Contract Law in England vs China: a Comparative Guide

As part of a series of articles co-authored by Culbert Ellis and IPO Pang Shenjun, both members of the International Commercial Law Alliance (“ICLA”), the authors of this article examine certain issues and distinctions between English and Chinese contract law, with particular reference to the extent to which one or the other may be preferable for inclusion in jurisdictional clauses.

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English Contract Law

English contract law is not directly codified as a single statute; rather, it is defined and well-developed by common law (being over centuries of case law as determined by an English judge) and supplemented by certain legislations (the Consumer Rights Act 2015, as an example). Some view English contract law as convenient and straightforward; others, too flexible. It is with this in mind that many contracts concluded across the globe, notwithstanding their execution in other jurisdictions, designate England (and Wales) as the governing jurisdiction. For good measure, it is particularly considered the dominant jurisdiction in international commercial contracts, mergers and acquisitions, litigation/dispute resolution and international arbitration.

One then turns to why this is the case, and we first must consider the principles of English contract law.

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The Key Elements of an English Contract

First and foremost, under English law a contract is understood as a legally binding agreement, whether made in writing or orally, whereby one party agrees to fulfil an obligation for another in exchange for consideration. In order to form an enforceable contract, there must be five key elements:

1. Offer: a promise by one party to enter into a contract on specific terms.
2. Acceptance: the final acceptance of an offer. The acceptance must usually be communicated, rather than by conduct.
3. Consideration: giving or promising something in exchange for the promise.
4. Intention to create legal relations: there must be a mutual intention to create a legally binding agreement.
5. Certainty of terms: all material terms of a contract must be agreed, i.e. it must be complete and not uncertain.

If the key elements of a contract are established, either party may seek to enforce its terms. This is particularly relevant where goods or services have not been delivered in accordance with the contract, or where one party seeks to terminate the agreement. Importantly, the presence of these elements means that a contract need not be formal in order to be enforceable. Recent case law, such as Sundorne Products v Geminor UK [2024] EWHC 1666 (Ch), illustrates this principle – a Memorandum of Understanding, ordinarily not regarded as a legally binding document, was held capable of being binding where it had not been expressly caveated (for instance, through wording such as “subject to contract”).

Culbert Ellis have been instructed in a number of cases concerning issues of contract formation, including whether a contract has been concluded and/or varied orally, and whether the parties possessed the requisite intention to create legal relations so as to give effect to a contract. Although every case turns on its facts, the inherent flexibility of English contract law allows the parties to present and argue their positions comprehensively. For instance, whilst contracts may be created orally, one must consider the case of Blue v Ashley [2017] EWHC 1928 (Comm), 26 July 2017, in which Leggatt LJ comments (and will overarchingly be in consideration by the English courts):

“It is rare in modern commercial litigation to encounter a claim, particularly a claim for millions of pounds, based on an agreement which is not only said to have been made purely by word of mouth but of which there is no contemporaneous documentary record of any kind. In the twenty-first century the prevalence of emails, text messages and other forms of electronic communication is such that most agreements or discussions which are of legal significance, even if not embodied in writing, leave some form of electronic footprint.”

Attention then turns to the reasons why English law is regarded as the dominant choice of jurisdiction for contracts. One significant factor is historical – through the expansion of the British Empire, English law was introduced into numerous jurisdictions, including Hong Kong, India and other parts of Asia, Canada, Australia, New Zealand and the wider Commonwealth. These jurisdictions continue to reflect a predominantly English legal system, which has contributed to the recognition and enduring respect afforded to English law internationally.

Another is the sufficient certainty and confidence that parties place on English law contracts. It should be noted that, under English law, there is no implied overarching duty of good faith between contracting parties, unlike in certain other jurisdictions. Accordingly, once the essential requirements of an English contract are established, the terms benefit from a greater degree of certainty than would be the case if, for example, the parties’ conduct could be invoked to vary the agreed contractual terms. Thus, what is set out in writing is generally taken to represent the parties’ agreement, subject to certain other mechanisms such as implied terms or estoppel (the detailed discussion of which lies beyond the scope of this article).

