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CISG CASE PRESENTATION

China 11 January 2001 Supreme Court of People's Republic of China (Singapore Da Guang Group v. Jiangsu Machines Import & Export Ltd.) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/010111c1.html]

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

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Case identification

DATE OF DECISION: 20010111 (11 January 2001)

JURISDICTION: People's Republic of China

TRIBUNAL: Supreme Court of People's Republic of China

JUDGE(S): Unavailable

CASE NUMBER/DOCKET NUMBER: (1999) Jing Zhong Zi Di No. 448

CASE NAME: Singapore Da Guang Group v. Jiangsu Machines Import & Export Ltd.

CASE HISTORY: Earlier instance Jiangsu High People's Court

SELLER'S COUNTRY: People's Republic of China (defendant)

BUYER'S COUNTRY: Indonesia [?] (plaintiff is buyer's agent)

GOODS INVOLVED: Electricity generators and boilers


Classification of issues present

APPLICATION OF CISG: Yes

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 74 ; 80

Classification of issues using UNCITRAL classification code numbers:

74A [General rules for measuring damages: loss suffered as consequence of breach];

80A [Failure of performance caused by other party (party causing non-performance): loss of rights]

Descriptors: Damages ; Failure of performance, other party

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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 Chinese text of case; see also CISG-China Case [SPC/04]: <http://aff.whu.edu.cn/cisgchina/en/news_view.asp?newsid=102>

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

Supreme Court of the People's Republic of China
Singapore Da Guang Group v. Jiangsu Machines Import & Export Ltd.

11 January 2001 [(1999) Jing Zhong Zi Di No. 448]

Translation [*] by Zheng Xie [**]

Singapore Da Guang Group [Buyer's Agent] objected to Jiangsu High People's Court's Judgment Su Chu Jing Zi Di No. 18, and appealed to the Supreme Court. The Supreme Court formed a collegial bench and heard this case.

After hearing the case, the Supreme Court verified the following facts.

On 28 July 1997, Bumi Raya Utama Group [Buyer] and Jiangsu Machines Import and Export Ltd. [Seller] signed three Sales Confirmations No. CG91K(IA)-FM003, CG91K(IA)-FM004, and CG91K(IA)-FM005 [Contracts No. 1, No. 2, and No. 3, respectively].

   -    Contract No. 3 stipulates that the [Seller] should sell the [Buyer] an Electricity Generator Model N25-35 for the unit price of US $1,154,600; after the Contract takes effect, the [Buyer] should pay the [Seller] US $230,920 by T/T, and should issue an irrevocable L/C in the total amount of US $992,956 by installment payment within three months; the [Seller] should ship the goods within 18 months after receiving the deposit.
 
   -    Contracts No. 4 and No. 5, respectively, stipulate that the [Seller] should sell the [Buyer] an Electricity Generator Model C6-35/10 under each Contract. The price of one of the machines is US $550,000, and the [Buyer] should pay the [Seller] the deposit of US $110,000 by T/T within 30 days after the Contract takes effect, and should issue an irrevocable L/C in the amount of US $473,000 by installment payment within three months; the [Seller] should ship the goods within nine months after signing the Contract. The price of the other machine is US $520,260, and the [Buyer] should pay the deposit in the amount of US $104,005.20 within 30 days after the Contract takes effect, and should issue an irrevocable L/C in the total amount of US $447,222.35 within three months after signing the Contract; the [Seller] should ship the goods within 12 months after receiving the deposit.

In August of the same year, the [Seller] and the [Buyer] signed another three Contracts [Contract No. 006, Contract 007, Contract 008, respectively], which stipulate that the [Seller] should sell the [Buyer] three Boilers, Models 91K(AC)-FM006, 91K(AC)-FM007, and 91K(AC)-FM008, including main machines and accessories. The unit prices are US $1,160,500, US $828,600, and US $602,000, respectively. Within 30 days after signing the Contracts, the [Buyer] should pay the [Seller] the deposits of US $232,100, US $165,720, $100,400, respectively, for the above machines, and should issue an irrevocable and confirmed L/C in the amount of 80% of the contract price by installment payment within three months after signing the Contracts.

