Impact of Mandatory Provisions on the Validity of Juristic Acts: A Path for Legal Policy Analysis

Wang Kun＊

Lingnan Normal University

Abstract: Contrary to the approach in judicial practice, Paragraph 1, Article 153, of the Civil Code of the People’s Republic of China, as a rule of invalidity for violating mandatory provisions, does not adopt a dichotomy towards mandatory provisions with effectiveness and administrative characteristics, yet it maintains the legislative philosophy of differentiation.It leaves unspecified whether mandatory provisions that do not explicitly render a juristic act invalid impact the act’s validity, entrusting this determination to the discretion of judges on a case-by-case basis.When judges, under the authority of Paragraph 1, Article 153 of the Civil Code, explore the normative intent of mandatory provisions to assess their effect on the validity of juristic acts, they should engage in legal policy analysis centered on consequence-based argumentation to overcome the limitations of norm typological analysis.This analysis employs a reasoning model predicated on the normative purpose, utilizing a consequencefocused interpretative approach for formulating and arguing propositions of rules applicable to pending cases, thereby arriving at case-specific conclusions.Since the invalidation of juristic acts serves as an auxiliary regulatory tool for the state economy and society, a consequence-oriented interpretation needs to be based on the idea of mutual instrumentalization of public and private laws.This entails predicting the outcomes of negating the validity of a juristic act in industrial regulatory scenarios and assessing these outcomes within the framework of public and private regulatory instruments.

Keywords: rule of invalidity for violating mandatory provisions, juristic acts, legal policy analysis, consequencebased argumentation, regulation

Research Question

Background

The provisions of in theCivil Code of the People’s Republic of China(“Civil Code”) governing the validity of illegal juristic acts, as an extension of the principles concerning the validity of illegal contracts, represent a focal point in the convergence of public and private law studies.Following the Supreme People’s Court’s2009 Interpretation(II)on Several Issues Concerning the Application of the Contract Law of the People’s Republic of China(hereinafter “Contract Law Interpretation II”),which construed mandatory provisions that limit contract content as “validity-specific mandatory provisions,” there has been a continuous endeavor in both theoretical and judicial realms to establish a clear definition of “validity-specific mandatory provisions.”Such effort aims to guide judicial practice in discerning the underlying rationale behind the impact of mandatory provisions on the validity of contracts (Yao, 2016, p.1264).However, this path has faced logical scrutiny due to its tendency to engage in circular reasoning by “answering questions with questions” (Su, 2012b, p.358) and “inverting cause and effect, treating interpretative outcomes as reasoning premises” (Zhu, 2016,p.169).Categorizing mandatory provisions into “validity-specific” and “non-validityspecific” based on their impact on the validity of juristic acts merely describes the effect without providing analytical judgment (Geng, 2009, pp.73–74), thus offering no practical guidance for judges.In response, civil law scholars have recently gone beyond identifying validity-specific mandatory provisions, exploring alternative analytical approaches such as the comprehensive judgment of individual cases (Li, 2021, pp.24–43) and crossjurisdictional analysis (Zhang, 2019, pp.23–41).

Definition

Paragraph 1, Article 153 of theCivil Codegoverns the validity of juristic acts that violate legal norms.It serves as an intermediary clause, bridging the gap between public and private law and facilitating the achievement of public regulatory objectives.However,the proviso within this paragraph reflects a reservation to public law intervention in juristic acts (Geng, 2009, p.187).In contrast to mandatory norms within regulatory laws, this intermediary clause is termed “the rule of invalidity for violating mandatory provisions” (Geng, 2009, p.76).Regardless of the interpretation of Paragraph 1, Article 153 of theCivil Code—whether it is “null in principle, valid by exception” or “valid in principle, null by exception”—there is a shared understanding of a legislative intent to differentiate.Do mandatory provisions affect the validity of juristic acts? How to develop a private law reasoning framework that distinguishes the rule of invalidity for violating mandatory norms? These are crucial matters at the confluence of public and private law balancing the achievement of regulatory objectives and the protection of autonomy of will.This explores the legal reasoning framework of the rule as a general clause, offering insights into these complex and intertwined aspects of law.

Due to the temporal, expedient, and variable characteristics of regulatory laws,legislators sometimes overlook the systemic effects of such laws, merely establishing public law consequences for violations of mandatory norms, while leaving the private law implications to be determined by judges on a case-by-case basis through the rule of invalidity for violating mandatory provisions.Consequently, two types of mandatory provisions do not fall under the “mandatory provisions” referenced in Paragraph 1, Article 153 of theCivil Code: first, those provisions that explicitly render a juristic act void when violated, as these can independently serve as grounds for invalidating a juristic act without applying Article 153; second, mandatory provisions within the scope of private autonomy, such as those regarding capacity to act and disposal rights, which do not prohibit or compel the juristic act itself but rather impose restrictions on the “competence”to perform such acts (Xie, 2007, p.127), and where private law typically already clarifies the effects of acts carried out without the requisite authority.

