China's Civil Code 2021

China’s first ever Civil Code will come into effect on January 1st, 2021. This Civil Code is a codification of the existing civil and tort related laws, regulations and judicial interpretations issued by the Supreme People’s Court.

The following laws shall be repealed on January 1st 2021; the General Principles of the Civil Law of the People's Republic of China, The Marriage Law of the People's Republic of China, the Law of Succession of the People's Republic of China, the Adoption Law of the People's Republic of China, the Security Law of the People's Republic of China, the Contract Law of the People's Republic of China, the Real Rights Law of the People's Republic of China, the Tort Law of the People's Republic of China and the General Rules of the Civil Law of the People's Republic of China.

The Civil Code consists of eight key sections:1) General Principles, 2) Property Rights, 3) Contracts, 4) Personality Rights, 5) Marriage and Family Law, 6) Inheritance, 7) Tort Liability, 8) Miscellaneous Provisions.

While the Civil Code does not significantly change the legal regime that governs commercial relations of foreign invested firms, the following changes are of note to foreign investors.

Contract Law Developments

Types of Contracts:

The Contract Law lists 15 types of typical contracts and provides specific stipulations applicable to such contracts.

The contract section of the forthcoming Civil Code lists 19 types of typical contracts, adding four new types of contracts: Guarantee Contract, Property Management Contract, Factoring Contract, and Partnership Contract.

Electronic Contracts formally recognised:

The Civil Code specifies rules for execution and performance of electronic contracts. The Civil Code recognises that Electronic Contracts online are considered written contracts. The point of delivery and conclusion for the contract will differ depending on whether the electronic contract is for a service or a good.

Force Majeure:

The Contract Law permits the change or termination of a contract with respect to a force majeure event or material adverse change which will result in a (i) obvious unfairness for a contractual party or (ii) a failure to fulfil the purpose of the contract.

The Civil Code has removed the failure to fulfil the contacts purpose as a cause for invoking Force Majeure. The contractual parties must negotiate for a reasonable period of time before change or termination of the contract.

Contract Termination:

Civil Code allows for the termination of a contract with unfixed contractual term at any time without cause.

Guarantee Law Changes

The Civil Code revises the stipulations of the Guarantee Law.

Under the Guarantee Law, the guarantee relationship is automatically considered as a joint and several guarantee, whereby the creditor may choose to enforce the debt towards the debtor or the guarantor, unless otherwise stipulated.

The Civil Code amends this assumption, and a guarantor will be considered as a general guarantee, meaning that the creditor may only claim the debt from the guarantor after it has exhausted the remedies through the debtor, unless otherwise stipulated.

The Guarantee Law stipulates that the transfer of a mortgaged property is subject to the prior consent of the creditor.

The Civil Code stipulates that a mortgaged property can be transferred as long as notice the creditor is given prior notice, this however may be limited by contractual clauses.

The transfer of the mortgaged property will not affect the creditors rights over the property.

Personal Privacy and Personal Information Protection:

The Civil Code includes a chapter named Personal Privacy and Personal Information Protection. The chapter defines Personal Information and specifies general personal information protection requirements and liability undertaking. This will be used in conjunction with the forthcoming Personal Information Protection Law in 2021.