Finally, English contract law places strong emphasis on the principle of freedom of contract. Parties are, in general, at liberty to agree upon whatever terms they choose, even where the result may amount to a poor bargain for one side, provided the terms are not inherently unlawful or contrary to public policy . The courts are generally reluctant to interfere with the commercial bargain struck between the parties, save where intervention is absolutely necessary. On the contrary, English courts demonstrate a clear preference for upholding contractual terms rather than seeking mechanisms to avoid them. Consequently, contractual terms are more likely to be recognised and enforced under English law than in many other jurisdictions.

¹For the avoidance of doubt, certain matters cannot be excluded under English law, such as fraud ,gross negligence, wilful misconduct, personal injury and death

The foregoing considerations render English law a prevalent choice of jurisdiction for the enforcement of contractual terms. However, as discussed below, there has been a growing trend towards contracts being governed by Chinese law, in preference to other jurisdictions.

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Chinese Contract Law

On the contrary, Chinese contract law is primarily codified in statutory legislation rather than developed through case law. The principal legal framework governing contractual relationships in the People’s Republic of China is the Civil Code of the People's Republic of China, which came into force on 1 January 2021 and replaced several previous statutes, including the former Contract Law of the People's Republic of China. The Civil Code provides a comprehensive and systematic legal framework regulating the formation, performance, modification, and termination of contracts.

Unlike common law jurisdictions, where judicial precedents play a central role, Chinese contract law relies heavily on statutory provisions. Judicial interpretations issued by the Supreme People's Court of the People's Republic of China also play an important role in clarifying how the Civil Code should be applied in practice. These interpretations provide guidance to lower courts and contribute to a more consistent application of contract law across China.

In recent years, with the rapid expansion of China’s economy and the increasing number of cross-border commercial transactions involving Chinese companies, Chinese law has increasingly been selected as the governing law for commercial contracts involving Chinese counterparties. This trend is particularly evident in supply agreements, manufacturing contracts, technology cooperation arrangements, and other commercial transactions closely connected with China.

One must therefore consider the fundamental principles underlying Chinese contract law.

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The Key Elements of a Chinese Contract

Under Chinese law, a contract is defined as an agreement between civil subjects establishing, modifying, or terminating civil legal relationships. In order for a contract to be legally binding and enforceable, several key elements must generally be satisfied:

1. Offer: An offer is a definite expression of intent by one party to conclude a contract with another party on specific terms. The offer must contain sufficiently clear terms and indicate the intention of the offeror to be bound once accepted.
2. Acceptance: Acceptance refers to the offeree’s assent to the terms of the offer. Acceptance must be made within the time limit specified in the offer or within a reasonable time where no time limit has been stated. Once an offer is validly accepted, the contract is generally considered to be formed.
3. Capacity of the Parties: The parties entering into the contract must possess the appropriate civil capacity. Natural persons must have full civil capacity, while legal persons and other organizations must act within their registered business scope.
4. Lawful Purpose and Content: The purpose and content of the contract must not violate mandatory provisions of laws or administrative regulations, nor may they contravene public order or good morals.
5. Genuine Expression of Intent: The parties must enter into the contract voluntarily and based on genuine intent. Contracts entered into through fraud, coercion, or significant misunderstanding may be subject to rescission or invalidation.

Where these elements are satisfied, a contract will generally be considered valid and legally binding under Chinese law. Notably, Chinese law recognises both written and oral contracts. However, in practice, written contracts are strongly preferred, particularly in commercial transactions, as they provide clearer evidence in the event of disputes.

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Judicial Practice and Contract Formation

In determining whether a contract has been formed, Chinese courts primarily examine the objective evidence of the parties’ intentions, including written agreements, correspondence, transaction records, invoices, delivery documents, and other commercial records.

Chinese courts often adopt a pragmatic approach to contract formation. Even where a formal written contract has not been executed, a contractual relationship may still be recognised if the parties’ conduct clearly demonstrates mutual intent to establish contractual obligations.

However, similar to other modern jurisdictions, contemporary commercial practice in China leaves a substantial documentary trail. Emails, electronic contracts and online transaction records are commonly relied upon as evidence in litigation or arbitration proceedings.

