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obligee. Therefore, the transfer of the obligor’s defense right will not take effect unless the obligee agrees to the delegation of the contractual obligations.

2.3. Comprehensive Assignment

In China, a comprehensive assignment occurs when there are both assignment of the contractual rights and delegation of the contractual obligations with regard to a particular contract. Under the Contract Law, the comprehensive assignment is to be governed by the provisions related to assignment and delegation. According to Article 88 of the Contract Law, the party to a contract may assign its rights and obligations together under the contract to a third party with the consent of the other party.37 Accordingly then, a comprehensive assignment of the contract is permissible, but the consent of the other party is required.

A comprehensive assignment may be made by agreement. In order to make an assignment as such, there are at least two agreements that must be made. One is the agreement between the original parties of the contract to the effect that a party’s request for the assignment of all of its rights and obligations under the contract to a third party is agreed by the other party to the contract. The other one is the agreement that is entered between the assignor and assignee, under which the assignee agrees to take over the rights the assignor has under the contract, and in the meantime to assume all obligations that the assignor is required to perform.

Under the Contract Law, for a comprehensive assignment to be valid, four elements are required. First, there must be a valid contract and such a contract must also be a bilateral one. If the contract is unilateral, there may only be either assignment of rights or delegation of obligations. Second, a mutual agreement is made between the assignor and assignee to the effect of the assignment. Third, an express consent must be obtained from the other party to the contract. And forth, there must be no violation of law with regard to the assignment, which means that the contract must be assignable and the obligations must also be delegable.

On its face, the comprehensive assignment may look similar to the novation in American contract law. They are similar because they all involve a change of the party to the contract. The major difference between the comprehensive assignment and novation perhaps is that in novation, an agreement between the existing original party and the assignee is required, but no such requirement is needed for the comprehensive assignment. To put differently,

37 See id., art. 88.

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the novation may not occur without mutual assent of all three parties because the result of novation is that one of the original parties to the contract is removed from the transaction and the newcomer is substituted in his place.38 Thus in novation, there will be a new contract between an original party to the contract and the newcomer (third party). Clearly, the comprehensive assignment under the Contract Law does not result in a new contract.

In China, a comprehensive assignment may also occur under the requirements of law. Such an assignment normally takes place in the situation where there is a merger or acquisition that affect the parties to the contract. Article 90 of the Contract Law requires that if one party to a contract is merged after the contract, the legal person or organization established after the merger shall exercise the contractual rights and perform the contractual obligations. Article 90 also makes it clear that if one party to the contract is separated after the contract is made, the legal persons or organizations thus established after the separation shall exercise the contractual rights and assume the contractual obligations jointly and severally.39

The provision of Article 90 seems hard to read. What it actually means is essentially that if there is a merger, acquisition, or separation of business, the newly established or organized business entity shall remain liable for the contract that is made by its predecessor. Particularly in case of separation of business, a joint liability will be imposed upon the business entities that are born as a result of the separation. The purpose is to maintain the stability of the business transactions and the continuity of existing contractual rights and obligations. Certainly, it will also help ensure that the contract will be performed and nobody may evade its contractual obligations through the change of business structure.

38See Rohwer & Schaber, supra note 16 at p. 398.

39See the Contract Law, art. 90.

Chapter IX

Dissolution and Termination of Contracts

As a general principle under the Contract Law, a contract, once legally formed, must be performed. The strict performance requirement is also underscored, at least in theory, by the traditional virtue of promise honoring. The performance, however, may be excused upon the occurrence of certain events prescribed by the law. The direct result of the excuse for the non-performance is the dissolution of the contract, under which the party’s obligation to perform is discharged. Generally, the contract dissolution is defined in China to mean extinguishment of contractual relationship between the parties by the manifestation of the intent of one or both parties as a consequence of the occurrence of the legally prescribed events.

Scholars in China debate on the difference between dissolution of the contract and termination of the contract. One argument is that dissolution and termination are the same, and the dissolution in essence is referred to as advance termination of the contract by agreement of the parties or by operation of law. Therefore, if the contract is dissolved by the parties’ agreement or pursuant to the provision of law, the contract is terminated. In the sense in which the contract is discharged, there is no difference between dissolution and termination.

The opposite opinion, however, regards the dissolution as one of the elements for termination of the contract. In this opinion, dissolution differs from termination in several aspects. First, the dissolution may be followed by restitution in order to avoid unjust enrichment, but the termination may end up with the discharge of the contract. Second, the dissolution may retroactively affect the past rights and obligations of the contract, while termination only