Article 12: After a contract is established in accordance with law, where the party with the obligation to report for approval does not perform the obligation to report for approval, or the performance of the obligation to report for approval does not conform to the provisions of the contract or the provisions of laws or administrative regulations, and the other party requests that it continue to perform the obligation to report for approval, the people's court shall support it; Where the other party claims to terminate the contract and requests that it bear the liability for compensation for violating the obligation to report for approval, the people's court shall support it.
Where the people's court makes a judgment that one of the parties still fails to perform after it has performed its obligation to report for approval, and the other party claims to terminate the contract and requests that it bear the liability for compensation with reference to the liability for breach of contract for breach of contract, the people's court shall support it.
Where, before the contract is approved, one party sues to request the other party to perform the main obligations agreed in the contract, and refuses to modify the litigation claim after interpretation, the people's court shall make a judgment to reject the litigation claim, but this does not affect the fact that it initiates a separate lawsuit.
Where a party with an obligation to report for approval has already gone through formalities such as applying for approval or has already performed the obligation to report for approval as determined by the effective judgment, and the approving organ decides not to approve it, and the other party requests that it bear liability for compensation, the people's court will not support it. However, if the contract is not approved due to reasons attributable to the parties such as delay in performance of the obligation to report for approval, and the other party requests compensation for the losses suffered thereby, the people's court shall handle it in accordance with the provisions of Article 157 of the Civil Code.
【Purpose of the Article】
This article deals with the approval of the validity of the effective contract.
【Overview of Provisions】
This article is divided into four paragraphs, which generally include two aspects: First, it stipulates that a contract that has not been submitted for approval is a contract that has not entered into force, and has made specific provisions on the validity of a contract that has not entered into force. A contract that has not entered into force is not a valid contract, and one of the parties may not sue the other party to perform the main obligations agreed in the contract; A contract that has not entered into force is also different from an invalid contract, and it can make the contract valid by fulfilling the obligation to submit for approval. In other words, before the contract is approved, the main rights and obligations between the parties revolve around the obligation to submit for approval rather than the main obligation agreed in the contract. The second is to make typological provisions on the circumstances after the order fulfills the obligation to report for approval. If, after the people's court has ordered a party to perform the obligation to report for approval, the other party refuses to perform the obligation, the other party may request to terminate the contract and request it to bear the liability for breach of contract; If the parties have fulfilled their obligation to report for approval, but the approving authority refuses to approve it, the contract shall not take effect, and the parties shall not be liable for compensation, except where the failure to approve the contract is due to delayed performance or other reasons attributable to the parties.
This article is integrated on the basis of Articles 37 to 40 of the Minutes of the Civil and Commercial Trial Conference, and although the two are different in expression, they are basically the same in content and spirit. From the point of view of expression, this article does not clearly stipulate that an unapproved contract is a "non-effective" contract as in Article 37 of the Minutes of the Civil and Commercial Trial Conference, but the relevant provisions fully reflect the validity of the non-effective contract. In this regard, the failure to upgrade Article 37 of the Minutes of the Civil and Commercial Trial Conference to a judicial interpretation does not affect the interpretation of this provision in accordance with the jurisprudence of a contract that has not yet taken effect. It is worth noting that this article does not follow the provisions of Article 38 of the Minutes of the Civil and Commercial Trial Conference on the obligation to report for approval and the relevant breach of contract clauses to take effect independently, because Article 502 of the Civil Code has made clear provisions on this. In other words, if the contract clearly stipulates the obligation to submit for approval and related clauses, its validity can be determined in accordance with the provisions of Article 502 of the Civil Code. In addition, Article 40 of the Minutes of the Civil and Commercial Trial Conference clearly stipulates that if the approving authority fails to approve it, the parties may request to terminate the contract, while paragraph 4 of this article only stipulates that in principle, one party cannot request the other party to bear the liability for compensation, and it is not clear whether the contract will not take effect or be terminated. In short, it is necessary to clarify the historical evolution of this provision, especially to clarify the relationship with the relevant provisions of the Minutes of the Civil and Commercial Trial Conference, so as to accurately apply this provision.
【Controversial Views】
Judging from the drafting process, the controversy in this article is mainly concentrated in the following aspects.
First, if one party fails to perform the obligation to report for approval, does it bear the liability for breach of contract or the liability for negligence in contracting? In our view, even if the breach of the obligation to submit for approval is regarded as an independent liability for breach of contract, and then the obligor is considered to be liable for breach of contract against the obligation to submit for approval, this determination is of great significance in the case of stipulating liability for breach of contract specifically for the obligation to submit for approval. However, on the whole, the entire contract has not yet entered into force at this time, so the obligor can only bear the liability for negligence in the contract relative to the entire contract. However, if the approval procedure is the most critical part of the whole transaction, and the possibility of approval after approval is very high according to the transaction practice, the liability for contractual negligence for breach of the approval obligation can be very close to the liability for breach of contract, but this is still a matter of calculating the amount rather than qualifying the liability.
Second, should there be a difference between the liability for delaying the performance of the obligation to report for approval and the responsibility for refusing to perform the obligation to report for approval after the order has been made for approval? In our opinion, the contract has not entered into force in both cases, so in terms of the nature of liability, both are liability for contractual negligence. However, in terms of the scope of liability, in the latter case, the fault of the obligor for approval is greater, so this article clearly stipulates that it shall be handled with reference to the liability for breach of contract. In the former case, the obligor bears the liability for contractual negligence, and its liability may be close to the liability for breach of contract, but theoretically it is still lighter than the liability for breach of contract. In this regard, there is still a difference in the scope of responsibility between the two.
Third, if the contract has not been approved by the relevant authorities, is the contract determined not to take effect or the conditions for termination have been fulfilled? In our view, the contract is determined not to take effect at this time, and it is not necessary and should not be resolved through the rescission system.
Fourth, does the effect of an approved contract take effect from the date of ratification or retroactively from the time the contract is signed? This judicial interpretation does not provide for this matter at present, and it is necessary to resolve it in judicial practice.
[Understanding and Application]
To fully and accurately understand the nature and effect of the approved effective contract, it is necessary to grasp the following points: first, it is necessary to understand the rule evolution of the effective approval system, so as to understand why the approval obligation takes effect independently, and then understand the effect of the contract that has not yet entered into force; Second, it is necessary to understand the validity of uneffective contracts and their relationship with valid, invalid and undetermined contracts from the perspective of contract validity system; Third, it is necessary to deeply analyze the nature, basis, object and structure of the approved contract, so as to understand the impact of approval on the validity of the contract; Fourth, it is necessary to reveal the validity of the contract that has not been submitted for approval in the litigation scenario, and clarify the relationship between the performance of the obligation to submit for approval and the promotion of the validity of the entire contract; Fifth, it is necessary to conduct a typological analysis of how to deal with the court's order after it is submitted for approval, which is an important aspect of the validity of the approved contract. The following is an analysis of the above issues.
1. The evolution of the rules for the approval of the effective system
The validity of an unapproved contract has long been a question that has plagued judicial practice. In order to unify the standards of adjudication, the Supreme People's Court has issued a series of judicial interpretations and judicial policies. Judging from the progress of relevant judicial interpretations and judicial policies, the Supreme People's Court itself has also undergone a process of deepening understanding.
