An Overview of Article 153

This article focuses on Article 153 of the Civil Code as it is the substantive legal provision that covers most civil juristic acts such as the creation of contracts, debts, wills, and property rights, whereas the other provisions in the Civil Code are specific to certain areas of law. A civil juristic act is ‘an act through which a person of the civil law, by expression of intent, creates, alters, or terminates a civil juristic relationship’.Footnote ³ Such acts are central to the private law system, as essentially, they are acts conducted by persons under civil law which give rise to rights and obligations among them.

Before examining in depth the concepts of public order and good morals, it is necessary to appreciate the effect of Article 153. As a general rule, a civil juristic act that violates mandatory provisions of law or administrative regulations (Article 153(1)) and public order and good morals (Article 153(2)) is void. The act does not create any rights or obligations and has no legal effect at any time. A party does not have to take any action to render the act void, although in a legal dispute, a court may declare that the civil juristic act is void.

The most straightforward application of Article 153 is where an act violates mandatory provisions of law such as criminal law or administrative regulations – this leads to invalidity of the act.Footnote ⁴ But where the act violates a source of law which is of lower hierarchy such as local regulations, administrative rules, or normative documents, there is no immediate application of Article 153(1) in rendering the act void. Instead, the applicable provision is Article 153(2). The courts would have to consider whether the act violates public order and good morals similar to other actions not prescribed by any formal legal sources. It is helpful to consider the latter more complex scenario before moving to discuss the concepts in depth to illustrate the general structure and coherence of Article 153.

Violation of laws or regulations of lower hierarchy

If the act violates provisions in a source of law of lower hierarchy, the courts may still consider that the violation of a provision contained in an administrative rule or normative documents involves an affront to public order or good morals. While administrative rules are sources of law, they are of lower hierarchy than the law and administrative regulations stated in Article 153(1).Footnote ⁵ Normative documents are not formal sources of law in the Chinese system but are non-legislative documents with binding force on private parties in a specific field.Footnote ⁶ Guiding Case No. 170 aptly illustrates this.Footnote ⁷ In the case, the plaintiff was the proprietor of a hotel. After winning the bid to lease a business building owned by the defendant, the plaintiff entered into a lease with the defendant. Clause 5 of the lease stipulated that, since the leased property had been identified by relevant authorities as a ‘dangerous building’, it would need to be reinforced structurally before use. The plaintiff was aware of the issues and defects related to the leased property. The plaintiff attempted to fulfil its contractual obligation under Clause 5 by reinforcing the property to make sure it met the standards for commercial real estate use. However, during the reinforcement construction process, a significant portion of the building collapsed.

Meanwhile, a ‘Housing Safety Appraisal Opinion’ issued by the Jiangxi Provincial Construction Safety Production Supervision and Management Station stated that the main structure of the property leased, including its design and construction of load-bearing components, did not meet the requirements of the current national design and construction standards and posed significant structural risks. Further, according to the Standards for Appraisal of Dangerous Housing, the building was classified as a ‘Class D dangerous structure’ and was to be completely demolished as soon as possible. Furthermore, Article 6 of the Administrative Measures for Leasing of Commercial Housing (Administrative Measures), a ministerial rule issued by the Ministry of Housing and Urban-Rural Development, stipulates that buildings which do not comply with mandatory standards for safety, disaster prevention, and other engineering construction shall not be leased.

The plaintiff filed a lawsuit in court, claiming the termination of the lease, the return of a security deposit of RMB 2.2 million, and compensation for various economic losses totalling RMB 2.81 million. The defendant counterclaimed, requesting the plaintiff be held liable for infringement and be ordered to pay RMB 24.635 million in compensation. The Supreme People’s Court, in its final ruling following two lower court judgments, determined that the lease was invalid. The Court ordered the defendant to return the security deposit of RMB 2.2 million to the plaintiff and rejected all other claims from both parties.

The Supreme People’s Court held that the contract concluded was in contravention of Article 6 of the Administrative Measures. While the Administrative Measures are a ministerial rule in terms of legal hierarchy, Article 6 reflects the protection of public safety and the maintenance of public order. In circumstances such as in the case at stake, where the property in question had been found to pose serious structural risks and was required to be demolished as soon as possible, the parties entering into a lease to operate a hotel on such premises endangered the safety of the general public. Such behaviour constitutes conduct contrary to public order. From the perspective of safeguarding public safety and establishing correct social values, the court added that it shall not lend support to or encourage behaviours which neglect public safety for the pursuit of economic interests.

