3)The contract does not contravene the law or publicinterests; and
　
　4)The contents of the contract must be definite,possible, legal and appropriate.
　　　　
　
　Viacomparisons, it could be seen that the conditions of a contract and theconditions of the contract’s taking effect is a sort of “external-internal”relationship. As long as the parties have a meeting of minds, thecontract is formed. This is an external representation. However, only whenparties who have fulfilled specific conditions make representation that fulfilsspecial requirements would the formed contract have legal effect. These typesof conditions are is what is legally required by the taking effect of thecontract; they are the “essence”. Therefore, contracts that are already formedneed not necessarily have legal effect, while a contract that has come intoeffect must already be formed. The setting up of two equally importantstandards of conditions for formation and conditions for taking effect toregulate juristic acts is to give effect to legislative intent. On one hand,the parties make offers and acceptances with the aim to create the contract,therefore, the law does not make many regulations with regards to the formationof the contract, its largest extent being to satisfy the expectations ofparties and to conform to the principle of the autonomy of parties’ will; onthe other hand, due to certain trends of social values, recognition in law of acontract should necessarily be strictly regulated in order to prevent contractsthat seem harmless on the face of it, but whose actual contents are harmful,from taking effect.
　
　The system of approval and registration of contractsis closely related to a contract’s formation and taking effect. According tolaws and legal regulations, some require the relevant government department’sapproval or the registration of formalities. With regards to the legal effectof such approval or registration, is it a matter of the formation of thecontract or a matter of the taking effect of a contract? The Contract Law doesnot resolve this question. From China’s past contract law legislation, it canbe seen that there are completely different legislative attitudes towards thelegal effects of act of approval or registration. In the Foreign EconomicContract Law, the act of approval is prescribed as a condition for theformation of a contract. Article 7 of the abovementioned law states,“whencontracts that should be approved by the country are given approval, thecontracts are regarded as formed”. The Technology Contract Law also prescribesacts of registration as conditions for the formation of a contract sinceArticle 10 states, “(contracts) that require approval from the relevantauthorities according to state law are formed from the date of approval”.However, two months after the promulgation of the Foreign Economic Law, in May,1985, the State Council released the Technology Introduction Contract GoverningRegulation of which Section 20 prescribes that technology introduction contracts“come into effect on the date of approval”. Before which, in January, 1982, theState Council released the Foreign Cooperative Exploitation of Ocean Crude OilResources Regulation where Section 6 also prescribes that contracts for crudeoil come into effect when given approval. Hereon, approval becomes a conditionfor the taking effect of a contract. In other words, state laws prescribe actsof approval and registration as conditions for the formation of the contractwhile the State Council’s regulations determine these as conditions for thetaking effect of a contract.
　
　The Contract Law distinguishes the formation and thetaking effect of the contract, but does not distinguishthe legal effects of approval andregistration.
　　　　ccording to Article 44 of the Contract Law, there will be on problems if lawsor regulations clearly state that approval or registration is a condition forthe contract to take effect. However, if when laws and regulations onlyprescribe the need for approval or registration procedures, and do notprescribe whether the procedures are conditions for the formation of thecontract or conditions for the taking effect of the contract, how do weascertain the legal effects of approval or registration? Looking at thearticles regarding the formation of a contract in contract law, questions thatdo not involve that of approval orregistration seems to reflect the inclination to view approval and registrationas conditions to the taking effect of the contract and not to the formation ofthe contract. However, due to the ambiguity of this article, it cannot removethe possibility that future laws and regulations would follow the precedence inthe foreign economic contract law and the technology contract law in decidingthat approval or registration goes towards the conditions for the formation ofa contract. However, the judicial construction by the Supreme People’s Courtaffirmed that acts of approval and registration go towards the conditions forthe taking effect of the contract.
　　　　
　
　According to the general principles of civil law, theessential condition for the formation of contract is the mutual consent of bothparties, as such there is no need for approvals and registration as a basis forthe formation of contract. A contract is the result of an agreement between theparties and is the embodiment of the principle of freedom of contract. As longas both parties adhere to the contractually stipulated regulations on offer andacceptance, and the terms of contract are consistent with the fundamentalprovisions, or alternatively if the contract conforms to the circumstancesprovided by articles such as article 37 of the Contract Law, then the contractis established. It is thus clear that the formation of a contract is a matterpurely within the scope of the parties, and is unrelated to the law, the stateagencies or even third parties.
　
　The same, however, cannot be said for the takingeffect of the contract as that is where a contract acquires its legalenforceability, and therefore, it is not merely the intentions of the parties.It certainly includes the State will, the state’s adjudication andacceptability of the acts of the parties. Thus it is impossible that the lawshould vest legal enforceability in a contract that clearly violates legalrequirements. Both the requirement of approval and registration are forms ofcontractual intervention by either the State will or external factors. Therequirement of approval is a reflection of an administrative act of the Statewill, the purpose being to interpose on the private lives of individualsthrough the power of the State. At the same time, it allows for contractualrelations that are in accordance to the interests of the party and which alsoare in keeping with the State and public interests. Registration is a specialprocedure handled by a statutory body and its purpose is to allow the legalrelations between the specific parties to gain the effect of fairness andcredence that is publicly recognized. The requirements of approval and registrationdo not entirely constitute the essential conditions to the formation of acontract, rather, they are used to determine whether the contractual objectivesof the anticipated contract can be realized by the State mandate, therebyachieving the expected civil legal result. This is, in fact, the issue that thesystem which governs the coming into effect of a contract has to address.
　
　II. Performanceof Contract
　
　 Theperformance of a contract is where an obligor performs his contractualobligation and the obligee realizes his contractual claim, therebyextinguishing the relationship between obligatory right and liability.
　　　　ith regards to the issue of contractual performance, Contract Law widely draws reference from foreign contract lawsystems. For example, it draws reference from regulations such as the right todemur when adversely affected,
　　　　nd the right to demur for a subsequent performance
　　　　nd specific performance etc.
　　　　
　
　Before the promulgation of the Contract Law, a severe gap in Chinese contract law existed withregards to the preservation of obligatory rights.
　　　　ven though judicial interpretation refers to the obligee’s right ofsubrogation, it is merely restricted to the procedure of civil action and doesnot involve the substantive law at all.
　　　　n order to remedy the legislative gap, ContractLaw provides for the system of preservation of contractual claim, moreprecisely, it provides for the system of the obligee’s right of subrogation andrights of rescission.
　　　　n obligee’s claim or right to rescind, through the use of the obligor’s assetsas a guarantee and the objective of the system of preservation of obligatoryright is founded upon the circumstances where the inappropriate dissipation ofthe obligor’s assets results in the obligee’s inability to realize his claim.The system of the obligee’s right of subrogation is mainly to give due regardto the obligor’s nonfeasance, whereas the obligee’s right to rescission is togive due regard to the positive acts of the obligor. The systems of anobligee’s rights to subrogation and rescission are a breakthrough with regardsto the principle of the ‘relativity of contract’. In the conventional contractlaw, the legislative foundation for such systems is founded on the guarantee tothe realization of obligatory rights.

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