After signing the Contracts, the [Buyer] executed a power of attorney authorizing the [Buyer]'s agent to perform the Contracts on behalf of the [Buyer] and requested the [Buyer]'s agent to pay the [Seller] 20% of the deposit, i.e., US $943,165, and on 10 September of the same year, the [Buyer]'s agent paid the [Seller] US $943,145.20 in accordance with the power of attorney.

   -    On 20 January, in Geneva, the parties executed a Memorandum modifying the models and specifications of the accessories under the Contracts, and ordering additional equipment, and delaying the delivery date of the Model 45T-H under Contract No. 008 from March of 1992 to June of the same year, which should be shipped with Model 75T-H under Contract No. 007; the corresponding accessories should be shipped in September of the same year, and the [Buyer] should issue the relevant L/C in May of the same year.
 
   -    24 March 1992, the [Buyer]'s agent sent a letter to the [Seller] requesting [Seller] not to manufacture Boiler Model 130T-H2 and Electricity Generator Model 25MW under Contracts No. 003 and No. 006 until further notice. [Seller] did not raise any objection to this nor did the [Seller] manufacture the relevant machines according to the original Contracts.
 
   -    In 1 April of the same year, the [Seller], and the [Buyer] and the [Buyer]'s Agent executed another Memorandum delaying delivery of Boiler Model 130T-H2 and Electricity Generator Model 25MW and changed the Electricity Generator Model 25MW from a non-sea water model to a sea water model.
 
   -    On 30 June 1992, the [Seller] sent letters to the [Buyer] and the [Buyer]'s agent requesting to confirm the delivery date of the two machines, but neither the [Buyer] nor the [Buyer]'s agent responded. On 30 July 1992, the [Seller], the [Buyer] and the [Buyer]'s agent executed another Memorandum confirming that the Model 45T-H and Model 75T-H Boilers had been manufactured, and requesting the [Buyer]'s agent to arrange shipment as soon as possible. In this Memorandum, the [Seller] also confirmed that the accessories and materials stipulated in the Contracts had been ordered, and requested the [Buyer] to make payments as soon as possible and to compensate the [Seller] for the storage charges incurred due to long time storage of the above machines and equipment.
 
   -    On 10 September 1992, the [Seller] sent another letter to the [Buyer] and the [Buyer]'s Agent requesting to arrange the shipment of the Boilers Model 45T-H and 75T-H, and two Electricity Generators Model 6MW.
 
   -    On 13 July of 1993, the [Buyer]'s Agent sent a letter to the [Seller] stating that because the import permits were not obtained, the two letters of credit were prolonged.
 
   -    On 31 May of the same year, the [Buyer]'s agent sent another letter to the [Seller] alleging that because the machines would be installed in ___ Kun Dian, ___, and all of the factories were in the urban area of Kun Dian, it could not be guaranteed that operation permits would be granted; therefore, in order not to delay the shipment of the machines, the [Buyer]'s Agent request the [Seller] to guarantee that the operation permits could be obtained. The [Buyer]'s Agent also requested the [Seller] to sell the machines and the accessories on behalf of the [Buyer], or to set up an electricity generation factory in China with the [Buyer].

Thereafter, the parties did not reach an agreement. On 22 January 1994, the [Seller] sent a letter to the [Buyer] and the [Buyer]'s Agent announcing the avoidance of the Contracts because the [Buyer] did not want to perform the Contracts, and alleging that the [Seller] would claim damages within a reasonable time. On 28 January 1997, the [Buyer]'s Agent filed a lawsuit with Jiangsu High People's Court alleging that the [Seller] unilaterally avoided the Contracts and that this constituted a breach of the Contracts. [Buyer]'s agent requested the Court to therefore rule that the [Seller] should refund double the amount of the deposit, totaling US $ 1,886,290.40, plus interest on the deposit from September 1991 to the ruling date, totaling US $414,983.88, and to rule that the [Seller] should bear the litigation fee.

