Meaning
Rules on contract formation dictate that a contract is established when the parties execute it by signing, sealing, or when one party has performed its main obligations and the other has accepted them. In Chinese commercial practice, civil code article 490 resolves disputes where formal seals were missing but actual performance occurred. This rule recognizes the reality of trade over formal administrative errors.
Performance Execution
The performance of core contract duties, such as the delivery of industrial machinery or the payment of an advance deposit, can override the absence of a formal contract seal. When one party accepts the delivered goods or receives the payment, the law deems the agreement fully executed. This prevents parties from escaping their obligations on a technicality after they have benefited from the transaction.
The receiving party cannot later claim that the contract was invalid because the corporate chop was missing.
Informal Formation
A transaction can become legally binding through conduct alone even if the written contract was never signed by either party. This occurs frequently in rapid manufacturing supply chains where components are shipped before legal reviews finish.
Evidentiary Threshold
To invoke this performance doctrine, the party asserting contract formation must present clear proof of delivery and acceptance. Delivery receipts, bank transfers, and email confirmations must be linked to the specific transaction. This evidence must satisfy the court.