The rule of invalidity for violating mandatory provisions primarily addresses those provisions that do not explicitly declare juristic acts void upon violation, thus functioning as a general clause.Here, this paper focuses on mandatory norms that do not expressly render a juristic act void upon violation.Judicial interpretations by the Supreme People’s Court are sources of knowledge rather than sources of validity (Lei, 2021, p.163).Even though the Supreme People’s Court has supplemented the legal effects of invalid juristic acts in its judicial interpretations, the mandatory provisions it refers to are still mandatory provisions that do not explicitly stipulate “violation leads to invalidity.”①Although the Civil Code abstracts the issue of the validity of illegal contracts into the broader issue of the validity of illegal juristic acts, both judicial practice and theoretical research continue to focus primarily on contracts as the prototypical juristic acts.The validity of illegal unilateral legal acts and illegal resolutions is beyond the scope of this paper.

Research Methods and Objectives

The rule of invalidity for violating mandatory provisions requires considering the applicability of this provision beyond private law.A collaborative research approach that combines public and private law is necessary.The function of the rule of invalidity for violating mandatory provisions requires considering the applicability of this intermediary provision beyond private law; a collaborative research approach that combines public and private law is necessary (Fang, 2012, p.36; Song, 2018).Techniques for bridging public and private law encompass more than the legislative establishment of referral and incorporative provisions; legal reasoning is a crucial area for advancing judicial techniques in this convergence.So this paper has adopted a research method that builds on the regulatory function of private law to explore the application of legal policy theory in arguing for normative purposes.It aims to provide a private law reasoning framework that is centered on consequence-based argumentation for the judicial application of the rule of invalidity for violating mandatory provisions.

Pathway for Normative Attribute Analysis and Its Shortcomings

The complexities associated with the validity of illegal juristic acts originate from regulations governing the validity of illegal contracts.Initially, illegal acts were deemed invalid under the prevailing influence of public law’s supremacy, evolving to a gradual restriction of public law’s private law effect on contracts.This restrictive trajectory can be encapsulated in a normative attribute analysis path, which has undergone two distinct phases: the first confines the hierarchy of legal sources, and the second confines the nature of legal sources.Restrictions based on the hierarchy of legal sources are specific and clear, thus attracting minimal dispute.Owing to the intricate nature of regulatory domains, a conclusive delineation of an abstractly defined, validity-centric mandatory provision remains unsettled regarding restrictions based on the nature of legal sources.Paragraph 1, Article 153 of theCivil Codeelevated the perennial debate over the validity of illegal contracts to encompass the validity of illegal civil juristic acts.

Establishment of the Path and Deepening of Practice

The restrictions on contract content (as opposed to restrictions on capacity to act and expression of intent) originate from two types of norms: mandatory provisions and public order or good morals.Contracts that breach mandatory provisions are termed illegal contracts, while those contravening public order or good morals are deemed contracts against morality.The assessment of the validity of moral-violating contracts and the assessment of illegal contracts are interconnected, yet distinct.Although both rely on the ultimate criterion of public interest in determining their validity, there are discernible differences between them.The legal or administrative regulations in question have institutionalized and codified certain public order into specific rules.Whether such a mandatory provision nullifies the validity of a contract can only be determined through abstract legal interpretation.It is possible to make the judgment prior to its formation;while the determination of a contract’s incompliance with morals can only be made retrospectively, on a case-by-case basis (Xie, 2007, p.139).Due to the research focus and the length constraints of this article, this paper will not elaborate further on the differences and connections between contracts against morality and illegal contracts.

The evaluation of the validity of illegal contracts has undergone a legislative process that increasingly curtails intervention in contractual freedom.This restraint manifests in two respects: First, regarding normative hierarchy, theEconomic Contract Lawof 1981 invalidated contracts “violating laws, state policies, and plans,” while theGeneral Principles of Civil Lawof 1986 rendered civil acts “contrary to laws or the public interest” void, and theContract Lawof 1999 declared contracts “infringing upon mandatory provisions of laws and administrative regulations” invalid.The legal sources thus narrowed from laws, state policies, and plans—virtually all “red-header documents”(Wang, 1995, p.16)—to laws and administrative regulations.Second, concerning the type of norms, the Contract Law imposes limits not only based on the normative hierarchy but also specifies the type as mandatory provisions.Contract Law Interpretation II in 2009further narrowed these to “validity-specific mandatory provisions.” Thereby, the normative attribute analysis path for the validity evaluation of illegal contracts has been established.