One of the main reasons for the increasing use of Chinese law as the governing law of contracts is the growing commercial presence of Chinese companies in global trade. Where contracts are closely connected with China, such as manufacturing agreements, supply contracts, or transactions involving Chinese assets, it is often practical for the governing law to be Chinese law, particularly where disputes may ultimately need to be enforced within China.

Another factor is the relatively comprehensive and codified nature of Chinese contract law. The Civil Code provides detailed provisions governing many aspects of contractual relationships, including contract interpretation, liability for breach, termination rights, and damages. This codification offers a degree of predictability for parties engaged in transactions involving China.

Chinese contract law also recognises the principle of good faith, which plays a central role in the performance and interpretation of contracts. Parties are expected to observe honesty and good faith throughout the negotiation, formation, and performance of contracts. This principle allows courts to address unfair conduct even where the contract terms themselves may not expressly regulate the situation.

Furthermore, Chinese law respects the principle of freedom of contract, allowing parties considerable autonomy to negotiate and structure their contractual arrangements. Subject to mandatory legal provisions and public policy considerations, parties are generally free to determine the rights and obligations arising from their contractual relationship.

Chinese courts typically place emphasis on enforcing the parties’ agreement while also ensuring fairness and compliance with statutory requirements. As a result, contractual obligations are generally enforceable provided that the agreement does not violate mandatory legal rules.

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Conclusion

As China continues to play a central role in global trade and investment, Chinese law has increasingly become a practical and relevant choice for the governance of commercial contracts involving Chinese counterparties. Its codified structure, detailed statutory framework, and emphasis on good faith provide a comprehensive legal basis for regulating contractual relationships.

For parties entering into commercial arrangements connected with China, a clear understanding of the principles of Chinese contract law is essential in order to structure enforceable agreements and effectively manage legal risks.

Contracting under English and Chinese Law: Practical Considerations

In practice, the choice between English law and Chinese law as the governing law of a contract will largely depend upon the commercial context of the transaction, the location of the parties and assets and the forum in which any dispute may ultimately be resolved.

English law is frequently selected in international commercial transactions owing to its well-established body of case law, the predictability of judicial interpretation, and the global reputation of the English courts and arbitral institutions. Its emphasis on certainty and freedom of contract enables parties to structure complex commercial arrangements with confidence that the contractual bargain will generally be upheld.

Conversely, where a transaction is closely connected with China, particularly where manufacturing, supply chains or assets are located within the jurisdiction, Chinese law may present a more practical governing framework. The codified structure of the Civil Code of the People’s Republic of China, together with the central role of the good faith principle, provides a comprehensive statutory regime regulating contractual relationships and their enforcement within China.

For cross-border transactions involving both jurisdictions, careful consideration should therefore be given not only to the governing law clause, but also to jurisdiction and dispute resolution provisions, as well as the location of enforceable assets. In many cases, international arbitration may provide an effective neutral forum capable of bridging differences between legal systems while ensuring enforceability of awards.

Ultimately, the selection of governing law is a strategic commercial decision. By understanding the structural and doctrinal differences between English and Chinese contract law, parties are better placed to structure agreements that are both legally robust and commercially effective.

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How To Get In Contact

To find out more or if you require assistance with any aspect of contract law, speak with our Corporate and Litigation Teams on +44 (0)204 600 9907 or email info@culbertellis.com.

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Co-authored by Wing Ming Choi and Yvonne Wu

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About Wing Ming Choi | Associate | Culbert Ellis

Wing Ming Choi is a qualified solicitor in England and Wales, having qualified in 2022, and has been engaged in a multitude of complex commercial disputes for high-net worth individuals and multi-national companies, particularly in the English High Court. He has also been involved in group actions.

Wing’s primary focus is on intellectual property disputes, large commercial disputes and sports law.

Wing also has extensive outside interests beyond the law, which include playing football, badminton and tennis on a weekly basis, and owning and producing his own podcast, “Growing Your Peace of Mind”. He also speaks Hakka and Cantonese at an intermediate level

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About Yvonne Wu | Senior Associate | IPO Pang Shenjun PLLC

Ms. Wu advises international clients on foreign direct investment, corporate structuring, and regulatory compliance in China. Her work includes market entry planning, contract enforceability, and ongoing corporate governance matters. She combines Western legal training with strong bilingual capabilities in English and Mandarin.