A domestic study of comparative law

A comparative study of contract law in mainland China, Hong Kong and Macau

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Written by Hao Jiang
Assistant Professor of Comparative Private Law
Bocconi University Department of Legal Studies

The comparative study of domestic law is the modus operandi for comparativists. One obvious use of comparative law is to study foreign law with the aim of improving domestic law on the same issue with the guide of foreign models. Rarely do comparativists compare laws from various regions in one country. Not to mention within one region. Yet the Greater Bay Area (“GBA”) in China is such a natural laboratory for this unprecedented comparative law experiment.

The Greater Bay Area in China is a megalopolis on the Pearl River Delta consisting of eleven cities and comprising three jurisdictions: nine cities in the province of Guangdong in mainland China, Hong Kong Special Administrative Region and Macau Special Administrative Region. Although geographically small, the GBA is one of the most economically developed areas in the country: its gross domestic product (“GDP”) is comparable to that of countries such as Italy, Canada and Korea.

In spite of its flourishing economy, the GBA is also characterized by substantial legal diversity, since each of the three jurisdictions has their own legal system, that has been distinctively influenced, in the recent past, by different strands of European law: mostly German law in mainland China, the English common law in Hong Kong, and Portuguese law in Macau. Despite in one region of China, the interplay of three distinct contract laws is no less complicated than what European comparativists do with comparing German, English and Portuguese laws. As a result, contractual transactions involving parties and/or goods from the three jurisdictions, despite the geographical proximities, are qualified as cross-border contracts. Legal diversity creates legal uncertainty and transactions costs for the trade in the region may significantly be lowered through the adoption of a uniform contract law.

In this project, we set out to study the fundamental doctrines in contract law across three jurisdictions with a specific aim of producing a model sales law for sales of goods between merchants. Our initial thoughts were that sales law is specific enough to stand a reasonable chance of harmonization. Over time, we realize that such an undertaking would require doctrinal compromises and significant political will. In the end, even if we were to succeed, it would mean letting some of the fundamental doctrines unregulated such as whether consideration is required in contract formation, the availability of duty to negotiate in good faith, the forms of contractual remedies (such as right to specific performance), and change of circumstances. We feel that we could not do a better job than Convention on International Sales of Goods (“CISG”). Perhaps, if an enactment of model sales law itself is the end, the region stands a better chance just to adopt the CISG. Still, the CISG itself, is not without problems. It does not deal with some fundamental doctrines in contract law and the interpretation of certain doctrines is ambiguous and the imperfect result of political compromises.

Having acknowledged these uncertainties, we decided to expand the scope of this study to cover the fundamental doctrines in contract law across all three jurisdictions. Not only did we cover the doctrinal topics in CISG or a typical sales law such as the battle of forms and formation of contract, good faith in performance, remedies for breach of contract, we also took stock of the fundamental differences in each jurisdiction’s response to pre-contractual liabilities, vitiating factors such as fairness and mistake, hardship and frustration. In doing so, in addition to accounting for the doctrinal differences between the jurisdictions, I asked each contributor to identify a pathway forward for harmonization. Each of the contributions examines the doctrines through not only the codified rules but also the cases and academic literature. Through a functional approach, we often ask what the purpose a doctrine serves and whether diverse rules would in fact produce similar results to serve such purposes.

Even though we have not yet produced a draft sales law for GBA, this comprehensive doctrinal study lays the groundwork for various future projects that would have significant impacts in trade and commercial activities in the region. Ideally, we could attempt to adopt a model contract law that unifies the main doctrines of contracts; alternatively, a common sales law could be adopted using CISG as a reference model; alternatively, as an academic exercise, we could draft a restatement of greater China contract law that takes stock of the existing laws with comparative law reference.

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