The Revised Contract Law and Its Implications on Consumerism in China

By Ip, Mary | International Journal of Business, Winter 2004 | Go to article overview

The Revised Contract Law and Its Implications on Consumerism in China


Ip, Mary, International Journal of Business


ABSTRACT

Contract is one of the great pivots of commercial activity and an intrinsic part of nearly every consumer transaction. Being inspired by the discussion amongst western scholars that contract law is not a practical tool for protecting consumer, this paper scrutinizes the role of the Revised Contract Law in the field of consumer protection in China. Before examining the ramifications of the Revised Contract Law on Chinese consumerism, the paper outlines the development of the revised legislation and emphasizes its distinctive characteristics. Then the paper explores its implications. In the final remark, the paper concludes that the Revised Contract Law is positive for safeguarding consumer rights in China.

JEL: K12, K20, K39

Keywords: Business; China; Consumer protection; Contract law

I. INTRODUCTION

China's rapid economic growth in the past two decades has been accompanied by further legal reform. Accordingly, law relating to market economy has become a major component of the Chinese legal system. In 1999 the Chinese government passed a new contract law. The revised law not only unifies and expands the previous major legislations, but also embraces certain underlying principles, such as 'freedom of contract', or 'good faith', that are not manifest in preceding contract statutes. This paper aims to scrutinise the Revised Contract Law from the perspective of consumerism and is one of the first articles in this area. Since the Revised Contract Law is the second largest enactment (1) in the modern Chinese legal regime, a comprehensive analysis of the whole statute pertaining to consumer protection would be beyond the scope of any single paper. Thus, this pioneer study will focus on several provisions. To set the necessary background for readers, part one of the paper briefly traces the development of the Revised Contract Law and highlights its distinctive features. In part two, discussion will focus on the possible implications on consumerism in China of these new features and the underlying principles of the Revised legislation. Those rules relating to sale of goods contracts that affect the protection of consumers will also be analysed. The final part of the paper will comment on whether the Revised Contract Law is positive to consumer protection in China.

II. THE EVOLUTION OF THE REVISED CONTRACT LAW AND ITS DISTINCTIVE CHARACTERISTICS

Contract law is an essential part of every commercial law system including the Chinese. This is because much of the law regulating the sale of goods, insurance, business organisations, agencies, banking or property contains the general principles of contract. Contract law has an important impact in Chinese economic reform too. It has been used as a tool to effectively implement Chinese economic plans. (2) It has also been used to attract foreign capital, since foreign investors would not do business with China if there were no laws enforcing commercial promises. Thus, contract law plays a significant role in the Chinese economic and legal system.

Due to the planned economic structure and political turmoil (3), the regime of contract law in China only started to take shape at the beginning of the eighties. Although there were earlier contract rules or regulations (4), they were predominantly used for carrying out governmental economic plans, more than performing their legal function. The previous Chinese contract law framework rested on four key legislations, namely, the Economic Contracts Law (1981); the Foreign Economic Contract Law (1985); the General Principles of Civil Law (1986); and the Technology Contract Law (1987). All of these contracts and related statutes were formulated during the early stage of Chinese economic reform. Even though the primary role of these contract legislations in promoting state economy policy had been comparatively diminished, they were still oriented to realise planned allocation of resources. …

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