The case statistical analysis indicates that the validity evaluation of illegal contracts mostly arises in disputes related to economic public order, encompassing areas such as real estate, land, work safety, financial supervision, and corporate law, and is sporadically observed in disputes related to political public order, involving education, medical care,trade unions, and other fields.The illegal invalid contracts are frequently found in transactions like house sale agreements, house leasing contracts, contracts for the transfer or assignment of land use rights, contracts for agricultural land leasing, construction project contracts, and loan agreements.The frequently violated mandatory provisions primarily involve stringent legal and regulatory measures, outside of traditional civil law,with a particular focus on controls over qualifications and subject matter that limit market entry (Yao, 2016; Ye, 2015, pp.120–132).

Given that a contract violating validity-specific mandatory provisions is considered invalid, the question arises: What constitutes a validity-specific mandatory provision?To guide judicial practice, the Supreme People’s Court has adopted the “comprehensive judgment approach,” listing various evaluative points such as the type of legal interest protected by the mandatory provision, protection of transaction safety, regulatory targets,and legal consequences of unlawful acts.This approach facilitates a comprehensive determination of the type of mandatory provision; it calls for differentiating the level of validity based on the regulatory targets and provides examples of types of validityspecific mandatory provisions.①Article 16 of the Supreme People’s Court’s Guiding Opinions on Certain Issues in Adjudicating Civil and Commercial Contract Disputes under Current Situations (FF [2009] No. 40). Article 30 of the Summary of the National Civil and Commercial Trial Work Conference of Courts (F [2019] No. 254) issued by the Supreme People’s Court.The path for analyzing the normative attributes in assessing the validity of illegal contracts is thereby further elaborated.

TheCivil Code, enacted in 2020, provides in Paragraph 1 of Article 153 that “A civil juristic act in violation of the mandatory provisions of laws or administrative regulations is void, unless such mandatory provisions do not lead to invalidity of such a civil juristic act.” This reveals that theCivil Codehas not incorporated the judicial practice of differentiating between validity-specific mandatory provisions and administrativespecific mandatory provisions—a distinction that has been progressively refined in judicial practice.Nevertheless, theCivil Codehas advanced the approach of minimizing intervention by differentiating normative attributes.

Challenges and Directions for Amendment

The legal academic community has conducted empirical investigations into the judicial application of normative attribute analysis, but the findings have been unsatisfactory.The analyses of diverse types of cases have shown that courts consistently view market access qualifications as an influencing factor in determining the validity of contracts.Consequently, it is no use in distinguishing provisions mandatory for validity and those mandatory for administration in market access cases.Furthermore, in other types of cases not related to market access, the binary division has also shown to mislead judicial practice (Zhu, 2016, p.162).

Empirical research has also scrutinized the application of the “comprehensive judgment approach” advocated by the Supreme People’s Court, uncovering that this approach has similarly misguided judicial practice.My empirical examination proceeds from both intrinsic and extrinsic perspectives of norms.Intrinsically, it analyzes three categories of cases according to whether the subject of regulation is the contract act itself, the party’s qualifications, or the performance act.Extrinsically, it assesses the necessity of negating contract validity based on the performance status of the contract and the propriety of negating contract validity based on the parties’ subjective state.The study suggests that given the intricate interplay among various normative points and the diversity of practical case types, the tripartite division of regulatory objects is insufficient, and evaluative inconsistencies are unavoidable (Yao, 2016, p.1285).

The above problem is related to the flaws in the argumentation of the normative attribute analysis path.There are two lines of reasoning in this approach.The first is to decide whether to negate the validity of a contract by synthesizing numerous factors in contracts that violate mandatory provisions.Suppose it is determined that the validity should be negated.In that case, such mandatory norms are deemed validity-specific mandatory norms, leading to the contract’s nullification on the basis of violating these norms.This reasoning suffers from a clear logical fallacy of mistaking effects for causes.The second approach treats validity-specific mandatory norms as a necessary but insufficient condition for a contract to be deemed illegally invalid.It involves first assessing whether a norm falls under the category of validity-specific mandatory norms,and then considering additional reasons, both internal and external to other norms, to determine the contract’s validity.As such, the concept of validity-specific mandatory norms does not neatly correlate with the outcome of contract invalidity, contradicting the purpose of distinguishing normative attributes.The first is known as the “descriptive path,” criticized for “answering questions with questions,” and the second as the “element path,” criticized for “a discrepancy between nomenclature and reality” (Yao, 2016, pp.1271–1272).

Indeed, the theory and practice of normative attribute analysis have amassed significant achievements and insights.This approach has delineated the boundaries between autonomy and compulsion by methodically analyzing individual evaluation criteria and by categorizing various case types based on different regulatory subjects.These efforts have established a groundwork for the exploration of alternative analytical methods.Building upon this, scholars have shifted their analytical emphasis towards the purposes of norms (Geng, 2009, p.195), purpose orientation (Yao, 2016, p.1287), and normative intent (Zhu, 2016, p.169).