Paragraph 2 of Article 44 of the Contract Law stipulates that: "Where laws and administrative regulations stipulate that approval and registration formalities shall be completed to take effect, such provisions shall be followed." However, the article does not specify the validity of an unapproved contract. In practice, it is often found that unapproved contracts are invalid, on the one hand, it is widely found that contracts are invalid, which is not in line with the principle of encouraging transactions; On the other hand, the party with the obligation to submit for approval should have made the contract effective by fulfilling the obligation to submit for approval, but finding that the unapproved contract is invalid will in many cases benefit the dishonest party and violate the principle of good faith. To this end, Article 9 of the Judicial Interpretation (I) of the Contract Law stipulates that an unapproved contract is a contract that has not yet entered into force. For the first time, the judicial interpretation puts forward the concept of "ineffective contract", which clarifies that a contract that has not entered into force is different from an invalid contract, which is of positive significance. However, because it does not make specific provisions on how to facilitate the transformation of a contract that has not entered into a valid contract, it is often determined that it has not taken effect in judicial practice, but in the end it is still treated as an invalid contract, which still fails to achieve the expected effect. In view of this, Article 8 of the Judicial Interpretation (II) of the Contract Law further stipulates that for a contract that can only take effect after approval, the people's court may, according to the specific circumstances of the case and the request of the counterparty, order the counterparty to go through the relevant formalities by itself, and the party who neglects to perform the obligation to report for approval shall bear the relevant costs and losses. This article stipulates that the counterparty can go through the approval formalities on its own, which means that when the entire contract has not taken effect, the approval obligation will take effect independently, and the counterparty can perform the approval obligation on its own instead of the approval obligor, so as to promote the transformation of the non-effective contract into a valid contract. Compared with the provisions of the Judicial Interpretation (I) of the Contract Law, it is undoubtedly a step further on the issue of promoting effectiveness. However, in the event that the obligor for approval refuses to cooperate, it is often difficult for the counterparty to prepare the documents required for approval, and it is ultimately difficult to obtain approval, resulting in the difficulty of implementing this provision.
It is precisely in view of the shortcomings of the above-mentioned judicial interpretations that the Provisions on Foreign-Invested Enterprises (I) promulgated in 2010 clearly stipulate for the first time that the provisions on the obligation to submit for approval and related clauses shall take effect independently, improving the mechanism for converting non-effective contracts into valid contracts. According to the provisions of the judicial interpretation, an unapproved contract is a contract that has not taken effect, and it has the following effects: first, the entire contract has not taken effect, and the failure to take effect is not only different from invalidity, but also different from validity; Second, the obligation to submit for approval and related clauses take effect independently, and the counterparty can request the obligor to continue to perform the obligation for approval, thus setting up an effective promotion mechanism for the contract that has not yet taken effect; the third is to stipulate the termination system of contracts that have not yet taken effect; Fourth, the responsibility to the obligor for approval is strengthened, if the obligor still refuses to perform after the court orders the performance of the obligation for approval, the liability borne by the obligor is equivalent to the liability for breach of contract in effect. The relevant provisions of the Provisions on Foreign-Invested Enterprises (I) were adopted by the subsequent Judicial Interpretations on Mining Rights Disputes, and the provisions of the Minutes of the Civil and Commercial Trial Conference on the validity of effective contracts generalize the special provisions of the above-mentioned judicial interpretations for a certain field. The spirit of the aforesaid judicial interpretation and judicial policy is adopted by Article 502 of the Civil Code. Paragraph 2 of Article 502 of the Civil Code clearly stipulates that if the failure to go through formalities such as approval affects the validity of the contract, it shall not affect the validity of the provisions on the performance of obligations such as reporting for approval and other relevant clauses in the contract, which is completely consistent with the spirit of Article 38 of the Minutes of the Civil and Commercial Trial Conference. Not only that, paragraph 2 of Article 502 of the Civil Code also stipulates that if a party who should go through formalities such as applying for approval fails to perform its obligations, the other party may request it to bear the responsibility for violating such obligations. There is controversy as to whether the nature of "liability for breach of this obligation" is liability for breach of contract or liability for contractual negligence. In our opinion, relative to the entire contract, because the contract has not yet entered into force, it is not a liability for breach of contract, but only a liability for negligence in contracting. Of course, there is room for further discussion on whether it is liability for breach of contract or liability for contractual negligence in relation to the obligation to submit for approval, which will be discussed in detail below.
Judging from the above-mentioned judicial interpretations and the evolution of legislative provisions, the basic consensus on approved contracts is that an unapproved contract is a contract that has not taken effect; However, in order to promote the transformation of non-effective contracts into valid contracts, the approval obligation clause and related clauses take effect independently. It should be particularly pointed out that Article 9 of the Judicial Interpretation on Mining Rights Disputes stipulates that: "If the mining right transfer contract stipulates that the transferee shall pay all or part of the transfer price and then go through the approval procedures, and the transferor requests the transferee to perform the payment obligation before going through the approval procedures, the people's court shall support it, unless the transferee has conclusive evidence to prove that the transferor transfers the same mining right to a third party, the mining rights holder will be merged and reorganized, and other circumstances that meet the requirements of Article 527 of the Civil Code." The premise of the application of this article is that the parties "agree" in the mining right transfer contract that the transferee shall go through the approval procedures after paying all or part of the transfer price, and the agreed clause is a clause related to the obligation to submit for approval, and according to Article 502 of the Civil Code, it can take effect independently before the entire contract takes effect. Therefore, "if the assignor requests the assignee to perform the payment obligation before going through the approval formalities, the people's court shall support it", which does not mean that the entire contract has come into effect, nor does it mean that the assignor can also request the transferee to perform the payment obligation before going through the approval formalities if the parties have not agreed. In this regard, Article 9 of the Judicial Interpretation on Mining Rights Disputes does not contradict the aforesaid provisions on contracts that have not yet entered into force.
2. Contracts that have not entered into force in the contract validity system
In dealing with contract disputes, it is generally necessary to follow the thinking sequence of "determining the nature of the contract, determining the validity of the contract, clarifying the content of the contract, determining which party is in breach of contract, and determining how to remedy according to the litigation claim", in which the issue of contract validity is a prerequisite that must be resolved to resolve contract disputes. Article 143 of the Civil Code stipulates that an effective civil juristic act shall meet the following three elements at the same time: first, the actor has the corresponding capacity for civil conduct; the second is that the meaning is true; Third, it does not violate the mandatory provisions of laws and administrative regulations, and does not violate public order and good customs. If any of the above three elements are missing, the civil juristic acts are flawed in their effectiveness, among which the acts lacking the capacity for civil conduct are acts whose validity is to be determined, the acts that express their intentions untrue are revocable acts, and the acts that violate the mandatory provisions of laws and administrative regulations and the acts that violate public order and good customs are invalid acts, and the three together with the valid acts constitute the main form of the validity of legal acts.
