History of Chinese Contract Law

INTRODUCTION In ancient China, private commercial transactions were mainly governed by local customs. As the development of society requires a set of commonly recognized rules to govern daily transactions, gradually, a set of codified laws came into effect to replace the reliance on local customs. The present-day contract law in China originated partially from ancient customary law. The customary law introduced the right to sue and, thus, commercial disputes increasingly were resolved through litigations in place of Chinese customary law. At the beginning of the Xi Zhou Dynasty (11-10 BC), the rules regarding ownership, possession, contract and remedy started to form. These rules came in the form of customs or governmental regulations, which contained provisions governing legal responsibilities, as well as providing mechanisms and procedures for dispute resolution. In general, the customary law was unpredictable, scattered and lacking in transparency. The traditional Chinese customary laws of contract differed from one region to another. Furthermore, as time went by, the customary laws began to be less applicable due to changes in social and economic circumstances from the days when the customs emerged. These problems called for a more uniform law, and therefore led to the emergence of codified contract law. The first documented codification of Chinese law was the “Tang Lü", drafted during the Tang Dynasty (AD 681-907). Interestingly the portion of the “Tang Lü" regulating business dealings, sale and purchase, largely relied on criminal sanctions. Further, all the regulations were tailor-made for specific types of contract. As a result, the “Tang Lü" failed to distinguish civil law from criminal law, and it failed to generate a legal framework that governs contracts in general. Contractual agreements had always been used as evidence to resolve proprietary disputes involving “sale of land or buildings, rentals, [and] agricultural tenanc[ies]”. However, due to the lack of a set of uniform rules over contracts, the enforceability of a contract varied across socioeconomic environments. The first comprehensive codification of Chinese contract law took a very long time. It was only at the end of the Qing Dynasty that the Chinese started to learn from Western laws and to broaden and tailor Chinese contract codes.