Determination of the validity of contractual relationship

　　In contract dispute cases, the validity of contractual relationship is not only the focus of disputes between the parties, but also the difficulty for judges to judge the entity of the case. The author combines the trial practice and the theory of contract law to further discuss the related issues.

　　I. Factors that do not affect the effectiveness of the contract

　　Article 52 of the General Principles of the Contract Law stipulates the statutory circumstances that constitute the invalidity of a contract, and a contract is invalid when it has any of the prescribed circumstances. However, the following circumstances cannot be used as a reason for determining that the contract is invalid:

　　1. The terms of the contract are incomplete. Regarding the conditions for the establishment of a contract, the contract law does not stipulate. In practice, the provisions of Article 9 of the Economic Contract Law (the parties agree on the main terms of the contract, and the economic contract is established) are generally used as a reference. Whether the main terms of a contract (referring to the terms that must be met according to the nature of the contract and the agreement of the parties) are available only involves whether the contract is established, and whether the contract is established only involves the interests of the parties to the contract, not the national and social public interests, so the contract cannot be deemed invalid because the main terms of the contract are not available. According to the relevant provisions of the contract law, the contract that does not have the main terms can be filled by the rules of contract interpretation, and the contract terms can be supplemented to make it effective.

　　2. Form of contract. The form of the contract is only the carrier of the contract content and the evidence of the existence of the contract, which does not affect the validity of the contract and cannot be used as the basis for judging the validity of the contract. If the written form is required by laws and administrative regulations, if the parties fail to use the written form, the contract is also established if there is other evidence to prove the existence of the contract. The legal norms set by the law for the form of contract are advocacy norms, which are only the norms of the parties’ behavior, not the norms of judges’ judgment. Whether the parties take the written form will only concern the private interests of the parties to the contract, and there is no need for the state to intervene. Violation of the advocacy provisions will not lead to the invalidity of the contract. The requirement of written form made by laws and administrative regulations for a specific contractual relationship is neither an important requirement for the establishment of a contract nor an important requirement for the entry into force of a contract. It mainly has the functions of evidence and urging the parties to trade cautiously. Mandatory standard clauses in the contract law are set for the interests of the state, the public and the unspecified third party, and cannot be changed by the parties. Violation of this contract is of course invalid, and judges can directly apply it.

　　3, beyond the scope of business. In China, mandatory norms for market access are set for specific industries, such as mining license and network culture business license. Regarding the relationship between the mandatory norms for market access for specific industries and the effectiveness of contracts, according to the provisions of Article 10 of the Judicial Interpretation of Contract Law (I), the effectiveness of contracts is generally not affected, but contracts that seriously exceed the business scope in violation of state restrictions, franchising and laws and administrative regulations (such as drugs and guns) are invalid. In my opinion, contracts that violate restricted operation and franchise can’t all be deemed invalid, so it is necessary to distinguish different situations.

　　4, in violation of local regulations and the State Council departmental rules. Encouraging transactions is an important spirit of contract legislation. After the implementation of the contract law, the validity of the contract can only be confirmed according to the laws formulated by the National People’s Congress and its Standing Committee and the administrative regulations formulated by the State Council. In the trial of contract disputes, except for the prohibitive provisions stipulated by laws and administrative regulations, the contract cannot be confirmed invalid according to the rules and local regulations promulgated by the relevant competent departments of the State Council. Mandatory provisions (such as foreign exchange and foreign trade management) in administrative rules and regulations related to the national economy and people’s livelihood and the vital interests of the country promulgated by the relevant competent authorities in the State Council, which have been interpreted by the judiciary before they are upgraded to laws and administrative regulations, shall be applied in accordance with the provisions of judicial interpretation, and the contract that violates the above provisions shall be confirmed to be invalid; If there is no judicial interpretation, the contract may be confirmed to be invalid on the grounds of harming public interests according to the provisions of Item (4) of Article 52 of the Contract Law. It can be seen that the position of regulations in the confirmation of contract validity is not absolutely denied, but there is still room for application considering its particularity.

　　II. Establishment, Effectiveness and Validity of the Contract

　　1. Establishment, validity and effectiveness of the contract. When a contract comes into effect, the parties must first reach an agreement on the main terms of the contract (the contract is established). Secondly, the contents of the contract do not violate the provisions of Article 52 of the Contract Law (the contract is valid), and the attached conditions and deadlines are achieved (the contract comes into effect). The entry into force of a contract is based on the establishment of the contract, and there are also differences in principle between the two: first, the constituent elements are different, the sign of the establishment of a contract is that the parties agree on their intentions, and some contracts need approval or agreed conditions for entry into force; Second, the legal effect is different, the contract is not legally binding, and the effective contract is legally binding on the parties. There is also a difference between the validity of a contract and the validity of the contract. The validity of the contract corresponds to the ineffectiveness of the contract, and the validity of the contract corresponds to the invalidity of the contract. The ineffectiveness of the contract does not mean that the contract is invalid, and the ineffective contract can be valid; The validity of the contract does not mean that the contract comes into effect, and the valid contract may not come into effect with conditions. Effective and effective focus is different: whether effective or not focuses on the characterization of the contract, which is to evaluate the legal nature of the contract in a certain state; Whether the contract comes into effect or not focuses on the time when the contract comes into effect, that is, the time when the rights and obligations stipulated in the contract become binding on the contracting parties. In the trial practice, we should pay attention to distinguish between invalid contract, invalid contract and ineffective contract, because this directly affects the determination of the nature of civil behavior and the determination of substantive responsibility. A contract that is not effective or established cannot be equated with invalidity, because the legal consequences are different.In fact, some contracts that are not effective are effective. For some contracts that are not established, the parties can make them effective through consultation and achieve the purpose of trading.

