Defects of Juristic Act MistakeFraudDuress. Mistake.

Defects of Juristic Act Defects of Juristic Act

MistakeMistakeFraudFraudDuressDuress

MistakeMistake

Concept of MistakeConcept of Mistake

The concept of mistake in civil law and in common law The concept of mistake in civil law and in common law are somewhat different. Taiwan scholars define mistake as are somewhat different. Taiwan scholars define mistake as

““A mistake is defined as nonconformity between the declared A mistake is defined as nonconformity between the declared intention and the real intention of a contracting party.intention and the real intention of a contracting party.

However, The First Restatement defined mistake asHowever, The First Restatement defined mistake as ””a state of mind that is not in accord with the facts” a state of mind that is not in accord with the facts”

The Restatement Second defined it asThe Restatement Second defined it as “ “a belief that is not in accord with the facts.” a belief that is not in accord with the facts.”

A does not know his girl friend is married and buys an A does not know his girl friend is married and buys an engagement ring for her. engagement ring for her.

Distinction between motive and intentionDistinction between motive and intention

X was aware of the city zoning project and waX was aware of the city zoning project and was informed that the limit of construction in Blas informed that the limit of construction in Blackacre will be lift. X bought the land from Y ackacre will be lift. X bought the land from Y and the proposal to lift was denied by the Munind the proposal to lift was denied by the Municipal Planning and Zoning Committee. Can X cipal Planning and Zoning Committee. Can X rescind the contract?rescind the contract?

Misunderstanding and MistakeMisunderstanding and Mistake

Upon the time of acting a declaration of intention, the declaranUpon the time of acting a declaration of intention, the declarant might misunderstand the situation of the facts or the understat might misunderstand the situation of the facts or the understanding to the fact of the other party. nding to the fact of the other party.

In China, there was a bird called Bai Tou Wong in some proviIn China, there was a bird called Bai Tou Wong in some provinces but in some place Bai Tou Wong was a species of cricket. nces but in some place Bai Tou Wong was a species of cricket. If X would like to buy birds from Y and manifest his intent as If X would like to buy birds from Y and manifest his intent as buying Bai Tou Wong. Y accepted the deal and just thought Bbuying Bai Tou Wong. Y accepted the deal and just thought Bai Tou Wong were crickets. When Y delivered the crickets, X ai Tou Wong were crickets. When Y delivered the crickets, X eventually understood the differences and rejected to accept. Ceventually understood the differences and rejected to accept. Can X rescind his declaration of intention? an X rescind his declaration of intention?

Mistake in ROC Civil CodeMistake in ROC Civil Code

The general basis for the ROC law of mistake is The general basis for the ROC law of mistake is provided in the ROC Civil Code Art. 88-91. and 91. provided in the ROC Civil Code Art. 88-91. and 91.

Under the ROC Civil Code there are four kinds of Under the ROC Civil Code there are four kinds of mistake in the declaration of intention, such as mistake in the declaration of intention, such as mistake in motive, mistake in motive, mistake in contents of declaration, mistake in contents of declaration, mistake in process of declaration, and mistake in process of declaration, and mistake in transmission.mistake in transmission.


ROC Civil Code Art.88ROC Civil Code Art.88 If a declaration was acting under a mistake as to If a declaration was acting under a mistake as to the the

contents of his declaration of intentioncontents of his declaration of intention, or , or had known had known the situation of affairs, he would not make the the situation of affairs, he would not make the declarationdeclaration; he may ; he may rescind the declarationrescind the declaration; provided ; provided that the mistake or the ignorance of the affairs was not due that the mistake or the ignorance of the affairs was not due to his own fault.to his own fault.

If a mistake in respect to the qualification of the other party If a mistake in respect to the qualification of the other party or the nature of a thing is regarded as essential in trade, it or the nature of a thing is regarded as essential in trade, it shall be deemed a mistake as to the contents of the shall be deemed a mistake as to the contents of the declaration of intent.declaration of intent.


ROC Civil Code Art.89ROC Civil Code Art.89 If a declaration of intention has been If a declaration of intention has been incorrectly traincorrectly tra

nsmittednsmitted by the person or institution employed for by the person or institution employed for its transmission, it may be revoked under the same its transmission, it may be revoked under the same conditions as provided in the preceding article.conditions as provided in the preceding article.

