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Contracts awarded through bidding

15 January, 2016 - 09:11

In China, the three competitive ways to procure a contract are: (1) bid invitation (tender); (2) auction; and (3) quotation.

Bid invitation refers to the bidding process which involves the release of the bid invitation notice, inviting specific or non-specific natural persons, legal persons and other organizations to participate in the bidding and determines the award of contracts according to the bidding results.

Auction refers to the bidding process involving the issue of the auction notice, pursuant to which the competitive buyers conduct open price competition at a designated time and place, and the contracts will be awarded according to the results of price competition.

In China, there is another bidding process for assignment of state-owned construction land use right through quotation, pursuant to which the assignor releases the quotation notice, lists and announces the trading terms about the land for assignment at a designated land exchange within the term specified in the notice, accepts the quotations of competitive buyers and updates the quotation, and determines the holder of state-owned construction land use rights according to the quotation results at the expiry time for quotation or the onsite quotation results.

This bidding process by ‘quotation’ is devised by reference to competitive contracting for securities transactions that embodies the advantages of bidding by invitation or auction: firstly, the listing for specific times is conducive to rational decision-making of investors; secondly, it is a user-friendly method that is easy to carry out; thirdly, the method is conducive to the formation and operation of the land market.

Link to Supplementary Information

Provisions on the Assignment of State-owned Construction Land Use Right through Bid Invitation, Auction and Quotation (Published here):

Article 18. The quotation term shall be no less than ten working days. The margin of price rise may be adjusted according to the prices offered by competitive buyers during the period of quotation.

Article 19. The termination of quotation shall be decided by the quotation presider. Upon expiry of the quotation term, the quotation presider shall announce the highest quotation and the quoter on the scene, and inquire about whether the competitive buyers would like to continue the price competition. Where there is any competitive buyer who shows any intent to continue the price competition, the assignment through quotation shall be turned into the onsite price competition, and the winner shall be determined through onsite price competition. If the quotation presider calls out a highest price for consecutive three times, and there is no buyer willing to continue the price competition, whether the transaction has been stricken shall be determined according to the following provisions:

If there is only one buyer for quotation within the quotation term, its quotation is not lower than the base price and it complies with other requirements, the quotation transaction is stricken;

If there are two or more competitive buyers for quotation within the quotation term, the quoter offering the highest price shall be the winner; and if their prices are the same, the quoter offering the quotation at first shall be the winner, unless its quotation is less than the base price; and

If there is no respondent within the quotation term, the price offered by competitive buyers is lower than the base price, or no quoter complies with other requirements, the quotation transaction is not stricken.

Contracts awarded through the process of bid invitation, auction or quotation are subject to regulation by the Contract Law, save for the procedures for awarding the contracts. Article 43 of the Government Procurement Law provides that the Contract Law is applicable to government procurement contracts. The rights and obligations of the procuring entity and the supplier respectively shall, on the principle of equality and voluntariness, be agreed on in a contract.

Case Study 1.3


At 5 am on 30 October 2004, Mr Yang called the emergency hotline, 120, asking for ambulance service for his wife. He waited for an ambulance for 15 minutes, but in vain. He took his wife to the hospital by taxi, but she was certified dead on arrival. It was later found that the ambulance had not departed at all. Mr Yang’s home was only 1.3 km away from the hospital (where the ambulance was).

The hospital’s position was that there is no law or regulation requiring that the ambulance should depart or arrive within a specified time. The patient died as a result of her own physical condition, for which the hospital should not be liable. On the other hand, Mr Yang’s position was that a contract existed at the time the hotline accepted Mr Yang’s request. If the ambulance did not arrive within a reasonable time, the contract would have been breached and the hospital should be liable for compensation.

Which view do you think is correct?

At common law, the above dispute would fall within the scope of the law of tort. Under Chinese law, however, the hospital is liable for breach of contract. According to the State Medical Service Regulation, emergence hotline 120 is established by the government to undertake the obligation of providing public medical services. A legal obligation thus arises when the hospital receives the phone call. Hence, a contract was created at the time when the hospital replied to Mr Yang that ‘the ambulance will arrive soon.’

As the hospital is subject to the State Medical Service Regulation, it would be liable even if it simply rejected the request.

Self-test 1.3

Shaw and three of his friends, all laid-off workers in Beijing, decided to contract a piece of rural land in Liaoning Province to cultivate organic vegetables. When they expressed their proposal to the local township government, the government officials, who showed support to their project, warmly received them. In view of the land being vacant, the officer in charge of the village committee and the secretary decided to contract out 20 acres of land to them for cultivation. The officer in charge of the village committee represented the village committee to sign the contract giving out the rural land to Shaw and his three friends to plant vegetables. A year later, many migrant workers returned to the village to start their own businesses. When they learnt that the rural land was contracted out to outsiders, they felt aggrieved and damaged Shaw’s crop, and requested the village committee to discharge the contract with Shaw and others.

Do you think that the villagers’ claim of discharging the contract has merit? Why or why not?