Article 654
A consumer of electricity shall pay the electricity fees in time in accordance with the relevant regulations of the State and the agreement between the parties. Where a consumer fails to pay the electricity fees due, he shall pay the agreed liquidated damages. Where a consumer, after being demanded, still fails to pay the electricity fees and the liquidated damages within a reasonable period of time, the supplier may stop the supply of electricity in accordance with the procedures provided by the State. Where a supplier stops the supply of electricity in accordance with the provision of the preceding paragraph, it shall notify the consumer in advance.
Article 655
A consumer shall use the electricity in a safe, economical and planned manner in accordance with the relevant regulations of the State and the agreement between the parties. Where a consumer fails to use the electricity in accordance with the relevant regulations of the State or the agreement between the parties, and thus causes losses to the supplier, the consumer shall bear the liability for compensation.
Article 656
The provisions of the contract for the supply and consumption of electricity shall be applied mutatis mutandis to contracts for the supply and consumption of water, gas, or heat.
Chapter XI Gift Contracts
Article 657
A gift contract is a contract under which a donor gives his own property to a donee gratuitously, and the donee indicates his acceptance of the gift.
Article 658
A donor may revoke the gift prior to the transfer of the rights in the gifted property.
The provisions of the preceding paragraph shall not apply to a notarized gift contract, or a gift contract of a public interest or moral obligation nature that shall, in accordance with law, not be revoked, such as a gift contract for disaster-relief, poverty-relief, disability-relief, or the like purposes.
Article 659 The gifted property shall go through registration or another procedure if the law so requires.
Article 660
For a notarized gift contract or a gift contract of a public interest or moral obligation nature that shall in accordance with law not be revoked, such as a contract for disaster-relief, poverty-relief, disability-relief, or the like purposes, where the donor does not deliver the gifted property, the donee may request such delivery.
Where the gifted property that shall be delivered in accordance with the preceding paragraph is destructed, damaged, or lost due to the donor’s intentional act or by his gross negligence, the donor shall bear the liability for compensation.
Article 661
A gift may be subject to an obligation.Where a gift is subject to an obligation, the donee shall perform the obligation in accordance with the agreement.
Article 662
A donor is not liable for any defect of the gifted property. Where a gift is subject to an obligation, if the gifted property has defects, the donor shall, to the extent of the attached obligation, bear the same liabilities as a seller.
Where a donor intentionally fails to notify the donee about the defect of the gifted property or has made a warranty therefor, thus causing losses to the donee, the donor shall bear the liability for compensation.
Article 663
A donor may revoke the gift if the donee has done any of the following acts:
(1) severely infringing upon the lawful rights and interests of the donor or any close relative of the donor;
(2) having an obligation to support the donor but failing to perform that obligation; or
(3) failing to perform the obligation as agreed in the gift contract.
The right to revocation of the donor shall be exercised within one year from the date the donor knows or should have known of the cause for revocation.
Article 664
Where a donee's illegal act leads to the death or loss of capacity for performing civil juristic acts of the donor, the donor’s heir or legal representative may revoke the gift.
The right to revocation of the donor's heir or his legal representative shall be exercised within six months from the date the heir or the legal representative knows or should have known of the cause for revocation.
Article 665
Upon revocation of a gift, the person having the right to revocation may request the donee to return the gifted property.
Article 666
Where a donor’s financial situation markedly deteriorates and his production, business, or family life is thus severely affected, he may cease to perform the obligation of delivering the gift.
Chapter XII Loan Contracts
Article 667
A loan contract is a contract under which a borrower borrows a loan from a lender and repays the loan with interests when the loan becomes due.
Article 668
A loan contract shall be made in writing, except for a loan between natural persons who agree otherwise.
A loan contract generally contains clauses specifying the category of the loan, kind of currency, purpose of use, amount, interest rate, term, and the method of repayment, and the like.
Article 669
Upon concluding a loan contract, a borrower shall, as required by the lender, provide true information about its business activities and financial conditions related to the borrowing to the lender.
Article 670
The interest on a loan may not be deducted from the principal in advance. Where the interest is deducted from the principal in advance, the loan shall be repaid and the interest shall be calculated according to the actual amount of the loan provided.
Article 671
A lender who fails to provide the loan at the agreed time and amount and thus causing losses to the borrower shall bear the liability for compensation.
A borrower who fails to take the loan at the agreed time and amount shall pay an interest based on the agreed time and amount.
Article 672
A lender may inspect and supervise the use of the loan in accordance with the agreement. A borrower shall regularly provide the relevant financial and accounting statements or other materials to the lender in accordance with the agreement.
Article 673
Where a borrower fails to use the loan for a purpose in accordance with the contract, the lender may stop providing the loan, recall the loan prior to its due date, or rescind the contract.