Mistake in PRC GPCLMistake in PRC GPCL

Article 59. Article 59. A party shall have the right to request a A party shall have the right to request a people's court or an arbitration agency to people's court or an arbitration agency to alter or alter or rescind the following civil actsrescind the following civil acts: :

(1) those performed by an actor who (1) those performed by an actor who seriously seriously misunderstood the contents of the actsmisunderstood the contents of the acts; ;

(2) those that are obviously unfair. (2) those that are obviously unfair. Rescinded civil acts shall be null and void from the Rescinded civil acts shall be null and void from the

very beginning. very beginning.

Mistake in PRC Contract LawMistake in PRC Contract Law

PRC Contract Law Art. 54PRC Contract Law Art. 54 Either of the parties may Either of the parties may petitionpetition the People's Court or an arbitral the People's Court or an arbitral

tribunal for tribunal for modification or rescission of a contractmodification or rescission of a contract if: if:(i) the contract was concluded due to a (i) the contract was concluded due to a material mistakematerial mistake;;(ii) the contract was grossly unconscionable at the time of its (ii) the contract was grossly unconscionable at the time of its conclusion.conclusion.

If a party induced the other party to enter into a contract against If a party induced the other party to enter into a contract against its true intention by fraud or duress, or by taking advantage of the its true intention by fraud or duress, or by taking advantage of the other party's hardship, the aggrieved party is entitled to petition other party's hardship, the aggrieved party is entitled to petition the People's Court or an arbitration institution for amendment or the People's Court or an arbitration institution for amendment or cancellation of the contract.cancellation of the contract.

Where a party petitions for amendment of the contract, the Where a party petitions for amendment of the contract, the People's Court or arbitration institution may not cancel the People's Court or arbitration institution may not cancel the contract instead. contract instead.

Differences among withdrawal, Differences among withdrawal, rescission, and revocationrescission, and revocation

Withdraw an offer, an acceptance, or a declaration of Withdraw an offer, an acceptance, or a declaration of intention before it takes effect.intention before it takes effect.

Revoke an offer or a declaration of intention after it Revoke an offer or a declaration of intention after it was effective.was effective. Revoke by the party who has a right to revoke.Revoke by the party who has a right to revoke. Revoke by the court onlyRevoke by the court only

Rescind an effective contract or a juristic act.Rescind an effective contract or a juristic act. Rescind by the party who has a right to rescind.Rescind by the party who has a right to rescind. Rescind by the court onlyRescind by the court only

UNDROIT PrinciplesUNDROIT Principles

Article 3.14 (Notice of avoidance) Article 3.14 (Notice of avoidance) The right of a party to The right of a party to avoid the contractavoid the contract is is exercised by notice to the other partyexercised by notice to the other party


Article 3.17 (Retroactive effect of avoidance) Article 3.17 (Retroactive effect of avoidance) (1) (1) Avoidance takes effect retroactively.Avoidance takes effect retroactively. (2) On avoidance either party may claim (2) On avoidance either party may claim restitution of whatever it has supplied under the restitution of whatever it has supplied under the contract or the part of it avoided, provided that it contract or the part of it avoided, provided that it concurrently makes restitution of whatever it has concurrently makes restitution of whatever it has received under the contract or the part of it received under the contract or the part of it avoided or, if it cannot make restitution in kind, it avoided or, if it cannot make restitution in kind, it makes an allowance for what it has received.makes an allowance for what it has received.

Material MistakeMaterial Mistake

A significant misconception may be found if a A significant misconception may be found if a person performing an act misapprehends the person performing an act misapprehends the nature of the act, the other party, or the kind, nature of the act, the other party, or the kind, quality, specification, quantity and the like of quality, specification, quantity and the like of the subject matter, so that the consequences of the subject matter, so that the consequences of the act are contrary to its true intention, the act are contrary to its true intention, thereby resulting in substantial loss. (SPC thereby resulting in substantial loss. (SPC Opinion on Certain Questions Concerning the Opinion on Certain Questions Concerning the Implementation of GPCL)Implementation of GPCL)

Elements of significant misconceptionElements of significant misconception A declarant must misapprehends A declarant must misapprehends

The content of the actThe content of the act the nature of the act,the nature of the act, the other party, orthe other party, or the kind, quality, specification, quantity and the like of the subject matter.the kind, quality, specification, quantity and the like of the subject matter.

