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(Adopted and Promulgated by the Second Session of the Ninth National People's
Article 107 Types of Liabilities for Breach
If a party fails to perform its obligations under a contract, or rendered non-conforming
performance, it shall bear the liabilities for breach of contract by specific
performance, cure of non-conforming performance or payment of damages, etc.
Article 108 Anticipatory Breach
Where one party expressly states or indicates by its conduct that it will not
perform its obligations under a contract, the other party may hold it liable
for breach of contract before the time of performance.
Article 109 Monetary Specific Performance
If a party fails to pay the price or remuneration, the other party may require
payment thereof.
Article 110 Non-monetary Specific Performance; Exceptions
Where a party fails to perform, or rendered non-conforming performance of, a
non-monetary obligation, the other party may require performance, except where:
(i) performance is impossible in law or in fact;
(ii) the subject matter of the obligation does not lend itself
to enforcement by specific performance or the cost of performance is excessive;
(iii) the obligee does not require performance within a reasonable
time.
Article 111 Liabilities in Case of Quality Non-compliance
Where a performance does not meet the prescribed quality requirements, the breaching
party shall be liable for breach in accordance with the contract. Where the
liabilities for breach were not prescribed or clearly prescribed, and cannot
be determined in accordance with Article 61 hereof, the aggrieved party may,
by reasonable election in light of the nature of the subject matter and the
degree of loss, require the other party to assume liabilities for breach by
way of repair, replacement, remaking, acceptance of returned goods, or reduction
in price or remuneration, etc.
Article 112 Liability for Damages Notwithstanding Subsequent
Performance or Cure of Non-conforming Performance
Where a party failed to perform or rendered non-conforming performance, if notwithstanding
its subsequent performance or cure of non-conforming performance, the other
party has sustained other loss, the breaching party shall pay damages.
Article 113 Calculation of Damages; Damages to Consumer
Where a party failed to perform or rendered non-conforming performance, thereby
causing loss to the other party, the amount of damages payable shall be equivalent
to the other party's loss resulting from the breach, including any benefit that
may be accrued from performance of the contract, provided that the amount shall
not exceed the likely loss resulting from the breach which was foreseen or should
have been foreseen by the breaching party at the time of conclusion of the contract.
Where a merchant engages in any fraudulent activity while supplying goods or
services to a consumer, it is liable for damages in accordance with the Law
of the People's Republic of China on Protection of Consumer Rights.
Article 114 Liquidated Damages; Adjustment; Continuing
Performance Notwithstanding Payment of Liquidated Damages
The parties may prescribe that if one party breaches the contract, it will pay
a certain sum of liquidated damages to the other party in light of the degree
of breach, or prescribe a method for calculation of damages for the loss resulting
from a party's breach.
Where the amount of liquidated damages prescribed is below the loss resulting
from the breach, a party may petition the People's Court or an arbitration institution
to increase the amount; where the amount of liquidated damages prescribed exceeds
the loss resulting from the breach, a party may petition the People's Court
or an arbitration institution to decrease the amount as appropriate.
Where the parties prescribed liquidated damages for delayed performance, the
breaching party shall, in addition to payment of the liquidated damages, render
performance.
Article 115 Deposit
The parties may prescribe that a party will give a deposit to the other party
as assurance for the obligee's right to performance in accordance with the Security
Law of the People's Republic of China. Upon performance by the obligor, the
deposit shall be set off against the price or refunded to the obligor. If the
party giving the deposit failed to perform its obligations under the contract,
it is not entitled to claim refund of the deposit; where the party receiving
the deposit failed to perform its obligations under the contract, it shall return
to the other party twice the amount of the deposit.
Article 116 Election Between Deposit or Liquidated
Damages Clauses
If the parties prescribed payment of both liquidated damages and a deposit,
in case of breach by a party, the other party may elect in alternative to apply
the liquidated damages clause or the deposit clause.
Article 117 Force Majeure
A party who was unable to perform a contract due to force majeure is exempted
from liability in part or in whole in light of the impact of the event of force
majeure, except otherwise provided by law. Where an event of force majeure occurred
after the party's delay in performance, it is not exempted from liability.
For purposes of this Law, force majeure means any objective circumstance which
is unforeseeable, unavoidable and insurmountable.
Article 118 Duty to Notify in Case of Force Majeure
If a party is unable to perform a contract due to force majeure, it shall timely
notify the other party so as to mitigate the loss that may be caused to the
other party, and shall provide proof of force majeure within a reasonable time.
Article 119 Non-Breaching Party's Duty to Mitigate
Loss in Case of Breach
Where a party breached the contract, the other party shall take the appropriate
measures to prevent further loss; where the other party sustained further loss
due to its failure to take the appropriate measures, it may not claim damages
for such further loss.
Any reasonable expense incurred by the other party in preventing further loss
shall be borne by the breaching party.
Article 120 Bilateral Breach
In case of bilateral breach, the parties shall assume their respective liabilities
accordingly.
Article 121 Breach Due to Act of Third Person
Where a party's breach was attributable to a third person, it shall nevertheless
be liable to the other party for breach. Any dispute between the party and such
third person shall be resolved in accordance with the law or the agreement between
the parties.
Article 122 Election of Remedy in Tort or in Contract
Where a party's breach harmed the personal or property interests of the other
party, the aggrieved party is entitled to elect to hold the party liable for
breach of contract in accordance herewith, or hold the party liable for tort
in accordance with any other relevant law.
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