A careful analysis of the regulatory objective in documents of lower hierarchy than law and administrative regulations is necessary. For example, nominee shareholder agreements of financial leasing companies, prohibited in rules promulgated by the Banking and Insurance Regulatory Commission,Footnote ⁸ are invalid to the extent that holding shares of financial leasing companies as a nominee shareholder for natural persons violates gongxuliangsu. This is because the specific qualification for shareholders of financial leasing companies to consist only of legal persons is intended to strengthen the supervision and management of financial institutions, prevent and mitigate financial risks, promote the healthy development of financial institutions, and safeguard social and economic order as well as public interests.Footnote ⁹ In a similar vein, nominee shareholder agreements of listed companies are likely to be invalid because they obscure regulatory measures on disclosure and connected transactions and undermine the public interest in the stability of financial markets.Footnote ¹⁰ However, nominee shareholder agreements of private limited companies are generally valid.Footnote ¹¹

The need to closely analyse the underlying objectives of the provisions contained in departmental and ministerial rules is emphasised in the Notice by the Supreme People’s Court on Issuing the Minutes of the National Court Work Conference for Civil and Commercial Trials 2019, which is intended as guidance to all national courts. Paragraph 31 of the Notice states that:

This paragraph summarises the current approach taken by Chinese courts when confronted with allegations that a departmental or ministerial rule has been violated. Where the rule contravened is of lower hierarchy in the sources of law than law and administrative regulations, the civil juristic act is considered under gongxuliangsu with reference to the rule’s regulatory objective in determining how public order or good morals are affected by the act in question. At the same time, not all provisions contained in sources of law, regardless of hierarchy, relate to gongxuliangsu.

The Concept of Gongxu – Public Order

Conceptually, the general judicial perspective is that:

Examples of contracts that offend public order include those facilitating tax evasion and unfair competition.Footnote ¹³ The interpretation of this concept in the Civil Code corresponds to Articles 52(1), 52(2), and 52(4) of the now repealed Contract Law. They provide that a contract is invalid if ‘one party induced conclusion of the contract through fraud or duress and impairs the State’s interests’, ‘the parties colluded in bad faith, thereby harming the interests of the State, the collective or any third party’, and ‘the contract harms social and public interests’. While public order is a general phrase, it is generally agreed that there is a typology of situations in which this concept may operate. They include contracts which (1) harm national political, economic, financial, taxation or security order; (2) restrict economic freedom; (3) violate fair competition; (4) violate consumer protection; and (5) violate labour protection.Footnote ¹⁴

In the recent Interpretation, the Supreme People’s Court has further clarified what constitutes violations of gongxu. Article 17 provides that (1) contracts which ‘affect the nation’s political security, economic security, military security, or otherwise the national security’, and (2) contracts which ‘affect social stability or fair competition, harm the public interest, or otherwise disrupt the public order’, are civil juristic acts to be held invalid in accordance with Article 153(2). The idea is that gongxu can be divided into, broadly, national security and social public order. Contracts which affect political, economic, military, or national security are in the subset of national security, whilst contracts that affect the fundamental public order of society fall under the subset of social public order. The latter subset, social public order, refers to the general order necessary for the existence and development of a modern civilised society such as health and safety, economic order, and order in public places. Since many civil juristic acts may affect social public order in everyday life, an act is only to be invalidated when it has a significant impact on the maintenance of the order concerned to the extent that it affects the fundamental order in society.