The concomitant circumstancesThe concomitant circumstances Erroneous assumption of the circumstances concomitant with the conclusion of the cErroneous assumption of the circumstances concomitant with the conclusion of the c

ontract that formed the essential basis of the mutual consent.ontract that formed the essential basis of the mutual consent. Liu Zhihan v. Li WeidongLiu Zhihan v. Li Weidong case (p188) case (p188)

The consequences of the act are contrary to its true intention.The consequences of the act are contrary to its true intention. The mistake caused the contract to be concluded. (the relation of cause-effeThe mistake caused the contract to be concluded. (the relation of cause-effe

ct)ct) Resulting in substantial loss.Resulting in substantial loss. A mistake that results from the gross negligence of the mistaken party is no A mistake that results from the gross negligence of the mistaken party is no

ground for avoiding a contract.ground for avoiding a contract.


Article 3.4 (Definition of mistake)Article 3.4 (Definition of mistake)Mistake is an erroneous assumption relating to Mistake is an erroneous assumption relating to

facts or to law existing when the contract was facts or to law existing when the contract was concluded.concluded.

UNDROIT PrinciplesUNDROIT Principles Article 3.5 (Relevant mistake)Article 3.5 (Relevant mistake) (1) A party may only (1) A party may only avoid the contract for mistakeavoid the contract for mistake if, when the contract was if, when the contract was

concluded, the mistake was of suchconcluded, the mistake was of such importance importance that a reasonable person in the that a reasonable person in the same situation as the party in error would only have concluded the contract on same situation as the party in error would only have concluded the contract on materially different terms or would not have concluded it at all if the true state materially different terms or would not have concluded it at all if the true state of affairs had been known, and of affairs had been known, and (a) the other party made the same mistake, or caused the mistake, or knew or ought (a) the other party made the same mistake, or caused the mistake, or knew or ought

to have known of the mistake and it was contrary to reasonable commercial to have known of the mistake and it was contrary to reasonable commercial standards of fair dealing to leave the mistaken party in error; or standards of fair dealing to leave the mistaken party in error; or

(b) the other party had not at the time of avoidance acted in reliance on the contract.(b) the other party had not at the time of avoidance acted in reliance on the contract. (2) However, a party may not avoid the contract if (2) However, a party may not avoid the contract if

(a) it was (a) it was grossly negligentgrossly negligent in committing the mistake; or in committing the mistake; or (b) the mistake relates to a matter in regard to which the risk of mistake was (b) the mistake relates to a matter in regard to which the risk of mistake was

assumed or, having regard to the circumstances, should be borne by the mistaken assumed or, having regard to the circumstances, should be borne by the mistaken party.party.


Article 3.6 (Error in expression or Article 3.6 (Error in expression or transmission)transmission)An error occurring in the expression or An error occurring in the expression or

transmission of a declaration is considered to be transmission of a declaration is considered to be a mistake of the person from whom the a mistake of the person from whom the declaration emanated.declaration emanated.

Mistake in PRC Civil LawMistake in PRC Civil Law

PRC Contract Law Art. 55PRC Contract Law Art. 55 A party's A party's rescission rightrescission right is extinguished in one is extinguished in one

of the following situations:of the following situations:(i) the party entitled to rescission fails to exercise the (i) the party entitled to rescission fails to exercise the

rescission right rescission right within one yearwithin one year after he knows or after he knows or should have known the cause for the rescission;should have known the cause for the rescission;

(ii) the party entitled to rescission (ii) the party entitled to rescission waives the right of waives the right of rescissionrescission by an explicit declaration or through his by an explicit declaration or through his own conduct after he knows the cause for rescission.own conduct after he knows the cause for rescission.


Article 3.15 Article 3.15 (Time limits) (Time limits) (1) Notice of avoidance shall be given within a reasonable (1) Notice of avoidance shall be given within a reasonable time, having regard to the circumstances, after the time, having regard to the circumstances, after the avoiding party knew or could not have been unaware of avoiding party knew or could not have been unaware of the relevant facts or became capable of acting freely. the relevant facts or became capable of acting freely. (2) Where an individual term of the contract may be (2) Where an individual term of the contract may be avoided by a party under Article 3.10, the period of time avoided by a party under Article 3.10, the period of time for giving notice of avoidance begins to run when that term for giving notice of avoidance begins to run when that term is asserted by the other party.is asserted by the other party.


