No business without contracts

Contracts are the basis of all business transactions. Without them, and their trustworthy enforcement, trade would grind to a halt. Contracts can be reliably enforced in China, as long as they are constructed properly and follow the letter of the Contract Law. But although that Law is relatively comprehensive and well-structured, it's old – it was last updated in 1999 – and in desperate need of revisiting. That's why the recent opinion issued by the country's top court is so welcome.

Much of the opinion (you can read CLP's translation on page 69) will make foreign companies happy. For instance, it deals decisively with determination of the place of signing of a contract (something which will cheer up businesspeople who are reluctant to spend money on flying to a large city just to sign a contract). Another article brings the law in line with those in many other countries by clarifying that if a party makes an assertion of “trading practice” in its contractual disputes, the burden of proof lies on that party. There is also a greater chance of an unwritten contract being upheld, if the things the parties have done seem to infer the existence of a contract.

Many other parts of the opinion show that the courts are now attaching more importance to the recognition and respect of parties' own voluntary choices. The principle of fairness is emphasised several times. The entire opinion seems geared towards removing ambiguity and defining certain terms which have been the subject of debate and conflict.