Article 674
A borrower shall pay the interest within the agreed time limit. Where there is no agreement between the parties on the time limit for payment of interest or the agreement is unclear, if it cannot be determined according to the provisions of Article 510 of this Code, the interest shall be paid at the time the principal is repaid if the term of the loan is less than one year; the interest shall be paid at the end of each full year if the term of the loan is more than one year, and the interest shall be paid when the principal is repaid if the remaining term is less than one year.
Article 675
A borrower shall repay the loan within the agreed time limit. Where there is no agreement between the parties on the time limist of repayment of the loan, or the agreement is unclear, if it cannot be determined according to the provisions of Article 510 of this Code, the borrower may repay the loan at any time, and the lender may demand the borrower to repay the loan within a reasonable period of time.
Article 676
A borrower who fails to repay the loan within the agreed time limit shall pay an overdue interest in accordance with the agreement or the relevant regulations of the State.
Article 677
Where a borrower makes a prepayment of the loan, unless otherwise agreed by the parties, the interest shall be calculated according to the actual duration of the loan.
Article 678
A borrower may apply to the lender for an extension of the term of the loan before the loan becomes due. The term of the loan may be extended upon consent of the lender.
Article 679 A loan contract between natural persons is formed at the time when the lender provides the loan.
Article 680
Usurious loans are prohibited, and the interest rate for lending shall not violate the relevant regulations of the State.
Where there is no agreement on payment of interest in the loan contract, the loan shall be deemed as bearing no interest.
Where the agreement on the payment of interest in a loan contract is unclear, if the parties are unable to reach a supplementary agreement, the interest shall be determined by taking account of the practices of the local area or between the parties such as the method of transaction, course of dealing, the market interest rate, and the like. Where the loan is between nature persons, the loan shall be deemed as bearing no interest.
Chapter XIII Suretyship Contracts Section 1 General Rules
Article 681
A suretyship contract is a contract under which a surety and a creditor agree, for the purpose of ensuring the enforcement of an underlying claim, that the surety shall perform the obligation or bear the liability when the debtor fails to perform it when it is due or a circumstance as agreed by the parties occurs.
Article 682
A suretyship contract is an accessary contract subordinated to a principal claim-obligation contract. Where the principal contract is invalid, the suretyship contract is invalid, unless otherwise provided by law.
Where a suretyship contract is determined to be invalid, the debtor, surety, or creditor who are at fault shall each bear civil liability in proportion to their respective fault.
Article 683
No State-organ leagal person may act as a surety, except that a state organ may, upon approval of the State Council, act as a surety in re-lending of the loans granted by a foreign government or an international economic organization.
No non-profit legal person established for public interest purposes or unincorporated organization may act as a surety.
Article 684 A suretyship contract generally contains clauses specifying the kind and amount of the principal claim that is secured, the time limit for the debtor to perform the obligation, the modes, scope, and term of the suretyship, and the like.
Article 685
A suretyship contract may be a contract concluded separately in writing or a guarantee clause in a principal claim-obligation contract.
A suretyship contract is formed when a third person unilaterally makes a guarantee in writing to a creditor who accepts it without making an objection.
Article 686
Suretyship consists of general suretyship and suretyship with joint and several liability.
Where there is no agreement in the surety contract on the form of the suretyship or the agreement is unclear, the surety shall bear the liability as in the form of a general suretyship.
Article 687
Where the parties agree in a suretyship contract that the surety shall undertake suretyship liability if the debtor is unable to perform his obligation, such a suretyship is a general suretyship.
A surety in a general suretyship may refuse to undertake suretyship liability to the creditor before a dispute arising from the principal contract is adjudicated or arbitrated and where the debtor is still unable to fully perform the obligation after his assets have been enforced in accordance with law, unless one of the following circumstances occurs:
(1) the whereabouts of the debtor have been unknown and there is no property available for enforcement;
(2) the people’s court has accepted the debtor’s bankruptcy petition`;
(3) the creditor has evidence to prove that the debtor’s property is insufficient to perform all of the obligations or the debtor loses his capacity to perform the obligation; or
(4) the surety waives his right provided in this paragraph in writing.
Article 688
Where the parties agree in a suretyship contract that the surety and the debtor shall be jointly and severally liable for the obligation, such a suretyship is a suretyship with joint and several liability.
Where a debtor under a suretyship with joint and several liability fails to perform his obligation due or when a circumstance agreed by the parties occurs, the creditor may request the debtor to perform his obligation, or request the surety to undertake the suretyship liability within the scope of his suretyship.
Article 689 A surety may request the debtor to provide a counter-security.
Article 690
A surety and a creditor may, through consultation, conclude a contract of maximum suretyship for floating claims to provide guarantee for the creditor’s claims which will arise consecutively within a certain period of time and the total amount of which is up to the maximum amount of his claims. In addition to applying the provisions of this Chapter, the relevant provisions of Book Two of this Code on the maximum mortgage for floating claims shall be applied mutatis mutandis.
Section 2 Suretyship Liability
Article 691 The scope of the suretyship covers the principal claims and the interest thereof, the liquidated damages, compens atory damages, and the expenses for enforcing the claim, unless otherwise agreed by the parties.1
Article 692
The term of suretyship is the period during which the surety shall undertake suretyship liability, and such period shall not be suspended, interrupted, or extended.