Gongxu in Judicial Practice

In practice, however, an express reference to the concept of public order is more limited in resolving civil disputes compared with the courts’ repeated emphasis on liangsu, as will be discussed later. This is because most civil juristic acts which may appear to fall within the categories identified above are likely to have already been prohibited by laws or administrative regulations.Footnote ¹⁵ For instance, the Chinese Criminal Law is neatly divided into sections which resemble the overall concept of public order: crimes endangering national security (Chapter 1 of Part 2), crimes endangering public security (Chapter 2 of Part 2), crimes destroying the order of socialist market economy (Chapter 3 of Part 2) including provisions on financial fraud, and crimes obstructing the administration of social order (Chapter 6 of Part 2) including provisions on obstruction of justice and endangerment of public health and natural resources. In relation to acts hindering fair competition, they are regulated by the Anti-Unfair Competition Law and the Anti-Monopoly Law. It follows that it is only where there is a borderline factual circumstance which may seem to fall outside the ambit of the Criminal Law. and other laws and administrative regulations that it will be necessary for the courts to rely explicitly on the notion of public order. Civil juristic acts involving criminal offences, such as contracts involving concealment of an offence, are, for example, invalid by a straightforward application of Article 153(1) unless the exception contained in the proviso applies.

As explained, public order entails a wide range of public interests, but it is applicable only as a legal concept to invalidate civil juristic acts when these interests have not yet been included in laws or administrative regulations as statutory safeguards. This is particularly relevant to emerging phenomena such as unprecedented societal conditions and evolving technologies where the concept of public order can play a pivotal role. An illustrative example is the nascent area of mining and trading of ‘virtual currencies’, i.e. Bitcoin and its equivalents. It is the State’s view that it is essential to resolutely clamp down on speculation of ‘virtual currencies’ to safeguard people’s property and maintain economic, financial, and social order.Footnote ¹⁶ The latest policy position is contained in the Notice on Further Preventing and Resolving the Risks of Virtual Currency Trading and Speculation jointly issued by the People’s Bank of China, Supreme People’s Court, and nine other ministries in 2021. It is made clear that crypto-related business activities within China may constitute crimes. If a crypto-related activity satisfies the requirements of specific offences in the Criminal Law, criminal responsibility shall be pursued in accordance with the law. Paragraph 4 of the Notice stipulates that:

Since such policy has not yet culminated in national legislation or administrative regulations, the mechanism for declaring a relevant civil juristic act invalid will be on the basis that it violates public order and good morals instead of plain vanilla illegality. The courts have suggested that crypto-mining activities violate public order as they adversely impact the nation’s effort to optimise its industrial structure, impede energy conservation and the attainment of carbon neutrality aims, in addition to disrupting financial order and fostering illegal activities.Footnote ¹⁷ Whether there is a violation of public order is therefore a matter of degree, which has to be countenanced with an objective assessment of the extent of its intrusion into an array of interests protected under the umbrella.

The Concept of Liangsu – Good Morals

For liangsu, the prevailing judicial view is that it refers to ‘customs based on prevailing social moral values, also known as public morality, which are ethical norms widely recognised and adhered to by all members of society.’Footnote ¹⁸ In judicial practice, the types of situations commonly found to fall within this concept are (1) disruption of family relationships; (2) violation of sexual morals; (3) infringement of human rights and personal dignity; (4) aleatory (gambling) contracts; and (5) profiteering activities. Footnote ¹⁹ In a similar vein, the latest Interpretation specifies that contracts which ‘deviate from social morality or family ethics, destroy personal dignity, or otherwise violate customs’ are to be held invalid.Footnote ²⁰ The phrase ‘customs’ in this concept implies that the relevant norms are identified through long-standing practices or traditions while ‘good morals’ represents the positive and virtuous social norms selected from these norms. It follows that the courts are required to analyse whether the social norms are well-established and whether they are virtuous. The concept represents the good values emerging from moral knowledge and consciousness which are common and widely accepted by the public.

The significance of the concept of liangsu in invalidating civil juristic acts is that the standard of good morals becomes essentially a standard of law which mandates people to refrain from violating not only blackletter law, but also common ethical standards as they conduct their civil relationships. While in common law jurisdictions, illegality and public policy, to the extent that they affect contracts and other civil relationships, have moved to focus primarily on statutes rather than immorality, public morality still plays a prominent role in civilian thinking.Footnote ²¹ Given the Chinese legal system’s civil law framework and its sui generis character, the distinctive concept of ‘good morals’ with Chinese characteristics warrants closer examination with reference to some illustrative examples below.