Mandatory norms are designed to protect the public interest in specific situations.The rule of invalidity for violating mandatory provisions grants judges the authority to balance the public interest against the primacy of contractual freedom when the invalidity of a juristic act is not expressly stipulated.This allows judges to decide whether it is necessary to employ regulatory measures to deny the effectiveness of a contract.When applying Paragraph 1, Article 153 of theCivil Code, judges are tasked not solely with identifying the aims of mandatory norms—since legislative purposes are often explicitly stated in the first article of statutes—but also with facilitating the convergence of public and private law.This is achieved by engaging in purpose-means reasoning within the framework of mutual instrumentalization of public and private law (Su, 2012a, p.312), ensuring that private law autonomy is not unduly compromised while regulatory objectives are met.

The purpose-means mode of reasoning is not exclusive to legislative endeavors.Legislators articulate their regulatory discretion over particular societal segments through legal norms, assessing whether the legal instruments employed to achieve specific legislative goals are appropriate and balanced (M.J.M?llers, 2022, p.258).When norms are unclear and judges must employ teleological arguments to determine the rules applicable to current cases, the purpose-means mode of reasoning is equally indispensable.

The purpose-means mode of reasoning represents a departure from the normative thinking traditionally associated with civil law doctrine.It is a distinctive private law reasoning approach that is fundamental to legal policy science, which requires the simultaneous consideration of both utility and norms (Xie, 2005, p.193).Judges who invalidate juristic acts solely based on a violation of the validity-specific mandatory provision without any legal policy analysis or balancing of legal interests effectively render a decision without justification (Su, 2012a, p.330).Thus, on top of existing normative considerations, conducting legal policy analysis rooted in the purpose of norms is an essential direction for assessing the validity of unlawful juristic acts.Yet, the methodology for such legal policy analysis is currently under-researched.

Legal Policy Analysis and Consequence Argumentation

The legal field’s lack of systematic research into the concept of policy does not preclude the utilization of policy in legal reasoning and analysis.Legal policy analysis finds its counterpart in judicial adjudication through the consideration or orientation toward consequences (Lei, 2019, p.17).This paper’s conception of consequence consideration is not a wholesale endorsement of consequentialism in judicial decisions but instead an advocacy for argumentation predicated on consequences.Consequence argumentation is not a wholly distinct methodology in legal scholarship; rather, it is frequently treated as equivalent to purpose-evaluation argumentation (MacCormick, 2014,p.179).Purpose argumentation commences with the normative purpose and employs a consequence-oriented interpretative model to argue for the propositions of rules applicable to pending cases, thereby reaching conclusions for individual cases.The essence of this methodology is the argumentation of consequence-oriented interpretation.

Consequence argumentation is often applicable in situations where decisions cannot be made based on clear mandatory rules or where the rules themselves are ambiguous.Judges, when adjudicating, are required to choose between two opposing rules, with the key to their choice resting on the consequences.This is because the outcomes of applying one rule over another can differ significantly in specific contexts (MacCormick, 2006,p.147).Thus, consequence argumentation involves using the potential consequences of a decision as grounds for argument, and assessing whether these consequences match the normative purpose within the ambit of purpose-based reasoning.

The “consequences” contemplated in consequence argumentation refer to the meaningful impact of a decision, not the direct result or outcome.It is about the systemic and general effects that could stem from the general judgment rules a judge establishes,not merely the specific impacts on the parties involved.This philosophy is termed rule utilitarianism, as opposed to act utilitarianism, which considers the effects on specific parties (Lei, 2019, pp.18–19; MacCormick, 2006, p.98 and pp.125–147).The challenge lies in how judges predict and assess these consequences, a process they need to articulate.From this emerges the foundational influence of legal policy.

In the legal community, the term “policy” often refers to standards used by courts or legislative bodies akin to moral criteria (Zamboni, 2023, p.95–107).Dworkin, for example, considers policies to be standards stipulating goals that must be achieved,typically related to economic, political, or social improvements (Dworkin, 1998, p.41).Some Chinese scholars include within the broad definition of legal policy both the objectives established by legislators during law-making and those identified by judges when interpreting and applying the law (Geng, 2017, p.102).Other scholars have categorized policy sources within the context of legal sources.In this framework, policies are recognized as cognitive sources for judicial activities, like those outlined in Article 6 of theGeneral Principles of Civil Law.However, theCivil Codeno longer acknowledges policies as cognitive sources; they can only serve as grounds for adjudication.Nevertheless, policies are still recognized as cognitive sources in other fields, such as economic and criminal laws (Lei, 2021, p.164).Overall, the concept of policy in the legal field is characterized by its static and outcome-oriented nature.

Unlike the legal field, the concept of policy in political science emphasizes that it is an amalgamation of processes and their authoritative determinations.Zamboni adopts this view of policy to assert that legal policy analysis involves the transformation of values into law and examines both the process and its consequences (Zamboni, 2023, p.110).These dynamics are evident at both the level of norm creation and norm application.