[Translator's note regarding the [Buyer]'s allegation that the [Seller] breached the Contract and should therefore be required to refund "double" the amount of the deposit: Although the Guaranty Law of the People's Republic of China is nowhere mentioned in this opinion, the [Buyer]'s claim for "double" the amount of the deposit may well have been derived from that law as it states that, if the party paying a deposit defaults, he shall not be entitled to demand the refund of the deposit; however, if the party accepting the deposit defaults, he shall refund twice the amount of the deposit. ]

At the trial before the Court of First Instance, both parties agreed that United Nations Convention on Contracts for International Sales of Goods ("CISG") and the relevant laws of the PRC should apply to this case. The Jiangsu High People's Court [Court of First Instance] ruled that the six Sales Confirmations No. CG91K(IA)-FM003, FM004, FM005, 91KAC-FM006, FM007 and FM008 in this case are contracts for the international sale of goods, and that these Contracts were the true expression of the parties and did not violate the CISG or any relevant laws of the PRC; therefore, the Contracts are valid. Although the six Contracts were signed by the [Seller] and the [Buyer], the [Buyer] issued a power of attorney to authorize the [Buyer]'s agent to perform the Contracts on behalf of the [Buyer]. Thereafter, the [Buyer]'s Agent paid the deposit to the [Seller] on behalf of the [Buyer]; it should thus be deemed that the [Buyer]'s Agent accepted the [Buyer]'s entrustment. A dispute later arose, and the [Buyer]'s Agent filed this lawsuit. The Court concluded that the [Buyer]'s Agent was entrusted by the [Buyer] to do so, and that the [Buyer]'s Agent has litigation capacity.

After signing the Contracts, the [Buyer] and the [Buyer]'s Agent paid the [Seller] the deposits in accordance with the Contracts, and the [Seller] commenced preparing and arranging to supply the goods. Thereafter:

   -    By Memorandum, executed in Geneva, the parties agreed that the delivery date of Machine 45T-H under Contract No. 008 would be delayed from March of 1992 to June of the same year, and that Machine should be shipped together with Machine 75T-H under Contract No. 007.
 
   -    In a Memorandum dated 1 April 1992, the parties expressly agreed to delay the delivery of the Boiler Model 130T-H2 and Electricity Generator Model 25MW.
 
   -    In a letter dated 24 March 1992, the [Buyer] requested that Boiler Model 130T-H2 and Electricity Generator Model 25 MW should not be manufactured until further notice.

The above modifications should be deemed modifications of the original Contracts by the parties. On 30 June 1992, the [Seller] sent a letter to the [Buyer]'s Agent requesting to advise of the shipping date of the two machines, but the [Buyer]'s Agent did not respond. In a Memorandum executed on 30 July of the same year, the parties confirmed that the Machines 45T-H and 75T-H had been manufactured, and the [Seller] had ordered the accessories and materials which the [Buyer] requested to purchase. The [Seller] asked the [Buyer] to arrange shipment as soon as possible; however, the [Buyer] did not arrange shipment. On 10 September of the same year, the [Seller] sent another letter to the [Buyer] and the [Buyer]'s Agent requesting to arrange shipment of the Boilers 45T-H and 75T-H, and the two Electricity Generators 6MW. Neither the [Buyer] nor the [Buyer]'s Agent responded. The above facts demonstrate that neither the [Buyer] nor the [Buyer]'s Agent accepted the goods supplied by the [Seller] within the period stipulated in the original Contracts or the modified Contracts, so they breached the Contract.