Violation of Good Morals – Typical Situations

The most prevalent situation in which a civil juristic act may be found immoral is when it disrupts family relationships. This is an instance of deviating from family ethics. A common example is a civil act premised on the basis of cohabitation with someone outside marriage. Under the Civil Code, extramarital cohabitation is defined as the situation where a married individual and a person of the opposite sex, not in the capacity of spouses, continuously and stably live together.Footnote ²² It is trite in Chinese law that where a spouse disposes of assets jointly owned by the married couple in favour of a person with whom the spouse is in extramarital cohabitation, the disposition or gift is invalid because it violates good morals. The concept of community property, which is jointly owned by the spouses, is defined under Article 1062 of the Civil Code, which covers income acquired by either spouse during the marriage, such as salaries, investment profits, and other types of income generated from property jointly owned by the spouses. As such, where there is a transaction which cannot be explained by other reasons except that there is an extramarital affair, such as a business relationship, the courts can readily interfere to find that any disposition is invalid if the other spouse raises the matter judicially. This is commonly known as an invalidation of a gift contract for violation of good morals in Chinese law. The default position is that the community property is considered an indivisible whole.Footnote ²³ The husband and wife have equal rights when it comes to the disposition of the community property except for daily necessities.Footnote ²⁴ It does not matter whether the property disposed of is of personal or real nature, nor does the amount matter. Multiple instances of bank transfers will be sufficient for, typically, the wife to challenge such transactions before the courts by suing the mistress.Footnote ²⁵ Such transactions are considered immoral because they undermine the integrity of the marriage institution and any benefit arising out of the illegitimate extramarital relationship shall not be protected or recognised by the judiciary.

This principle applies not only to inter vivos dispositions but also to testamentary dispositions. A textbook example is the Luzhou Yizeng An, which concerns a will made by a man in which he decided to bequeath his property to his mistress rather than his wife or immediate family members.Footnote ²⁶ The man was married to the defendant for some 30 years with an adopted son. Since 1994, the man was in a relationship with the claimant, and in 1996 they began cohabiting and jointly operated a business. At no time did the man seek to divorce the defendant. In February 2001, the man was seriously ill and hospitalised, during which time, the defendant continuously cared for him as the court acknowledged. Yet, in the will made on 18 April 2001, the man decided to bequeath essentially all of his personal property to the mistress. The mistress sought to execute the will, asking the defendant to transfer the property to her. The court refused to execute the will and ruled that the substance of the will violates the fundamental principle of good morals, rendering it invalid despite satisfying the formalities.

This judgment contains strong moral implications with an apparent conflict between testamentary freedom and the courts’ oversight of good morals. The same reasoning has continued to be applied by the courts throughout the past twenty years or so. In a recent high-profile case, a man made a will bequeathing all three properties acquired during marriage to an extramarital cohabitee who acted as a carer in his twilight years for over a decade.Footnote ²⁷ The bequest was contested by the testator’s estranged spouse, with whom he had been separated for many years, despite the fact that the testator had initiated divorce proceedings against her on two occasions where the court refused the petition. The court on appeal ruled that the property belonged to the community property jointly owned by the husband and wife before death. The unilateral expression of the intention to dispose of the property to someone outside the marriage is not to be given effect because the extramarital relationship is immoral and shall not be acknowledged by the courts. As such, the will is invalid and not to be enforced.

Concerning social morality and human dignity, typical examples of offending sexual morality include aiding prostitution, contracts of prostitution, and contracts involving the transfer or establishment of brothels.Footnote ²⁸ Whether a surrogacy contract involves a breach of social morality is subject to much interpretation with varied approaches in the courts.Footnote ²⁹ A debt premised on explicit photos of the debtor as collateral or guarantee is invalid because it affronts social morality and violates the fundamental principles of public decency.Footnote ³⁰ The explicit materials are not considered property but are inherently linked to personal rights and bodily integrity. They are classified as obscene materials which are prohibited from circulation by the State, rendering them unacceptable as collateral.Footnote ³¹ Such loan arrangements may also be regarded as an infringement of personal dignity. Where one uses their family members’ personal freedom as collateral for a loan or transacts the family members’ labour without consent and where excessive restrictions on personal liberty are imposed in a contract, they are instances of a breach of good morals for the invasion of human rights and personal dignity.Footnote ³² Another example of violating human dignity is employment contracts that exclude the employer’s responsibility for any workplace injuries. Restraint of trade clauses may fall under this category insofar as they unduly restrict an employee’s activities.