Regarding the control of the validity of juristic acts by public law, legislation delegates to judges the task of conducting legal policy analysis through the generalized provision of the rule of invalidity for violating mandatory provisions.Judges, bound by the mandate of lawful adjudication, assess the validity or other possible outcomes of a juristic act.This involves balancing the legal interests protected by the mandatory provisions against those represented by the juristic act and the objectives of the norm (Su, 2004, p.41).This legal policy analysis occurs within the structure of judicial reasoning.

Legal policy analysis differs from deductive reasoning.Deductive reasoning relies on statutory language and case law as doctrinal premises, representing a classic normative thinking pattern.However, when decisions cannot be made from explicit mandatory rules or when the rules are vague, legal policy analysis centered on consequence argumentation requires first deriving a general rule from practical rationality as a premise for judicial reasoning.This embodies a purpose-means thinking model.Doctrinal private law reasoning assesses the validity of juristic acts by evaluating their conformity with principles of good conduct grounded in political and moral theories (Collins, 2014, p.2), constituting a path of act evaluation.In contrast, legal policy analysis determines the necessity of negating the validity of juristic acts by considering the objectives of norms,representing a path of consequence evaluation.

Thus, the legal policy analysis of the effect of mandatory provisions on the validity of juristic acts is premised on the normative purpose of these provisions.It utilizes a consequence-oriented argumentation model to analyze the validity rule for illicit acts in pending cases, leading to case-specific conclusions.The acquisition of the rule through consequence argumentation is critical; applying this rule to pending cases reverts to the traditional framework of normative reasoning, allowing for individual case conclusions to be drawn through deductive inference.

Consequence argumentation includes two core stages: prediction and evaluation(Lei, 2019, p.25).Therefore, obtaining the rule of invalidity for juristic acts in violation of mandatory provisions, for application to pending cases, is central to the legal policy analysis when assessing the validity of unlawful juristic acts.

Legal Policy Analysis Path for the Validity of Illegal Juristic Acts

Consequence prediction entails an empirical and neutral description based on the functional analysis of rule capabilities, distinct from value judgments; consequence selection involves arguing the legitimacy of rule functions through teleological interpretation at the value level (Xu, 2005, p.84).Moreover, the system of invalidating illegal contracts is a specific manifestation of regulatory rules established by modern states to promote welfare and efficiency (Xu, 2016, p.77).Compared to the public law effectiveness of regulatory rules, the invalidation of illegal juristic acts serves as an ancillary regulatory tool for achieving regulatory objectives.Therefore, when analyzing the validity of illegal juristic acts from a legal policy perspective, it is essential to undertake both consequence prediction and assessment within the regulatory context.The following discussion will elucidate this process by integrating regulatory theory and practice, focusing on the argumentative process for deducing the rule of invalidity for illegal juristic acts.

Private Law as a Regulatory Form

In the seminal texts on government regulation theory and public law,Regulation:Legal Forms and Economic Theory, Anthony Ogus employs the term “regulation” to denote laws that uphold the community system, in contrast to the private law that underpins the market system.Regulatory norms primarily employ public law as their tool, possessing a directive function; private individuals are expected to behave in prescribed ways or face penalties.Yet, the legal function’s complexity and diversity resist oversimplification; law within the market system is not strictly private law, as no society could function without the state ensuring a baseline of order and safety and intervening in private contracts when necessary.Conversely, regulation is not always imperative, focused on public welfare,or centralized—some sectors’ regulation occurs through self-regulation, and achieving regulatory objectives often involves a myriad of tools, including regulation via contract(Ogus, 2008, pp.1–3).Hugh Collins, under the expansive regulation definition that views “all rule systems intended to govern their subjects as forms of regulation,” posits that private law is capable of providing a more nuanced, context-sensitive, and effective regulatory framework (Collins, 2014, pp.7–8, 392).Within regulatory theory, private law serves not just as the backbone of private order within civil society but also as a mechanism for realizing policy objectives.

Consequence Prediction Based on Regulatory Scenarios (Industries)

In situations where public law governs juristic acts, it is often aimed at achieving specific economic or social regulatory goals.The sheer number of regulatory measures makes it challenging to consider the goals or consequences of regulation holistically.On one hand, efforts to generically summarize all regulations tend to be too abstract or must incorporate exceptions, thus limiting their practical utility.On the other hand,the discussion of individual regulatory cases often becomes too particular, narrow, or exceptional to provide substantial insights into the entire regulatory framework (Breyer,2006, p.6).