As an institutional tool for the implementation of autonomy of will, legal acts certainly allow the parties to take effect or become invalid from a certain point in time in the future by agreeing on certain conditions or time limits, which are legal acts with conditions for entry into force (initial period) or conditions for rescission (final period). In addition to the agreed conditions for entry into force, it also includes the statutory conditions for entry into force, typically the approval of the effective contract. Regardless of whether the conditions for entry into force are agreed upon or the conditions for entry into force by law, the contract will only take effect after the conditions are fulfilled; The contract is not in force until the conditions are fulfilled. It is worth discussing how to determine the relationship between "effective" and "effective". There is a view that in the judgment of the validity of a contract, the judgment order of "whether it is formally binding (whether the contract is established) - whether it has substantive effect (including four situations of validity, invalidity, pending effect, and revocation, which can ultimately be reduced to two states: effective and invalid) - whether it is effective (depending on whether the conditions are fulfilled, it is divided into three states: effective, ineffective and not effective before the conditions are fulfilled)". From this point of view, a contract that has not entered into force is first and foremost a valid contract, and the contract is valid before the conditions are fulfilled, but it is not performable. Moreover, whether it is enforceable refers not to the entire contract, but only to one or several clauses of the contract. In a bilateral contract, the conditions are often limited by the performance of one party, while the performance of the other party is not restricted. The further development of this logic will inevitably result in the fact that, when the conditions are not fulfilled, unless the parties have expressly agreed, it is necessary to determine whether the entire contract is effective or not due to whether the conditions are fulfilled or not, depending on whether the non-performable clause is a necessary clause or the main clause of the contract: if the specific clause does not take effect and the purpose of the entire contract is frustrated, the fate of the entire contract is affected by it; Conversely, only part of the terms of the contract are affected, and the other parts of the contract are not only valid but also enforceable. In the case where the entire contract is affected by the non-fulfillment of the conditions restricting the performance of one party, in view of the view that the contract itself is valid, it can only be resolved by the system of rescission of the contract, rather than by considering that the contract is not effective because the conditions are not fulfilled.
The aforesaid view is to a great extent confusing, and its starting point for deciphering the profit of the approval obligor from the non-performance of the approval report is worthy of affirmation, and the ingenuity of its logic is also commendable, but this view is inconsistent with the provisions of the Civil Code and the currently effective judicial interpretation on the validity of contracts that have not yet entered into force. First of all, it is indeed enlightening to distinguish between valid and invalid and effective and ineffective, and then determine the validity of the contract according to the logical sequence of "whether it is formally binding, whether it is valid, and whether it is effective", but it does not mean that the contract that has not entered into force is already a valid contract. Because the contract has not entered into force before the conditions are fulfilled, neither party can claim rights based on the provisions of the contract, and its effect is similar to the effect to be determined rather than valid. Therefore, the "condition" in a contract with effective conditions is essentially a special effective element of the contract, which is different from the general effective element stipulated in Article 143 of the Civil Code. Secondly, the entry into force condition refers to the entire contract, that is, the entire contract has not yet taken effect because the "condition" that is a particularly effective element has not been fulfilled, rather than only pointing to a certain clause in the contract, let alone further limiting it to only a clause related to the performance of a certain party. The above-mentioned view refers to only a certain contract clause, which in essence confuses the conditions for entry into force and the conditions for performance (the supplementary clause of the contract), which is contrary to the provisions of the Civil Code and judicial interpretations on the validity of contracts that have not yet entered into force. Finally, when the failure of a specific clause to take effect leads to the frustration of the entire purpose of the contract, the idea that the contract should be resolved through the contract termination system is also inconsistent with the provisions of Article 157 of the Civil Code on determining the invalidity of the contract.
3. Approve the legal structure of the effective contract
Contract approval means that the parties to engage in a certain transaction must obtain the approval of the relevant competent authority. Contract examination and approval is a specific administrative act of the competent authority to achieve the purpose of control by examining and approving a specific transaction behavior (mainly manifested as a contract), which is essentially an administrative license and a form of administrative power intervening in private law. From the perspective of contract validity, a contract only takes effect after it is approved, so approval is a statutory condition or a particularly effective condition for a contract. To accurately understand the legal structure of a contract that has been approved into effect, it is necessary to grasp the following aspects.
(1) The essence of approval is administrative licensing
As to whether administrative examination and approval is an administrative license, there was controversy in the process of formulating the Administrative Licensing Law. However, the Administrative Licensing Law holds that administrative examination and approval is administrative licensing and should be subject to the Administrative Licensing Law. [1] This restriction is manifested in the fact that the establishment and implementation of administrative licensing shall be in accordance with the statutory authority, scope, conditions and procedures. In practice, some parties violate the provisions of the Administrative Licensing Law if the approving authority fails to submit for approval beyond the statutory authority after submitting for approval. In this case, the counterparty can seek relief by applying for administrative reconsideration, filing an administrative lawsuit, etc. According to the provisions of Paragraph 1 of Article 15 of the Administrative Licensing Law, if no laws or administrative regulations have been formulated for administrative licensing matters, local regulations may set up administrative licensing; Where laws, administrative regulations, or local regulations have not yet been formulated, and it is truly necessary to immediately implement administrative licensing due to administrative management needs, the rules of the people's governments of provinces, autonomous regions, and municipalities directly under the Central Government may set up temporary administrative licensing. It can be seen that, in principle, administrative licensing can only be set by laws and administrative regulations, but in exceptional circumstances, it can also be set by local regulations or provincial government rules. However, Article 502 of the Civil Code stipulates that the approval that can affect the validity of a contract and is a statutory requirement for the effectiveness of a legal act can only be the approval provided for by laws and administrative regulations. In other words, even if local regulations and provincial government rules allow the establishment of administrative licenses, such administrative licenses do not affect the validity of the contract.
(2) The essence of contract approval is to allow the implementation of a specific transaction
From the perspective of civil law, administrative licensing acts can be further divided into the following types: First, the implementation of a certain factual act, for example, Article 329 of the Civil Code provides for quasi-real rights such as prospecting rights, mining rights, water intake rights, and quasi-real rights such as aquaculture and fishing in waters and tidal flats, which are also called concession property rights. Only after approving the acquisition of the aforesaid quasi-real rights can the right holder engage in factual acts such as prospecting and mining. The second is to approve the implementation of a certain type of legal act, that is, a certain type of act can only be engaged in after obtaining an administrative license, and once the administrative license is obtained, the act can be repeatedly engaged. For example, tobacco sales can only be carried out after obtaining a tobacco monopoly license, and a commercial housing pre-sale contract can only be signed after obtaining a commercial housing pre-sale license, and so on. The third is to grant the implementation of a specific legal act, and such permission is often manifested as an ex post facto examination and approval of a contract, at which point approval becomes a statutory condition for the contract to take effect. Compared with the previous two types of approval, contract approval has the following characteristics.
