问答题
In October 2008 while Artai Construction Co Limited (Artai Co) was building a residence project, a serious accident took place because of geological causes. To rescue the project many construction materials, such as cement and sand, were needed. However, it was impossible for Artai Co to fi nd such a huge quantity of construction materials in a very short period of time. Artai Co, under such circumstances, had to negotiate with a developer of the neighbouring project and fi nally reached an agreement to buy construction materials from the developer at a very high price, three times the normal market price at that time.
Artai Co fell into fi nancial diffi culty as a lot of funds had been spent on the rescue work and failed to pay the price for the construction materials as agreed. A dispute arose between Artai Co and the developer.
Required:
Answer the following questions in accordance with the relevant provisions of the Contract Law of China, and give your reasons for your answer:
问答题
(a) State the validity of the agreement between Artai Co and the developer with respect to the purchase of the construction materials, and who would decide the validity of the agreement; (4 marks)
【正确答案】In accordance with Article 54 of the Contract Law where a contract which is obviously unfair when the contract is being concluded, such a contract is a voidable one. When the parties concluded the agreement in question, Artai Co was under an urgent situation. It had no bargaining capacity but to accept the unfair price. The developer took advantage of Artai Co’s distress to sell the construction materials at an unfair price. The agreement fell within the situation as provided for in Article 54 of the Contract. The validity of the agreement was to be determined by a court or arbitration commission.
【答案解析】
问答题
(b) State what legal procedure Artai Co might take if it considered the agreement was unfair for it to pay the price. (2 marks)
【正确答案】Where a contract is concluded under circumstances as set forth in the Contract Law, the party who considers the contract to be a voidable one may, within the statutory time limit, request a court or an arbitrary body to modify or rescind the contract.
【答案解析】
问答题
(c) State the precondition for Artai Co to take such a legal procedure. (4 marks)
【正确答案】The right of revocation extinguishes under the following circumstances: where a party who is entitled to revoke the contract fails to exercise his right of revocation within one year from the date on which he knows or should have known the reason for the revocation; where a party who is entitled to revoke the contract expressly or through an act indicates that he gives up the right of revocation.