Aleatory contracts, such as gambling contracts, unless officially licensed and profiteering activities are also considered acts that violate social morality. One of the more relevant examples in the commercial context is the validity of a valuation-adjustment mechanism (VAM) agreement, also known as a bet-on agreement, which is present in some Chinese private equity merger and acquisition deals.Footnote ³³ Since 2019, the general approach has been that in the absence of other vitiating factors, a VAM agreement between an investor and a target company’s shareholders or actual controllers is valid and enforceable.Footnote ³⁴ Profiteering refers to activities that pursue excessive profits through unethical, unfair, or exploitative practices which harm the interests of more vulnerable groups such as workers or customers. So far, Chinese courts are flexible in the application of liangsu. There is no definitive categorisation of situations constituting infringements and the examples are not intended to be exhaustive.

Applying Gongxuliangsu as a Legal Principle

It is imperative to ensure that gongxuliangsu operates as a legal principle to be applied mechanically, and not a phrase to be indiscriminately employed in judgments solely for the purpose of substantiating the court’s reasoning in a generic manner. Guiding Case No. 140 is an example of a generic, rather than an undiscerning employment of gongxuliangsu.Footnote ³⁸ The case involved a dispute regarding liability for an accident that occurred when the plaintiff fell from a tree while attempting to pick fruit within a public area in a Red Mountain Village. The Red Mountain Village Residents’ Committee, responsible for managing the public area, was sued by the plaintiff’s family members, who claimed that the committee had failed to ensure the plaintiff’s safety and demanded compensation for his injuries and subsequent death. The claim was rejected. The court found that the committee’s obligation to ensure safety in the public area was limited to reasonable and manageable measures within its capacity. Since the activity of picking fruit from trees within the public area was not officially sanctioned, and it was the plaintiff’s own decision to engage in the activity while the trees themselves did not pose inherent safety risks. This means that a reasonable standard was met by the committee and causation was not made out. The court also found that the committee acted reasonably and without fault following the incident. The committee promptly called for emergency assistance, and local villagers also contributed to sending the plaintiff to the hospital for treatment. The court, however, included as part of its reasoning the finding that the plaintiff’s action was in violation of the customs of the local village community, hence constituting a departure from public order and good morals. Such an inclusion is superfluous. It is submitted that the courts should refrain from invoking gongxuliangsu as a perfunctory means to buttress reasoning which is otherwise sufficiently soundly constructed. To treat gongxuliangsu as an extra layer of justification when the specific rules in that area of law are capable of delivering the same outcome suffers from a lack of precision in judicial reasoning.

The same is emphasised by the Supreme People’s Court in Article 18 of the Interpretation:

Although this Article may appear difficult to grasp, it is essentially about provisions of laws and administrative regulations that restrict or confer civil rights. The concept is that if an act contravenes a law that restricts or confers civil rights and that contravention constitutes an unauthorised behaviour as a matter of civil law, the court shall determine the act’s validity in accordance with that provision of law instead of gongxuliangsu. In other words, where other private law rules are applicable to invalidate an act, the court shall apply that rule before considering gongxuliangsu. To this extent, it may be said that gongxuliangsu should be applied residually when other private law rules are not applicable or fail to invalidate the act.

