China 18 July 2001 Zhejiang Cixi People's Court [District Court] (Carl Hill v. Cixi Old Furniture Trade Co., Ltd.) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/010718c1.html]
DATE OF DECISION:
CASE NUMBER/DOCKET NUMBER: (2001) Cijingchuzi No. 560
CASE HISTORY: Unavailable
SELLER'S COUNTRY: People's Republic of China (defendant)
BUYER'S COUNTRY: United States (plaintiff)
GOODS INVOLVED: Old furniture
APPLICATION OF CISG: Yes
APPLICABLE CISG PROVISIONS AND ISSUES
Key CISG provisions at issue:
Classification of issues using UNCITRAL classification code numbers:
11A [Writing or other formality for conclusion of contract: not required]; 12A1 [Effect of reservation under article 96 rejecting article 11: formalities of state of either party may be applicable]; 32B [Seller's duties when obliged to arrange for carriage];
74A [General rules for measuring damages: loss suffered as consequence of breach];
77A [Obligation to take reasonable measures to mitigate damages]
11A [Writing or other formality for conclusion of contract: not required];
12A1 [Effect of reservation under article 96 rejecting article 11: formalities of state of either party may be applicable];
32B [Seller's duties when obliged to arrange for carriage];
74A [General rules for measuring damages: loss suffered as consequence of breach];
77A [Obligation to take reasonable measures to mitigate damages]
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Excerpt from Jie Huang, "Direct Application of International Commercial Law in Chinese Courts: Intellectual Property, Trade, and International Transportation," 5 Manchester Journal of International Economic Law (3/2008) 105 at 110-113, available online at <http://works.bepress.com/jie_huang/3/>
In the area of international trade, a well-known difference between Chinese law and its treaty obligations is the different requirements for the form of contracts. This is also a notable example that a treaty provision may not be more commerce-friendly than Chinese laws. When joining the United Nation Convention on Contracts for the International Sale of Goods (hereinafter 'CISG') in 1986, China made a reservation against Article 11 and required that contracts of international sale of goods should be concluded or evidenced by writing (which is not required by Article 11). This reservation was consistent with the then Chinese Economic Contract Law. Yet in 1999 China published a Unified Contract Law to replace the Economic Contract Law, and this new law allows parties to contract in forms other than writing. China, however, has not revoked its reservation regarding the contract form under the CISG. In terms of this inconsistent requirement between the Chinese Unified Contract Law and the CISG, Chinese courts hold that under the Article 142 of Chinese Civil Law, a treaty provision prevails over conflicting Chinese law. Therefore, theoretically contracts for international sale of goods between a Chinese party and a party from other CISG member states should be concluded by or evidenced in writing.
However, in actual adjudication, courts may hold that contracts for the international sale of goods can be concluded by, or evidenced in, forms other than writing. Carl Hill v Ci Xi City Old Furniture Trading Co. is a case where the court upheld the validity of an oral [page 110] contract for international sale of goods, and it even adopted evidence, including a witness's testimony to interpret the place of delivery agreed upon by the parties. Mr. Carl Hill was an American citizen who bought old furniture from the defendant, Ci Xi City Old Furniture Trading Co. (hereinafter 'Ci Xi'). They made an oral agreement about the furniture, FOB price, and place of delivery. Mr. Hill paid for the product and the delivery, but he did not receive the product in Illinois (US), where he thought the contracted place of delivery should be. Later he learned that Ci Xi thought the place of delivery should be Los Angeles and that it had no responsibility to deliver the furniture to Illinois. Mr. Hill brought an action against Ci Xi, claiming damages due to the wrong place of delivery. He provided the Bill of Lading (hereinafter 'B/L') he received from Ci Xi, which showed that the consignee was him and the address was 'Denetril Fernanoo 17700 Rosewood Terrace Country Club Hills Illinois 60411.' This B/L also showed that the arrival port was Los Angeles, but the place of final delivery was blank. Ci Xi argued that before it shipped the furniture it had faxed the B/L to Mr. Hill for confirmation, and it provided a fax in English as evidence. The court ruled that lex loci contractus should be applied in this case. Because the contract