A creditor and a surety may agree on the term of suretyship. However, where the expiration date of the agreed term of suretyship is earlier than or the same as the expiration time for performance of the principal obligation, it is deemed as there is no agreement on the term of suretyship. Where there is no agreement between the parties on the term of suretyship or the agreement is unclear, the term of suretyship shall be six months from the date of expiration of the time limit for performance of the principal obligation.
Where a creditor and a debtor fails to agree on the time limit for performance of the principal obligation or the agreement is unclear, the term of suretyship shall be counted from the date when the grace period for the creditor to request the debtor to perform the obligation expires.
Article 693
Where a creditor of a general suretyship fails to file a lawsuit or apply for arbitration against the debtor within the term of suretyship, the surety no longer bears the suretyship liability.
Where a creditor of a suretyship with joint and several liability fails to request the surety to undertake his suretyship liability within the term of suretyship, the surety no longer bears the suretyship liability.
Article 694
Where a creditor of a general suretyship files a lawsuit or apply for arbitration against the debtor prior to the expiration of the term of suretyship, the limitation period of the suretyship obligation shall be counted from the date when the surety’s right to refuse to undertake the suretyship liability is extinguished.
Where a creditor of a suretyship with joint and several liability requests the surety to undertake his suretyship liability prior to the expiration of the term of suretyship, the limitation period of the suretyship obligation shall be counted from the date when the creditor requests the surety to undertake his suretyship liability.
Article 695
Where a creditor and a debtor, without the surety’s consent in writing, agree to alter the content of the principal claim-obligation contract, if the obligation is reduced, the surety shall continue to bear the suretyship liability for the altered obligation; if the obligation is increased, the surety shall not bear the suretyship liability for the increased part.
Where a creditor and a debtor alter the time limit for performance of the principal claim-obligation contract，the term of suretyship shall not be affected unless upon the surety’s written consent.
Article 696
Where a creditor transfers his claim in whole or part without notifying the surety, such a transfer is not effective against the surety.Where transfer of a claim is prohibited as agreed between the surety and the creditor, if the creditor transfers its claim without the surety’s written consent, the surety shall no longer bear the suretyship liability.
Article 697 Where a creditor, without the surety’s written consent, allows the debtor to transfer the obligation in whole or part, the surety shall no longer bear the suretyship liability to the extent of the obligation transferred without his consent, unless otherwise agreed by the creditor and the surety.
Where a third person joins to be one of the debtors, the surety’s liability shall not be affected.
Article 698
Upon expiration of the time limit for performance of the principal obligation, if the surety of a general suretyship provides to the creditor true information concerning the debtor’s property available for enforcement, but the creditor waives or fails to exercise his right, and thus causing such property to be unenforceable, the surety shall no longer bear liability to the extent of the value of the said property available for enforcement the information of which is provided by the surety.
Article 699 Where there are two or more sureties guaranteeing one obligation, the sureties shall undertake the suretyship liability in proportion to their share of suretyship in accordance with the suretyship contract. In the absence of such an agreement, the creditor may request any of the sureties to undertake the suretyship liability within the scope of his liability.
Article 700
After a surety has assumed the suretyship liability, unless otherwise agreed by the parties, the surety has the right to indemnification against the debtor within the scope of his suretyship liability, and may enjoy the right of the creditor against the debtor, provided that the creditor’s interests shall not be harmed.
Article 701 A surety may claim a defense that the debtor has against the creditor. Where the debtor waives his right of defense, the surety shall still have the right to claim such defense against the creditor.
Article 702 Where a debtor has the right of offset or revocation against the creditor, the surety may refuse to undertake the suretyship liability within the corresponding scope.
Chapter XIV Lease Contracts
Article 703 A lease contract is a contract under which a lessor delivers the leased object to a lessee for use or for obtaining proceeds, for which the lessee pays the rent.
Article 704 A lease contract generally contains clauses specifying the name, quantity, purpose of use of the leased object, the term of the lease, rent, and the time limit and method of its payment, and the maintenance of the leased object, and the like.
Article 705
The term of a lease may not exceed twenty years. If a lease exceeds twenty years, the part beyond twenty years is invalid.
Upon expiration of the lease term, the parties may renew the lease contract, provided that the agreed term of lease may not exceed twenty years from the date of renewal.
A lessor shall perform the duty of maintaining the leased object, unless otherwise agreed by the parties.
Article 713
Where a leased object needs to be maintened or repaired, the lessee may request the lessor to have it maintened and repaired within a reasonable period of time. Where the lessor fails to perform the obligation of maintenance or repair, the lessee may maintain or repair the leased object by himself and the expenses thus incurred shall be borne by the lessor. If the maintenance or repair of the leased object affects the lessee’s use of it, the rent shall be reduced or the term of the lease shall be extended accordingly.