First, the object of approval is a contract, which distinguishes it from an administrative license that grants the implementation of a de facto act. There is a controversy over whether the object of approval of the contract is the contract or the qualification of the subject. Taking the equity transfer contract of a commercial bank in excess of the statutory proportion as an example, there is a view that Article 17 of the Banking Supervision Law stipulates that: "Where an application is made for the establishment of a banking financial institution, or a banking financial institution changes the shareholder whose total capital or total shares hold more than the prescribed proportion, the banking regulatory authority under the State Council shall examine the shareholder's source of funds, financial status, capital replenishment capacity and creditworthiness." Accordingly, the reason why the regulatory authorities want to approve the contract is not to restrict the transaction itself, but to review whether the transferee has the transaction qualifications to see whether it meets the regulatory requirements. In other words, the object of approval is whether the parties are qualified to the transaction, rather than intervening in the transaction itself. We believe that issues such as who the transferee shareholder is and whether the proportion of equity transferred has reached the statutory proportion that should be submitted for approval all stem from the provisions of the equity transfer contract, and if the equity transfer contract is not submitted for approval, the review by the regulator will have no basis. From the perspective of the approval result, if the transferee does not meet the relevant regulations, the approval authority will not approve it, and it will not be possible for the transferee to obtain equity while affecting the validity of the contract. In this regard, there is no essential difference between the qualifications of the approval entity and the approval contract.
Second, the contract examination and approval is to have the contract first and then the approval, that is, the contract that has been signed is submitted to the relevant departments for approval. Under normal circumstances, administrative licensing is often the first to have a license and then a civil act, and the administrative license is manifested as the lifting of such prohibition or restriction on the premise that the law "generally prohibits" or "restricts" the parties from engaging in a certain type of behavior. In addition, the examination and approval of contracts has the characteristics of individual or item-by-item, that is, every time the parties enter into a contract, they must submit it for approval, otherwise, its validity will be in a state of uncertainty. In the case of general administrative licensing, once a party obtains a certain administrative license, it does not need to apply for a license for any specific civil act that it engages in in the future. As a result, administrative licensing is often associated with the acquisition of specific qualifications or capabilities, while contract approval is only associated with a specific transaction.
Third, the examination and approval of the contract is essentially the legality review of the counterparty's application by the examination and approval authority. As a specific administrative act in response to an application, although the examination and approval authority has the right to decide whether to approve or disapprove, its content depends on the application of the parties. In this sense, the approval of the contract does not create a new relationship of rights and obligations, but is only a confirmation of the intention of the parties, and strengthens the legal effect through the confirmation. The effect of this kind of enhancement is mainly manifested in the presumption of authenticity of the act that has been subject to administrative examination and approval. However, the record in the approval certificate may be inconsistent with the real status of rights, which may be due to the false information provided by the parties when submitting for approval, or the wrong approval decision made by the examination and approval authority. However, in any case, from the perspective of respecting the parties' right to decide on their will, interested parties should be allowed to file a lawsuit for confirmation of rights and adduce counter-evidence to overturn it. It can be seen that the approval certificate itself cannot be used as a basis for confirming rights, which indicates that it has not conducted a genuine examination of the parties' expressions of intent.
As mentioned above, the result of contract approval is the decision of whether to agree or not, and the validity of the contract is indirectly affected by whether or not to agree. In this process, the examination and approval authority cannot examine whether the parties' expressions of intent are voluntary and genuine. On the one hand, the reason why the examination and approval authorities cannot review the authenticity of the parties' expressions of intent is that it is necessary to safeguard the principle of autonomy of will, because if the public authority is allowed to review the authenticity of the expression of intent itself through examination and approval, the autonomy of will will be eroded by the public power, which violates the principle of autonomy of will; On the other hand, it stems from the consideration of the principle of administration according to law. As an administrative act, the exercise of the examination and approval act must of course follow the principle of "prohibition without authorization by law", and it must not intrude into the field of private law without restraint. In addition, it should also be pointed out that whether the expression of intent is true and free can only be judged by the expressor himself, and it is impossible for any third party, including the examination and approval authority, to make such a judgment. On the one hand, the practical advantage of limiting the examination and approval of a contract to the examination of legality rather than the examination of authenticity lies in the fact that, even if the contract has been approved, if there is a situation where the expression of intent is not true or free, the parties can directly file a civil lawsuit in accordance with the provisions of the Civil Code on voidable contracts, without first filing an administrative lawsuit to revoke the approval. On the other hand, since the examination and approval does not involve the authenticity of the expression of intent, in principle, the parties should be allowed to perform the contract or confirm their rights according to their true intentions when the true expression of intent of the parties is inconsistent with the record in the approval certificate, thus indirectly solving the premise of the right confirmation lawsuit.
(3) The legal basis for the examination and approval of the contract
As an administrative license, contract approval must be based on the law. There are different understandings as to which contracts are approved and entered into force under Article 502 of the Civil Code. There is a view that the application of Article 502 of the Civil Code requires not only that laws and administrative regulations clearly stipulate that the contract shall go through approval procedures, but also that the contract shall take effect upon approval. If laws and administrative regulations only stipulate that certain types of transactions must be approved, but do not clearly stipulate that the contract shall take effect upon approval, the provisions of Article 502 of the Civil Code cannot be applied. Another view is that as long as laws and administrative regulations stipulate that a contract needs to be approved, even if there is no explicit expression such as "the contract shall take effect on the date of approval", it can generally be regarded as a contract for approval and entry into force under Article 502 of the Civil Code. This judicial interpretation adopts the latter viewpoint, because in the current legal system, it is clearly stipulated that the contract must go through approval and other formalities before it can take effect, only Article 10 of the Administrative Measures for the Transfer of Prospecting Rights and Mining Rights, paragraph 3 of this article stipulates: "If the transfer is approved, the transfer contract shall take effect from the date of approval." "Other laws and administrative regulations, such as article 28 of the Commercial Bank Law, do not stipulate that the contract shall take effect from the date of approval, although it stipulates that the contract shall be submitted for approval. According to the first view, the provisions of Article 502 of the Civil Code cannot be applied. In order to avoid unnecessary confusion, the Legislative Affairs Committee of the Standing Committee of the National People's Congress clearly pointed out in its book on the interpretation of the Civil Code: "Other laws and administrative regulations only stipulate that some contracts shall go through approval and other formalities, but do not clearly stipulate that the failure to go through the approval and other formalities will affect the validity of the contract. A means of managing and controlling specific contractual trading activities. Whether the failure of the parties to go through the formalities such as approval affects the validity of the contract involves the determination of the nature and purpose of social management by laws and administrative regulations through the establishment of relevant approval and other formalities, and it is necessary to make a balanced judgment between the social management policy of setting approval and other formalities and the protection of autonomy of will and the encouragement of transactions in the contract section of this Law. ”
From the perspective of judicial practice, the common approval and effective contracts mainly include the following situations: First, the equity transfer contract of a financial enterprise that exceeds the statutory proportion. For example, Article 28 of the Commercial Bank Law stipulates that "any entity or individual purchasing more than 5% of the total shares of a commercial bank shall obtain prior approval from the banking regulatory authority of the State Council." Article 122 of the Securities Law stipulates that "a securities company shall be subject to the approval of the securities regulatory authority under the State Council if it changes the scope of securities business, changes its major shareholders or the actual controller of the company, merges, divisions, suspension of business, dissolution or bankruptcy." Article 84 of the Insurance Law also provides similarly: "The change of shareholders whose capital contribution accounts for more than 5% of the total capital of a limited liability company, or the change of shareholders who hold more than 5% of the shares of a company limited by shares, shall be subject to the approval of the insurance regulatory authority. The second is the transfer of state-owned assets. For example, Article 24 of the Interim Regulations on the Supervision and Administration of State-owned Assets of Enterprises: "If the major matters of the important subsidiaries invested and established by the invested enterprises shall be submitted to the State-owned Assets Supervision and Administration Agency for approval by the invested enterprises, the management measures shall be formulated separately by the State-owned Assets Supervision and Administration Agency of the State Council and submitted to the State Council for approval." "The third is the transfer of prospecting rights and mining rights. For example, according to Article 6 of the Mineral Resources Law, prospecting rights and mining rights may be transferred under the following two circumstances: First, the prospecting right holder may transfer the prospecting right to another person after completing the prescribed minimum exploration investment and with the approval of law. Second, if a mining enterprise that has obtained mining rights needs to change the subject of mining rights due to merger, division, joint venture or cooperative operation with others, or due to the sale of enterprise assets or other circumstances that change the property rights of enterprise assets, the mining rights may be transferred to others for mining with approval in accordance with the law.