　　2. The influence of approval and registration on the validity of the contract. Judicial Interpretation of Contract Law (1) The provisions of Article 9 actually distinguish the approval and registration stipulated in Article 44 of the Contract Law. If laws and administrative regulations stipulate that a contract shall come into effect after it has been approved and registered, and the parties concerned have not completed the approval and registration before the end of the debate in the court of first instance, the court shall consider the contract not to come into effect, but to be invalid. At this time, it should be noted that although the contract did not come into effect due to the failure to go through the approval or registration procedures, the provisions such as the liability for breach of contract and the way to resolve disputes should be handled in accordance with the relevant provisions of the contract law, that is, they should be considered effective. If laws and administrative regulations stipulate that a contract should be approved and registered, but it does not come into effect after approval and registration, the failure of the parties to approve and register will not affect the effectiveness of the contract, and the contract will still come into effect, but the ownership of the subject matter of the contract cannot be transferred. At this point, the parties can request the other party to perform the obligation of transferring ownership or property right according to the contract.

　　Third, the identification of mandatory clauses in contract law

　　Mandatory provisions include management norms and effectiveness norms. Administrative norms refer to norms that are not clearly stipulated by laws and administrative regulations, and violation of such norms will lead to the invalidity of the contract. Such norms aim to manage and punish violations, but they do not deny the effectiveness of such acts in civil and commercial law. Validity norms refer to the norms that laws and administrative regulations clearly stipulate that the violation of such regulations will lead to the invalidity of the contract, or that the violation will lead to the invalidity of the contract, but if the contract continues to be effective, it will harm the national interests and social public interests. Such norms are not only aimed at punishing violations, but also at denying their effectiveness in civil and commercial law. Mandatory norms usually use words and wording such as "must, should, shall not, and prohibit", but some of the above-mentioned words and clauses contained in the norms are advocacy norms and some are industrial administrative norms. If only the provisions contain the above-mentioned words and wording indiscriminately, they will be considered as mandatory provisions, which obviously does not conform to the legislative intent of the contract. It is necessary to identify mandatory clauses by combining the following factors:

　　1. To judge whether a certain legal provision is mandatory, we should consider the legislative purpose of the law, the degree of damage to the interests of the state, the collective, the third party and the public interest in violation of the provision. Mandatory provisions in contract law generally involve major social interests and public morality, or are related to important macro-control measures of the state, the basic order of market economy, and the basic rights of market economic subjects.

　　2. The mandatory provisions in the contract law generally involve the prohibition of the trading behavior of both parties, rather than the administrative management norms that prohibit the behavior of one party in the industry for the sake of industry management. Administrative norms maintain a specific management order and do not directly involve public interests; Administrative norms, the law does not prohibit such transactions, but prohibits an element of the transaction. For example, Article 39 of the Commercial Bank Law stipulates that commercial banks shall not extend loans beyond a certain deposit ratio; Article 40 stipulates that commercial banks shall not issue loans to related parties. Among them, the "no" is the nature of industry management, which shows that the People’s Bank of China has strengthened its prudent supervision over the loan business of commercial banks more effectively. Because the commercial bank law is the organization and management law of commercial banks, it restricts the behavior of commercial banks, but cannot directly restrict the customers of commercial banks. Commercial banks that violate this provision shall be subject to administrative punishment, but the validity of the contract shall not be affected.

　　3. The mandatory provisions of the contract law generally have corresponding sanctions for both parties. Sometimes the content of sanctions against both parties may not be stipulated in the same article or even the same law. Because mandatory prohibitive norms prohibit anyone from engaging in this behavior at any time, anywhere and in any form, unlike administrative norms that only restrict one party or a certain element of the transaction, there are sanctions for both parties to the transaction. If only one party is sanctioned or punished, it may be an administrative provision.

　　Four, the application of mandatory provisions to determine the effectiveness of the contract should be paid attention to.

　　First, the contract can only be deemed invalid if the rights and obligations stipulated in the contract itself violate the mandatory provisions. If the parties perform the contract in violation of the mandatory provisions, the contract cannot be deemed invalid. If the transaction itself does not violate the prohibitive norms, only the performance violates the prohibitive norms, then the contract shall be valid. We must pay attention to the fact that the performance of the contract will not lead to the invalidity of the contract, and we must distinguish between the contract behavior and the performance behavior. For example, the two sides signed a contract to buy and sell crude oil, and delivered it by smuggling oil. This performance definitely violated the prohibitive provisions of the law, and the performance was invalid, but the contract should be valid. Second, the effectiveness of the contract cannot be judged by whether the effect of contract performance is realized. Third, for a contract whose rights and obligations are separable, only the clauses that violate the mandatory provisions are invalid, and the whole contract cannot be invalidated, which will hinder the transaction. For example, according to the provisions of the contract law, the exemption clause that industrial injury is not responsible in the standard contract is invalid, and other contents are still valid.

　　(Author: Anhui Higher People’s Court)