Article 3.12 Article 3.12 (Confirmation) (Confirmation) If the party entitled to avoid the contract If the party entitled to avoid the contract expressly or impliedly confirms the contract expressly or impliedly confirms the contract after the period of time for giving notice of after the period of time for giving notice of avoidance has begun to run, avoidance of avoidance has begun to run, avoidance of the contract is excluded.the contract is excluded.

UNDROIT PrinciplesUNDROIT Principles Article 3.13 (Loss of right to avoid) Article 3.13 (Loss of right to avoid)

(1) If a party is entitled to avoid the contract for mistake but the other (1) If a party is entitled to avoid the contract for mistake but the other party declares itself willing to perform or performs the contract as it party declares itself willing to perform or performs the contract as it was understood by the party entitled to avoidance, the contract is was understood by the party entitled to avoidance, the contract is considered to have been concluded as the latter party understood it. considered to have been concluded as the latter party understood it. The other party must make such a declaration or render such The other party must make such a declaration or render such performance promptly after having been informed of the manner in performance promptly after having been informed of the manner in which the party entitled to avoidance had understood the contract and which the party entitled to avoidance had understood the contract and before that party has reasonably acted in reliance on a notice of before that party has reasonably acted in reliance on a notice of avoidance. avoidance. (2) After such a declaration or performance the right to avoidance is (2) After such a declaration or performance the right to avoidance is lost and any earlier notice of avoidance is ineffective.lost and any earlier notice of avoidance is ineffective.

Mistake in JapanMistake in Japan

Japan Civil Code Art. 95 Japan Civil Code Art. 95 A declaration of intention shall be A declaration of intention shall be null and voidnull and void if if

made under a mistake with regard to any essential made under a mistake with regard to any essential elements of a juristic act; however, if such mistake elements of a juristic act; however, if such mistake was caused by was caused by gross negligencegross negligence on the part of the on the part of the declarant, its nullity cannot be asserted by the decldeclarant, its nullity cannot be asserted by the declarant himself.”arant himself.”

DuressDuress


Article 3.9 (Threat) Article 3.9 (Threat) A party may avoid the contract when it has been A party may avoid the contract when it has been led to conclude the contract led to conclude the contract by the other party's by the other party's unjustified threatunjustified threat which, having regard to the which, having regard to the circumstances, is so imminent and serious as to circumstances, is so imminent and serious as to leave the first party no reasonable alternative. In leave the first party no reasonable alternative. In particular, a threat is unjustified if the act or particular, a threat is unjustified if the act or omission with which a party has been threatened omission with which a party has been threatened is wrongful in itself, or it is wrongful to use it as a is wrongful in itself, or it is wrongful to use it as a means to obtain the conclusion of the contract.means to obtain the conclusion of the contract.

UNDROIT PrinciplesUNDROIT Principles Article 3.10 (Gross disparity) Article 3.10 (Gross disparity)

(1) A party may avoid the contract or an individual term of it if, at the time of (1) A party may avoid the contract or an individual term of it if, at the time of the conclusion of the contract, the contract or term unjustifiably gave the the conclusion of the contract, the contract or term unjustifiably gave the other party an excessive advantage. Regard is to be had, among other factors, other party an excessive advantage. Regard is to be had, among other factors, to to (a) the fact that the other party has taken unfair advantage of the first party's (a) the fact that the other party has taken unfair advantage of the first party's dependence, dependence, economic distress or urgent needseconomic distress or urgent needs, or of its improvidence, , or of its improvidence, ignorance, inexperience or lack of bargaining skill; and ignorance, inexperience or lack of bargaining skill; and (b) the nature and purpose of the contract. (b) the nature and purpose of the contract. (2) Upon the request of the party entitled to avoidance, a court may adapt the (2) Upon the request of the party entitled to avoidance, a court may adapt the contract or term in order to make it accord with reasonable commercial contract or term in order to make it accord with reasonable commercial standards of fair dealing. standards of fair dealing. (3) A court may also adapt the contract or term upon the request of the party (3) A court may also adapt the contract or term upon the request of the party receiving notice of avoidance, provided that that party informs the other party receiving notice of avoidance, provided that that party informs the other party of its request promptly after receiving such notice and before the other party of its request promptly after receiving such notice and before the other party has reasonably acted in reliance on it. The provisions of Article 3.13(2) apply has reasonably acted in reliance on it. The provisions of Article 3.13(2) apply accordingly.accordingly.


