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CISG CASE PRESENTATION

China 30 June 2000 Wuhan Economic and Technology Development Zone People's Court [District Court], Hubei Province (Shen Zhen fengshen Industry Development Co. v. Inter Service Internation France) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/000630c1.html]

Primary source(s) of information for case presentation: Case text

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Case identification

DATE OF DECISION: 20000630 (30 June 2000)

JURISDICTION: People's Republic of China

TRIBUNAL: Wuhan Economic and Technology Development Zone People's Court [District Court], Hubei Province

JUDGE(S): Unavailable

CASE NUMBER/DOCKET NUMBER: Unavailable

CASE NAME: Shenzhen Fengshen Industry Development Co. v. Inter Service Internation France

CASE HISTORY: Unavailable

SELLER'S COUNTRY: France (defendant)

BUYER'S COUNTRY: People's Republic of China (plaintiff)

GOODS INVOLVED: Knives


Classification of issues present

APPLICATION OF CISG: Yes [Article 1(1)(a)]

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 35 ; 38 [Also cited: Article 79 ]

Classification of issues using UNCITRAL classification code numbers:

35A ; 35B4 [Conformity of goods to contract: quality, quantity and description required by contract; Packaging to protect goods in usual manner for similar goods];

38A [Buyer's obligation to examine goods: time for examining goods];

78B [Rate of interest]

Descriptors: Examination of goods ; Conformity of goods ; Interest

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Editorial remarks

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Citations to case abstracts, texts, and commentaries

CITATIONS TO ABSTRACTS OF DECISION

(a) UNCITRAL abstract: Unavailable

(b) Other abstracts

Unavailable

CITATIONS TO TEXT OF DECISION

Original language (Chinese): Click here for pdf of Chinese text; see also CISG-China Case [BPC/01]: <http://aff.whu.edu.cn/cisgchina/en/news_view.asp?newsid=50>

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

Unavailable

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Case text (English translation) [second draft]

Queen Mary Case Translation Programme

Wuhan Economic and Technology Development Zone Court

Shenzhen Fengshen Industrial Development Co. Ltd.
v.
Inter Service Internation

30 June 2000

Translation [*] by Jing Li [**]

Plaintiff, Wuhan Fengshen Industrial Development Co. Ltd. [of the People's Republic of China] (hereinafter, "[Buyer]"), filed a lawsuit with this Court against Defendant, Inter Service Internation [of France] (hereinafter, "[Seller]"). On 7 December 1999, this Court accepted the case and a collegial bench was formed according to the relevant law, and held public court sessions on this case on 17 January 2000 and 21 June 2000. All parties and their respective representatives were present at the court sessions. This case is now closed.

POSITIONS AND REQUESTS BY THE PARTIES

[Buyer]'s position

The [Buyer] claimed that:

      On 23 March 1998, the [Buyer] and the [Seller] concluded a sales contract for knives (hereinafter, the "Contract"). On 20 May, the [Seller] shipped the knives to Hong Kong by air and the [Buyer] made payment of the contract price in the amount of French francs [Ffr] 540,630. Since the end-user was Dongfeng Peugeot Citroen Automobile Company Ltd. (hereinafter, "DPCA") [located in Wuhan, Hubei], the [Buyer] did not examine the goods in Hong Kong, and the goods were transferred by land to Xiangfan, Hubei. In July 1998, the [Buyer] discovered that the knives were rusted. Therefore, the [Buyer] raised objection. On 23 July, both parties agreed that the [Buyer] would return the goods to the [Seller]. However, due to the fact that the [Seller] was closed for vacation for a month from 26 July, the [Buyer] did not return the goods by air from Hong Kong to France until 26 September. On 8 May 1999, the parties signed a letter of commitment whereby the [Seller] promised that within seventeen days of signature, it would refund the contract price and interest thereon totaling Ffr 587,448. However, after refunding Ffr 200,000, the [Seller] failed to return the residue. Therefore, the [Buyer] requested this Court to require the [Seller] to make payment of the residue of renminbi [RMB] 512,878.42 to the [Buyer] and interest thereon, as well as the litigation fee arising out of this lawsuit.