The challenges regulatory frameworks face mirror those encountered with the aforementioned path of normative attribute analysis.The contexts in which mandatory provisions apply are manifold, and their normative objectives vary greatly.Scholars have reluctantly concluded that the types of mandatory norms are “indistinguishable”or “unnecessary to distinguish” (Li, 2023, pp.160–161), given the diverse application scenarios of the multitude of mandatory provisions.Even though the Supreme People’s Court has enumerated various evaluative points and listed specific types of mandatory provisions with definitive effects in its judicial interpretations, these have limited guiding influence on the adjudication of individual cases, as the empirical studies cited above reveal.Indeed, the Supreme People’s Court’s approach to comprehensive judgment already includes elements of consequence-based argumentation, such as considering the legal consequences of unlawful acts as one of the evaluative points.Nevertheless, it requires further refinement to scenarize the prediction of regulatory consequences and distinguish between different regulatory scenarios.

Regulatory Measures Adopted Based on Regulatory Scenarios

In regulatory practice, identical regulatory objectives can necessitate markedly distinct regulatory measures across different sectors.For instance, in the realm of qualification regulation, which aims to safeguard personal safety, the contravention of these regulations yields divergent legal outcomes based on the industry.In healthcare, a medical service contract executed without a valid physician’s license is deemed void, often mandating the refund of fees paid for unlicensed medical services.Conversely, in construction, a contract signed using borrowed credentials is invalidated, yet the contractor may still retain the right to payment upon satisfactory completion and inspection of the project.The key to different treatment in private law is not the different interests protected by the regulatory system, as the direct impact on personal interests in medical practice is not necessarily more significant than the safety concerns in construction.The focus of qualification regulation is professional conduct, and when the result of an act proves regulation unnecessary, there is no need to deny the act’s effect, nor does it affect the compensation the actor should receive.This distinction is based on the results of the actions rather than the interests involved.A construction project completed and approved using borrowed qualifications showcases the contractor’s work, while a patient’s recovery cannot easily be attributed to the actions of an unlicensed physician.Therefore, the necessity to deny the effectiveness of an act varies between these scenarios, and the evaluation of such effectiveness should differ accordingly.Although judicial practice currently denies the validity of contracts involving illegal market entry, the obligation to return benefits obtained under such invalidated contracts differs markedly.The intent of this comparison is solely to underscore that regulatory measures differ with the regulatory context, not to endorse the judicial approach that uniformly nullifies the effectiveness of illegal market entry contracts.Different regulatory methods yield different consequential outcomes, and thus, predictions regarding the impact of regulatory measures should be grounded in the regulatory context at hand.

Significance of Industry Administrative Regulations for Judges’ Consequence Predictions

Can judges effectively forecast the consequential outcomes of regulations in specific cases? The response may not be overly positive.In the construction sector,qualification management reform has been a hotly debated issue since the promulgation of theConstruction Law.On November 11, 2020, theReform Plan for the Qualification Management System of Construction Engineering Enterpriseswas proposed, aiming to further ease market access restrictions for the construction sector.This entails a relaxation of preliminary regulation and a strengthening of during-and-post-activity regulation, representing the direction of quality management reform in the industry.As industry regulations trend toward a more relaxed approach to qualification control,the logic is straightforward: qualifications and quality are not inherently linked.Possession of qualifications does not necessarily imply acceptable construction quality,just as the absence of qualifications does not automatically indicate inferior quality, as numerous construction projects that lack qualifications but pass acceptance inspections demonstrate.Yet, this progressive trend in industry regulation has not garnered sufficient judicial consideration.The Supreme People’s Court’sInterpretation(I)on Issues Concerning the Application of Law in Hearing Cases of Disputes over ConstructionContracts, revised in December 2020, still employs the rules established by the 2004 judicial interpretation, declaring construction contracts signed in contravention of qualification management to be invalid in accordance with Paragraph 1, Article 153 of theCivil Code.This is evidence of a deficit in the judiciary’s ability to judge regulatory policies.

Requiring judges to forecast the consequential impact of regulatory actions is no different from demanding individuals to perform a cost-benefit analysis of safety-related measures.When it comes to the calculation of costs and benefits of safety measures,two reasons explain why it needs to be done by a good government or through collective decision-making rather than by individuals themselves.One is that professional decisionmakers have access to higher-quality data; the other is that safety measures should be determined by rules rather than by individuals (Levmore, 2015, pp.155–156).When public law governs juristic acts, if judges are able to utilize professional judgment to predict the regulatory consequences, it would undoubtedly alleviate the burden of argumentation significantly.

Regulation encompasses a multitude of highly technical fields, and regulatory policies need to be adjusted due to changing times, technological advancements, and social development.Ordinary courts may face challenges in their technical proficiency and policy judgment when dealing with such complex matters.In contrast, in many regulatory domains, specific administrative bodies are designated to assume the responsibility of regulation.These administrative bodies possess a deep understanding of the industries they oversee, including their development dynamics.Additionally, they often have dedicated technical experts who can provide the necessary technical support for effectively implementing regulations (Song, 2017, pp.159–170).Consequently, when courts predict the consequential impact of regulation and assess whether regulatory tools align with regulatory objectives, they can leverage the policy judgment flexibility and technical expertise of industry administrators to establish a cooperative regulatory framework, achieving complementary advantages.In fact, industry policies are of a higher quality than other arguments due to their highly flexible and technical nature.Therefore, consequence prediction based on regulatory scenarios (industries) benefits judges remarkably in that they can make their adjudication more persuasive through industry regulatory policies.