Not all Customs are Good Morals

Further, the courts must not conflate customs with good morals. Article 10 of the Civil Code provides that ‘[c]ivil disputes shall be resolved in accordance with law. Where the law does not specify, custom may be applied, provided that public order and good morals may not be offended’. It is clear from this Article that customs are not the same as public order and good morals. However, as can be seen from Guiding Case No. 140, courts may at times have considered that public order and good morals are synonymous with customs. This approach can be criticised because public order and good morals are normative concepts which find their roots in different sources, such as the general spirit of law and customary practices. It is precisely the judge’s duty to distil the essential normative elements from these origins as the relevant normative concepts in law. Traditional customs such as the Confucian gender concept of ‘exalting males and demeaning females’ (nanzun nubei) and to ‘assess a woman’s behaviour and aspirations and her status relative to that of men’Footnote ³⁹ ought to be discarded or closely scrutinised in modern Chinese society. While the Civil Code is unequivocally clear that ‘a marriage system based on freedom of marriage, monogamy, and equality between men and women is implemented’,Footnote ⁴⁰ instances of customary practices continue to exist and must be evaluated against the standards of modern decency and civility. Further, they are to be rejected in accordance with Article 10, if they offend public order and good morals. As judges have suggested with regard to undesirable marriage customs, the modern concept of gongxuliangsu mandates the eradication of demeaning superstitious marriage rites.Footnote ⁴¹ As in other jurisdictions, where customs, that are not against public policy, may have the same effect as laws,Footnote ⁴² the truth is that gongxuliangsu has the crucial task of being measured against and circumscribing customs in Chinese civil law.

The function of deterrence

There are some often-cited justifications for refusing relief on the basis of public policy or illegality: ‘(1) furthering the purpose of the rule infringed by the claimant’s behaviour, (2) consistency, (3) prevention of profit from the claimant’s wrongdoing, (4) deterrence, and (5) maintaining the integrity of the legal system’.Footnote ⁴³ As to whether the principle has a punitive function,Footnote ⁴⁴ the modern tendency is to acknowledge that while rules of civil law might have a punitive effect, this is not their predominant purpose. Punishment is a matter for the criminal courts.Footnote ⁴⁵

It is well-established that the Chinese civil law system constitutes a set of legal rules which adjust personal and property relationships rather than apply criminal sanctions.Footnote ⁴⁶ For consistency and for maintaining the integrity of the legal system, the law maintains its coherence by refusing to ‘give by its right hand what it takes away by its left hand’.Footnote ⁴⁷ The judicial system ‘must aspire to be a unified institution, the parts of which – contract, tort, the criminal law – must be in essential harmony’.Footnote ⁴⁸ For the prevention of profit from the claimant’s wrongdoing, it essentially means that ‘the court will not lend its aid to a man who founds his course of action upon an immoral or an illegal act or contract’.Footnote ⁴⁹

As to the furtherance of the rule infringed by the claimant’s behaviour, adopted in the context of gongxuliangsu, it should be understood as furthering some moral values and the protection of public order. In this regard, it is essential to recognise that the negative terminology of the law indicates that civil juristic acts are void if they contravene public order and good morals, as opposed to requiring them to be in compliance with or adherence to the latter. It follows that the primary purpose of gongxuliangsu should be regarded as deterrence instead of the promotion of loftier ethical standards. The deterrent function underlines that ‘to hold otherwise would in some cases offer an inducement to crime or remove a restraint to crime and that its effect is to act as a deterrent to crime’.Footnote ⁵⁰ How deterrence operates also requires consideration of the legal consequences that follow from a void civil juristic act, as provided in Article 157 of the Civil Code. While this issue falls outside the scope of the present discussion, it suffices to recognise that the function of deterrence in the Chinese context should be understood as predominantly negative in character, rather than as a judicial mechanism for affirmatively promoting values such as good morals.

Nevertheless, in the context of gongxuliangsu, how deterrence operates in the context of public order and good morals is more contested than the corresponding effect on crimes. If the deterrent effect is to have force, there must be a rule which is applied by the courts consistently and is widely known by members of the public, for they can only be advised on the enforceability of the civil juristic act if the rule is clear.Footnote ⁵¹ Criminal law provides for this consistency. For morals, it can be suggested that, while they are inherently ambiguous and their standards varied among different individuals, they are, at the same time, held in everyone’s mind intrinsically such that one knows the rights and duties without subjecting them to the opinion of another person whereas, for the law, one consults the statutes or has to refer to the opinion of the judge.Footnote ⁵² The core issue is discerning the operative standards for the purpose of denying relief, thereby deterring parties from committing acts that violate public order or commit immoral acts.