Where a leased object needs to be maintened or repaired due to the lessee’s negligence, the lessor shall not bear the obligation of maintenance or repair as provided in the preceding paragraph.
Article 714 A lessee shall properly keep the leased object and shall bear the liability for compensation if the leased object is destructed, damaged, or lost owing to his failing to properly keep it.
Article 715
A lessee may, upon the lessor’s consent, improve the leased object or install additions thereto.
Where a lessee improves the leased object or install additions thereto without the consent of the lessor, the lessor may request the lessee to restore the leased object to its original status or to compensate for the losses.
Article 716
A lessee may, upon the lessor’s consent, sublease the leased object to a third person. The lease contract between the lessee and the lessor shall continue to be valid despite the sublease by the lessee, and if the third person causes loss to the leased object, the lessee shall bear the liability for compensation.
Where a lessee subleases the leased object without the consent of the lessor, the lessor may rescind the contract.
Article 717
Where a lessee, upon consent of the lessor, subleases the leased object to a third person, if the term of the sublease exceeds the remaining term of the lessee, the sublease in the period in excess of the original term shall not be legally binding on the lessor unless otherwise agreed by the lessor and the lessee.
Article 718 Where a lessor knows or should have known of the sublease made by a lessee but fails to raise any objection within six months, the lessor is deemed to have consented to the sublease.
Article 719
Where a lessee defaults on payment of the rent, the sublessee may pay the rent in arrears and the liquidated damages for the lessee, unless the sublease contract is not legally binding on the lessor.
The rent and liquidated damages paid by the sublessee for the lessee may be used to offset the rent payable by the sublessee to the lessee. If the amount of rent and liquidated damages thus paid by the sublessee exceeds the rent, the sublessee has the right to indemnification against the lessee.
Article 720 Any proceeds accrued from the possession or use of the leased object during the term of the lease shall belong to the lessee, unless otherwise provided by the parties.
Article 721
A lessee shall pay the rent within the time limit in accordance with the agreement. Where there is no agreement between the parties on the time limit for paying the rent or the agreement is unclear, if it cannot be determined according to the provisions of Article 510 of this Code, the rent shall be paid at the time the term of the lease expires if the term is less than one year, or at the end of each full year where the term is more than one year, provided that the rent shall be paid at the time the term of the lease expires if the remaining term is less than one year.
Article 722
Where a lessee fails to pay the rent or delays a payment of the rent without just cause, the lessor may request the lessee to pay the rent within a reasonable period of time, and may rescind the contract if the lessee fails to pay the rent within such period of time.
Article 723
Where a lessee is unable to use or to receive benefit from the leased object owing to a claim from a third person, the lessee may request for a reduction of or exemption from the rent.
Where a third person claims his right against the leased object, the lessee shall notify the lessor in a timely manner.
Article 724
A lessor may rescind the contract under any of the following circumstances if the leased object cannot be used due to a reason not attributable to the lessee:(1) the leased object is seized or detained by the judicial authority or administrative authority in accordance with law;(2) there are disputes over the attribution of rights of the leased object; or(3) the leased object violates mandatory provisions of laws and administrative regulations in respect of the conditions for use thereof.
Article 725 A change in the ownership of a leased object during the period that a lessee possesses the leased object in accordance with the lease contract shall not affect the validity of the lease contract.
Article 726
A lessor intending to sell a leased house shall notify the lessee within a reasonable period of time prior to the sale, and the lessee shall have the priority right to purchase the house under equivalent conditions, unless the person who is a co-owner by share exercises his priority right to purchase the house or if the lessor sells it to his close relatives.
Where a lessee fails to explicitly express his intention to purchase the house within fifteen days after the lessor has fulfilled his obligation of notification, the lessee shall be deemed to have waived such priority right.
Article 727
Where a lessor authorizes an auctioneer to sell the leased house through auction, he shall notify the lessee five days prior to the auction. The lessee shall be deemed to have waived his priority right to purchase it if he fails to participate in the auction.
Article 728
Where a lessor fails to notify the lessee or otherwise hinders the lessee from exercising his priority right to purchase the leased house, the lessee may request the lessor to bear the liability for compensation, except that the validity of the contract for sale of the leased house concluded between the lessor and a third person shall not be affected.
Article 729
Where a leased object is partially or wholly destructed, damaged, or lost for a cause not attributable to the lessee, the lessee may request a reduction or exemption of the rent; and the lessee may rescind the contract if the purpose of the contract is unable to be achieved owing to such destruction, damage, or loss.
Article 730
Where there is no agreement between the parties on the term of the lease, or the agreement is unclear, if it cannot be determined according to the provisions of Article 510 of this Code, the lease shall be deemed a lease with an indefinite term. Either party may rescind the contract at any time, provided that the other party shall be notified within a reasonable period of time in advance.
Article 731
Where a leased object endangers a lessee's safety or health, the lessee may rescind the contract at any time, even if the lessee is clearly aware of the substandard quality of the leased object upon concluding the contract.