For a long time before, the Law on Sino-Foreign Equity Joint Ventures and the Law on Sino-Foreign Cooperative Joint Ventures both stipulated that foreign-invested enterprises must submit for approval for the transfer of equity to foreign countries. However, the Foreign Investment Law implements a pre-establishment national treatment plus negative list management system for foreign investment. The so-called pre-establishment national treatment refers to the treatment accorded to foreign investors and their investments at the stage of investment access that is not lower than that of domestic investors and their investments; The so-called negative list refers to the special administrative measures for foreign investment in specific fields stipulated by the state. The state shall give national treatment to foreign investment not included in the negative list. According to the Foreign Investment Law, the system of approval for the equity transfer of foreign-invested enterprises will be withdrawn, and only the establishment and equity transfer of foreign-invested enterprises that fall within the scope of the negative list will need to go through the approval procedures, and thus belong to the approval and effective contracts provided for in Article 502 of the Civil Code.
It is worth discussing that Article 40 of the Law on the Administration of Urban Real Estate stipulates that if the land use right is obtained by way of allocation, the transfer of real estate shall be reported to the people's government with the right of approval for approval in accordance with the provisions of the State Council. If the people's government with the right to approve approves the transfer, the transferee shall go through the formalities for the transfer of land use rights. and pay the land use right transfer fee in accordance with the relevant provisions of the state; If the people's government with the right to approve decides in accordance with the provisions of the State Council that it may not go through the formalities for the transfer of land use rights, the transferor shall, in accordance with the provisions of the State Council, hand over the land income from the proceeds obtained from the transfer of real estate to the state or make other dispositions. Literally, the object of approval of this article is also the transaction act of "transfer of real estate", but can it be determined that this article also belongs to the norm that the contract must be approved and effective as stipulated in Article 502 of the Civil Code? There are different views on this. The first view is that this article is a provision that contracts must be approved to enter into force, so a contract that has not been approved is a contract that has not entered into force. The second view is that this article is a mandatory provision, and a contract that violates this provision shall be deemed invalid in accordance with the provisions of Article 153, Paragraph 1 of the Civil Code. The third view is that this article is a mandatory administrative provision, and the contract is valid according to the proviso to paragraph 1 of Article 153 of the Civil Code. It should be said that there is some truth in all of the above, and we agree with the third point of view for the following reasons: First, the approval provided for in Article 40 of the Urban Real Estate Management Law, the object of approval seems to be a "real estate transfer contract", but in fact it is a land degeneration. Second, Article 51 of the Urban Real Estate Management Law stipulates that if a mortgage is set on the buildings on the allocated land, the mortgage is valid; Article 50 of the Judicial Interpretation of the Guarantee System of the Civil Code even stipulates that if the mortgage is only based on the allocation of land use rights, the mortgage contract shall also be deemed valid. Once the mortgage contract is valid, the auction of the mortgaged property will be involved when the mortgage right is realized, which is not substantially different from the transfer of the allocated land use right. From the perspective of system interpretation, it seems appropriate to determine that the assignment contract is valid, otherwise it is easy to lead to systemic conflicts. Third, as stated by the Legislative Affairs Committee of the Standing Committee of the National People's Congress in its interpretation book of the Civil Code, whether the failure of the parties to go through the approval and other formalities will affect the validity of the contract needs to be judged in light of the specific circumstances and between the social management policy of setting approval and other formalities and ensuring the autonomy of will and encouraging transactions. After the contract is found to be valid, the parties may request to continue to perform the contract, but before going through the formalities for the transfer of property rights, it is sufficient to pay the land transfer fee, hand over the proceeds to the state or make other dispositions in accordance with the regulations. Once the contract is found to be invalid or not effective, it is not conducive to protecting autonomy of will and encouraging transactions.
(4) Approval is a statutory condition for the contract to take effect
As far as the relationship between administrative licensing and the validity of the contract is concerned, some scholars summarize it as follows: First, the administrative license that grants the implementation of a certain factual act, since it is a factual act rather than a legal act that is approved for implementation, there is no problem of being violated by the contract act, so there is no question of illegality and invalidity. Second, if a party engages in a certain type of legal act without obtaining an administrative license, it shall be determined in accordance with Article 153 of the Civil Code on illegality, invalidity and its exceptions. The third is to approve the implementation of a specific legal act, in which case approval is a statutory condition for the contract to take effect, and the validity of a contract that has not been submitted for approval shall be determined in accordance with the relevant rules of Article 502 of the Civil Code on the approval of effective contracts.
Why is it that a violation of the provisions authorizing the execution of a certain type of legal act should be dealt with in accordance with Article 153, paragraph 1 of the Civil Code, while a violation of the rules authorizing the execution of a specific legal act should be determined in accordance with Article 502 of the Civil Code? What is the justification or basis for the discrimination? In determining whether a contract is invalid due to illegality in accordance with paragraph 1 of Article 153 of the Civil Code, it essentially depends on whether the autonomy of will has exceeded the boundaries of mandatory provisions. However, there are many elements of the expression of intent, including the subject, the object (content), the transaction method, the transaction time, the transaction venue, and other elements. The provisions on the granting of certain types of legal acts are essentially market access issues, so their effectiveness should be examined by including the rules of illegality and invalidity and its exceptions. The examination and approval of the contract is essentially a review of whether the application should be agreed to in accordance with the provisions of the law, that is, the legality of the application is reviewed, rather than the authenticity or validity of the expression of intent. Both of these types of review are public law interventions in private law, involve the coordination of private law autonomy and state regulation, and both may affect the validity of contracts, but there are significant differences between the two. On the one hand, the normative nature of the two is different. The validity review mainly examines whether the contract violates the mandatory provisions of laws and administrative regulations, and the essence is to examine whether the expression of intent exceeds the mandatory provisions, and the basis for determining whether the contract is valid or invalid is Article 153, paragraph 1 of the Civil Code. The examination and approval of a contract is essentially the management of the contract by the relevant authorities, and whether the conditions for entry into force are fulfilled is determined by whether the approval can be obtained, and then whether the contract is effective in accordance with Article 502 of the Civil Code. Once it is determined that the contract is invalid due to illegality, such invalidity is ab initio, absolutely invalid, and completely invalid, and if the contract is not submitted for approval due to violation of the approval provisions, the contract is only not effective and not invalid, and the contract can be made effective by submitting it for approval by supplementary application. On the other hand, the subject of examination is different. The subject of validity review is the people's court, and in disputes that have been accepted by the people's court, the people's court may determine the validity of the contract ex officio. However, the subject of examination and approval is the examination and approval authority as the competent department, and the examination and approval does not have the nature of dispute resolution, and its review also has the characteristics of limited scope, and the examination and approval authority itself has no right to evaluate the validity of the contract and declare the contract invalid. Even if a contract is not approved, it is not declared invalid by the examination and approval authority (in this case, it is still the people's court that has the right to declare the contract invalid), but because the contract has not been approved, the contract "does not meet" the statutory conditions for taking effect and is determined not to be effective.
