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CISG CASE PRESENTATION

China 19 February 2001 Jiangsu High People's Court [Appellate Court] (Tai Hei v. Shun Tian) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/010219c1.html]

Primary source(s) of information for case presentation: Wu Dong

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Case identification

DATE OF DECISION: 20010219 (19 February 2001)

JURISDICTION: China

TRIBUNAL: Jiangsu High People's Court [Appellate Court]

JUDGE(S): Chief Judge: Liu Jiangong; Agent Judges: Xu Meifen, Kong Yan

CASE NUMBER/DOCKET NUMBER: Sujingzhongzi No. 011

CASE NAME: Tai Hei Business Co. Ltd. v. Jiangsu Shun Tian International Group Nantong Costume Import and Export Company

CASE HISTORY: 1st instance Nantong Intermediate People's Court 29 September 2000 [affirmed]

SELLER'S COUNTRY: Japan (plaintiff)

BUYER'S COUNTRY: Peoples' Republic of China (defendant)

GOODS INVOLVED: Excavating machines


Classification of issues present

APPLICATION OF CISG: Evidently, Yes. But minimal mention of CISG by court.

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 7 ; 30

Classification of issues using UNCITRAL classification code numbers:

7A3 [Observance of good faith];

30A [Seller's obligations: Delivery of goods, handing over of documents, etc.]

Descriptors: Delivery ; Good faith

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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): <http://www.lawyee.net>; <http://www.ccmt.org.cn/ss/writ/judgementDetial.php?sId=568>; CISG-China Case [HPC/12]: <http://aff.whu.edu.cn/cisgchina/en/news_view.asp?newsid=89>

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

Jiangsu High People's Court [February 2001]

Translation [*] by Wu Dong [**]

Summary

[PROCEEDINGS]

FIRST INSTANCE. Nantong Intermediate People's Court 29 September 2000; (2000) Tongzhongjingchuzi No. 134; Judges: Chief Judge: Xu Wenquan; Agent Judge: Zhang Ji, Wang Yan. Clerk: Ren Zhifeng.

PARTIES AND COUNSEL. Plaintiff (Appellant): Tai Hei Business Co. Ltd. Legal Representative: Changjing Longdao. Attorney: Song, Lianfu, Lawyer of Shanghai No. 5 Law Firm; Sun, Wei, Lawyer of Shanghai No. 5 Law Firm. Defendant (Appellee): Jiangsu Shun Tian International Group Nantong Costume Import and Export Company. Legal Representative: Ling, Fuyan, General Manager. Attorney: Li, Weiping, Lawyer of Nantong Jingye Law Firm.

FINDINGS OF THE COURT OF FIRST INSTANCE

In July 1999, China Shanghai Yintuo Enterprise Development Co., Ltd. (hereinafter referred as "Yintuo") ordered six excavating machines under the brand of SUMITOMO and requested that four excavating machines be delivered first. But, the Letter of Credit [L/C] [Seller] received which was established by Yintuo could not be cashed. Because [Seller] had delivered the four excavating machines, Yintuo thus entrusted [Buyer] as its agent via the introduction by Mr. Wang, Jianbu of Nantong Puxin Group Co., [Buyer] and [Seller] thereupon signed a contract entitled "Confirmation of Purchase". In this contract they agreed on the following contents: CIF (Nantong); 4,750,000 Japanese Yen per machine; total price 19,000,000 Yen; payment by irrevocable Letter of Credit [L/C] in 90 days from presentation. The contract also required that the original documents delivered to [Buyer] should include the Bill of Lading [B/L] and invoices. [Buyer] then applied to the Bank of China Nantong Branch for the L/C and indicated especially that: beneficiary’s documents were required and should be delivered in entire set by DHL (including a set of original Bills of Lading, signed invoices and packing lists). On 30 August 1999, the Bank of China Nantong Branch established an irrevocable L/C, on which the applicant was [Buyer], the beneficiary was [Seller] and the total sum was 19,000,000 Yen. On 1 September 1999, [Seller] submitted a set of false post receipts and beneficiary’s documents to the Bank of China Nantong Branch to prove that [Seller] had delivered directly to [Buyer] the original set of documents (including the original B/L three pieces, invoices and packing lists). But in fact, [Seller] had them transferred directly to Yintuo.

