Chapter Three Validity of Contracts
Article 44 Effectiveness of Contract
A lawfully formed contract becomes effective upon its formation.
Where effectiveness of a contract is subject to any procedure such as approval or registration, etc. as required by a relevant law or administrative regulation, such provision applies.

Article 45 Conditions Precedent; Conditions Subsequent; Improper Impairment or Facilitation
The parties may prescribe that effectiveness of a contract be subject to certain conditions. A contract subject to a condition precedent becomes effective once such condition is satisfied. A contract subject to a condition subsequent is extinguished once such condition is satisfied.
Where in order to further its own interests, a party improperly impaired the satisfaction of a condition, the condition is deemed to have been satisfied; where a party improperly facilitated the satisfaction of a condition, the condition is deemed not to have been satisfied.

Article 46 Contract Term
The parties may prescribe a term for a contract. A contract subject to a time of commencement becomes effective at such time. A contract subject to a time of expiration is extinguished at such time.

Article 47 Contract by Person with Limited Capacity
A contract concluded by a person with limited capacity for civil act is valid upon ratification by the legal agent thereof, provided that a contract from which such person accrues benefits only or the conclusion of which is appropriate for his age, intelligence or mental health does not require ratification by his legal agent.
The other party may demand that the legal agent ratify the contract within one month. If the legal agent fails to manifest his intention, he is deemed to have declined to ratify the contract. Prior to ratification of the contract, the other party in good faith is entitled to cancel the contract. Cancellation shall be effected by notification.

Article 48 Contract by Unauthorized Agent
Absent ratification by the principal, a contract concluded on his behalf by a person who lacked agency authority, who acted beyond his agency authority or whose agency authority was extinguished is not binding upon the principal unless ratified by him, and the person performing such act is liable.
The other party may demand that the principal ratify the contract within one month. Where the principal fails to manifest his intention, he is deemed to have declined to ratify the contract. Prior to ratification of the contract, the other party in good faith is entitled to cancel the contract. Cancellation shall be effected by notification.

Article 49 Contract by Person with Apparent Agency Authority
Where the person lacking agency authority, acting beyond his agency authority, or whose agency authority was extinguished concluded a contract in the name of the principal, if it was reasonable for the other party to believe that the person performing the act had agency authority, such act of agency is valid.

Article 50 Contract Executed by Legal Representative
Where the legal representative or the person-in-charge of a legal person or an organization of any other nature entered into a contract acting beyond his scope of authority, unless the other party knew or should have known that he was acting beyond his scope of authority, such act of representation is valid.

Article 51 Unauthorized Disposal of Property through Contract
Where a piece of property belonging to another person was disposed of by a person without the power to do so, such contract is nevertheless valid once the person with the power to its disposal has ratified the contract, or if the person lacking the power to dispose of it when the contract was concluded has subsequently acquired such power.

Article 52 Invalidating Circumstances
A contract is invalid in any of the following circumstances:
(i) One party induced conclusion of the contract through fraud or duress, thereby harming the interests of the state;
(ii) The parties colluded in bad faith, thereby harming the interests of the state, the collective or any third party;
(iii) The parties intended to conceal an illegal purpose under the guise of a legitimate transaction;
(iv) The contract harms public interests;
(v) The contract violates a mandatory provision of any law or administrative regulation.

Article 53 Invalidity of Certain Exculpatory Provisions
The following exculpatory provisions in a contract are invalid:
(i) excluding one party's liability for personal injury caused to the other party;
(ii) excluding one party's liability for property loss caused to the other party by its intentional misconduct or gross negligence.

Article 54 Contract Subject to Amendment or Cancellation
Either of the parties may petition the People's Court or an arbitration institution for amendment or cancellation of a contract if:
(i) the contract was concluded due to a material mistake;
(ii) the contract was grossly unconscionable at the time of its conclusion.
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 other party's hardship, the aggrieved party is entitled to petition the People's Court or an arbitration institution for amendment or cancellation of the contract.
Where a party petitions for amendment of the contract, the People's Court or arbitration institution may not cancel the contract instead.

Article 55 Extinguishment of Cancellation Right
A party's cancellation right is extinguished in any of the following circumstances:
(i) It fails to exercise the cancellation right within one year, commencing on the date when the party knew or should have known the cause for the cancellation;
(ii) Upon becoming aware of the cause for cancellation, it waives the cancellation right by express statement or by conduct.

Article 56 Effect of Invalidation or Cancellation; Partial Invalidation or Cancellation
An invalid or canceled contract is not legally binding ab initio. Where a contract is partially invalid, and the validity of the remaining provisions thereof is not affected as a result, the remaining provisions are nevertheless valid.

Article 57 Independence of Dispute Resolution Provision
The invalidation, cancellation or discharge of a contract does not impair the validity of the contract provision concerning the method of dispute resolution, which exists independently in the contract.

Article 58 Remedies in Case of Invalidation or Cancellation
After a contract was invalidated or canceled, the parties shall make restitution of any property acquired thereunder; where restitution in kind is not possible or necessary, allowance shall be made in money based on the value of the property. The party at fault shall indemnify the other party for its loss sustained as a result. Where both parties were at fault, the parties shall bear their respective liabilities accordingly.

Article 59 Remedies in Case of Collusion in Bad Faith
Where the parties colluded in bad faith, thereby harming the interests of the state, the collective or a third person, any property acquired as a result shall be turned over to the state or be returned to the collective or the third person