Measures for Monitoring and Dealing with Illegal Acts Related to Contracts

Article 3: When parties conclude and perform contracts, they shall comply with laws and administrative regulations, abide by social morality, and may not disturb the socioeconomic order or harm the interests of the state or the public.

Article 4: Administrations for industry and commerce at every level shall be responsible for monitoring and dealing with illegal acts related to contracts within their purviews in accordance with relevant laws, regulations and these Measures.

Article 5: In monitoring and dealing with illegal acts related to contracts in accordance with the law, administrations for industry and commerce shall implement a combination of investigation/handling and guidance, of punishment and education, promote administrative guidance, procure and guide the lawful conclusion and performance of contracts by parties and safeguard the interests of the state and the public.

Article 6: A party may not use a contract to commit the following fraudulent acts:

(1) forging the contract;

(2) fabricating its qualifications to be a party to the contract, or stealing or fraudulently using another's name to conclude the contract;

(3) fabricating the subject matter of the contract or enticing another to conclude and perform the contract by fabricating the source of the goods and/or sales channel;

(4) releasing or using false information to entice another to conclude the contract;

(5) concealing material facts to lure the other party into making a declaration of intent in concluding the contract that was not its/his/her real intent, or luring the other party into performing the contract;

(6) not having the actual performance capacity but luring the other party into concluding and performing the contract by first performing a small value contract or partially performing the contract;

(7) setting, in bad faith, terms that actually cannot be performed, making it impossible for the other party to perform the contract;

(8) fabricating false grounds for suspending (terminating) the contract in order to fraudulently obtain property;

(9) providing fraudulent security; or

(10) taking other deceptive means to conclude and perform the contract.

Article 7: A party may not use a contract to commit the following acts that jeopardise the interests of the state or the public:

(1) using bribery, coercion or other such means to conclude and perform the contract, harming the interests of the state and/or the public;

(2) using malicious collusion means to conclude and perform the contract, harming the interests of the state and/or the public;

(3) illegally buying and selling property, the buying and selling of which is prohibited or restricted by the state;

(4) not performing, without just cause, contractual obligations mandated by the state; or

(5) committing another illegal act related to a contract that jeopardises the interests of the state and/or the public.

Article 8: No entity or individual may provide certificates, a licence, seal, account or other facilitating condition to a party committing any of the illegal acts set forth in Article 6 or 7 hereof where it/he/she was aware or ought to have been aware of the same.

Article 9: If a business operator uses standard clauses to conclude a contract with a consumer, it may not exempt itself from the following liabilities in those standard clauses:

(1) liability for causing personal injury to the consumer;

(2) liability for causing property loss to the consumer due to a deliberate act or gross negligence;

(3) warranty liability that it is required to bear in accordance with the law for the goods or services it provides;

(4) liability for breach of contract that it is required to bear in accordance with the law for a breach of contract; or

(5) other liability it is required to bear in accordance with the law.

Article 10: If a business operator uses standard clauses to conclude a contract with a consumer, it may not increase the seriousness of the following liabilities bearable by the consumer in those standard clauses:

(1) liquidated damages or damages exceeding the statutory amount or a reasonable amount;

(2) bearing liability for business risks that ought be the borne by the provider of the standard clauses; or

(3) other liabilities that, in accordance with laws and regulations, are not bearable by the consumer.

Article 11: If a business operator uses standard clauses to conclude a contract with a consumer, it may not deny the consumer the following rights in those standard clauses:

(1) the right to amend or terminate the contract in accordance with the law;

(2) the right to demand payment of liquidated damages;

(3) the right to demand damages;

(4) the right to have the standard clauses explained;

(5) the right to institute a legal action in respect of a dispute over the standard clauses; or

(6) other rights enjoyed by the consumer in accordance with the law.

Article 12: If a party violates Article 6, 7, 8, 9, 10 or 11 hereof and laws or regulations provide therefor, such provisions shall apply. If laws or regulations are silent thereon, the administration for industry and commerce shall, depending on the seriousness of the circumstances, give a warning or impose a fine of up to three times the illegal income, not, however, to exceed a maximum of Rmb30,000, or, if there was no illegal income, a fine of up to Rmb10,000.

Article 13: If a party's illegal act related to a contract was minor, rectified in a timely manner and did not result in any harm, no administrative penalties shall be imposed in accordance with the law. If the party eliminates or reduces the harm at its own initiative, lighter or reduced administrative penalties shall be imposed in accordance with the law. If through advice and guidance the party can rectify the matter or, in a timely manner, suspend the illegal act related to a contract at its own initiative, lighter administrative penalties may be imposed in accordance with the law.

Article 14: If there is suspicion that a violation of these Measures constitutes a criminal offence, the administration for industry and commerce shall, in accordance with relevant provisions, transfer the case to the judicial authorities for criminal prosecution.

Article 15: The State Administration for Industry and Commerce is in charge of interpreting these Measures.

Article 16: These Measures shall be effective as of November 13 2010.