In addition, the Court found that on 10 August 1999 [Seller] entered into another import agreement with Beijing Huateng Agriculture and Stockbreeding Co., Ltd. (hereinafter referred as "Huateng"). This agreement provided that Huateng purchased four excavating machines from [Seller] at the price of 5,000,000 Yen per machine, the total price was 20,000,000 Yen and the destination port was Nantong in Jiangsu province [China].

On 3 September 1999, an agent company applied to customs for the four excavating machines with the entrustment of Huateng, copies of multimodal transport B/L, tax exemption form of Huateng, customs seal of Beijing Customs as filing in other places and invoices (sum 20,000,000 Yen). On 6 September, Nantong Customs completed the procedure of inspection and discharged the goods. On the same day, Wang Jianbu obtained the duplicate of the B/L from Yintuo with the signature of [Seller] on its back and, after paying relevant fares to the port, Wang gave it to the agent company applying to customs to exchange for the delivery order with the shipping company. After obtaining the delivery order, the agent company gave it to Wang Jianbu and let him go to the container company to pick up the goods. Wang Jianbu and another third party picked up the goods and unpacked the boxes. Upon learning this – when they were going to load the goods on the trucks they leased – Zhang Yu, as [Buyer]'s employee, arrived at the port and prevented them from carrying the goods away because the establishing fee for the L/C had not been paid to [Buyer] by Yintuo. Zhang Yu thereupon requested that the goods be stored with a company provisionally connected with the [Buyer].

When leaving the port, Zhang Yu signed in the "Notes" column of the delivery record and indicated the numbers of his trucks. On the delivery order of the container company, it was recorded:

"the consignee was the agent company; in the consignee column there was a stamp of "Sinotrans Jiangsu Group Co. Nantong Company Import & Export Business Special Seal"; and an employee of [Buyer] Zhang Yu signed in the "Notes" column of the delivery record and wrote the number of the vehicle."

The four excavating machines were then stored with another costumer company which had business connection with [Buyer].

On 7 September and 8 October 1999, the four excavating machines in the present case were involved in smuggling and seized by the customs. The responsible persons of Huateng, Yintuo and its legal representative accepted criminal punishments. Later, [Seller] applied to the bank for negotiation of the L/C established by [Buyer], but was denied due to the non-coherence of the documents and the L/C. [Seller] thereupon brought the suit before the Nantong Intermediate People’s Court after failure to get paid directly from [Buyer].

[Seller] asserted that: Yintuo purchased the excavating machines from [Seller] and entrusted [Buyer] to be its import agent. [Seller] had delivered the goods and the employee of [Buyer] Zhang Yu had signed on the delivery record and picked up the goods. [Seller] requested the court to direct [Buyer] to pay the price and compensation for breach of contract.

In response, [Buyer] asserted: [Buyer] was entrusted to deal with the import. But [Seller] did not deliver the original B/L to [Buyer] and the goods were picked up by others. As another company had picked up the goods, facing the risk of negotiation of the L/C, the employee of [Buyer] was sent to the port to hold up the goods. As [Seller] did not perform its obligation to deliver the goods, [Buyer] should not pay the price.