Article 732
Where a lessee dies within the term of lease of a leased house, a person who lives with or the joint operator of the deceased may lease the house according to the original lease contract.
Article 733
A lessee shall return the leased object upon expiration of the term of the lease. The leased object returned shall be maintained in its after-use state in accordance with the agreement or in line with its nature.
Article 734
Where a lessee continues to use the leased object after the expiration of the term of the lease and the lessor has not raised any objection, the original lease contract shall continue to be valid, except that the lease term shall become unfixed.
Upon expiration of the lease, a lessee of the house has the priority right to lease it under equivalent conditions.
Chapter XV Contracts for Financing Lease
Article 735
A contract for financing lease is a contract under which a lessee selects a leased object and its seller, and a lessor purchases the leased object from the selected seller and provides it to the lessee for use, who pays the rent in return.
Article 736
A contract for financing lease generally contains clauses specifiying the name, quantity, specifications, technical performance, and inspection method of the leased object, the term of the lease, the composition of rent, the time limit, method, and currency for payment of the rent, the ownership over the leased object upon expiration of the term, and the like.
A contract for financing lease shall be made in writing.
Article 737 A contract for financing lease concluded by the parties on a fictitious leased object is void.
Article 738
Where the operation or use of a leased object requires administrative license in accordance with the provision of laws and administrative regulations, the failure of the lessor to obtain such administrative license does not affect the validity of the contract for financing lease.
Article 739
Where a lessor concludes a sales contract based on a lessee’s selection of the seller and the leased object, the seller shall deliver the object to the lessee as agreed by the parties, and the lessee shall enjoy the rights of a buyer with regard to the object received.
Article 740
A lessee may refuse to accept the subject matter delivered by the seller where a seller breaches his obligation of delivery of the subject matter to the lessee, and one of the following circumstances occurs:
(1) the subject matter is materially inconsistent with the agreement; or
(2) the seller fails to deliver the subject matter as agreed by the parties, and still fails to deliver it within a reasonable period of time after being demanded by the lessee or the lessor.
Where a lessee refuses to take delivery of the subject matter, he shall promptly notify the lessor.
Article 741
The lessor, the seller, and the lessee may agree that, where the seller fails to perform the obligations under the sales contract, the lessee shall exercise the right to claim against the seller. Where the lessee exercises such a right, the lessor shall render assistance.
Article 742
A lessee’s exercise of the right to claim against the seller shall not affect his performance of the obligation to pay the rent. However, where a lessee has relied upon the lessor's expertise in selecting the leased object or the lessor has intervened with the selection of the leased object, the lessee may request reduction or exemption of the rent accordingly.
Article 743
Where any of the following circumstances occurs, which causes the failure of the lessee to exercise the right to claim against the seller, the lessee has the right to request the lessor to bear corresponding liability:
(1) the lessor clearly knows that the leased object has quality defects but fails to notify the lessee; or
(2) when the lessee exercises the right to claim, the lessor fails to provide necessary assistance in a timely manner.
Where a right to claim agaisnt the seller may only be exercised by the lessor but the lessor fails to exercise such right owing to his indolent, thus causing loss to the lessee, the lessee has the right to request the lessor to bear the liability for compensation.
Article 744
Where a lessor concludes a sales contract based on the lessee’s selection of the seller and the leased object, the lessor may not, without the consent of the lessee, modify the content of the contract related to the lessee.
Article 745
The lessor’s ownership over the leased object shall, without being registered, not be asserted against a bona fide third person.
Article 746
The rent under a contract for financing lease shall, unless otherwise agreed by the parties, be determined according to the whole or major part of the cost for purchasing the leased object plus reasonable profits to be gained by the lessor.
Article 747
Where a leased object does not conform to the agreement or the purpose of its use, the lessor shall not bear any liability, unless the lessee has relied upon the lessor's expertise in selecting the leased object or the lessor has intervened with the selection of the leased object.
Article 748
A lessor shall guarantee the possession and use of the leased object by the lessee.
A lessee has the right to request the lessor to bear the liability for compensation where the lessor falls under any of the following circumstances:
(1) taking back the leased object without just cause;
(2) obstructing or interfering with the possession and use of the leased object by the lessee without just cause;
(3) a third person claims a right over the leased object due to a reason attributable to the lessor; or
(4) the lessor otherwise improperly affects the possession and use of the leased object by the lessee.
Article 749
Where a leased object causes any personal injury or property damage to a third person during the period it is under the lessee’s possession, the lessor shall not bear any liability.
Article 750
A lessee shall properly maintain and use the leased object. A lessee shall perform the obligation for the maintenance of the leased object during the period the leased object is under his possession.
Article 751
Where the leased object is destructed, damaged, or lost during the period it is under the possession of the lessee, the lessor has the right to request the lessee to continue to pay the rent, unless otherwise provided by law or agreed by the parties.
Article 752
A lessee shall pay the rent in accordance with the agreement. Where a lessee fails to pay the rent within a reasonable period of time after being demanded, the lessor may request full payment of the rent, or rescind the contract and take back the leased object.