The material evidence submitted by the [Buyer] included:

a) The Contract;
b) Evidence of payment;
c) The Commodity Inspection Certificate;
d) Correspondence between the parties by facsimile;
e) The Letter of Commitment; and
f) A copy of the evidence for return of payment.

[Seller]'s position

The [Seller] made an oral argument before the court alleging that:

      The Contract expressly provided that the [Seller] was to ship the knives on a CIF basis, which meant that the [Seller] was responsible to customs classification, and the goods were limited to carriage by sea or inland waterways. However, the [Buyer] failed to examine the goods in Hong Kong. Therefore, the [Buyer] should be responsible for the resulting losses. Moreover, the [Buyer] stated that the goods went through the Shenzhen Customs and that, according to the regulations on foreign trade of import and export, as a commodity subject to inspection required by law, the knives were to be inspected before releasing. In addition, the wooden containers of the knives were subject to animal and plant inspection. If the knives were rusted, they would not have been allowed to go through the Customs. It was possible that the knives became corroded on the way from Hong Kong to Xiangfan due to inappropriate protective measures and inappropriate transportation means. After the parties agreed to the return of the goods on 23 July 1998, the [Seller] sent a letter on 19 August requesting the [Buyer] to return the knives within twenty days. However, the goods were not returned until October. The corrosion of the knives could not be repaired due to this delay. The [Seller]'s supplier refused to exchange the goods, and thus, the damages were increased. Besides, [Seller] objected to the authenticity of the Letter of Commitment provided by the [Buyer].

The material evidence submitted by the [Seller] included:

a) The Contract;
b) The Airway Delivery Note; and
c) Copies of the correspondence between the parties by facsimile.

REASONING OF THE COURT

According to the ascertained facts and the cross-examined evidence, this Court finds the following:

[1] On 23 March 1998, the [Buyer] and the [Seller] signed the Contract agreeing that the [Buyer] purchased from the [Seller] knives for the total price of Ffr 540,630 packed in wooden containers at CIF Hong Kong. The Contract also provided that any disputes arising out of the contract shall be submitted to arbitration. On 20 May 1998, the [Seller] shipped the goods by air to Hong Kong. Upon receiving the goods, the [Buyer] made payment via acceptance by letter of credit, and arranged for the goods to be delivered to the end-user, DPCA in Wuhan, Hubei.

[2] In July 1998, the goods arrived at Xiangfan, Hubei. The Hubei Import and Export Commodity Inspection Bureau inspected the goods and discovered that six boxes of knives were partly rusted in different levels. Therefore, it issued Inspection Opinion stating that "because of the intact packages of goods, the knives were rusted in damp conditions caused by ineffective damp-proof measures". On 20 July, the [Seller] sent a letter to the [Buyer] in the hope of negotiating with the [Buyer] for an exchange of goods. The [Seller] also notified the [Buyer] of the one-month vacation of the [Seller]'s. On July 23, the parties agreed that the [Buyer] would return the goods. On 19 August, the [Seller] requested the [Buyer] to return the goods within the next twenty days. On 21 August, the [Buyer] made payment of the contract price totaling Ffr 540,630 by letter of credit. On 4 September, the [Buyer] initiated the return of the goods by train. On 26 September, the goods were shipped from Hong Kong to France by air. On 8 May 1999, the [Seller] issued the Letter of Commitment stating that the [Seller] promised to refund the [Buyer] the total contract price and the interest thereon in the amount of Ffr 587,448. On 4 June 1999, the [Seller] refunded Ffr 200,000 to the [Buyer] without any further payment of the residue. On 22 November 1999, the [Buyer] requested the Court to grant permission to a pre-action custody of property. According to Civil Order (Wu Kai Fa Jing Bao Zi No. 1(1999)), this Court froze the contract price of RMB 572,787.42 that the [Seller] was to obtain from DPCA. On 7 December 1999, the [Buyer] filed the present lawsuit before this Court.

[3] This Court also finds that on 17 May 2000, the [Seller] submitted a written statement advising that it agreed to abandon arbitration and accepted the jurisdiction of this Court.

[4] The issues in dispute are:

a) Whether the [Buyer] was responsible for its failure to examine the goods in Hong Kong;
b) Whether the fact that the goods went through Shenzhen Customs could prove whether the knives were rusted at the time of delivery;
c) Whether the [Buyer] was responsible for the corrosion of the goods when it arranged delivery from Hong Kong to Xiangfan;
d) Whether the [Buyer] was in delay returning the goods and whether it was responsible; and
e) The authenticity of the Letter of Commitment.