The question is, why does the regulation of laws and administrative regulations that require the approval of a contract become a statutory condition for the validity of a contract or a particularly effective condition, which is a regulatory norm under administrative law? It should be noted that the direct purpose of contract approval is to administer the contract by the competent authority. However, in the examination and approval of the contract, the examination and approval authority intervenes in the private law transaction between the parties, and whether the approval result agrees to the application of the parties indirectly affects the validity of the contract: if it is agreed, the contract becomes effective; If you do not agree, the contract shall not be effective. Compared with the effect of public law, the effect of the contract of approval is its indirect effect, which is the effect of "refraction" of the effect of public law and the effect of private law. Given the degree of uncertainty as to whether the approval authority can approve a particular transaction, approval is considered a condition rather than a duration; Since the question of whether a contract should be submitted for approval stems from the provisions of laws and administrative regulations rather than the agreement of the parties, such conditions are statutory conditions for entry into force rather than agreed conditions for taking effect; In view of the fact that the contract has not yet taken effect before the statutory conditions for entry into force have been fulfilled, the parties cannot claim rights based on the contract, so it is a particularly effective element.
4. Validity of contracts that have not been submitted for approval
In the case of an approved contract, if the contract has not been submitted for approval, it is natural that there is no issue of approval, so the validity of the contract at this time is that it has not taken effect; In order for a contract to be effective, it is necessary to make the obligation to submit for approval and related clauses independent of each other, which is an important aspect of the validity of a contract that has not entered into force; In the case where a party files a lawsuit based on a valid contract, how the people's court should focus on the issue of approval by exercising the power of interpretation is also a judicial practice issue that needs to be resolved urgently.
(1) Effect 1: The entire contract has not taken effect
If the contract is not approved, the entire contract does not come into force. A contract that has not entered into force is not a valid contract, and the parties cannot request the other party to perform the contract or request it to bear the liability for breach of contract on the basis of a valid contract; A contract that has not entered into force is not an invalid contract, and the parties cannot directly request confirmation of the invalidity of the contract and request the other party to bear the liability for damages. However, judging from the development process of relevant judicial interpretations, if the non-effective contract is not given an "effect promoter" - the obligation to report for approval and the relevant clauses take effect independently, once a dispute arises, the people's court will often treat the non-effective contract as an invalid contract based on the need to resolve the dispute, which not only deviates from the principle of encouraging transactions, but also violates the jurisprudence of the contract that has not yet entered into force.
Whether approval as a statutory condition for the effective effect of a contract can be applied by analogy with Article 159 of the Civil Code, which provides that "if a party improperly prevents the fulfillment of a conditional civil juristic act for its own interests, the condition shall be deemed to have been fulfilled; If it improperly contributes to the fulfillment of the conditions, it shall be deemed that the conditions have not been fulfilled". In our view, this article regulates contracts with agreed conditions. In terms of agreement, whether to agree on conditions, what conditions to agree on, and when the conditions are fulfilled all belong to the scope of party autonomy. Under the agreed conditions, the Civil Code makes the aforesaid provisions out of consideration for the punishment of malicious parties and the maintenance of honest and trustworthy transaction order. However, the approval stipulated by laws and administrative regulations is a statutory condition for the contract to take effect, and approval is essentially a regulatory act of an administrative organ, and whether or not to approve is within the scope of the exercise of administrative discretion and not within the scope of party autonomy. Therefore, if one party refuses to perform the obligation to report for approval, in principle, the provisions of Article 159 of the Civil Code cannot be applied by analogy, and it shall be deemed to have been approved, and the contract shall be deemed to be valid. Otherwise, the requirements for approval will be reduced to a dead letter. Only under certain circumstances, if the effective judgment has ordered the parties to perform the obligation to report for approval, but the parties still refuse to perform, the provisions of this article may be applied by analogy, so that the parties can bear the liability for breach of contract.
(2) Effect 2: The obligation to submit for approval and related clauses take effect independently
The reason why it is stipulated that the failure of the entire contract to take effect does not affect the validity of the clauses on the obligation to submit for approval between the parties and the relevant clauses set up as a result of the obligation to submit for approval is that in practice, the crux of the contract dispute caused by examination and approval often lies in the failure of the parties to submit for approval rather than the failure of the administrative organ to approve. If the parties do not submit for approval, the contract does not take effect; Before the contract comes into effect, one party cannot request the other party to perform its contractual obligations, including the obligation to submit for approval; If the parties do not need to perform the obligation to submit for approval, they will often decide whether to submit for approval according to the circumstances: if the approval is beneficial to themselves, they will apply for approval; Otherwise, they will not apply for approval. The result is that it is clearly inappropriate for a dishonest party to benefit from its dishonest conduct. It is precisely in view of the above-mentioned problems that it is necessary to stipulate that the failure of the contract to enter into force does not affect the validity of the relevant clauses between the parties regarding the obligation to submit for approval and the liability for breach of contract created as a result of the obligation.
From a legal point of view, there is also a solid theoretical and normative basis for the obligation to submit for approval and the independent entry into force of related provisions. The core purpose of a contract between the parties is naturally to determine the rights and obligations of the parties. However, there are two types of contract clauses, the nature of which determines their rights and obligations clauses that are independent of the contract: one is the clause that facilitates the entry into force of the contract, mainly the approval clause and related clauses. Where the contract is conditional on the fulfillment of a condition, such prerequisites will take effect independently of the terms of the contract. Otherwise, it will fall into the aforementioned paradox, which will ultimately be neither conducive to the realization of the purpose of the treaty nor conducive to the maintenance of the principle of good faith. The second is the clause on dispute resolution when the contract is not effective, invalid, revoked or terminated. Article 502 of the Civil Code provides for the independent effect of the approval clause and related clauses, while Article 507 provides for the independent effect of the dispute resolution clause. The former is for the "lifetime" of the contract, and the latter is for the "posthumous" of the contract; One promotes the validity of the contract, and the other resolves disputes arising after it is not effective, invalid, revoked or terminated, both of which have the characteristics of means, which are different from other contract clauses in which the parties enjoy rights and assume obligations through the contract, and are of course independent.