Article 753
Where a lessee transfers, mortgages, pledges, invests and contributes as share, or otherwise disposes of the leased object without the lessor’s consent, the lessor may rescind the contract for financing lease.
Article 754
A lessor or a lessee may rescind the contract for financing lease under any of the following circumstances:
(1) the sales contract between the lessor and the seller is rescinded, determined as void or revoked, and the parties fail to conclude a sales contract anew;
(2) the leased object is destructed, damaged, or lost due to a reason not attributable to the parties, and it is impossible to repair the leased object or determine a substitute therefor; or
(3) the purpose of the contract for financing lease cannot be achieved owing to a reason attributable to the seller.
Article 755
Where a contract for financing lease is rescinded because the sales contract is rescinded, invalidated, or revoked, if the seller and the leased object are selected by the lessee, the lessor has the right to request the lessee to compensate for the corresponding losses, unless the sales contract is rescinded, invalidated, or revoked owing to a reason attributable to the lessor.
Where the losses of the lessor have been recovered at the time the sales contract is rescinded, invalidated, or revoked, the lessee no longer bears liability for compensation.
Article 756
Where a contract for financing lease is rescinded owing to a reason not attributable to the parties, such as an accidental destruction, damage, or loss of the leased object after it is delivered to the lessee, the lessor may request the lessee to make compensation based on the depreciation status of the leased object.
Article 757
A lessor and a lessee may agree on the ownership over the leased object upon expiration of the term of the lease. Where there is no agreement between the parties on the ownership of the leased object or the agreement is unclear, if it cannot be determined according to the provisions of Article 510 of this Code, the ownership of the leased object shall belong to the lessor.
Article 758
Where the parties agree that the lessee shall have the ownership over the leased object upon expiration of the term of the lease, if the lessee has paid most of the rent but is unable to pay the remaining part, and the lessor has therefore rescineded the contract and taken back the leased object, the lessee may request the corresponding refund if the value of the leased object taken back exceeds the rent and other expenses in arrears.
Where the parties agree that the lessor shall have the ownership over the leased object upon expiration of the term of the lease, and the lessee is unable to return the leased object due to destruction, damage, or loss of the leased object, or because the leased object has attached to or been mixed with another thing, the lessor has the right to request the lessee to make reasonable compensation.
Article 759
Where the parties agree that the lessee is only required to pay the lessor a symbolic price upon expiration of the term of the lease, the ownership of the leased object shall be deemed as belonging to the lessee after the lessee has fulfilled his obligation to pay the rent in accordance with the agreement.
Article 760
Where a contract for financing lease is invalid and the parties have agreed on the ownership of the leased object under such a circumstance, such an agreement shall be followed. Where there is no agreement between the parties on the ownership of the
leased object or the agreement is unclear, the leased object shall be returned to the lessor. However, where the contract becomes invalid owing to a reason attributable to the lessee, if the lessor does not request the return of the leased object or the return of the leased object will significantly reduce the usefulness thereof, the ownership of the leased object shall belong to the lessee, and the lessee shall make reasonable compensation to the lessor.
Chapter XVI Factoring Contracts
Article 761
A factoring contract is a contract under which a creditor of accounts receivable transfers the existing or after-acquired accounts receivable to a factor who provides services such as accommodation of funds, management or collection of the accounts receivable, guarantee for the payment of a debtor of the accounts receivable, and the like.
Article 762
A factoring contract generally contains clauses specifying the business type, scope of service, term of service, information on the underlying transaction contract and the accounts receivable, the financing funds through factoring, the service remuneration, the methods of payment thereof, and the like. A factoring contract shall be in writing.
Article 763
Where a creditor and a debtor fabricate an account receivable as the object of transfer and then conclude a factoring contract on it with a factor, the debtor of the fabricated account receivable shall not assert a defense against the factor on the ground that the account receivable does not exist, unless the factor clearly knows such fabrication.
Article 764
Where a factor notifies a debtor of an account receivable of the assignment of the account receivable, he shall disclose his identity as a factor and present necessary certifying documents.
Article 765
Where, after a debtor of an account receivable receives the notice of assignment thereof, the creditor and the debtor of the account receivable agree to modify or terminate the underlying contract without just cause, which has an adverse impact on the factor, such modification or termination is not effective against the factor.
Article 766
Where the parties agree that the factoring is one with the right of recourse, the factor may claim against the creditor of the account receivable for refunding the principal and interest of the financing funds or redemption of the claim on the account receivable, or claim against the debtor of the account receivable. Where a factor claims against the debtor of the account receivable after deducting the principal and interest of the financing funds and the other relevant expenses, any balance shall be returned to the debtor of the account receivable.
Article 767
Where the parties agree that the factoring is one without the right of recourse, the factor shall claim against the debtor of the account receivable, and the factor is not required to return to the creditor of the account receivable the amount in excess of the principal and interest of the financing funds and the other relevant expenses he has obtained.
