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CONTRACT LAW OF THE PEOPLE'S REPUBLIC OF CHINA

(Adopted and Promulgated by the Second Session of the Ninth National People's

Chapter Fourteen  Financial Leasing Contracts

Article 237     Definition of Financial Leasing Contract
A financial leasing contract is a contract whereby the lessor, upon purchase of the lessee-selected lease item from a lessee-selected seller, provides the lease item to the lessee for its use, and the lessee pays the rent.

Article 238     Terms of Financial Leasing Contract; Writing Requirement
A financial leasing contract includes terms such as the name, quantity, specifications, technical performance, and method of inspection of the lease item, the lease term, the rental components and the time, method and currency of payment, as well as the ownership of the lease item at the end of the lease term, etc.
A financial leasing contract shall be in writing.

Article 239     Lessee's Assumption of Buyer's Rights
Under the sales contract concluded by the lessor according to the lessee's selection of the seller and the lease item, the seller shall deliver the subject matter to the lessee in accordance with the contract, and the lessee enjoys the rights of the buyer in respect of taking delivery of the subject matter.

Article 240     Lessee's Assumption of Buyer's Remedies in Case of Seller's Non-performance
The lessor, the seller and the lessee may agree that any claim arising from the seller's non-performance of its obligations under the sales contract will be made by the lessee. Where the lessee makes such a claim, the lessor shall provide assistance.

Article 241     Certain Amendment of Sales Contract Subject to Consent by Lessee
Absent consent by the lessee, the lessor may not amend any lessee-related term in the sales contract concluded by it according to the lessee's selection of the seller and the lease item. 

Article 242     Exclusion of Lease Item from Bankruptcy Assets of Lessee
Title to the lease item vests in the lessor. In case the lessee enters into bankruptcy, the lease item is not part of its bankruptcy assets.

Article 243     Determination of Rental Components
Unless otherwise agreed by the parties, the rent under a financial leasing contract shall be determined based on the major portion of or full costs of purchasing the lease item and the lessor's reasonable profit.

Article 244     Lessor Not Liable for Non-fitness of Lease Item; Exceptions
Where the lease item does not comply with the contract or is not fit for the intended purpose, the lessor is not liable, except where the lessee relied on the skills of the lessor in selecting the lease item or the lessor interfered in the selection thereof.

Article 245     Warranty by Lessor
The lessor shall give warranty in respect of the lessee's possession and use of the lease item.

Article 246     Lessor Not Liable for Damage or Injury
If while in the possession of the lessee, the lease item caused personal injury or property damage to any third person, the lessor is not liable.

Article 247     Lessee's Obligation of Due Care; Maintenance Obligations
The lessee shall keep and use the lease item with due care.
While in possession of the lease item, the lessee shall perform the obligations of maintenance and repair thereof.

Article 248     Lessor' s Remedies in Case of Non-payment by Lessee
The lessee shall pay the rent in accordance with the contract. Where the lessee fails to pay the rent within a reasonable period after receiving demand for payment from the lessor, the lessor may require payment of the full rent; or it may terminate the contract and repossess the lease item.

Article 249     Partial Refund in Case of Termination by Lessor
Where the parties agreed that title to the lease item will vest in the lessee at the end of the lease term, and after paying a major portion of the rent, the lessee is unable to pay the remaining balance, resulting in the lessor's termination of the contract and repossession of the lease item, if the value of the repossessed lease item exceeds the rent owed by the lessee and other expenses, the lessee may require partial refund.

Article 250     Ownership of Lease Item at End of Lease Term
The lessor and the lessee may agree on the ownership of the lease item at the end of the lease term. Where ownership of the lease item was not prescribed or clearly prescribed, and cannot be determined in accordance with Article 61 hereof, title to the lease item shall vest in the lessor.

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