Perspective | New Provisions and Understandings of "Significant Imbalance" in the Civil Code
Published:
2025-02-13
The new provisions regarding "obvious unfairness" in the Civil Code represent a further improvement of China's civil law system. This article aims to compare the differences between the old and new laws, analyze the elements constituting "obvious unfairness," and the applicable situations, in order to provide theoretical references for judicial practice and promote social fairness and justice.
Introduction
The new provisions on "obviously unfair" in the Civil Code are a further improvement of China's civil law system. This article aims to compare the differences between the old and new laws, analyze the constitutive elements and applicable situations of "obviously unfair," in order to provide theoretical references for judicial practice and promote social fairness and justice.
1. Comparison of the Civil Code and previous laws regarding "obviously unfair"
Article 151 of the Civil Code of the People's Republic of China stipulates that if one party takes advantage of the other party's state of distress or lack of judgment ability, resulting in an obviously unfair civil legal act, the harmed party has the right to request the people's court or arbitration institution to revoke it. Article 59 of the General Principles of Civil Law of the People's Republic of China (now abolished) stipulates that the following civil acts can be requested by one party to the people's court or arbitration institution for modification or revocation: (1) the actor has a significant misunderstanding of the content of the act; (2) it is obviously unfair. The revoked civil act is invalid from the beginning of the act. Article 54 of the Contract Law of the People's Republic of China (now abolished) stipulates that the following contracts can be requested by one party to the people's court or arbitration institution for modification or revocation: (1) those established due to significant misunderstanding; (2) those that are obviously unfair at the time of establishment. If one party uses fraud, coercion, or takes advantage of the other party's difficulties to enter into a contract against their true intentions, the harmed party has the right to request the people's court or arbitration institution to modify or revoke it. If a party requests modification, the people's court or arbitration institution shall not revoke it.
It is not difficult to see from the comparison that both the General Principles of Civil Law and the Contract Law start from objective elements, mainly stipulating the legal consequences of obviously unfair acts, while the Civil Code emphasizes the subjective judgment of obviously unfair acts. In addition, both the General Principles of Civil Law and the Contract Law list obviously unfair acts alongside taking advantage of others' difficulties as revocable situations, while the Civil Code incorporates taking advantage of others' difficulties as a subjective reason into the situation of obviously unfair acts, no longer stipulating it separately as a revocable situation.
2. Constitutive elements of "obviously unfair"
Objectively speaking, the interests of both parties are significantly unbalanced, and it is obviously unfair at the time the civil legal act is established. The system of obviously unfair acts is not intended to eliminate the commercial risks that parties should bear, but to prohibit or restrict one party from obtaining "windfall profits" that do not conform to trading rules. To determine whether it is obviously unfair, attention should be paid to trading rules, using the actor's trading scenario as the standard. The evaluation of whether it is obviously unfair should be based on the time point of the transaction; post-event judgments belong to commercial judgments and are not within the scope of legal intervention.
Subjectively speaking, when engaging in civil legal acts, one party has the intention to take advantage of their superior position or the other party's recklessness or inexperience to engage in obviously unfair civil legal acts. For example, when an actor is in a temporary urgent predicament and urgently needs money or has other urgent needs. Another example is when financial institution personnel sell high-risk financial products to elderly people with lower educational levels in towns, which may constitute obviously unfair.
3. Understanding of "and other situations" in "obviously unfair"
The Civil Code, after clearly stipulating "the other party is in a state of distress and lacks judgment ability," adds "and other situations," meaning that obviously unfair is not limited to the other party being in a state of distress and lacking judgment ability. The characteristic of being in a state of distress is that one party is temporarily in a dangerous and difficult state, and in order to change this situation, when trading with others, the other party takes advantage of one party's urgent need to change this state, resulting in a significant imbalance of interests during the transaction, which is extremely unfair. The characteristic of lacking judgment ability is that one party has insufficient knowledge related to the transaction, and the other party takes advantage of this deficiency, leading to a significant imbalance of interests during the transaction, which is extremely unfair. Therefore, the determination of "and other situations" needs to be based on whether the specific circumstances of the civil act are similar to the other party being in a state of distress or lacking judgment ability. Only if they are similar to these two situations can the provisions of obviously unfair be applied; otherwise, the rules of obviously unfair cannot be used for handling.
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