Article 768
Where a creditor of an account receivable concludes multiple factoring contracts with different factors so that the factors claim their rights against the same account receivable, the account receivable shall be obtained by the factor of a registered factoring contract in priority over the factors of unregistered factoring contracts, or, where all factoring contracts are registered, by the factors in an order according to the time of registration, or, where none of the factoring contracts have been registered, by the factor stated in the transfer notice which has reached the debtor of the account receivable first in time. Where none of the factoring contracts have been registered and no transfer notice has been sent, the account receivable shall be obtained by the factors on a pro rata basis on the amount of financing funds each has provided, or the service remuneration each is entitled to.
Article 769 For matters not provided in this Chapter, the relevant provisions of Chapter Six of this Book on the assignment of claims shall be applied.
Chapter XVII Work Contracts
Article 770
A work contract is a contract under which a contractor, in accordance with the requirements of a client, completes a work and delivers the work product to the client who pays remuneration in return. A contracted work includes processing, manufacturing on order, repair, reproduction, testing, inspection, and the like.
Article 771
A work contract generally contains clauses specifying the object, quantity, and quality of the work, remuneration of the work, the mode of the work, supply of materials, the period of performance, the standard and method of inspection, and the like.
Article 772
The contractor shall complete the principal part of the work with his own equipment, technology, and labor force, unless otherwise agreed by the parties.
Where a contractor entrusts the major part of the contracted work with a third person, the contractor shall be accountable to his client concerning the work completed by the third person and the client may rescind the contract if he has not consented thereto.
Article 773
A contractor may entrust the accesory part of his contracted work with a third person. Where a contractor entrusts an accessory part of the contracted work to a third person, the contractor shall be accountable to the client concerning the work product completed by the third person.
Article 774
Where a contractor is to provide the materials, he shall select and use the materials in accordance with the agreement and accept the inspection of the client.
Article 775
Where a client is to provide the materials, he shall provide the materials in accordance with the agreement. The contractor shall promptly inspect the materials provided by the client, and, if any inconformity is found, the contractor shall promptly request the client to make replacement, make up the shortage or take other remedial measures.
Without the consent of the client, a contractor may not change the materials provided by the client nor change the accessories and parts which do not need repair.
Article 776
A contractor shall promptly notify the client if he finds that the drawings or technical requirements provided by the client are unreasonable. Where losses are caused to the contractor due to the client's failure to response or the like reasons, the client shall bear the liability for compensation.
Article 777
Where, in the course of a contracted work, the client changes his requirements, thus causing loss to the contractor, the client shall bear liability for compensation.
Article 778
Where a contracted work requires assistance from the client, the client has the obligation to provide such assistance. Where the client fails to perform such obligation, thus making the completion of the contracted work impossible, the contractor may demand him to perform his obligation within a reasonable period of time, and may also extend the term of performance accordingly. If the client still fails to fulfill his obligation within the extend term, the contractor may rescind the contract.
Article 779 A contractor shall accept necessary supervision and inspection of the client in the course of his work. The client may not disturb the normal work of the contractor by such supervision and inspection.
Article 780
Upon completion of his work, a contractor shall deliver to the client the work product and provide the client with the necessary technical materials and related quality certificates. The client shall inspect the work product for acceptance.
Article 781
Where the work product delivered by the contractor fails to meet the quality requirements, the client may, in a reasonable manner, request the contractor to bear default liability in forms of repair, reworking, remuneration reduction, ocompensation for losses.
Article 782
A client shall pay remuneration within the time limit agreed by the parties. Where there is no agreement between the parties on the time limit for paying remuneration or the agreement is unclear, if it cannot be determined according to the provisions of Article 510 of this Code, the client shall make payment at the time of delivery of the work product; and where part of the work product is delivered, the client shall pay the corresponding remuneration.
Article 783
Where a client fails to make such payments as remuneration or materials fees, the contractor has the right to retain the work product under lien or to refuse delivery, unless otherwise agreed by the parties.
Article 784
A contractor shall properly keep the materials provided by the client and the completed work product, and shall bear the liability for compensation if such materials or the work product are destructed, damaged or lost owing to his inappropriate maintenance thereof.
Article 785
A contractor shall keep confidential the relevant information in accordance with the requirements of the client and, without the latter's permission, may not retain copies or technical data thereof.
Article 786 Co-contractors shall bear joint and several liabilities to the client, unless otherwise agreed by the parties.
Article 787 The client may rescind the work contract at any time before the contractor completes his work, provided that he shall bear the liability for compensating any loss thus caused to the contractor.
Chapter XVIII Contracts for Construction Project
Article 788
A contract for construction project is a contract under which a contractor carries out the construction of a project and the contract-offering party pays the price in return.Contracts for construction project consist of contracts for project prospecting, designing, and construction.
Article 789 A contract for construction project shall be made in writing.
Article 790 Bidding for a construction project shall be carried out in an open, fair, and impartial manner in accordance with the provisions of the relevant laws.