On 20 May 1993, the [Buyer]'s Agent sent a letter to the [Seller] alleging that the machines were to have been installed in Kun Dian, and that all of the factories are in urban areas, so it was hard to guarantee that operation permits would granted. Therefore, in order not to delay shipping the goods any more, the [Buyer]'s Agent requested the [Seller] to sell the machines and accessories on behalf of the [Buyer], or to set up an electricity generation factory in China with the [Buyer]. The [Buyer]'s Agent also stated that it was almost impossible to ship the goods to Indonesia, and that the above two proposals were the only way to solve the problem. This letter shows that the [Buyer]'s Agent had no intent to perform the Contract. This constituted a fundamental breach of contract. Under such circumstances, the [Seller] announced the avoidance of the Contracts on 22 January 1994. That was consistent with the CISG and the relevant laws of the PRC.

It was the [Buyer] and the [Buyer]'s Agent that fundamentally breached the Contracts, therefore, the [Buyer]'s Agent's claim that the [Seller] should refund double the amount of the deposits should not be sustained. On 24 March 1992, the [Buyer]'s Agent sent a letter via facsimile to the [Seller] requesting that the Machines 130T-H2 under Contract No. 006 and the Electricity Generator Model 25MW under Contract No. 003 should not be manufactured until further notice. The Court of First Instance concluded that neither this letter nor the letter dated 10 September 1992 sent by the [Seller] to the [Buyer] and the [Buyer]'s Agent demonstrated that the parties had agreed to avoid Contracts No. 003 and No. 006. The Court of First Instance concluded that the [Buyer]'s Agent's allegation that Contracts No. 003 and 006 had been cancelled by agreement of the parties lacked sufficient evidence. Accordingly, that Court did not sustain that allegation.

According to Article 29 Clause 1 Item (1) and Item (2) of the Economic Contracts Involving Foreign Interests of the People's Republic of China, Article 39 Clause 1 Item (3) of the Law of Civil Procedure of the People's Republic of China, and the relevant provisions of CISG, the Court of First Instance ruled that:

  1. Sales Confirmations No. CG91K(IA)-001, CG91K(IA)-002, CG91K(IA)-003, CG91K(AC)-004, CG91K(AC)-005, CG91K(AC)-006, CG91K(AC)-007 and CG91K(AC)-008 are avoided;

  2. The [Buyer]'s Agent's claim is dismissed; and

  3. The [Buyer]'s Agent should bear the litigation cost of RMB 115,523.

The [Buyer]'s Agent objected to this ruling, and appealed to this Court alleging that during the performance of the Contracts until 21 March 1993, the [Buyer]'s Agent and the [Seller] by negotiation agreed to modify the six Sales Confirmations, including delaying the delivery and halting manufacturing of the machines under Contracts No. 003 and 006 and that the Court of First Instance did not rule correctly on this. The [Buyer]'s agent alleged that:

   -    The [Seller] refused to perform the duty to provide data under the Contracts, which constituted a severe breach of contract; and that
 
   -    During the parties' negotiation to modify the Contracts, the [Seller] unilaterally announced the avoidance of the Contracts, which constituted a fundamental breach, so the [Seller] should be held liable for the breach.

The [Buyer]'s Agent requested the Supreme Court to revoke the Jiangsu High People's Court's Judgment (1997) Su Jing Chu Zi Ding No. 18, and to rule that the [Seller] should refund double the amount of the deposits, totaling US $2,438,903.33 plus interest at the annual rate of 8% (from September 1991 to March 1999), and to rule that the [Seller] should bear the litigation fees for the first and the second instances.

In its Response, the [Seller] alleged that:

   -    The [Buyer]'s Agent had never requested the [Seller] to provide environmental data, and that the data of the machines had been specified in the Appendix of the Contracts.
 
   -    The [Buyer]'s Agent's nine severe breaches of the Contracts were the basic reason for the non-performance of the Contracts, and that this caused the [Seller] to suffer severe damages, so the [Buyer] should be liable.
 
   -    The [Seller] legitimately and justifiably avoided the Contracts, and this right should be protected.

The [Seller] requested the Supreme Court to dismiss the appeal of the [Buyer]'s agent and to sustain the judgment of the Court of First Instance.

