The Measures for the Supervision and Administration of Contract
Violations ("Measures") promulgated by
the State Administration of Industry and Commerce
("SAIC") were implemented on 13 November
2010. The Measures define fraudulent conduct, activities that
damage the national interest and public interest and the misuse of
standard term contracts. They apply to natural persons, legal
persons and other organisations and institutions.
1. Main contents
The Measures prohibit ten kinds of fraudulent conduct, including
forging a contract; providing a false guarantee; making up a false
reason to terminate a contract; defrauding someone of property;
disseminating or using false information to entice others into
concluding a contract; and conducting and performing a contract
through other deceptive ways.
The Measures further describe several types of activities that
damage the national or public interest through the use of a
contract; for example, concluding and performing contracts through
bribery, threats, or malevolent collusion, and buying or selling
property that may not be transferred, or which may only be
transferred by the State.
2. Restrictions on standard term contracts
The Measures protect consumers who are subject to standard term
contracts by prohibiting an operator from exempting itself from
liability, encumbering the consumer with certain liabilities and
waiving the consumer's rights.
Restricting operator liability exemptions
The Measures prohibit an operator from exempting itself from the
liability of personal harm caused to the consumer;
liability of property loss caused to the consumer due to
deliberate or culpable negligence;
warrantee liability of the products or services provided under
liability for breach of contract under law; and
other liabilities under law.
Restricting consumer liability
The Measures also prohibit the operator from using a standard
term contract to encumber a consumer by:
stipulating liquidated damages or other compensation exceeding
the legal amount or a reasonable amount;
shifting to the consumer the operational risk that is the
responsibility of the operator; and
evading other responsibilities under law that protect
Protecting consumers from waiving rights
Consumers may not waive the following rights though a standard
right to alter or terminate the contract by law;
right to apply for payment of liquidated damages;
right to apply for damage awards;
right to an explanation of the standard terms;
right to institute legal proceedings due to a dispute over the
standard terms; and
other rights which the consumers have under law.
3. Liability and/or responsibility due to misuse
The Measures provide that violations should be handled according
to existing laws and regulations. In the absence of applicable law,
industry and commerce authorities can, according to the seriousness
of the case, issue a warning or a penalty of up to three times the
illegal gains (up to a maximum of RMB 30,000). Penalties of up to
RMB 10,000 can be assessed if there are no illegal gains.
Where the contract violation is minor and rectifi ed in a timely
manner, such penalties may be disregarded or replaced by other
In contrast, where violation of the Measures involves a criminal
act, industry and commerce authorities should refer the case to
judicial authorities for an investigation of criminal
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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Anyone with standard form contracts who deals with small business must review the contracts for potential unfair terms.
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