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China Published Judicial Interpretations on Trial of Disputes Involving
Sale and Purchase Contracts

5 June 2012 

On 10 May 2012, the PRC Supreme People's Court published "Interpretations on Issues Concerning Application of Law in Trial of Cases of Disputes Involving Sale and Purchase Contracts", which will be implemented as from 1 July 2012. The stipulations contained in the said judicial interpretations are in relation to the following areas:
1. Establishment and effect of sale and purchase contracts;
2. Delivery and ownership transfer of subject matter;
3. Assumption of risks of subject matter;
4. Inspection of subject matter;
5. Liabilities for breach of contract;
6. Retention of ownership;
7. Special sale and purchase; and
8. Miscellaneous issues.
  Some of the stipulations of the said judicial interpretations are interesting, the following are two examples:
  - According to the said judicial interpretations, before a seller has obtained the ownership of an asset, he may still conclude an effective sales agreement with a purchaser to sell that asset, while if the seller fails to deliver the asset due to his failure to obtain the ownership of the asset, the purchaser is entitled to claim against the seller for damages; and
  - Even if there is no stipulations on liquidated damages for late payment in a sale and purchase contract, the seller is still entitled to claim against the purchaser for liquidated damages due to the late payment by the purchaser, and in such a case, according to the calculation method stipulated in the said judicial interpretations, the liquidated damages for late payment will be calculated at present at a rate ranging from 130% to 150% of the RMB lending rate published by the People’s Bank of China applicable to RMB loans of the same term and same type.
In other words, except for the projects above mentioned, for the vast majority of encouraged projects, and for all the permitted projects (i.e. the projects not listed in the Guidance Catalogue of Foreign Investment Industries), no matter how much the total investment (including capital increase) of a project is, the approval is not required, and instead, a filing procedure is to be carried out.


Any legal information contained in this newsletter is general in nature and laws and regulations are changing from time to time and compliance will always depend upon the particular circumstances. We have not attempted to give exhaustive descriptions of law or to give a legal opinion on specific legal issues. You should not rely on this newsletter as a legal advice for any particular purpose.



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