[5] This Court finds that the present dispute arose from the performance of the contract for the sale of knives between the [Buyer] and the [Seller]. One of the parties to the Contract is a foreign company. Therefore, this is an international sales contract dispute. The contract between the [Buyer] and the [Seller] conformed to the international sales contract law and international trade usage. The intention expressed by both parties was genuine, and thus, the Contract was valid. The written statement submitted by the [Seller] renounced its claim to arbitration and accepted China's judicial jurisdiction. Such a statement conforms to international usage and to the regulations of the People's Republic of China, and hence, shall be found valid.

[6] The Contract between the parties was on a CIF basis. However, due to having been packaged without effective damp-proof measures, damages occurred to the goods. Therefore, the [Seller] shall be responsible. The fact that the [Buyer] did not examine at acceptance of the goods in Hong Kong and that it failed to provide a Certificate of Release issued by China Customs after inspection resulted in the inability to decide the responsibility for the corrosion of the goods. Moreover, after receiving the letter from the [Seller] requesting return of the goods within twenty days, the [Buyer] did not return the goods accordingly, nor did it object to that request. Therefore, the [Buyer] is responsible for its failure to prove its claims, and it shall bear the adverse legal effect therefrom.

[7] Based on the ascertained facts, since China and France are both Contracting States of the United Nations Convention on Contracts for the International Sale of Goods (1980) (hereinafter, the "CISG"), and the contract at dispute did not exclude the application of the CISG, nor did the Contract choose the applicable law, the CISG applies to the present case. This Court does not fully support the [Buyer]'s request that the [Seller] should return the residue and the interest thereon pursuant to the CISG's principle of equality and mutual benefit.

RULING OF THE COURT

According to Articles 35(1), 35(2)(d), 38(1), and 79 of the CISG and Article 21 of the Law of the People's Republic of China on Economic Contracts Involving Foreign Interests, and Articles 243 and 244 of the Civil Procedure Law of the People's Republic of China, upon the discussion of the collegial bench and the determination by the Judicial Committee, this Court hands down the following ruling:

  1. The [Buyer] is entitled to a refund of Ffr 324,378. Since the [Seller] has made payment of Ffr 200,000, the [Seller] shall make payment to the [Buyer] of the residue of Ffr 124,378 and the interest thereon (calculation shall be in accordance with People's Bank of China's deposit rate in French francs in the corresponding period, i.e., from 21 August 1998 to the date when the entire amount is paid) within 30 days after this ruling takes effect;

  2. Other economic losses incurred from the present dispute shall be borne by the [Buyer] and the [Seller], respectively.

The litigation fee of this case is RMB 10,138 and the application fee for the pre-trial custody of property is RMB 3,384, totaling RMB 13,522 (the [Buyer] has paid in advance). Therefore, the [Buyer] is responsible for payment of RMB 5,409 and the [Seller] is responsible for RMB 8,113 (such amount shall be paid to the [Buyer] with the above-mentioned amount in Item 1).

For any objection to this ruling, the [Buyer] may appeal within fifteen days upon the receipt of this ruling and the [Seller] may appeal within thirty days upon the receipt of this ruling. The appeal may be made to the Intermediate People's Court of Hubei, Wuhan by filing application to this Court, preparing copies for the other party, and submitting the fee for appeal in the amount of RMB 10,138.


FOOTNOTES

* All translations should be verified by cross-checking against the original text. For purposes of this translation, Plaintiff, Shenzhen Fengshen Industrial Development Co. Ltd. of the People's Republic of China, is referred to as [Buyer] and Defendant, Inter Service Internation of France, is referred to as the [Seller], respectively. Amounts in the currency of France (French francs) are indicated as [Ffr]; amounts in the currency of the People's Republic of China (renminbi) are indicated as [RMB].

** Jing Li, LL.M., University of Texas at Austin, School of Law; Master of Laws, Sun Yat-Sen University School of Law, China; LL.B., Sun Yat-Sen University School of Law, China.

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Pace Law School Institute of International Commercial Law - Last updated February 1, 2010
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