The Supreme Court held that:

   -    The six Contracts in this case are contracts for the international sale of goods;
 
   -    Based on the parties' choice of law, the Court of First Instance correctly applied the CISG and the relevant laws of the PRC;
 
   -    The six Contracts reflected the true intent of the parties, and did not violate the relevant laws and regulations of the PRC, and the parties had the capacity to sign the Contracts, so they are valid and legitimate.
 
   -    The six Contracts are independent and separable.
 
   -    Regarding Contracts No. 004, 005, 007 and 008, the [Seller] had already manufactured the machines, and was ready to deliver the goods, but the [Buyer]'s Agent delayed taking delivery many times, and did not take delivery. The [Buyer]'s Agent's reason of appeal that the [Seller] did not provide data under the Contract, and severely breached the Contract, lacks factual evidence. This Court does not sustain that allegation. On the contrary, the [Seller]'s allegation that the avoidance of these four Contracts was caused by the [Buyer]'s Agent's fundamental breach, is established. The [Buyer]'s Agent should therefore be held liable for the avoidance of the Contracts No. 004, 005, 007 and 008, and the [Buyer]'s Agent is not entitled to the refund of the deposit under these four Contracts, totaling US $480,125.20.
 
   -    However, with respect to Contracts No. 003 and 006, on 24 March 1992, the [Buyer]'s Agent sent a letter to the [Seller] requesting the [Seller] not to manufacture the machines under these two Contracts until further notice and the [Seller] did not raise any objection. This was a modification of the original Contracts. The [Seller] had not arranged for the manufacture of the machines under these two Contracts. It was inappropriate for the [Seller] to cancel these two Contracts together with the above four Contracts alleging the [Buyer]'s breach as the basis for that cancellation. The [Buyer]'s Agent neither agreed to cancel these two Contracts nor notified the [Seller] to manufacture the machines under these two Contracts. The [Buyer]'s Agent should, nevertheless, bear some liability regarding the non-performance of these two Contracts. Based on the parties' respective liability, the [Seller] should refund the deposit in the amount of US $463,020 plus interest to the [Buyer]'s Agent. The [Buyer]'s Agent's claim for double amount of the deposit should not be sustained, because it also had fault regarding the non-performance of these two Contracts.
 
   -    Because neither party requested the continued performance of any of the Contracts, the ruling of the Court of First Instance to cancel all six Contracts should be sustained. The Court of First Instance almost correctly verified the facts and applied the relevant laws, but regarding Contracts No. 003 and 006, its determination of the liability which each party should bear was not appropriate. With respect to that, this Court revised part of the judgment of the Court of First Instance.

According to Article 153 Clause 1 Item (3) of the Law of Civil Procedure of the PRC, this Court handed down the following ruling:

   1.   Item 1 of Jiangsu High People's Court's Judgment (1997) Su Jing Chu Zi Di No. 18 is sustained;
 
   2.   Item 2 of Jiangsu High People's Court's Judgment (1997) Su Jing Chu Zi Di No. 18 is revoked;
 
   3.   The [Seller] should refund to the [Buyer]'s Agent the deposit in the amount of US $463,020 plus interest (calculated from 22 January 1994 to the date when the payment is made at the one-year CD deposit rate of Bank of China during the same time);

The litigation fees of first instance and the second instance are RMB 115,523. The [Buyer]'s Agent and the [Seller] should each bear half of this amount.

This is the final judgment.


FOOTNOTES

* All translations should be verified by cross-checking against the original text. For purposes of this translation, Plaintiff-Appellant is referred to as [Buyer]'s Agent; Defendant-Appellee is referred to as [Seller]. Amounts in the currency of the United States (dollars) are indicated as [US $]; amounts in the currency of the People's Republic of China (renminbi) are indicated as [RMB].

** Zheng Xie, LL.M. Washington University in St. Louis, LL.M., BA in Economics, University of International Business and Economics, Beijing.

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