Mandatory Rules And Validity Of The Contract

Item5, Article52of Contract Law of PRC stipulates thatthe contract violating the mandatory provisions of laws andadministrative regulations shall be null and void. And Article14ofInterpretations of the Supreme People’s Court on Certain Issuesconcerning the Application of Contract Law of PRC (Part Two)(Interpretations of Contract Law Ⅱ,ICL Ⅱ) stipulates that the terms“mandatory provisions” as stipulated in Item5, Article52of ContractLaw shall refer to mandatory provisions on validity. But both the law andthe judicial interpretation do not define “mandatory provisions onvalidity” clearly, leading to a great dispute on the identification of“mandatory provisions on validity” in judicial practice and a debateon the relation between the mandatory rules and the validity of thecontract. The state will inevitably regulate the economy and the societyfor the sake of the public interest, including restricting the freedomof contract and adjusting the validity of the contract. The validity ofthe contract is destined to be intervened by state regulation because ofits statutory characterization. However, the state regulatoryintervention to the validity of the contract should neither be arbitrarynor unrestricted. There is always a limit to state regulation in the fieldof civil law. And China tends to restrict state regulation increasinglystrictly. The direct intervention to the validity of the contract of stateregulation is limited in narrow scope. However, the excessive restrictionof state control will pose serious challenge to the unity of the legalsystem. On the one hand, the legal validity of state regulation shouldbe recognized in the field of administrative law; on the other hand, thestate regulatory intervention should be excluded in the field of civillaw. The result is that the same legal rules give distinct legal evaluation to the same juristic act in different field of law, which is obviouslyintolerable to a sound and unified legal system. Thus, the validity ofstate regulation in the civil field should be recognized to some extentin order to keep up with that in the administrative law, which leads usto focus on the validity of the contract. The exploration of the validityof the contract should be started from the analysis of its very nature,which means the contract shall be invalid if the binding force of thecontract or the claims of the parties arising from the contract isprevented by state regulation. In other words, the contract shall be voidwhen its validity suffers negative evaluation from state regulation. Ofcourse, we could not simply determine a contract involving stateregulation is valid or invalid. The possibility of mitigating the validityof contract should be reserved to ease the fierceness of state regulationin a law-governed society respecting party’s autonomy. When the validityof the contract is prevented explicitly by state regulation, what isreally important is not to announce the contract to be void, but to restorethe rights and obligations of the parties and resolve the followingdispute.