You’re sitting in a Shanghai conference room. Your Chinese manufacturer just nodded during your video call and said “okay” to your purchase order. You think you have a deal. But do you actually have a legally binding contract under Chinese law? The answer isn’t as simple as you might expect.
For international businesses and expatriates operating in China, understanding when a contract becomes enforceable can mean the difference between a successful transaction and a costly legal dispute. The 2020 Civil Code of the People’s Republic of China revolutionized contract formation rules, creating a unified framework that replaced decades of scattered regulations. This isn’t just legal housekeeping—it’s a fundamental shift that directly affects whether your business agreements in China will hold up when things go wrong.
The 2020 Civil Code: China’s Contract Law Revolution
Before 2020, China’s contract law landscape resembled a patchwork quilt. Businesses had to navigate the 1999 Contract Law, various civil codes, and countless judicial interpretations that sometimes contradicted each other. Foreign business owners frequently found themselves in gray areas, unsure whether their agreements were enforceable.
The Civil Code, which took effect on January 1, 2021, changed everything. For the first time, China consolidated its contract formation rules into a single, coherent legal framework. This matters enormously for international clients because it provides clarity where confusion once reigned. The Civil Code’s Book Three specifically addresses contract formation, establishing clear rules for when your deal moves from negotiation to binding obligation.
What makes this particularly significant for global businesses is the Civil Code’s explicit recognition of digital commerce. In an era where most international deals involve email exchanges, e-signatures, and online platforms, the Civil Code finally provides legal certainty for electronic agreements. This isn’t a minor update—it’s the legal foundation that makes modern cross-border business with China possible.
When Your “Yes” Becomes Legally Binding: Offer and Acceptance Under the Civil Code
Understanding offer and acceptance in Chinese contract law isn’t academic theory—it’s the mechanism that determines whether you’re legally committed to a deal. The Civil Code follows a structured approach that foreign businesses must understand before sending that purchase order or signing that manufacturing agreement.
According to Article 472 of the Civil Code, an offer must contain definite terms showing clear intent to enter a binding contract. This means your proposal to a Chinese supplier needs specific details: what you’re buying, how much you’re paying, delivery terms, and other material conditions. A vague inquiry like “Can you supply 10,000 units?” isn’t an offer—it’s an invitation to negotiate.
Here’s where many international businesses get tripped up: Chinese law distinguishes between an offer and an “invitation to offer” (what common law systems call an “invitation to treat”). Price catalogs, advertisements, and tender announcements are generally invitations to offer, not binding offers. Your Chinese counterpart’s product brochure isn’t a contract offer—it’s asking you to make an offer.
Acceptance creates the binding contract, but only if it matches the offer’s material terms. Article 479 states that acceptance must be consistent with the offer. If your Chinese manufacturer responds to your purchase order by changing the delivery date or price, that’s not acceptance—it’s a counter-offer, and now you’re the one who needs to accept.
The Civil Code also requires good faith and lawful conduct throughout the contract formation process. Article 7 establishes this as a fundamental principle. You can’t use misleading information to induce acceptance, and your Chinese counterpart can’t either. This good faith requirement extends beyond contract signing—it governs pre-contractual negotiations, meaning misrepresentations during the deal-making process can invalidate the entire agreement.
Digital Deals: When Your Email Creates a Binding Contract
Most international business with China happens online—emails flying between time zones, PDF contracts signed electronically, orders placed through B2B platforms. The Civil Code’s recognition of digital contract formation is therefore crucial for foreign businesses.
Under Article 491, an acceptance becomes effective when it reaches the offeror. But “reaches” in the digital age has specific meaning. When you email your acceptance to a Chinese supplier, the contract forms the moment your message enters their information system—not when they read it. This matters enormously if disputes arise about contract timing.
Here’s a real scenario: You email acceptance of a supplier’s offer at 11:59 PM on March 31. The supplier checks email the next morning, April 1, and claims the offer expired at midnight. Under the Civil Code, if your email reached their server before midnight, you have a binding contract. The formation moment is arrival, not reading.
Electronic signatures carry the same legal weight as handwritten signatures under China’s Electronic Signature Law, which the Civil Code reinforces. This means contracts signed through platforms like iTerms, which provides secure e-signature functionality, are fully enforceable. However—and this is critical—the electronic signature must be reliable, meaning it’s uniquely linked to the signatory and under their control.
Foreign business owners should understand that China’s courts now routinely enforce contracts formed entirely online. The Civil Code eliminated previous uncertainties about digital agreements, providing clear rules that protect international transactions conducted through email, messaging apps, or e-commerce platforms.
