Illegal, minimum guarantee clause refers to the content stipulated in the contract that one party will enjoy a fixed return regardless of whether it suffers a loss or not. It is commonly found in joint venture contracts, entrusted financial management contracts, Sino-foreign cooperative enterprise contracts, and construction project joint construction contracts. . Regarding the validity of guarantee clauses, the current legislation has no general provisions on the validity of guarantee clauses in some specific types of contracts. In fact, the diversity of contracts does not allow legislation to stipulate the validity in general terms. In practice, the effectiveness of guarantee clauses is determined differently for different types of contracts.

The validity of the "guarantee clause" in the contract

When hearing cases, the court generally tends to find the guarantee clause in the contract invalid. Specifically, the following methods are used:

As for the guarantee clause in the joint venture contract, because the judicial interpretation clearly stipulates that it is invalid, so as long as the contract is indeed a joint venture contract, the court will rule that it is invalid. Even though the judicial interpretation is from 1990, it may be out of date, but the court Whatever applies.

As for the minimum guarantee clause in the entrusted financial management contract, the court will determine that the minimum guarantee clause in the entrusted financial management contract between the securities company and the client is invalid in accordance with the provisions of the Securities Law. For entrusted financial management between non-securities companies and the client, The guarantee clause in the contract is generally considered invalid.

As for the minimum guarantee clause in the construction participation and joint construction contract of the construction project, the court is inclined to identify the construction participation and joint construction contract as a joint venture contract, thus deeming it invalid.

However, the court tends to find the minimum guarantee clauses in Sino-foreign joint venture contracts to be valid.

Legal basis:

Article 502 of the "People's Republic of China and Civil Code"

A contract established in accordance with the law shall take effect from the time of establishment. However, unless otherwise provided by law or otherwise agreed upon by the parties. In accordance with the provisions of laws and administrative regulations, if the contract should be subject to approval and other procedures, the provisions shall be followed. If the failure to go through approval and other procedures affects the effectiveness of the contract, it will not affect the effectiveness of the contract's obligation clauses such as submission for approval and related clauses. If the party that should go through the application approval and other procedures fails to perform its obligations, the other party may request that it bear liability for violating such obligations. In accordance with the provisions of laws and administrative regulations, if the modification, transfer, termination, etc. of a contract require approval and other procedures, the provisions of the preceding paragraph shall apply.