(By Luo Yanjie) Recently, the Chinese government sent an official notice to the General Secretary of the UN to withdraw its statement made to the United Nations Convention on Contracts for the International Sales of Goods (the “Convention”) that “China would not be bound by Article 11 and the relevant regulations of Article 11.” (As provided in Article 11 of the Convention, “A contract of sale need not be concluded in or evidenced by writing and is not subject to any other requirement as to form. It may be proved by any means, including witnesses.”) Presently, the withdrawal has already come into effect. Therefore, the articles in the Convention and the Contract Law of China have become more integrated. Today, we are going to share with our readers our opinions on this issue.

I. A Comparison of Contract Form in Convention and Contract Law

With respect to contract forms, we can see in addition to Article 11 of the Convention, Article 13 also provides further explanation:

“Article 13: For the purposes of this Convention “writing” includes telegram and telex.”

On the other hand, as provided in Article 10 of China’s Contract Law:

“A contract may be made in a writing, in an oral conversation, as well as in any other form. A contract shall be in writing if a relevant law or administrative regulation so requires. A contract shall be in writing if the parties have so agreed.”

Based on the the above regulation, it can be concluded that both the Convention and the Law have made similar regulations over the form of a contract, stipulating that it may include both written forms as well as any other forms. But in reality, it is also stipulated pursuant to China’s Contract Law that:

“A contract shall be in writing if a relevant law or administrative regulation so requires.”

And yet, so far China has promulgated no laws or administrative regulations demanding a sales contract to be specifically within a written form. For this reason, in essence, Article 11 of the Convention does not produce any conflicts with the Contract Law.

II. Why China would claim a reservation to the articles?

As described above, Article 11 of the Convention is not in conflict with the context of China’s Contract Law. Why then, does China make such a reservation in regard to Article 11? The main reason is that the current Chinese Contract Law had not yet been published when China was admitted into the Convention, and pursuant to Article 7 of the Law of the People’s Republic of China on Economic Contracts Involving Foreign Interests as applied then (the “Economic Contract Law”), when parties to an agreement conclude the articles in the contract in written form and sign their names or stamp it, the contract is considered to have come into full effect. Therefore, pursuant to the regulation, the articles in the Convention would be in conflict with that, and therefore China made its statement of reservation to that specific article in the Convention. After the promulgation of the Contract Law, the new one replaced the original regulation, and thereby the conflict would no longer exist.

III. An Analysis on the Pros and Cons of China’s withdrawal from the Contract Form

From a practical aspect, the statement of withdrawal benefits China, for in foreign trade, in the interest of fairness, both parties would adopt legislature from a third party as the governing law. Taking that into consideration, the withdrawal could result in the following influence on Chinese trade:

1. A Uniform Legislature to ensure Conformity between the Law and Judicial Practice.

If the reservation is not withdrawn, it is foreseeable that a conflict between the Contract Law and the Convention would be inevitable. But after the withdrawal, it removes the difference between the domestic laws and the signed international treaties. Moreover, in International sales contracts, once a party chooses the Convention as the governing law, taking into consideration the fact that the Contract Law supports the effectiveness of contracts signed in oral or other forms, once a contract would be formed pursuant to the Convention, it would result in a conflict with the Contract Law.

2. Increasing Market Activity

Granting adequate freedom to a businessman in the market is an essential element contributing to the prosperity of the market as a whole. Once the law limits the form of contract to only that of a written contract, it is undeniable that the efficiency of the market in general would be negatively affected. Furthermore, the subjects in market transactions in various business environments would choose a specified form of contract based on actual conditions, and once that is regulated in the law, it would appear that the law would be putting words into one’s mouth.

3. Promotion of E-Commerce Development

With the rapid development of e-commerce in China, if the parties were required to conclude a sales contract in written form, it would likely hinder the development of the e-commerce in the country. Due to China’s earlier reservation regarding the regulation in the Convention, contracts established through data exchange or e-mail would also be included in the reservation, because they are regulated as non-written forms of contract. It goes without saying that this would severely limit the development of e-commerce. Due to China’s withdrawal, it is obvious e-commerce has benefited greatly.

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