The Legal Effectiveness Of A Contract Thathasnot Completed Relevant Approval Procedure

The principle of freedom of contract is recognized;in addition,the principle of party autonomy is respected in regards to the field of contract law.Based on these importantrules in civil laws and regulations,commonly,the issues upon contracts such as how is a contract established and when does the contract enter into force are solved by private law purely and decided by party autonomy.On the other hand,the hand of nation may put in civil and commercial legislation,i.e.legislators will sometimes impose restrictions on party autonomy.For some kinds of contracts,they should not only keep compliance with legal requirements,but also obtain administrative examination and approval so as to enter into force.In terms of some special contracts,the national power may step into the private legal filed.Since the private legal relationships are affected by public law behaviors somehow,the state control may conflict with autonomy of private law.The administrative approval procedureis a kind of administrative licensing,considering its procedure features and functions.The administrative examination and approval mentioned in Paragraph 2 of Article 44 of Chinese Contract Law is regulated as a special requirement of validity in addition to party autonomy.The setting of the administrative approval procedureis aimed to regulate how and when a contract take effect rather than to take control the execution of a contract.Moreover,the object ofthe administrative approval procedureis single contract instead of a qualification or a behavior.If a contract is not approved by administrative organ,it does not mean the contract contains some negative factors.And the administrative organ will not examine the intention of both parties of the contract in order to determine whether they are true and legal.The Paragraph 2 of Article 44 of Chinese Contract Law is a reference clause,which connected the contract law and other specialized laws and rules.To determine the effect of contracts when administrative is required,it is necessary to combine all these laws and rules and make out their logical relationship.The Paragraph 2 of Article 44 and the Article 52 of Chinese Contract Law have some commons in terms of function.However,we are supposed to recognize their differences clearly.It is regulated in the first paragraph of article nine of Interpretations of Certain Issues concerning The Application of The Contract Law that,“Where ?the relevant law or administration regulation provides that the effectiveness of a certain contract is subject to completion of the relevant approval procedure,?if before completion of court debate by the parties in the trial of first instance,the parties still fail to carry out the relevant approval procedure,? as the case may be,the People's Court shall rule that the contract has not yet taken effect.” This clause,for the first time,gives direction upon the question of when the contract which is subject to completion of the relevant approval procedure enter into forceif the parties fail to carry out such a procedure;in despite that the real meaning of “has not yet taken effect” is not clear certain enough for practice concern.It should be noted that,even if a contract has not yet taken effect,it does not mean the contract has no legal effect or binding force at all.As a matter of fact,the contract,which has not yet taken effect,still has formal binding force upon both parties of the contract.Such a design shows appropriate respect to the principle of party autonomy and freedom of contract,so as toprovide protection for transaction security,increase transaction sufficiency and lower transaction cost to a certain degree.When a contract has not yet taken effect,the obligation to submit for approval still comes into being.The party who undertakes this obligation shall perform his dutyby his own active behavior,or he is responsible to compensate the other of the contract who acts in good faith.In addition to the compensation for damages,the bona fide party can get relief if he chooses to submit for administrative approval on himself.