Clarity obligations of standardised clauses under Civil Code

Authors: Zhang Guanglei / Chen cheng

(This article was first published on China Business Law Journal column "Cross-border dispute resolution", authorised reprint)

The Civil Code comes into effect on 1 January 2021, and article 496 revises article 39 of the Contract Law on the obligation of presentation and explanation of standardised clauses, which is expected to have a significant impact on the conclusion of contracts concerning cross-border transactions.

Article 39 of the Contract Law provides that, “the party providing the standardised clauses shall … call the attention of the other party to the clause exempting or limiting its liability”; while article 496 of the Civil Code provides that, “the party providing the standardised clauses shall … remind the other party of … the clauses in which the other party has material interests”, so expanding the scope of the obligation of presentation and explanation.

Before the implementation of the Civil Code, laws, regulations and rules related to consumer protection have broken through the scope of “clauses exempting or limiting its liabilities”, and the parties providing standardised clauses are required to fulfil the obligation of presentation and explanation based on the existence of “material interest”.

For example, article 26 of the Consumer Protection Law provides that, “business operators shall adopt conspicuous means to call consumers’ attention to … in which consumers have material interests”. Article 17 of the Measures for the Administration of Online Transactions provides that, “online commodity operators and related service operators … [shall] call consumers’ attention to clauses in which consumers have material interests”. Article 31 of the Judicial Interpretation of the Civil Procedure Law provides that, “if the operator uses the standardised clauses to conclude a jurisdiction agreement with the consumer, and fails to take reasonable measures to remind the consumer, and the consumer claims that the jurisdiction agreement is invalid, the people’s court shall support the claim”.

On the contrary, in civil and commercial contract disputes outside the field of consumer protection, clauses unrelated to liability are usually not recognised as “clauses exempting or limiting its liabilities”, and are included in the scope of the obligation of presentation and explanation.

For example, in the dispute over loan contracts of Yue 03 Min Xia Zhong Case No. 3565 [2017] and Wan Min Shen Case No. 1351 [2020], the court held that the standardised clauses stipulating jurisdiction, interest and attorney’s fees were not clauses exempting or limiting liabilities, and so did not support the party’s claim that the obligation of presentation and explanation was not fulfilled.

After the implementation of the Civil Code, the court’s examination of “clauses involving material interest” will not only be limited to consumer-related contracts. As for the specific type of “clauses involving material interests”, further observation on the judgments after the implementation of the Civil Code is needed.

At this stage, the authors interpret the definition of “clauses involving material interest” according to the cases made after the Civil Code is promulgated, and before its implementation (from 28 May to 31 December 2020), so as to provide reference for laws and business practice.

In Hu 01 Min Zhong Case No.8107 [2020], the letter of intent for equity transfer provides that, “this letter of intent has no legal effect, and any party who withdraws from, or violates, this letter of intent does not need to bear any liability to the other party”. Shanghai No. 1 Intermediate People’s Court held that this letter of intent was a preliminary contract, and involved the trust and reasonable expectation formed between the parties. However, as the provider had not taken reasonable measures to draw the attention of the other party, the above clause was void.

In Hu 0115 Min Chu Case No. 22233 [2020], Shanghai Pudong Court held that the clauses involved were not binding, on the grounds that the intermediary party failed to explain and call the other party’s attention to the settlement method of intermediary service fees in the contract.

The standardised clauses in the above-mentioned cases involved various clauses such as the validity, nature, performance period and price settlement method of the contract, which were not directly related to the distribution and assumption of liabilities. However, the courts all considered them to be “clauses involving material interests”, incorporated them within the scope of obligation of presentation and explanation, and denied the validity of the clauses.

Although article 496 of the Civil Code, which was not implemented at that time, cannot be directly quoted as the basis of judgment in the above-mentioned cases, considering that the judgments were made at the time of the alternation of old and new laws, and were consistent with the provisions of the new law, the judgment viewpoints on the scope of obligation of presentation and explanation have certain reference significance for cases after the implementation of the Civil Code.

In addition, article 9 of the Several Provisions on the Time Validity of Applying the Civil Code, implemented at the same time as the Civil Code, provides that, “If the party providing standardised clauses of the contract concluded before the implementation of the Civil Code fails to perform the obligation of presentation or explanation, which involves the determination of the effectiveness of the standardised clauses, the provisions of article 496 of the Civil Code shall apply”.

In view of the wide application of standardised clauses in different fields, and the further strengthening of the obligation of presentation and explanation in law, the party providing standardised clauses will undoubtedly bear greater risk in terms of validity of the clauses while gaining advantages in the contract.

To control risk, the party providing standardised clauses shall present or explain the main contract terms in a clear and definite way, and can provide a risk notice (like the following) outside the contract, which should be executed by the recipient of the standardised clauses for confirmation: “The party providing standardised clauses has clearly presented or explained the main contract terms to the other party, and each party has clearly understood the meaning of the terms and corresponding legal risks. The execution is made voluntarily.”

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作者介绍 张光磊

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张光磊律师毕业于中国政法大学，获法学学士、民法学硕士和商法学博士学位；此外，获美国乔治华盛顿大学法学硕士学位，为哥伦比亚大学法学院访问学者。张律师拥有中国及美国纽约州律师资格，为香港国际仲裁中心在册仲裁员，中国政法大学法律硕士学院和对外经济贸易大学法学院兼职导师。

张律师的主要业务领域为争议解决，在民商事诉讼、仲裁、调解等领域拥有丰富的经验和良好的声誉，于2018年被CLECSS评选为“中国十大杰出青年律师”，于2020年被《商法》（CBLJ）评选为“A-List法律精英100强”，于2021年被《亚洲法律杂志》（ALB）评选为“中国十五佳诉讼律师”。在香港国际仲裁中心2019年主办的首届国际仲裁中文赛中，张律师带领竞天公诚律师事务所获得北京赛区冠军和全国亚军，其个人在所有场次比赛中均被评为最佳律师。

张律师曾代表境内外客户处理过中国国际经济贸易仲裁委员会及其分会、北京仲裁委员会、上海国际仲裁中心、深圳国际仲裁院、珠海国际仲裁院、香港国际仲裁中心、国际商会国际仲裁院等仲裁机构及中国不同层级法院的数百宗民商事案件。张律师擅长在跨境交易纠纷中为客户制定整体解决方案，曾在美国、新加坡、德国、香港等地的诉讼和仲裁程序中多次担任中国法顾问及专家证人。

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陈程

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陈程律师毕业于清华大学法学院，获法律硕士学位，拥有中国律师执业资格。陈律师的主要业务领域为争议解决，曾代表境内外客户处理过数十宗民商事诉讼仲裁案件，也曾参与过多宗商事交易的尽职调查和谈判，在争议预防和解决方面拥有丰富的经验。

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