loss of service function from the time the ecological

environment is damaged to the time the restoration is completed;

(2) losses caused by permanent damage to the function of the ecological

environment ;

(3) expenses for investigation, appraisal, and assessment of the damage to the

ecological environment;

(4) expenses for cleaning-up the pollution and restoring the ecological

environment; and

(5) other reasonable expenses incurred to prevent the occurrence or aggravationof the damage.

**Chapter VIII** Liability for Ultra-hazardous Activities

- Article 1236

A person who engages in ultra-hazardous operations and thus causes damage to

another person shall bear tort liability.

- Article 1237

Where a nuclear accident occurs at a civil nuclear facility or when nuclearmaterials are transported into or out of a civil nuclear facility and damage is thuscaused to another person, the operator of the facility shall bear tort liability. However,the operator shall not assume such liability if it can be proven that the damage iscaused by a war, an armed conflict, a riot, or under other like circumstances, or thedamage is intentionally caused by the victim.

- Article 1238

Where a civil aircraft causes damage to another person, the operator of theaircraft shall bear tort liability, provided that the operator shall not assume anyliability if it can be proven that the damage is intentionally caused by the victim.

- Article 1239

Where the possession or use of flammable, explosive, highly toxic, highlyradioactive, strongly corrosive, highly pathogenic, or other ultrahazardous thingscauses damage to another person, the possessor or user thereof shall bear tort liability,provided that such a possessor or user shall not assume any liability if it can be proventhat the damage was intentionally caused by the victim or caused by force majeure.Where the infringed person is grossly negligent for the occurrence of the damage, theliability of the possessor or user may be mitigated.

- Article 1240

Where damage is caused to another person by a person engaging in work at aheight, high voltage, or underground excavation activities, or by using high-speed railtransport vehicles, the operator shall bear tort liability, provided that the operator shallnot assume any liability if it can be proven that the damage was intentionally causedby the victim or caused by force majeure. Where the infringed person is grosslynegligent for the occurrence of the damage, the liability of the operator may bemitigated.

- Article 1241

Where damage is caused to another person by an ultra-hazardous thing that islost or abandoned, the owner shall bear tort liability. Where the owner has delivered

the ultra-hazardous thing to another person for management, the manager shall beartort liability, provided that the owner shall assume joint and several liability with themanager where he is at fault.

- Article 1242

Where damage is caused to another person by an ultra-hazardous thing that isillegally possessed, the illegal possessor shall bear tort liability. The owner ormanager of the thing shall assume joint and several liability with the illegal possessorif he cannot prove that he has fulfilled a high duty of care to prevent the illegalpossession.

- Article 1243

Where a person, without authorization, enters into an area where ultra-hazardousactivities are conducted or ultra-hazardous things are stored therein and is thus injured,the liability of the manager of the area may be mitigated or eliminated if it can beproven that he has taken sufficient security measures and fulfilled the duty ofsufficient warning.

- Article 1244

Where there is a provision of law providing for a limit of compensation forliability incurred as a result of an ultra-hazardous activity, such provision shall befollowed unless the damage is caused by the actor intentionally or with grossnegligence.

**Chapter IX** Liability for Damage Caused by Domesticated Animals

- Article 1245

Where a domesticated animal causes damage to another person, the keeper orcustodian of the animal shall bear tort liability, provided that his liability may bemitigated or eliminated if it can be proven that the damage is caused by the infringedperson intentionally or by gross negligence.

- Article 1246

A keeper or custodian of an animal who, in violation of the rules of management,fails to take safety measures on the animal and thus causes damage to another personshall bear tort liability, provided that his liability may be mitigated if it can be proventhat the damage is intentionally caused by the infringed person.

- Article 1247

Where damage is caused to another person by a dangerous animal that is

prohibited from being kept, such as a fierce dog, the keeper or custodian of the animalshall bear tort liability.

- Article 1248

Where an animal of a zoo causes damage to another person, the zoo shall beartort liability unless it can be proven that it has fulfilled its duties of management.