Article 791
A contract-offering party may conclude a contract for construction project with a general contractor, or conclude separate contracts for prospecting, designing, and construction with the prospecting, designing, and construction parties respectively. A contract-offering party may not break up one construction project that should be completed by one contractor into several parts and offer them to several contractors.
A general contractor or a prospecting, designing or construction contractor may, upon consent by the contract-offering party, entrust part of the contracted work with a third person. The third person shall assume joint and several liability with the general contractor or the prospecting, engineering, or construction contractor to the contract-offering party on the work product of the third person. A contractor may not delegate the whole of the contracted construction project to a third person or break up the contracted construction project into several parts and delegate them separately to third persons in the name of subcontracting.
A contractor is prohibited from subcontracting the contracted project to any entity without the corresponding qualifications. A subcontractor is prohibited from re-subcontracting the contracted project. The main structure of the construction project must be completed by the contractor itself.
Article 792 Contracts for major construction projects of the State shall be concluded in accordance with the procedures set forth by the State and such documents as investment plans and feasibility study reports approved by the State.
Article 793
Where a contract for construction project is invalid but the construction project has passed the inspection for acceptance, the contractor may be compensated with reference to the project price agreed in the contract and based on the appraised price of the construction project.
Where a contract for construction project is invalid and the construction project fails to pass the inspection for acceptance, it shall be dealt with in accordance with the following provisions:
(1) where the construction project after being repaired has passed the inspection for acceptance, the contract-offering party may request the contractor to bear the repairing costs; or
(2) where the construction project after being repaired still fails to pass the inspection for acceptance, the contractor has no right to request for payment with reference to the project price agreed in the contract or based on the appraised price of the construction project.
Where a contract-offering party is at fault for the loss caused by the substandard of the construction project, he shall bear corresponding liabilities.
Article 794 A prospecting or designing contract generally contains clauses specifying the time limit for submission of documents relating to the basic materials and budget, quality requirements, expenses and other cooperative conditions, and the like.
Article 795 A construction contract generally contains clauses specifying the project scope, the period for construction, the time of commencement and completion of the project to be delivered in midcourse, project quality, costs, delivery time of technical materials, the responsibility for the supply of materials and equipment, fund allocation and settlement, project inspection and acceptance upon its completion, range and period of quality warranty, cooperation, and the like.
Article 796 For any construction project to which a superintendence system is applied, the contract-offering party shall conclude an entrustment contract of superintendence in writing with the entrusted superintendent. The rights and obligations as well as the legal liabilities of the contract-offering party and the superintendent shall be defined in accordance with the provisions on entrustment contracts of this Book as well as the relevant provisions of other laws and administrative regulations.
Article 797 The contract-offering party may, without disturbing the normal operation of the contractor, inspect the progress and quality of the work at any time.
Article 798 Prior to the concealment of a concealed project, the contractor shall notify the contract-offering party to inspect it. If the contract-offering party fails to conduct an inspection in a timely manner, the contractor may extend the period for the completion of the project accordingly, and may request compensation for losses caused by the work stoppage, the workers' forced idleness, and the like.
Article 799 Upon completion of a construction project, the contract-offering party shall promptly undertake the inspection for acceptance in accordance with the construction drawings and descriptions, as well as the rules of inspection and acceptance of construction projects and the standards for quality inspection issued by the State. Where the project passes the inspection for acceptance, the contract-offering party shall pay the agreed price and take over the construction project.
A construction project may be delivered and put into use only after it has passed the inspection for acceptance upon completion. Without being inspected or failing to pass the inspection, the construction project may not be delivered or put into use.
Article 800 Where losses are caused to a contract-offering party due to the fact that the prospecting or designing does not conform to the quality requirements or that the prospecting or designing documents are not submitted as scheduled, so that the period for construction is delayed, the prospecting or designing party shall continue on perfecting the prospecting or designing, reduce or waive the prospecting or designing fees, and make compensation for the losses.
Article 801 Where the quality of a construction project fails to conform to the contract due to a reason attributable to the constructor, the contract-offering party has the right to request the constructor to repair, rework, or reconstruct the project without further charge within a reasonable period of time. If delivery is delayed because of the repair, reworking, reconstruction, the constructor shall bear default liability.
Article 802 Where a construction project causes personal injury and property damage due to a reason attributable to the contractor within a reasonable period of use of the project, the contractor shall bear the liability for compensation.Article 803 Where a contract-offering party fails to provide raw materials, equipments, premises, funds, or technical materials at the agreed time and pursuant to the agreed requirements, the contractor may extend the period of construction accordingly and has the right to request compensation for the losses caused by work stoppage, and workers' forced idleness, and the like.
Article 803 Where a contract-offering party fails to provide raw materials, equipments, premises, funds, or technical materials at the agreed time and pursuant to the agreed requirements, the contractor may extend the period of construction accordingly and has the right to request compensation for the losses caused by work stoppage, and workers' forced idleness, and the like.
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