Article 3.11 (Third persons) Article 3.11 (Third persons) (1) Where fraud, (1) Where fraud, threatthreat, gross disparity or a party's mistak, gross disparity or a party's mistake is imputable to, or e is imputable to, or is known or ought to be known byis known or ought to be known by, a t, a third person for whose acts the other party is responsible, third person for whose acts the other party is responsible, the contract may be avoided under the same conditions as if he contract may be avoided under the same conditions as if the behaviour or knowledge had been that of the party itselthe behaviour or knowledge had been that of the party itself. f. (2) Where fraud, threat or gross disparity is imputable to a (2) Where fraud, threat or gross disparity is imputable to a third person for whose acts the other party is not responsibthird person for whose acts the other party is not responsible, the contract may be avoided if that party knew or ought le, the contract may be avoided if that party knew or ought to have known of the fraud, threat or disparity, or has not to have known of the fraud, threat or disparity, or has not at the time of avoidance reasonably acted in reliance on the at the time of avoidance reasonably acted in reliance on the contract.contract.

Case Study: duressCase Study: duress

On October 1, 1998, Mr. Gale began to work for the Sanitary On October 1, 1998, Mr. Gale began to work for the Sanitary Department in the City Government of Saxon City. Under the Department in the City Government of Saxon City. Under the civil service rules, an employee may be discharged without civil service rules, an employee may be discharged without cause or explanation at any time during the first six months of cause or explanation at any time during the first six months of employment after which he attains permanent civil service employment after which he attains permanent civil service status. At 1:00 p. m. on March 30, 1999, the last working day status. At 1:00 p. m. on March 30, 1999, the last working day of Gale's probation, his supervisor, Ms. Elva, the Assistant of Gale's probation, his supervisor, Ms. Elva, the Assistant Director of the Department, handed him a memorandum, Director of the Department, handed him a memorandum, signed by her, which stated that he would be terminated signed by her, which stated that he would be terminated "effective 2:00 p.m. today, Friday, March 30, 1999.""effective 2:00 p.m. today, Friday, March 30, 1999."

After reading the memo, and without prompting from Elva, After reading the memo, and without prompting from Elva, Gale told her that he was seeking another position with the Gale told her that he was seeking another position with the city. He asked if, in order to avoid being fired, which would city. He asked if, in order to avoid being fired, which would have precluded him securing another city job, it would be have precluded him securing another city job, it would be possible for him to resign instead. Elva replied that she had no possible for him to resign instead. Elva replied that she had no objection to a resignation but that the decision was entirely up objection to a resignation but that the decision was entirely up to him. After going out to lunch to "give this some thoughts," to him. After going out to lunch to "give this some thoughts," Gale returned at 1:50 p.m. with a handwritten resignation, Gale returned at 1:50 p.m. with a handwritten resignation, which bore the time "1:55 p. m.," intended specifically to which bore the time "1:55 p. m.," intended specifically to become effective prior to her discharge. become effective prior to her discharge.

The note stated:The note stated:As I can no longer comply with the requirements of As I can no longer comply with the requirements of

the position I occupy, I am tendering my resignatiothe position I occupy, I am tendering my resignation, effective immediately.n, effective immediately.

Elva accepted the resignation. Elva accepted the resignation.

After resignation, Gale made several attempts to obtain other After resignation, Gale made several attempts to obtain other employment from the city and to extend his probationary employment from the city and to extend his probationary status with the Department. After all such efforts proved status with the Department. After all such efforts proved unsuccessful, he first learned the fact, from his lawyer, which unsuccessful, he first learned the fact, from his lawyer, which Elva, as the assistant director of his department, did not have Elva, as the assistant director of his department, did not have the authority to discharge a probationer. Under the city code, the authority to discharge a probationer. Under the city code, only the director of a department, with the approval of the City only the director of a department, with the approval of the City Manager, possesses the power to do so. Thus, Gale believe Manager, possesses the power to do so. Thus, Gale believe that, if Elva's memorandum had been the cause of his that, if Elva's memorandum had been the cause of his termination, his resignation would have been ineffective as termination, his resignation would have been ineffective as contrary to the requirements of the city's own regulations and contrary to the requirements of the city's own regulations and his resignation was the product of duress created by the invalid his resignation was the product of duress created by the invalid notice of dismissal. notice of dismissal.