The clauses related to the obligation to submit for approval are mainly the provisions specifically stipulated in the contract that the obligor for approval will bear the liability for breach of contract if it neglects to perform the obligation for approval, which is different from the clause on liability for breach of contract stipulated in the main contract. Of course, the "relevant clauses" are not limited to the clauses on liability for breach of contract related to the obligation to submit for approval, but also include other clauses related to the obligation to submit for approval, for example, in the case of equity transfer, the parties agree that the transferor will only perform the obligation for approval when the transferee pays a certain percentage of the price first; Another example is that when performing the obligation to submit for approval, the parties have agreed on the time limit for approval and the transferee's obligation to assist, which are all terms related to the obligation to submit for approval, and are independent in effect and are not affected by the failure of the entire contract to take effect.
(3) Effect 3: You may request to perform the obligation to submit for approval and assume responsibility
If the parties expressly stipulate the relevant clauses in the contract, such as the obligation to report for approval and the liability for breach of contract, then the parties may, in accordance with the contract, request the person who violates the obligation to report for approval to bear the liability for breach of contract specifically agreed for the obligation to submit for approval, and there should be no doubt. It is worth discussing whether the person with the obligation to submit for approval can be requested to bear the responsibility when the contract does not stipulate the obligation to report for approval or the obligation to report for approval but does not stipulate a special liability for breach of contract. In this regard, an affirmative answer should be given, but there is controversy as to whether such liability is in the nature of liability for breach of contract or liability for contractual negligence. In our opinion, in the case of an approved contract, the entire contract has not yet entered into force before the contract is approved, so the obligor is still liable for the negligence of the contractor relative to the entire contract, which is also consistent with the nature of the obligation to submit for approval. The obligation to submit for approval, as an obligation to facilitate the entry into force of the contract, falls within the scope of pre-contractual obligations. From the perspective of the evolution of relevant judicial interpretations, Article 8 of the Judicial Interpretation (II) of the Contract Law stipulates that: "After the conclusion of a contract that can only be effective after approval or registration in accordance with the provisions of laws and administrative regulations, if a party who is obliged to go through the formalities of applying for approval or registration fails to apply for approval or registration in accordance with the provisions of the law or the contract, it shall be provided for in Article 42 (3) of the Contract Law." For other acts that violate the principle of good faith, the people's court may, on the basis of the specific circumstances of the case and the request of the counterpart, make a judgment that the counterparty shall handle the relevant formalities on its own, and the other party shall be liable for damages for the expenses incurred and the actual losses caused to the counterparty. Accordingly, the parties' negligence in performing their obligation to report for approval is "other acts that violate the principle of good faith" as stipulated in Article 42, Paragraph 3 of the Contract Law. However, this article is a provision on liability for negligence in contracting, which violates the pre-contractual obligation based on the principle of good faith at the stage of contracting, so the obligation to report for approval is a pre-contractual obligation. The difference is that the parties to the general pre-contractual obligations cannot request actual performance, while Article 502 of the Civil Code and this judicial interpretation stipulate that the obligation to submit for approval and related clauses take effect independently, and also stipulate that one party may request the other party to perform the obligation to submit for approval. If the liability for breach of contract is specifically stipulated for the obligation to submit for approval, the other party may also be requested to bear the special liability for breach of contract, which obviously goes beyond the scope of traditional pre-contractual obligations. In our view, even if Article 502 of the Civil Code clearly stipulates the obligation to submit for approval, it cannot be denied that it is essentially a pre-contractual obligation based on the principle of good faith that can be independently claimed. Even if it is considered that the breach of the obligation to report for approval bears the liability for breach of contract, it still falls within the scope of liability for negligence in contracting the contract as a whole.
There is a view that the obligation to report for approval requires the obligor to do something, and whether the obligor engages in a certain act involves the issue of freedom of conduct and is not enforceable, so the obligation to report for approval cannot be enforced. In our view, this view confuses personal liberty with freedom of conduct and is wrong. The modern rule of law respects the personality of the individual, so it cannot be enforced to perform the debtor's debts by infringing on the debtor's material personality rights (i.e., the right to life and health), degrading the mental personality rights or depriving the debtor of his personal freedom (the right to freedom at the level of personality rights). This does not mean, however, that the debtor's conduct (including acts and omissions) cannot be the subject of enforcement. In fact, when the obligor neglects to perform its obligations, the obligee can force the debtor to perform certain acts through the court, such as requesting the debtor to continue to deliver the subject matter or price, which is the basic legal theory that compulsory performance can be used as a form of liability for breach of contract. Although requiring the assignor to perform the obligation to report for approval restricts the obligor's freedom of action to a certain extent, it does not infringe upon its personal freedom, so it can request compulsory performance.
It should be noted that the agreed approval obligor is often inconsistent with the actual approval obligor, which requires the resolution of the question of who the approval obligor is. Taking the equity transfer of a financial institution in excess of the statutory proportion as an example, the transferor's main payment obligation is to transfer the equity, and according to the principle of privity of contract, the transferee can only request the transferor to complete the approval procedures. However, according to the relevant provisions of the Measures for the Supervision and Administration of the Banking Industry, the approver of the equity change is the commercial bank and not the transferring shareholder. This is a mismatch in the legal relationship: the assignee requests the transferor to perform the approval procedures, and the transferor can only request the commercial bank to apply for approval, and there is no direct legal relationship between the transferee and the commercial bank. We believe that after receiving the request of the transferor, the commercial bank has the obligation to go through the approval formalities unless it considers that the equity transfer does not comply with the provisions of the Commercial Bank Law or the articles of association. If it fails to perform such obligations without justifiable reasons, it is tantamount to infringing the transferor's right to transfer shares in accordance with the law, and the transferor may request the court to order the commercial bank to compel the transferor. In order to better solve the problem of misalignment of the approval obligor, in contract disputes involving approval, it is advisable for the parties to apply for the target company to be listed as a third party, and the court may also add the target company as a third party ex officio, so as to solve the problem of misalignment of the approval obligation and the problem that the effect of the judgment is not as effective as that of the target company. From the perspective of dispute resolution, given that there is no third-party system in arbitration, and the effect of an arbitral award only extends to the parties to the arbitration agreement and not to a third party, even if the target company is not a party to the arbitration agreement, the effect of the arbitral award will not extend to the target company, so it is difficult to achieve the purpose of resolving disputes through arbitration as a package.
For contracts that need to be concluded through competitive methods such as bidding, auction and listing, how to fulfill the obligation to submit for approval has become an issue that needs to be studied because there is no individual negotiation. We believe that the conditions of the transferee can be clearly set out in the announcement of bidding, auction and listing, and the approval authority will review the qualifications of the parties in advance, and then perform the approval procedures after the parties are determined and the contract is signed.