Consequence Selection Within the Framework of Regulatory Measures

Consequence selection involves assessing the acceptability of outcomes, and it effectively entails a choice of regulatory measures, since the outcomes being evaluated are the consequential effects of particular regulatory mechanisms.First, this process necessitates consideration from the perspective of the convergence of public and private law, and the division of labor between private law regulatory mechanisms and public law regulatory mechanisms aligned with regulatory objectives.Second, it demands ensuring coherence within the civil law doctrinal system with legal principles and other legal norms, and adjusting the regulatory mechanisms appropriately based on the acceptability of outcomes.Therefore, consequence selection includes the following three stages:

Alignment Test

This test examines whether regulatory measures align with the intended purpose of regulation.Several factors are considered when evaluating effective regulation, such as whether it is purpose-based, whether it is proportional to the issue at hand, and whether it is used in combination with previous regulations (Ogus, 2008, p.345).

Consequence selection for the rule of invalidity for illegal juristic acts, as an auxiliary regulatory tool, should be carried out within corresponding regulatory frameworks.Given the distinct roles of judicial and administrative bodies in regulating industries, it is crucial for judicial bodies to exhibit deference to, and recognize the expertise of, administrative bodies in this area.In making decisions about predicting consequences, they should refer to evolving industry policies and choose regulatory measures that are consistent with the intended purposes of regulation, operating within the collaborative framework of public and private law.

In typical social regulation scenarios such as safety and health, environmental protection, and consumer protection, due to information asymmetry that prevents individuals receiving goods or services from obtaining complete product quality information, and because transaction spillover effects, or externalities, may negatively impact third parties not involved in the transaction, policymakers often opt to employ a variety of regulatory tools for intervention.These range from highly interventionist prerequisite approvals like licenses and authorizations, to less interventionist approaches such as informational regulations (disclosure of information, controlling misleading information) and economic instruments (fees, taxes, subsidies, emissions trading rights),to standards for product providers that lie in between (Ogus, 2008, pp.5–6).The chosen regulatory measures vary across different fields and are mostly underpinned by legal techniques.

For example, in the construction industry, a construction contract is deemed a special contract under which the contractor completes the project and delivers it to the owner.However, users of the construction project do not have full access to the information about project quality and there are notable concerns with construction and building safety, information asymmetry, and externalities.Consequently,regulating construction quality has always been a primary objective in the enactment of theConstruction Law.The construction safety and quality regulation framework is a whole-process framework that entails pre-regulation, in-process regulation, and post-regulation.Pre-regulation measures mainly include qualification certificates for four types of construction occupations, permits for construction project planning and construction, and permits for the use of construction land; in-process regulation measures include control of various performance behaviors, such as information disclosure, various engineering standards, and project supervision; post-regulation tools encompass accountability or sanctions ranging from warranty liability for defects to tort liability, administrative liability, and criminal liability, spanning the entire process from surveying and design to construction, supervision, acceptance and warranty.The rule of invalidity for illegal juristic acts mainly serves the regulatory purpose of prevention.It is a pre-regulation measure that supports the regulatory purpose of public law by negating the principle of autonomy of will.When evaluating the validity of a construction contract concluded in violation of qualification control, it is necessary to think systematically.Invalidating the construction contract is merely one of many regulatory measures to regulate construction project quality.It is necessary to consider whether there are alternative legal measures to safeguard social and public interests (Xu, 2016, p.75).This also represents a fundamental requirement of the substantive rules of argumentation concerning the civil law’s value judgments (Wang, 2004, p.104).Especially when a construction project has been completed and accepted, fulfilling the regulatory aim of quality control, it is unnecessary to challenge the validity of a contract concluded without proper qualifications.This is because public law sanctions for qualification violations are already in effect.The theory of performance stages posits that the legal effects of unlawful acts in private law differ based on the contract’s execution stage (Xie, 2003, p.42).This approach, which varies public law controls over illegal contracts based on the stage of private contract performance, exemplifies the interdependency between public and private law.

There is ongoing scholarly debate about the legal norm concerning illegal juristic acts established in Paragraph 1, Article 153 of theCivil Code: whether it is generally valid with exceptions of invalidity, generally invalid with exceptions of validity, or partially valid and invalid.It is clear, however, that while relevant mandatory norms regulate civil life, they do not assess the effectiveness of these regulations.The absence of explicit guidelines on the validity of illegal juristic acts in regulatory law is attributed to a division of regulatory responsibilities among various legal departments.Consequently, judges are empowered to respond within the private law framework from a regulatory system perspective (Yao, 2016, pp.1286–1287).The invalidity of illegal juristic acts involves balancing private law autonomy with other values.A comprehensive understanding emerges from exploring rational solutions to the tug-of-war between private law and administrative law, viewing the issue through the lens of the interplay between public and private law (Fang, 2012, p.36).