was made in China and the transportation was arranged in China, China was the country with the closest relationship to the contract, and therefore Chinese law should apply. The court recognized that treaties ratified by China should prevail if they are different from Chinese law. However, although Mr. Hill was an American Citizen, so the contract involved foreign factors, the court upheld the oral contract between Mr. Hill and Ci Xi because the former wanted to buy and the later wanted to sell. The court required Ci Xi to translate the fax into Chinese, but Ci Xi failed to do so in the time limit specified by the court. The court proceeded to take a witness's testimony. This witness was the person in charge of arranging international transportation in [page 111] this case. She testified that Ci Xi had never required her to contact Mr. Hill to confirm the delivery information on the B/L and that Ci Xi itself confirmed the information on the B/L. Since Ci Xi could not provide counter-evidence, the court adopted the witness's testimony and ruled that Ci Xi should be responsible for the blank place of delivery on the B/L under Article 32(2) of the CISG and Article 142 paragraph 2 of the Chinese Civil Law. This case brings up a thorny question: in the field of international commercial law, whether a court should sua sponte invoke a reservation made by the state. In this case, because both parties had no dispute about the validity of the contract although it was not in writing and was against China's reservation under the CISG, the court upheld the validity of this oral contract. Considering the particularity of the facts in this case, I think the court made a correct judgment: parties have no dispute about the validity of the oral contract; Mr. Hill claimed damages of 6,570 dollar so it was a relatively small amount claim in international trade; this case did not involve any public interests; the reservation of the form of contract under the CISG was inconsistent with current Chinese law and this inconsistency has been widely criticized for years. However, in a case where parties have disputes over the validity of contract because of its oral form based on China's reservation under the CISG, courts possibly will rule that the reservation under the CISG prevails the Chinese Unified Contract Law. But courts may exercise discretions regarding whether to invoke this reservation on its own initiative. Moreover, besides the form of contract, China also made a reservation against Article 1(b) under the CISG. As a result, when contracts of international sale of goods between parties whose places of business are in different States and when the rules of private international law lead to the application of the law of a Contracting State, the CISG does not apply to such contracts when litigated in China. Courts would sua sponte invoke this reservation to avoid the application of the CISG to such contracts unless the CISG is a law chosen by the parties. More research needs to be done to assess this prediction. However, [page 112] there is a good chance that this prediction is correct because the Supreme People's Court has adopted a very favorable view to choice-of-law clauses in international commerce. [page 113]
5. China ratified the CISG on Apr. 11, 1980 and the CISG became effective to China on Jan. 1, 1988.
6. Art. 10 indicates the parties may conclude a contract in written, oral or other forms. Where the laws or administrative regulations require a contract to be concluded in written form, the contract shall be in written form. If the parties agree to do so, the contract shall be concluded in written form. Tong Yi He Tong Fa [Unified Contract Law] (adopted at the Second Session of the Ninth National People's Cong., Mar. 15, 1999, effective Oct. 1, 1999).
7. The question whether contracts for international sales of goods should be concluded in writing is a very controversial issue in China. Scholars hold different even conflicting views on this question. See Pingping Si, Lanye Zhu, Wei Ding, & Zhidong Chen, Wo Guo Dui 'Guo Ji Huo Wu Xiao Shou He Tong Gong Yue' Di 11 Tiao de Bao Liu Ying Fou Che Hui [Does China should withdraw its reservation against Article 11 of the CISG], 7 FA XUE [Law Review] 22, 22-26 (1999).
8. Carl Hill v Ci Xi City Old Furniture Trading Co. available at <http://www.chinacourt.org/public/detail.php?id=13339&k_title=%C1%AA%BA%CF%B9%FA%B9%FA%BC%CA%BB%F5%CE%EF%CF%FA%CA%DB%BA%CF%CD%AC%B9%AB%D4%BC&k_content=%C1%AA%BA%CF%B9%FA%B9%FA%BC%CA%BB%F5%CE%EF%CF%FA%CA%DB%BA%CF%CD%AC%B9%AB%D4%BC&k_author=> (last visited Oct 14, 2008) (P.R.C.) (the People's Ct. of Ci Xi City Zhejiang Province, Jul. 18, 2001).