(4) Effect 4: You can request the termination of the contract and assume responsibility
If one party fails to perform the obligation to submit for approval, the other party may directly request to terminate the contract and claim compensation for losses in addition to requesting the performance of the obligation to submit for approval. There is a view that a contract that has not yet entered into force, as a contract with defective validity, should be denied its validity in accordance with the relevant provisions of the voidable contract, and it is not appropriate to directly terminate the contract beyond the stage of judging the validity of the contract. In our view, in a voidable contract, the right of rescission should be exercised within the statutory period, beyond which the right of rescission will be extinguished. If it is considered that the parties cannot revoke the contract after a certain period of time, then in the case of the obligor for approval refuses to submit for approval, the non-breaching party can neither require the obligor to perform the obligation to report for approval to make the contract come into effect, but also cannot revoke the contract due to the loss of the right of revocation, which will result in the non-effective contract can neither be transformed into effective nor invalidated, and fall into a dilemma of "effect deadlock", which is not conducive to resolving disputes. Although the right of rescission should also be exercised within the statutory time limit, according to article 564 of the Civil Code, if the law does not stipulate or the parties have not agreed on the time limit for exercising the right of rescission, the right of rescission shall be extinguished only if it is not exercised within a reasonable period of time after being urged by the other party. In the event that the approval obligor refuses to perform the approval obligation, it will generally not urge the non-breaching party to actively exercise the right of rescission. On the contrary, if it sends a reminder to the non-breaching party when it refuses to perform the obligation to report for approval, the non-breaching party can raise a defense that it has first performed the obligation to report for approval, so that there is no problem that the right of rescission is extinguished because it exceeds a reasonable time limit. It can be seen that it is a better choice to deny the validity of an ineffective contract through the contract rescission system than the revocable contract system.
As for the conditions for exercising the right of rescission, the other party can only terminate the contract if it fails to perform the obligation to report for approval within a reasonable period of time after being reminded, which is more stringent than the termination of a valid contract. According to Article 563 of the Civil Code, for the termination of a valid contract, in the event of refusal to perform or non-performance, the non-breaching party can directly terminate the contract without a reminder, and only delay in performance can have the problem of termination by reminder. In a contract that has not yet entered into force, the obligation to submit for approval itself has the significance of contributing to the entry into force of the contract. According to the principle of encouraging transactions, the parties should be facilitated to perform the obligation to submit for approval as much as possible, and it is not appropriate to easily terminate the contract on the grounds that the obligor for approval has not submitted for approval, so the conditions for exercising the right of termination should be more stringent.
In the case of a direct request to terminate the contract, the liability borne by the obligor for approval varies depending on whether the contract specifically stipulates independent liability for breach of contract for the obligation to submit for approval: if the liability for breach of contract is specifically agreed for the obligation to submit for approval, according to the legal theory that the obligation for approval and related clauses take effect independently, such liability clause for breach of contract shall take effect independently, and the parties may request the obligor for approval to bear the liability for breach of contract based on the agreement while terminating the contract. On the contrary, if the contract does not specifically stipulate the liability for breach of contract for the obligation to submit for approval, the parties can only request the obligor to bear the liability for negligence in concluding the contract.
It is worth exploring that this article only provides for the circumstances of statutory termination, and does not deal with the issue of rescission by agreement. As mentioned above, the agreement between the parties on the obligation to submit for approval and its related clauses is independent and takes effect independently without being affected by the failure of the contract as a whole to take effect. Therefore, the parties may specifically agree on the right to terminate the approval obligation, for example, if the approval obligor fails to complete the approval within a certain time limit, the other party has the right to terminate the contract. In addition, the parties may terminate the contract by agreement. In the litigation stage, if one party requests to terminate the contract and the other party agrees to it, it can also be considered that the two parties have reached an agreement on the termination of the contract that has not yet taken effect, and thus terminate the contract.
(5) The court's interpretation
The court's interpretation mainly includes two situations.
First, before the contract is approved, if the party requests the obligor to continue to perform the contract and bear the liability for breach of contract, it shall inform it to change the litigation claim to continue to perform the obligation for approval. Where the parties still refuse to modify the litigation demands after the explanation, their litigation claims may be rejected. There is a view that if the claim is dismissed directly, it may be subject to the rule of res judicata, making it difficult to file a separate lawsuit, thereby effectively depriving the party of the right to sue, and accordingly suggesting that the lawsuit should be dismissed. Since the dismissal of the lawsuit is deemed not to have been filed, there is no legal obstacle for the parties to file a separate lawsuit. In our view, there is some truth in this argument, but in a contract that has not yet entered into force, although there is no legal basis for one party to directly request the other party to bear the liability for breach of contract, the form of the lawsuit meets the conditions for filing a lawsuit under the Civil Procedure Law, and there is no basis for dismissing the lawsuit. Moreover, facts such as whether a contract is an approved contract and whether the person obligated to submit for approval should perform the obligation to submit for approval can only be determined after the substantive trial, and it is difficult to solve the practical problem by simply rejecting the lawsuit. Moreover, the rejection is a party's direct claim for performance of the contract and liability for breach of contract, rather than a claim for continuing to perform the obligation to report for approval, so the party can still file a separate lawsuit to request the obligor to perform the obligation for approval.
Second, if the parties directly request confirmation of the invalidity of the contract, the people's court shall also explain to them and inform them of the request to terminate the contract; Where the parties still refuse to modify the litigation demands after the explanation, their litigation claims may be rejected.
5. Handling after the order fulfills the obligation to report for approval
Where one party requests the other party to perform the obligation to report for approval, and the people's court orders that party to perform the obligation to report for approval, it may have different dispositions depending on the circumstances.
First, if the party still refuses to perform the obligation to report for approval after the people's court has ordered the party to perform the obligation, the party may file a separate lawsuit to request the termination of the contract, and request the obligor for approval to bear the liability for compensation with reference to the liability for breach of contract for breach of contract. The reasons have already been mentioned and will not be repeated here.
Second, the approval organ has not approved it. If the parties have fulfilled the obligation to report for approval in accordance with the effective judgment, but the relevant departments have not approved it, the contract shall not take effect at this time. As to whether the approval obligor should be held liable, it will be judged on a case-by-case basis whether it is at fault for failing to obtain approval. If the failure to obtain approval is caused by the negligence of the approval obligor in performing the approval obligation, if the approval could have been obtained, but the approval cannot be obtained due to policy changes, the approval obligor shall be liable. On the contrary, if it is solely caused by the non-approval of the approving authority, it shall not be liable. Therefore, paragraph 4 of this article stipulates that, in principle, the parties shall not be liable for compensation at this time, except for the failure to approve the application due to reasons attributable to the parties, such as delay in performing the obligation to report for approval.
Third, if the approving authority approves the contract, the contract is determined to be effective, and the question is whether the contract becomes effective at the time of approval or retroactively from the time of its establishment, and there is no room for study. Jurisprudently speaking, ratification is a statutory condition for taking effect, and the time of ratification is also the time when the conditions are fulfilled, and the contract should take effect from the time of ratification.
[Practical issues]
For example, if A transfers a 6% equity interest in a commercial bank to B at a price of 100 million yuan, and B pays the full price in a lump sum within five days after the contract is signed, but it is not approved until two years later, if it is considered that the contract takes effect from the time of approval, A not only obtains a capital occupation fee of 100 million yuan, but also obtains dividends before the approval after the contract is established, which is suspected of unjust enrichment. For the sake of balance, retrospective of the time when the contract was in force from the time the contract was signed is a solution that could be considered.