XIE Hongfei: Theoretical Problems with the Recognition of Precontracts and Their Practical Solutions

Abstract: In the most typical precontract, each party undertakes the obligation to make a contract within a certain period in the future. The essence of a precontract is that the parties set the compulsory obligation to make a contract, restricting their future freedom of contract based on the freedom of contract.  The key point of this rule is to determine the constituent elements and effectiveness of contracting obligations. Article 6 of the Interpretation of Several Issues Concerning the Application of General Provisions of the Book on Contract of Civil Code is based on the double precontract stipulated in Article 495 of the Civil Code and adds the requirement that a precontract itself must be a constituent element of a contract, which conforms to the modern theory of the source of the binding force of the contract. Similar to a term contract, the future contracting period stipulated in an advance contract should be a reasonable period. If the two parties agree to make a contract when the conditions are fulfilled, the rules of appointment may also be applied in part by analogy. If the parties only agree on a certain period of consultation and negotiation in the future, such an agreement also constitutes a contract, and both parties should undertake the obligation of reasonable consultation based on the principle of good faith. Whether the signing stage document such as the letter of intent constitutes a precontract depends on the specific content of the document and should not be determined by its name alone. If the reason for signing a subscription letter or another document is that the subject matter does not exist or cannot be sold according to law, it may be deemed that the two parties have formed a contract when both of them have reached an agreement on the subject matter, quantity and other main contents, even if one party refuses to sign a contract.  A precontract cannot be directly identified as the contract itself, no matter how detailed its content is. 

Key Words: precontract, contract, letters of intent and memoranda, Article 495 of the Civil Code, Article 6 of the Interpretation of the Book on Contract of Civil Code

Author: Xie Hongfei, a research fellow at CASS Institute of Law and CASS Center for Private Law Studies and a professor and doctoral supervisor at the University of Chinese Academy of Social Sciences.

Source: 1 (2024) Journal of National Prosecutors College.