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c. Protection for the other parties
The other party may demand that the person with capacity confirm the contract within one month. Where the person with capacity fails to reply, he is deemed to have declined to confirm the contract. The other party is entitled to cancel the contract.
B. Void Contracts: 无效合同
a. Definition
By the reason of contradict with public order, those contracts are regarded as never coming into existence. They can not become valid in any situation and bind nobody.
b. Six situations
A contract concluded by a person without capacity (age: less that 10)for civil act (Art. 58.1 GPCL)
One party induced conclusion of the contract through fraud or duress, thereby harming the interests of the state; (Art. 52.1 CL)
The parties colluded in bad faith, thereby harming the interests of the state, the collective or any third party; (Art. 52.2 CL)
The parties intended to conceal an illegal purpose under the guise of a legitimate transaction; (Art. 52.3 CL)
The contract harms public interests; (Art. 52.4 CL)
The contract violates a mandatory provision of any law or administrative regulation. (Art. 52.5 CL)
D. Contracts Subject to Amendment or Cancellation: 可变更可撤销合同
a. Definition
After formation of these contracts, parties in the contracts are entitled to amend or cancel the contracts concerned. Once cancelled, these contracts are regarded as void contracts.
The underlying reason of contracts subject to amendment or cancellation is that these contracts are concluded against freedom of contract; nevertheless, concluding a contract against freedom of contract is kind of tolerable by the society, compared with concluding a contract against public order. Therefore, these contracts are not automatically void and their validity depends on the other parties’ action.
Compared with contract the validity of which is uncertain, in terms of Art. 58 CL the aggravated party can claim for damage against the other party under contracts subject to amendment or cancellation, whereas the aggravated party under contracts the validity of which is uncertain can only claim for pre-contract liability according to Art. 42 CL.
b. Three situations
The contract was concluded due to a material mistake (Art. 54.1 CL) 重大误解
A material mistake refers to a situation where a person acts contrary to his intention based on incorrect knowledge, and therefore suffers substantive loss.(Art. 71, the Opinion)
Case 8
A is a professor. At the beginning of his lecture, he said that the students who want to buy his new book can sign their name on a paper he provided. B came to class late so that he did not catch what A said. When seeing other students sign their name on a paper, he thought it is the paper to register the presence. Then he signed his name on that paper. What is the effect of B’ signature? (Selected from Chinese Bar Examination 2005)
A. it implies that B has the intention to buy;
B. it constitutes a material mistake and according it the contract may be cancelled;
C. A’ act is an offer and B’s signature is an acceptance. A contract has been concluded;
D. B’s signature does not mean anything.
The contract was grossly unconscionable at the time of its conclusion(Art. 54.2 CL) 显示公平
The contract was grossly unconscionable when one party takes advantages of other parties’ inexperience to the extent contrary to the principle of fairness and equivalence. (Art. 72, the Opinion)
Case 9
A has a painting produced by a famous painter. However, he does not know the fact. He sells the painting as an ordinary painting to B. later A knows that the market price of the painting great higher than the sales to B. He has the right to cancel or amend the contract based on this article.
A contract was concluded against one parties true intention by fraud or duress, or by taking advantage of the other party’s hardship (Art. 54.3 CL) 欺诈，胁迫，趁人之危
Fraud refers to a situation one party is intended to tell the other parties’ false information, or is intended to conceal true information, in order to make the other parties to draw wrong conclusion. (Art. 67, the Opinion)
It is duress that one party acts contrary to his real intention based on threat of his heath, reputation and property. (Art. 68, the Opinion)
Taking advantage of the other parties’ hardship means in order to seek unfair benefit, taking advantage of the other parties’ hardship one party compel the other to manifest contrary to real intention and makes the other parties suffer seriously. (Art. 69, the Opinion)
c. how to amendment or cancel (Art. 54 CL)
Under the former two cases, all parties in the contract have the right to amend or cancel the contract concerned before courts or arbitrative tribunals. Under the third case, only the aggravated partied has such right.
d. Extinguishment of Cancellation Right (Art. 55 CL)
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