Practical Risk Points: What Foreign Businesses Must Check Before Assuming They Have a Deal
The theory is clear, but practical application reveals hidden traps that can destroy deals you thought were solid. International clients working with Chinese companies need to verify specific elements before assuming contract formation.
First, confirm proper delivery of acceptance. If you’re accepting a Chinese company’s offer, ensure your acceptance actually reaches them. For email, verify the email address is correct and check for delivery confirmation. For physical documents, use trackable shipping. Many contract disputes arise because acceptance never properly reached the offeror, meaning no contract ever formed.
Second, watch for counter-offers disguised as acceptances. Your Chinese supplier might respond to your purchase order with language like “We accept your order with the following modifications…” That’s not acceptance—it’s a counter-offer. You haven’t formed a contract until you accept their modified terms.
Third, maintain detailed records of all contract formation communications. Save emails, chat logs, and electronic documents with timestamps. Chinese courts increasingly rely on electronic evidence in contract disputes. If you can’t prove when acceptance reached the other party, you can’t prove when the contract formed.
Fourth, understand that silence doesn’t equal acceptance. Unlike some jurisdictions where continuing a business relationship can imply acceptance, Chinese law requires explicit acceptance. If your Chinese counterpart doesn’t respond to your modified terms, you don’t have a deal.
Fifth, pay attention to offer validity periods. Many offers specify acceptance deadlines. Under Article 481, if the offer states a time limit and you accept after that period expires, your acceptance is a new offer requiring their acceptance. Missing acceptance deadlines by even one day can destroy your deal.
For manufacturing contracts, distribution agreements, and technology transfers—the high-value contracts that bring foreign businesses to China—these formation rules directly impact enforceability. Uncertainty about whether your contract actually formed can lead to significant financial exposure, especially if you’ve already made investments or shipments based on an agreement you believed was binding.
Why This Matters for Your China Strategy
For global corporate clients, the Civil Code’s contract formation rules provide unprecedented clarity for China operations. Companies can now structure cross-border transactions with confidence, knowing the exact moment their obligations begin. This certainty reduces legal risk and enables more aggressive market entry strategies.
International legal professionals advising clients on China matters must understand these formation rules to provide competent guidance. The Civil Code’s offer and acceptance framework differs from common law approaches, particularly regarding the treatment of counter-offers and the effectiveness of electronic communications.
Expatriates living in China benefit from clearer standards too. Whether you’re signing a lease, purchasing property, or entering employment agreements, understanding when your signature creates binding obligations protects you from unexpected commitments. The Civil Code’s good faith requirement also provides protection against Chinese counterparts who might use misleading information during negotiations.
The Civil Code’s modernization of contract formation rules aligns with international business practices while maintaining Chinese legal characteristics. For foreign businesses, this balance means you can apply familiar contract concepts while remaining compliant with Chinese requirements. Digital commerce provisions, in particular, eliminate the uncertainty that previously plagued online agreements with Chinese companies.
Your Next Step: Building Contracts That Actually Work
The Civil Code’s contract formation rules don’t just tell you when you have a binding deal—they reveal how to structure agreements that withstand legal challenges. Understanding offer, acceptance, and good faith requirements lets you build contracts from the foundation up, ensuring enforceability before disputes arise.
This is where iTerms AI Legal Assistant transforms legal complexity into business advantage. Our AI-powered contract drafting engine incorporates Civil Code formation requirements automatically, ensuring your agreements with Chinese companies meet all necessary legal standards. When you use iTerms to create contracts, the system verifies that offers contain definite terms, acceptances align with offer terms, and digital signatures meet reliability standards.
The platform’s legal consultation engine provides real-time guidance on contract formation questions specific to your situation. Need to know if your email exchange created a binding contract? Want to understand whether your Chinese supplier’s response was acceptance or counter-offer? iTerms delivers contextual answers grounded in Civil Code provisions, helping you make informed decisions before committing resources.
For international businesses navigating China’s legal landscape, understanding the Civil Code’s contract formation rules isn’t optional—it’s the foundation of every deal you make. The difference between a binding agreement and an unenforceable handshake comes down to specific legal requirements that the Civil Code now clearly defines.
By integrating these formation rules into your China strategy, you protect your business from costly disputes while building relationships with Chinese partners on solid legal ground. The Civil Code provides the framework; iTerms provides the tools to apply it practically, ensuring every contract you sign in China starts with proper legal formation and ends with enforceable rights.
Your next deal with a Chinese company depends on understanding when “yes” becomes binding. With the Civil Code’s clear rules and iTerms’ AI-powered legal guidance, you can navigate contract formation with confidence—turning legal requirements into competitive advantage in the world’s largest market.