Towards an objectively delineated standard of gongxuliangsu

This brings us to consider the appropriate substance of gongxuliangsu in courts as they enforce the legal principle whereby deterrence is its primary function. The concern is how to strike a balance between civil legal persons’ expectation that certain legal actions should be legally recognised and acknowledging the occasions when the courts might intervene based on their discretion to provide some degree of legal certainty. First, there must be an objective element in such an exercise. A judge’s own value system must not take precedence over the law’s value system in gongxuliangsu. The room for judicial subjectivity must be limited. As once said:

For public order, the objective element shall be developed from a systematic outline of the detriments to public order in the judgment which in theory should be less subjective than deciding on moral issues. As the basis of public order is that ‘membership of social groups entails obligations of an overriding character which cannot be eliminated by mere agreement with a particular individual’,Footnote ⁵⁴ such as the maintenance of health and safety, determining a breach of public order should hinge on an objective assessment of the balance between individual interests and the essentials of common welfare.

For good morals, a possible objective limitation is to premise it on a widespread consensus over moral issues. A clear public consensus as to modern day’s bounds of acceptable behaviour is the intuitive basis for deciding on good morals. The judge should have in mind ‘what accords with customary morality and the general conscience of the community’.Footnote ⁵⁵ The court must be capable of reflecting a representation of the contemporary mores of the average person, as distinguished from opinions premised on legal learning. But the judge must analyse further. The prescription of good morals suggests that merely following mass opinion or widely accepted moral conceptions is not sufficient. Where it concerns public policy, it has been suggested that it is incumbent on the judge to reject the mass morality when it is contrary to ‘the opinion of the healthy elements of the population’.Footnote ⁵⁶ The judge’s discretion in this regard lies in the rejection of common morality where he or she believes that the conscience of the courts so requires.

In the context of Chinese law, good morals as a concept exemplify that the community in which the courts find their sources must possess wholesome social ethical standards for, by definition, to be considered within the ambit of gongxuliangsu, the norms must be virtuous. At the same time, finding a social consensus is a necessary limitation to counteract the possibility of finding these norms in an overly sagacious community. Values such as selflessness, integrity, and altruism are representative of standards inspiring individuals to reach for the best within themselves and contribute positively to their communities and society as a whole. They are nonetheless inappropriate to be promoted by the concept of gongxuliangsu as the paramount position of private law autonomy necessitates a refined standard involving moral concepts which possess a fundamental nature. That refined standard consists of minimum ethical requirements which serve as the basis for a harmonious society such as dignity. For example, where a disposition of the assets co-owned by a married couple is made by a person who commits an extramarital affair, the disposition is liable to be invalidated for it breaches good morals; a relationship which cannot be proved to be an affair but merely an unconventional relationship of financial support warrants different considerations and is not necessarily immoral.Footnote ⁵⁷

A confined delineation of good morals is also preferable given the existence of the general principles of good faith and honesty in Chinese civil law,Footnote ⁵⁸ and to ‘act in a manner that facilitates conservation of resources and protection of the ecological environment’Footnote ⁵⁹ which exhibit some degree of overlap with gongxuliangsu. Although it may be suggested that the other principles relate more to the performance of a contract rather than the content of a contract, to invoke and interpret breaches of public order and good morals loosely risks obfuscating these principles. If we compare the doctrine of good faith and the principle of gongxuliangsu – which both function to contribute to the establishment of an ethical, civilised commercial society in China – the idiosyncrasy and potential stretch of gongxuliangsu is plain. Whilst the former encompasses duties such as loyalty, non-deception, and business ethics, the latter, as explained above, relates to the minimal tolerable ethical standards, such as civil relationships predicated on deliberate harm to other people’s interests through extortion or abuse of power. What is unique about gongxuliangsu is that it scrutinises the substance of a civil juristic act whereas the doctrine of good faith focuses on the formation and performance of typically the contract.

As discussed above, common to both general principles of Chinese civil law is however the caveat that, in rendering judgments, they shall be deployed whilst paying regard to other applicable laws, but not be casually relied upon by judges. It is the deterrence, but not the promotional function of gongxuliangsu that shall be borne in mind by judges when deciding cases for it is important to preserve parties’ freedom to act and seek relief for their actions within the boundaries of civil law. As the principle of gongxuliangsu probes into the substance of the civil juristic act, it shall be founded with a degree of objectivity and public conscience to discourage fundamentally intolerable behaviours such that the judicial discretion accorded is not boundless.