Is there any contract between Gale and the City Is there any contract between Gale and the City Government as to his resignation? If yes, what did Government as to his resignation? If yes, what did Gale promise to the City Government?Gale promise to the City Government?

What does "duress" mean? Under the civil law or What does "duress" mean? Under the civil law or common law theory of duress, can Gale successfully common law theory of duress, can Gale successfully rescind or cancel his resignation and restore to the rescind or cancel his resignation and restore to the position he would have occupied had it not been position he would have occupied had it not been tendered that is, as a non-probationary civil service tendered that is, as a non-probationary civil service employee with full back pay and emoluments?employee with full back pay and emoluments?

Elements of DuressElements of Duress

There is a threatening conduct.There is a threatening conduct. The threat throws a scare into the other party (the declThe threat throws a scare into the other party (the decl

arant) and coerces him to make a declaration of intentarant) and coerces him to make a declaration of intention.ion.

The threat committed by the threatener is intentional.The threat committed by the threatener is intentional. Threat shall be illegal.Threat shall be illegal.

Illegal mannerIllegal manner Illegal (unjustified) purposeIllegal (unjustified) purpose The relation between manner and purpose is unjustified. The relation between manner and purpose is unjustified.

Article 58 0f GPCLin PRCArticle 58 0f GPCLin PRC Civil acts in the following categories shall be Civil acts in the following categories shall be null and voidnull and void::

(1) those performed by a person without capacity for civil conduct; (1) those performed by a person without capacity for civil conduct; (2) those that according to law may not be independently performed by (2) those that according to law may not be independently performed by

a person with limited capacity for civil conduct; a person with limited capacity for civil conduct; (3) those performed by a person against his true intentions as a result of (3) those performed by a person against his true intentions as a result of

cheating, cheating, coercion coercion or exploitation of his unfavorable position by the or exploitation of his unfavorable position by the other party;other party;

(4) those that performed through malicious collusion are detrimental to (4) those that performed through malicious collusion are detrimental to the interest of the state, a collective or a third party; the interest of the state, a collective or a third party;

(5) those that violate the law or the public interest; (5) those that violate the law or the public interest; (6) economic contracts that violate the state's mandatory plans; and (6) economic contracts that violate the state's mandatory plans; and (7) those that performed under the guise of legitimate acts conceal (7) those that performed under the guise of legitimate acts conceal

illegitimate purposes. illegitimate purposes. Civil acts that are null and void shall not be legally binding from the very Civil acts that are null and void shall not be legally binding from the very

beginning.beginning.

Contract Law§52(i)Contract Law§52(i)

A contract is A contract is invalid invalid in any of the following in any of the following circumstances:circumstances: (i) (i) One party induced conclusion of the contract One party induced conclusion of the contract

through fraud or through fraud or duress,duress, thereby harming the interests thereby harming the interests of the stateof the state;;

(ii) The parties colluded in bad faith, thereby harming the (ii) The parties colluded in bad faith, thereby harming the interests of the state, the collective or any third party;interests of the state, the collective or any third party;

(iii) The parties intended to conceal an illegal purpose (iii) The parties intended to conceal an illegal purpose under the guise of a legitimate transaction;under the guise of a legitimate transaction;

(iv) The contract harms public interests;(iv) The contract harms public interests; (v) The contract violates a mandatory provision of any (v) The contract violates a mandatory provision of any

law or administrative regulation. law or administrative regulation.

Contract Law§54IIContract Law§54II

Either of the parties may petition the People's Court or an Either of the parties may petition the People's Court or an arbitration institution for amendment or cancellation of a contract arbitration institution for amendment or cancellation of a contract if:if: (i) the contract was concluded due to a material mistake;(i) the contract was concluded due to a material mistake; (ii) the contract was grossly unconscionable at the time of its (ii) the contract was grossly unconscionable at the time of its

conclusion.conclusion. If a party induced the other party to enter into a contract If a party induced the other party to enter into a contract

against its true intention by against its true intention by fraud or fraud or duressduress, or by taking , or by taking advantage of the other party's hardship, advantage of the other party's hardship, the aggrieved party is the aggrieved party is entitled to petition the People's Court or an arbitration entitled to petition the People's Court or an arbitration institution for amendment or cancellation of the contractinstitution for amendment or cancellation of the contract ..


