On The Validity Of A Contract Violating The Compulsory Provisions

The market economy in the course of development has witnessed increasing challenges to our country from globalization. However, some of our legal institutions, especially remarkable in some designs of the Contract Law, are inadequate to deal with such a contemporary tendency. For example, the Contract Law explicitly regards as null and void a contract violating the compulsory provisions of laws and administrative regulations. This provision has not pushed people to the pursuit of legitimate interests as is expected by legislators, but has restricted and reduced the freedom of the rational man in pursuing his own interests through his conscious will, even has become the most insurmountable obstacle to the rational man in his pursuit of legitimate interests; moreover, this provision has also led to serious deviation from legislative intent in judicial practices. For such a situation, there are many fundamental reasons, to which the defects in the law-making, apart from problems of the entire system, obviously belongs. The concrete reason above all is the lack in our country of the tradition of autonomous will or contractual freedom, and the absence of the modern judicial spirit fully penetrating the social operation and law-making. Based on those actual conditions, this dissertation attempts to clarify the validity of a contract violating the compulsory provisions, and the changing views upon it in our legislation and practices.Chapter One penetrates into the general theory of the validity of a contract violating compulsory provisions and its theoretical origins, and locates the definition of compulsory provisions in the comprehensive analysis of various factors, for example, the general principles of law, the essential features of compulsory provisions, legislative techniques, the status quo of our laws and administrative regulations. A contract is null and void which agrees on acts prohibited by compulsory provisions or which violates compulsory provisions immediately aimed at constraining the freedom of transaction or protecting social common interests. A contract is valid in principle which violates compulsory provisions designed to set up a certain governance procedure, without excluding the possible administrative penalty imposed on the party in issue by the administrative organ. So when concretely judging the validity of a contract violating compulsory provisions, we should resort to the normative aims and legislative purposes, and make public order and good customs the immanent standard.By comparing the related legal propositions in civil law world (France, Germany, Japan, etc.) about the validity of a contract violating the compulsory provisions, Chapter Two explains that there are no general propositions of "the null and void of a contract violating the compulsory provisions" in theories and doctrines of the civil law world, but that they distinguish different compulsory provisions according the legal transactions referred to, and separately specify the effects of violating different compulsory provisions. The main civil law states, although with considerable discrepancies in legislative techniques, make the violation of legal provisions as well as public order and good customs the criterion of negating a contract. Viewed concretely, their legislations either negates a contract violating legal provisions "as well as" public order and good customs, or negates a contract violating legal provisions "or" public order and good customs. It shouldn’t be ignored that the judicial operations in different places and states as for cases violating legal provisions and violating public order and good customs may reveal various purposes and features. But courts all the world in fact agree that the judgment of the validity of a contract should comply with the legislative aims, and that not every contracts violating legal provisions will be null and void. Thus we can learn a lot from foreign experiences in improving related propositions on the validity of a contract violating compulsory provisions. Chapter Three examines the development of our civil law legislation from General Principles of Civil Law to Contract Law in relation to the validity of a contract violating the compulsory provisions, and holds that Contract Law has given more freedom to civil subjects than General Principles of Civil Law, but it is to be admitted many contracts made according to autonomous will are directly regarded as null and void in judicial practices just for their violation of the compulsory provisions. So to speak, simple and rude coercion, which uses administrative power to undermine the free wills of civil subjects, expresses itself in both the judicial ignorance of legislative defects and the attitude of relevant typical judgments. We thus point out three concrete reasons to explain the fact that we always intend to regard as null and void those contracts violating compulsory provisions:the lack of the spirit and tradition of modern civil law. the repudiation of individual interests and functions in market economy, and the ambiguity of the legal expressions. Based on the preceding discussion, we maintain that, in the development of our legal modernization, the relative separation between public law and private law is the theoretical foundation of judging the validity of a contract violating compulsory’provisions. Therefore the state power oriented notions expressed as the primacy of state power should be abandoned, and the society-oriented notions be established, along with such core ideas of modern private law as autonomous will and contractual freedom, and the interests of social groups as the impetus and ultimate end of the evolution of modern private law. The theory of the validity of a contract ought to be put like this:not every contract violating the compulsory provisions of laws and administrative regulations certainly is null and void, on the contrary, we should adopt the complex thinking mode produced by modern market economy and regard such a contract as valid when its performance does not essentially violates public order and good customs or social common interests. In other words, the null and void of a contract is not mainly due to its violation of compulsory provisions, but to its violation of public order and good customs or social common interests at the same time.Chapter Four discusses the validity judgment of a contract violating compulsory provisions, and insists on the relative separation and mutual combination of the public law and the private law, for the relative separation leads to the existence of compulsory norms and permissive norms, and the mutual combination makes possible that an act in private law violates compulsory provisions."Interpretation II of the Supreme People’s Court of Several Issues concerning the Application of the Contract Law" divides compulsory provisions into ones on validity and ones on administration, but in judicial practices, this division on which those judicial debates focus as regards the validity of a contract, doesn’t manifest itself so accurately. Although we may in some extent make clear the differences between the two kinds of norms by the relative separation and intrinsic combination of the public law and the private law, the classified enumeration cannot exhaust every type of compulsory norms, that is, some compulsory norms remain beyond the enumeration; even if we attribute some compulsory norms to a certain type, there are still controversies over their classification according to "Interpretation Ⅱ". Therefore, to ascertain the validity of a contract violating compulsory provisions, we must deal with complex problems of value weighing apart from analyses of norms. And in weighing values to make clear the validity of a contract violating compulsory provisions, we’ll apply teleological interpretation of legislation, the principle of proportionality which takes equilibrium, appropriateness and necessity as inner demands, and the method of economic analysis that takes efficiency and the like as content. However, those three methods are not all that we can apply in making clear the validity of a contract violating compulsory provisions, so that we regard public order and good morals as the supplementary standard. That means we take public order and good morals as.supplementary values, and include into them the general order, the general interests, the basic moral identity etc. that changes in the life world, in order to keep open the civil law system, make civil law fully correspond to social life. Therefore, in relation to Article7in General Principles of Civil Law and Article7in Contract Law, a civil act violating public order and good morals doesn’t just violate the concrete content of public order and good morals, but also violates the basic principles of civil law, so that in considering cases, we need not only appeal to concrete norms in civil law, but also the basic principles in civil law.