- Article 1249

Where an abandoned or escaped animal causes damage to another person duringthe period of abandonment or escape, the original keeper or custodian of the animalshall bear tort liability.

- Article 1250

Where an animal causes damage to another person due to a third person’s fault,the infringed person may claim compensation against the keeper or custodian of theanimal, or against the third person. The keeper or custodian of the animal who haspaid compensation has the right to indemnification against the third person.

- Article 1251

Anyone who keeps an animal shall abide by laws and regulations, respect socialmorality, and shall not disturb the life of others.

**Chapter X** Liability for Damage Caused by Buildings and Objects

- Article 1252

Where a building, structure, or another type of a facility collapses or subsidesand causes damage to another person, the project owner and the constructor shallassume joint and several liability, unless they can prove that there is no quality defect.Where the damage is due to the fault of another responsible person, the project owneror constructor who has made compensation has the right to indemnification againstthe responsible person.

Where a building, structure, or another type of facility collapses or subsides, anddamage is thus caused to another person due to the fault of the owner, manager, user,or a third person, the owner, manager, user, or the third person shall bear tort liability.

- Article 1253

Where a building, structure, or another type of facility, or any object laid orhanged thereon, comes loose or falls down and thus causes damage to another person,the owner, manager, or user shall bear tort liability if it cannot be proven that he is not

at fault. Where the damage is due to the fault of another responsible person, the owner,manager, or user who has paid compensation has the right to indemnification againstthe responsible person.

- Article 1254

Throwing objects from within a building is prohibited. Where an object thrownfrom within a building or falling off a building causes damage to another person, thetortfeasor shall bear tort liability in accordance with law. Where it is difficult toidentify the specific tortfeasor upon investigation, any user of the building who mayhave caused the damage shall make compensation, unless he can prove that he is notthe tortfeasor. A user of the building who has paid compensation has the right toindemnification against the tortfeasor.

The manager of a building such as the property management service enterpriseshall take necessary security measures to prevent the occurrence of the incidentspecified in the preceding paragraph. Where no necessary security measures are taken,it shall bear tort liability for failure to perform the obligation of providing securitymeasures in accordance with law.

Where an incident as specified in the first paragraph of this Article occurs, therelevant authorities, such as the public security department, shall timely conductinvestigation in accordance with law and identify the responsible person(s).

- Article 1255

Where a stack of objects collapses, rolls down, or slips down, and causes damageto another person, the person who piles up the stack shall bear tort liability if hecannot prove that he is not at fault.

- Article 1256

Where damage is caused to another person due to an object stacked, dumped, orleft on public road so that the road is obstructed, the actor shall bear tort liability. Thepublic road manager shall assume the corresponding liability if he cannot prove thathe has fulfilled his duties such as the duty of clean-up, protection, and warning.

- Article 1257

Where a breaking or falling tree or a falling fruit causes damage to anotherperson, the owner or manager of the tree shall bear tort liability where he cannotprove that he is not at fault.

- Article 1258

Where excavation of the ground or repair or installation of underground facilitiesis conducted in a public place or on a public road, which causes damage to anotherperson, the constructor shall bear tort liability if he cannot prove that he has posted anobvious warning sign and taken safety measures.

Where an underground facility, such as a utility access pit, causes damage toanother person, the manager shall bear tort liability if he cannot prove that he hasfulfilled his management responsibilities.

Supplementary Provisions

- Article 1259

In the civil law, the terms “not less than”, “not more than”, “within” and“expiration/expire on” include the given figure; the terms “less than”, “more than”and “beyond” do not include the given figure.

- Article 1260

This Code shall come into force on January 1, 2021. The Marriage Law of thePeople’s Republic of China, the Succession Law of the People’s Republic of China,the General Principles of Civil Law of the People’s Republic of China, the AdoptionLaw of the People’s Republic of China, the Security Law of the People’s Republic ofChina, the Contract Law of the People’s Republic of China, the Real Right Law of thePeople’s Republic of China, the Tort Liability Law of the People’s Republic of China,and the General Provisions of Civil Law of the People’s Republic of China shall berepealed at the same time.