Effectiveness Of Contracts By Violation Of Mandatory Provisions On Validity

The state coercion and private autonomy are just like two opposite poles of civillaw, Yin and Yang. On the one hand, one aspect wanes, the other waxes whilesymbiosis and perdition are together; on the other hand, they are all the timeattempting to be coordinating with each other, searching for a way of harmony.Invalidity and validity of contracts are like the miniatures of the state coercionand private autonomy: one aspect wanes, the other waxes while symbiosis andperdition are together, which can be seen from the legislation by legislative branchand judicial interpretation by judicial branch.From the three major “Economic Contract Law”, General Principles of the CivilLaw of the PRC, to Interpretations of the Supreme People’s Court on Certain Issuesconcerning the Application of Contract Law of the People’s Republic of China (Part I)and (Part II), the effect of contract violating the mandatory provisions on validity hasgone through a process in which the scope of valid contracts is enlarging while thescope of invalid contracts is narrowing. The standards of determining the effect ofcontract has changed from the violation of any rule of law at beginning, violation ofmandatory provisions, violation of mandatory provisions on validity. Obviously, it isa big progress for our private law.Behind the invalidity of contracts is the state coercion which meansmaintainance and protection to the common benefits and common order of society.However, how to adjust the state coercion and private autonomy, how to protect theprivate autonomy of citizens at maximum and simultaneously achieve the protectionof common benefits and common order of society, and how to reasonably demarcatethe line between invalidity and validity of contracts which are violating themandatory provisions on validity, finally lie in the interpretation of mandatoryprovisions on validity. This paper is divided into five parts:The introduction mainly talks about the existing difficulty in how to definemandatory provisions on validity. It includes that the legal area and the rank where itexists is not clear, the boundary line between mandatory provisions on validity andmandatory provisions on administration is obscure, determination of the effect ofcontracts violating mandatory provisions on validity is too simplified and lack ofdiscretion for judges. All these reasons have caused the unclear definition ofmandatory provisions on validity which directly influences the status of effect ofcontracts. And the abuse of this may enlarge the scope of invalid contracts.Chapter I, logical analysis shall be conducted upon how to determinemandatory provisions on validity, and this part will be divided into two levels: Firstly,make clear the scopes of mandatory provisions by limiting its priority where themandatory provisions shall be stipulated by laws and administrative rules andregulations with the local laws and regulations be excluded. Secondly, mandatoryprovisions shall be distinguished from the non-mandatory provisions and mandatoryprovisions on validity shall be distinguished from the mandatory provisions onadministration.In Chapter II, we will discuss the contract validity if it violates the mandatoryprovisions. A contract validity determining mechanism with multiple layers shall beestablished, within which the violation of mandatory provisions on validity is notsurely to result in invalidity of the contract and one of the effects of void, changeable,revocable and valid may be determined according to different categories of themandatory provisions on validity.Chapter III is mainly talking about the discretion of judges. It is correction tothe individual case. Though the principle of proportionality, on the one hand, judgescan employ the discretion; on the other hand, the discretion can be limited to certainextent, in order to avoid the abuse of this power and make sure the stability of law.Chapter IV raises some suggestions for legislation as to Art52paragraph5ofContract Law of PRC. A proviso shall be added to the end the Art52paragraph5.One purpose is to construct multi-levels evaluation system; another is to endowjudges with judicial discretion. It not only fits for the mode of legislation in China but also fits the characteristics of language for legislation.The key point of this paper rests with coming up a sound logic system on howto define mandatory provisions on validity as to Art14of Interpretations of theSupreme People’s Court on Certain Issues concerning the Application of ContractLaw of the People’s Republic of China (Part II). Therefore the definition could beclear, feasible in judicial practice, and flexible for the use of discretion by judges toindividual cases, which in the end safeguard the justice of individual case.