Coherence Test

The coherence test involves assessing whether regulatory measures are in harmony with the values embedded in general legal principles and existing rules (MacCormick,2006, p.100; Feteris, 2005, pp.85–87).This is a requirement within and beyond the civil law doctrinal system.

To illustrate this, two cases reported in the Supreme People’s Court Gazette (2011)concerning disputes over construction contracts voided due to lack of qualifications serve as examples.If a construction contract is declared void, the benefits accrued by the contracting party from the competent work must be returned in the form of construction payments.Not only are payments settled as per the agreement recognized (2011 MTZ Case No.235), but in situations where the terms are unclear, payments are also made based on market rates, inclusive of profits for the unqualified contractor (2011 MTZ Case No.104).During the litigation of 2011 MTZ Case No.235, the party lending qualifications to the contractor highlighted the logical inconsistency of the court mandating settlement based on an invalid contract.In 2011 MTZ Case No.104, the prosecution objected, arguing that if an unqualified contractor is precluded from profiting from post-contract invalidation,the contracting party would effectively realize the profits.Such an acquisition of profits by the contracting party, under an invalid contract, contravenes the principles of fairness and equivalent remuneration.

The long-term judicial approach of “declaring invalid yet treating as valid” in persistent construction contract disputes involving borrowed qualifications illustrates a compromise with practical construction norms.While this method of interest adjustment aligns with the principles of fairness and equitable remuneration, its continued discordance with existing rules challenges its coherence and sustainability.

Adjustments of the Validity of Illegal Juristic Acts

Mandatory provisions regulate juristic acts through two primary mechanisms: control of elements and control of consequences.Control of elements involves the specification of the content of juristic acts, the conditions for their formation, and the status of the parties involved.Control of consequences pertains to managing the outcomes of these acts (Geng,2016, p.47; Canaris, 2016, pp.62–81), referring to various states of validity.Paragraph 1,Article 153 of theCivil Codenot only allows for the potential validity of illegal contracts but also opens the possibility for different validity statuses, such as partial invalidity,relative invalidity, unilateral invalidity, indeterminate validity, revocability, terminability,and convertibility, which judges may determine in individual cases (Su, 2012b, p.363).In the process of evaluating outcomes, conclusions deemed unacceptable should be revised accordingly.The provision of eight discretionary validity statuses, as opposed to a simplistic binary of valid or invalid, better addresses the need for nuanced validity adjustments.

Conclusions

Based on the regulatory role of private law, and through an examination of the legal reasoning processes for Paragraph 1, Article 153 of theCivil Code, the following primary conclusions have been arrived regarding the policy analysis approach for the effects of mandatory provisions on the validity of juristic acts:

First, the normative attribute analysis path centered on identifying validity-specific mandatory provisions faces challenges for “answering questions with questions” and for “a discrepancy between nomenclature and reality.” On top of existing normative considerations, conducting legal policy analysis rooted in the purpose of norms and centered on consequence-oriented argumentation is an essential direction for assessing the validity of illegal juristic acts in thorny cases.

Second, the legal policy analysis of the effect of mandatory provisions on the validity of juristic acts is premised on the normative purpose of these provisions and utilizes a(consequential) outcome-oriented argumentation model to analyze the validity rule for illegal juristic acts in pending cases.Applying this rule to pending cases is a process of reverting to the traditional framework of normative reasoning, allowing for individual case conclusions to be drawn through deductive inference.Consequence argumentation through prediction and evaluation and obtaining the rule of invalidity for juristic acts in violation of mandatory provisions is central to the legal policy analysis of assessing the effect of mandatory provisions on the validity of illegal juristic acts.

Third, the invalidation of illegal juristic acts serves as an ancillary regulatory tool for achieving regulatory objectives.It is essential to undertake both consequence prediction and assessment within the regulatory context.Regulatory measures vary across regulatory scenarios (industries).Therefore, consequence prediction shall be based on regulatory scenarios (industries).Judges should draw on the advantages of administrative bodies in regulatory techniques and policies to make their adjudication more persuasive when predicting the consequential outcomes of evaluating the validity of illegal juristic acts.Consequence selection in effect entails a choice of regulatory measures since the outcomes being evaluated are the consequential effects of particular regulatory mechanisms.This process first necessitates consideration from the perspective of the convergence of public and private law, of the division of labor between private law regulatory mechanisms and public law regulatory mechanisms aligned with regulatory objectives.Second, it requires ensuring the compatibility of regulatory mechanisms within the civil law doctrinal system with legal principles and other legal norms, and if necessary, adjusting these mechanisms appropriately based on the acceptability of outcomes.