Chinese contract law in Civil Code Chapter IX defines the object of a contract as the thing to which parties’ rights and obligations are directed. In a Contract of Purchase and Sale, the object of the contract is the merchandise being exchanged as provided for by the rights and obligations of the parties. Taking a Lease Agreement as another example, the object of the contract is the premises of the lease, and its provisions cover legal subject matter that addresses the nature of the lease, including a specified duration. However, not every contract needs to have an object, only subject matter. To illustrate this principle, consider that an Employment Contract only contains provisions defining what is to be done, but does not specify an object of the contract.

The Chinese Civil Code recognizes four types of subject matter in contracts. First is tangible property, which is characterized as any physical thing having value and circulating in the economy. Second is intangible property, which refers to intellectual property that holds value and can legally circulate in the economy. Third is labor services, such as those provided by a taxi driver or real estate broker, which do not constitute tangible property. Fourth is the work product attained as a result of performing a contract, which constitutes either tangible or intangible property. An example of a typical tangible property work product is the buildings constructed by a general contractor, while an example of a typical intangible property work product is a patentable invention produced by an R&D center.

A Contract of Purchase and Sale is mainly for transferring title to the object of the contract. The subject matter for such a contract includes the purchaser’s obligation to pay the agreed price and the seller’s obligation to transfer title to the object of the contract because such a contract is intended to facilitate a transaction. The transfer of title to the contractual object is fundamental to the Contract of Purchase and Sale and material to the parties’ interests. The seller in such a contract faces irreparable harm should the purchaser refuse to pay or file for bankruptcy after taking possession, unless the seller retains title to or a security interest in the property. If a security interest was not obtained prior to bankruptcy, the seller would instead have to become a bankruptcy creditor and likely have its recovery significantly reduced. Thus, as can be seen, both the object of a contract and the contractual provisions define the parties’ property rights.

Comparative Law

The concept of the contractual object in Chinese law was originally derived from continental European law but has roots in traditional Chinese legal tradition. One United States jurisdiction, Louisiana, also uses this legal concept in Chapter 6—Object and Matter of Contracts, whereas common law jurisdictions use the concept of consideration. However, Chinese law differs as to contract formation because the socialist law traditionally looks to fairness as the determinant of whether a contract has been formed, and the new Civil Code of the People’s Republic of China has much more detailed rules on contractual objects than Louisiana’s code. Moreover, Chinese securities regulation also requires consideration to support a contract of purchase and sale of securities.

Further Reading

See our comprehensive resources on China’s Foreign Investment Law. and an overview of FDI regulation in our Foreign Investment Law FAQ.

Translation Guide

See : 标的物