FraudFraud

FraudFraud

ChinaChinaVoidVoid

GPCL§58I(iii):GPCL§58I(iii):Economic Contract Law§7I(ii)Economic Contract Law§7I(ii)Technology Contract Law §21I(iv)Technology Contract Law §21I(iv)Foreign Economic Contract Law §10 Foreign Economic Contract Law §10

Avoidable and VoidAvoidable and VoidContract Law§52(i)Contract Law§52(i)Contract Law§54IIContract Law§54II


Article 3.8 (Fraud) Article 3.8 (Fraud) A party may A party may avoid the contractavoid the contract when it has been when it has been led to conclude the contract by the other party's led to conclude the contract by the other party's fraudulent representation, including language or fraudulent representation, including language or practices, or fraudulent non-disclosure of practices, or fraudulent non-disclosure of circumstances which, according to reasonable circumstances which, according to reasonable commercial standards of fair dealing, the latter commercial standards of fair dealing, the latter party should have disclosed.party should have disclosed.

GPCL§58I(iii)GPCL§58I(iii) Civil acts in the following categories shall be Civil acts in the following categories shall be null and voidnull and void: :

(1) those performed by a person without capacity for civil conduct; (1) those performed by a person without capacity for civil conduct; (2) those that according to law may not be independently performed by a (2) those that according to law may not be independently performed by a

person with limited capacity for civil conduct; person with limited capacity for civil conduct; (3) (3) those performed by a person against his true intentions as a result of those performed by a person against his true intentions as a result of

cheating, coercion or exploitation of his unfavourable position by the other cheating, coercion or exploitation of his unfavourable position by the other partyparty; ;

(4) those that performed through malicious collusion are detrimental to the (4) those that performed through malicious collusion are detrimental to the interest of the state, a collective or a third party; interest of the state, a collective or a third party;

(5) those that violate the law or the public interest; (5) those that violate the law or the public interest; (6) economic contracts that violate the state's mandatory plans; and (6) economic contracts that violate the state's mandatory plans; and (7) those that performed under the guise of legitimate acts conceal illegitimate (7) those that performed under the guise of legitimate acts conceal illegitimate

purposes. purposes. Civil acts that are null and void shall not be legally binding from the very Civil acts that are null and void shall not be legally binding from the very

beginning. beginning.

Economic Economic ContractContract Law§7I(ii) Law§7I(ii) The following economic contracts are The following economic contracts are null and voidnull and void: :

1) contracts that violate the law or administrative regulations; 1) contracts that violate the law or administrative regulations; 2) 2) contracts that are signed through the use of fraudcontracts that are signed through the use of fraud, duress or similar , duress or similar

means; means; 3) contracts signed by an agent who exceeds the scope of his power of agency 3) contracts signed by an agent who exceeds the scope of his power of agency

or contracts signed by an agent, in the name of his principal, with himself or or contracts signed by an agent, in the name of his principal, with himself or with another person whom he represents; and with another person whom he represents; and

4) economic contracts that violate the interests of the state or the public 4) economic contracts that violate the interests of the state or the public interest. interest.

Economic contracts that are void, from the time they are concluded, have Economic contracts that are void, from the time they are concluded, have no legally binding force. When a part of an economic contract is confirmed no legally binding force. When a part of an economic contract is confirmed to be void, if the validity of the remainder is not affected, the remainder to be void, if the validity of the remainder is not affected, the remainder shall still be valid. shall still be valid.

A void economic contract shall be confirmed by the people's courts or A void economic contract shall be confirmed by the people's courts or arbitration agencies. arbitration agencies.

Technology Technology ContractContract Law Law §21I(iv)§21I(iv)

The following technology contracts shall be The following technology contracts shall be invalidinvalid:: (1) Those which violate the law or regulations or which are harmful to (1) Those which violate the law or regulations or which are harmful to

the national or common social interest;the national or common social interest; (2) Those which illegally monopolize or obstruct the progress of (2) Those which illegally monopolize or obstruct the progress of

technology;technology; (3) Those which violate another's legitimate rights or interests; and(3) Those which violate another's legitimate rights or interests; and (4) (4) Those concluded by way of deceptionThose concluded by way of deception or coercion. or coercion.