The court found that: The contract for international sale of goods between [Seller] and [Buyer] was legal and valid. The two parties should perform their obligations according to the principle of good faith. [Buyer] had established a L/C, but [Seller] did not post the documents to [Buyer] according the clauses in the L/C and the contract, but to another company. The other company thus obtained the documents to apply to customs, and with the original B/L with [Seller]’s endorsement, it exchanged for the delivery order with the apply-to-customs company which was the agent of the transport company. It thus picked up the goods. As the B/L was blank, with no consignee listed on it, after [Seller] signed on its back anyone holding it could obtain the ownership of the goods without complete endorsement. According to the relevant rules of the Chinese Custom Law, the consignee of the goods imported was the legal applicant for customs. In the present case, the consignee was Huateng. As [Seller] did not deliver the B/L to [Buyer], this caused [Buyer] to lose the right to pick up the goods. [Seller] had submitted a set of false beneficiary’s documents and modified post receipts to the bank in purpose to cash the L/C, which was an act of business fraud. Pursuant to the principle of coherence of rights and obligations, [Seller] did not deliver the documents of ownership of the goods to [Buyer], nor were there facts proving [Buyer] had received the goods. In reviewing the claim for payment of [Seller] against [Buyer], the Court found no evidence that [Seller] had delivered the goods. The employee of [Buyer] requested to store two excavating machines with another costumer company in the event that no original B/L or delivery order was received by [Buyer] and a third company had picked up the container, unpacked the boxes, held the ownership but did not yet pay to the [Buyer]. He did so in order to prevent the risk of negotiation of the L/C and protect the legal rights and interests of [Buyer], and his signature in the column of "Notes" could not prove that [Seller] had directly transferred the ownership to [Buyer] via the shipping company. Therefore, the claim of [Seller] had no factual or legal basis, and thus was not supported by the Court. According to article 4 and article 88 para.1 of the General Principle of Civil Law of the People’s Republic of China, article 37 and 67 of the Contract Law of the People’s Republic of China, and article 30 of the CISG, the court on 29 September 2000 decided:

[Seller]’s claim was dismissed. The suit acceptance fee (19,402 RMB) should be borne by [Seller].

THE APPEAL

[Seller] was not convinced in the judgment of the Court of First Instance and appealed before the Jiangsu High People’s Court. [Seller] asserted that: the Court of First Instance was mistaken in finding Zhang Yu’s signature in the "Notes" column could not prove [Seller] had directly transfer the ownership of the goods to [Buyer]. [Seller] therefore requested the Court to overrule the judgment and direct [Buyer] to pay the price of the four excavating machines and relevant damages.

[Buyer] requested the Court to uphold the judgment of the Court of First Instance.

After the appeal hearing, the Jiangsu High People’s Court found that: [Seller] did not post the original B/L documents directly to [Buyer] according to the contract, but delivered them to Yintuo. The result was [Buyer] did not have access to obtain the ownership of the goods. [Seller] was at fault in this. As to the signature of Zhang Yu ([Buyer]’s employee) on the delivery record, he did not sign in the column of "Consignee", and he was not the employee of the company applying to customs. His signature in the "Notes" column could not prove that [Buyer] was the actual consignee of the goods. Thus, the reason for [Seller]’s appeal did not exist. The Court of First Instance found the facts clearly and applied the laws correctly. Therefore, its judgment should be upheld.

According to article 153 para.1 item 1 of the Civil Procedure Law of the People’s Republic of China, the court on 19 February 2001 decided:

The appeal was dismissed and the original judgment was upheld. The suit acceptance fee of the appeal (19,402 RMB) should be borne by [Seller].


FOOTNOTES

* All translations should be verified by cross-checking against the original text. For purposes of this translation, Plaintiff of Japan is referred to as [Seller]; Defendants of the PR China are referred to as [Buyer]. Amounts in the currency of Japan (yen) are indicated as [yen]; amounts in the currency of the People’s Republic of China (Renminbi) are indicated as [RMB].

** Wu Dong, LL.M. candidate, Peking University School of Law, Beijing, P.R. China, 2001 to present; LL.B. Peking University School of Law, 2001.

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Pace Law School Institute of International Commercial Law - Last updated May 11, 2010
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