Comment On Equity Transfer Contract Dispute Between Chen Fashu And Yunnan Hongta Group Co.Ltd

Paragraph2of Article44of the Chinese Contract Law prescribes theapproved and valid contract but not clearly prescribes the state-owned equitytransfer contract without administrative approval. It results in theinconsistency of the judgments of local courts, which affects the authority oflaw. Therefore, when it comes to the contract which needs to getadministrative approval before coming into force, it is necessary to reconsiderthe validity of the contract, the approval obligations and the legalresponsibilities, make clear the suitable principles to resolve the problems inthe juridical practices effectively. This article analyzes a typical equitytransfer contract case, basing on the present law system of our country,distinguishes some concepts which are likely to be confused, especiallydiscusses on how the approval obligations affect the validity of the contract insate-owned equity transferring contract, etc.The validity of a contract has a broad meaning. It begins at theestablishment of the contract and ends at the termination of the contract. Theestablishment of a contract and the validation of a contract is quite different.When the declaration of intention meet, the contract establishes. While thevalidation of a contract is based on the establishment of the contract and, inaddition, needs to meet some necessary conditions. Invalidation is theopposition of validation. However, besides valid contracts, invalid contracts,there are contracts whose validity is uncertain or could be revoked. Beforediscussing that either a contract comes into effect or not we have to make surethat the contract is valid. There is no need to discuss whether the contract isvalid or not if the validity of the contract is uncertain or revocable. If thecontract didn’t meet the necessary conditions and failed to come into force,it’s also called an invalid contract. But we have to distinguish this kind ofcontracts from the contracts invalid from the very beginning. Contract whichneeds to get administrative approval to become valid, is invalid without approval. The approval obligation has two meanings: because the contracthas’t come into force the approval obligation is the pre-contract obligation,because of the “Honesty-Credit Principle” the approval obligation isindependent. If one party of the contract failed to preform the approvalobligation, the other party could claim both contracting fault liability andbreach liability which is a kind of liability concurrences.