An invalid contract shall have no legally binding force from An invalid contract shall have no legally binding force from the time it is made. The invalidity of a portion of a contract the time it is made. The invalidity of a portion of a contract shall not affect the remainder of the contract which shall retain shall not affect the remainder of the contract which shall retain its validity.its validity.

Foreign Economic Contract Law §10Foreign Economic Contract Law §10

Contracts concluded by means of fraud or under Contracts concluded by means of fraud or under duress are duress are invalidinvalid..

Contract Law§52(i)Contract Law§52(i)

A contract is A contract is invalid invalid in any of the following in any of the following circumstances:circumstances: (i) (i) One party induced conclusion of the contract One party induced conclusion of the contract

through fraud or duress, through fraud or duress, thereby harming the interests thereby harming the interests of the stateof the state;;

(ii) The parties colluded in bad faith, thereby harming the (ii) The parties colluded in bad faith, thereby harming the interests of the state, the collective or any third party;interests of the state, the collective or any third party;

(iii) The parties intended to conceal an illegal purpose (iii) The parties intended to conceal an illegal purpose under the guise of a legitimate transaction;under the guise of a legitimate transaction;

(iv) The contract harms public interests;(iv) The contract harms public interests; (v) The contract violates a mandatory provision of any (v) The contract violates a mandatory provision of any

law or administrative regulation. law or administrative regulation.

Contract Law§54IIContract Law§54II

Either of the parties may Either of the parties may petition the People's Court or an petition the People's Court or an arbitration institution forarbitration institution for amendment or cancellation of a contractamendment or cancellation of a contract if:if: (i) the contract was concluded due to a (i) the contract was concluded due to a material mistakematerial mistake;; (ii) the contract was grossly unconscionable at the time of its (ii) the contract was grossly unconscionable at the time of its

conclusion.conclusion. If a party induced the other party to enter into a contract If a party induced the other party to enter into a contract

against its true intention by fraudagainst its true intention by fraud or duress, or by taking or duress, or by taking advantage of the other party's hardship, advantage of the other party's hardship, the aggrieved party is the aggrieved party is entitled to petition the People's Court or an arbitration entitled to petition the People's Court or an arbitration institution for amendment or cancellation of the contractinstitution for amendment or cancellation of the contract ..


Article92 of ROC Civil CodeArticle92 of ROC Civil Code

An expression of intent which is procured by fraud or by duresAn expression of intent which is procured by fraud or by duress may be revoked by the expresser.If the fraud was done by a ts may be revoked by the expresser.If the fraud was done by a third party, the expression may be revoked only under the circuhird party, the expression may be revoked only under the circumstances that the other party knew, or might know the affairs.mstances that the other party knew, or might know the affairs.

The revocation of an expression of intent on the ground of frauThe revocation of an expression of intent on the ground of fraud can not be a valid defense against the bona fide third party.d can not be a valid defense against the bona fide third party.

Article93 of ROC Civil CodeArticle93 of ROC Civil Code

The right of revocation in the preceding article The right of revocation in the preceding article must be exercised within one year from the datmust be exercised within one year from the date when the fraud was discovered or when the de when the fraud was discovered or when the duress ceased.uress ceased. 　　 But it can not be exercised aftBut it can not be exercised after ten years since the expression of intent.er ten years since the expression of intent.

Article 96 of Japan Civil CodeArticle 96 of Japan Civil Code

A declaration of intention induced by fraud or duress A declaration of intention induced by fraud or duress is voidable.is voidable.

If a third person has committed fraud inducing a partyIf a third person has committed fraud inducing a party’s declaration of intention to another party, such decla’s declaration of intention to another party, such declaration of intention may be avoid only if such other parration of intention may be avoid only if such other party had knowledge of the fraud.ty had knowledge of the fraud.

The revocation of a declaration of intention on the grThe revocation of a declaration of intention on the ground of fraud can not be set up against a third party wound of fraud can not be set up against a third party who has acted in good faith.ho has acted in good faith.

Defects of Juristic Act MistakeFraudDuress. Mistake.

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Transcript of Defects of Juristic Act MistakeFraudDuress. Mistake.