10. The original text in the judgment is: '[Chinese symbols not reproduced].' Id.
11. The court also cited Article 92 of the Chinese Civil Law, Article 60, 61, 62, 64, 112, 113, 119, 126, 135, 141 of the Chinese Unified Contract Law. Id.
12. See American President Liners, Co. v. Feida Electric Appliance Factory, Feili Company, and Great Wall Company, where the Supreme People's Court upheld a choice-of-law clause that chose a law having no relation to the contract. (Sup. People's Ct., June 25, 2002) LAWINFOCHINA (last visited July 7, 2008) (P.R.C.). The analysis of this case can be found in Section III.Go to Case Table of Contents
CITATIONS TO ABSTRACTS OF DECISION
(a) UNCITRAL abstract: Unavailable
(b) Other abstracts
CITATIONS TO TEXT OF DECISION
Original language (Chinese): <http://www.lawyee.net>; <http://www.fayuan.cixi.gov.cn/alfx/dxalm13.htm>; CISG-China Case [BPC/04]: <http://aff.whu.edu.cn/cisgchina/en/news_view.asp?newsid=47>
Translation (English): Text presented below
CITATIONS TO COMMENTS ON DECISION
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Case text (English translation) [second draft]
Queen Mary Case Translation Programme
PARTIES AND COUNSEL. Plaintiff: Carl Hill; Citizenship: USA; Date of Birth: 5 November 1965; General Manager of Laote International Co., Ltd. Tianjin Company; Residence: Room 401, Shuiyun Garden Flat Building, Shuixi Village, Nankai District, Tianjin, P.R. China. Attorney (with Special Authorization): ZHANG Chunhu, Attorney-at-law of Tianjin Jinhui Law Firm. Defendant: Cixi Old Furniture Trade Co., Ltd.; Residence: Development Zone, Tianyuan Town, Cixi City, Zhejiang Province, P.R. China. Legal Representative: ZHAO Jianquan, General Manager. Attorney (with Special Authorization): ZHOU Guohua; Male; Date of Birth: 16 December 1968; Defendant's Business Manager; Residence: Room 404, Sanbei Axletree Factory Building, Andong Town, Cixi City, Zhejiang Province, P.R. China. Attorney: SUN Zhichong, Attorney-at-law of Zhejiang Shanglin Law Firm
[POSITION OF THE PARTIES]
[Buyer]'s position. [Buyer] brought the present suit before the Court on 12 January 2001. On March 14, the Court accepted the suit, later established the tribunal according to the law and held two open hearings on 10 May and 2 July. [Buyer] and his attorney, ZHANG Chunhu, [Seller]'s legal representative ZHAO Jianquan's attorneys, ZHOU Guohua and SUN Zhichong attended the hearings. The Court has now finished the trial.
[Buyer] asserted: On 28 November 1999, [Buyer] bought items of old furniture from [Seller] at the price of 40,000 Renminbi [RMB]. After [Buyer] paid the total price, the parties agreed that [Seller] would have the goods transported to Illinois, U.S. and [Buyer] paid [Seller] the relevant fees. But after receiving the fees, [Seller] wrongly delivered the goods to Los Angeles, U.S. The result was [Buyer] could not receive the goods in time and [Buyer] incurred added expenses (losses), storage fee, etc,; total added expenses US $6,570. [Buyer] requested compensation several times, but [Seller] did not pay it. [Buyer]'s position is that [Seller] did not perform its obligation of deliver the goods to the proper place in time and this caused [Buyer] to incur losses. According to the General Principles of the Civil Law of the People's Republic of China, [Buyer] requested the Court to direct [Seller] to compensate [Buyer]'s losses of US $6,570 or 54,465 RMB (at the exchange rate on 1 September 2000, 1 US $ = 8.29 RMB), and to bear all suit fees.
To prove his assertions, [Buyer] provided the following evidence to the Court:
[Seller]'s position. In response, [Seller] acknowledged that [Buyer] purchased old furniture from [Seller]. FOB was the price term the parties stipulated. Ningbo Cixi Import and Export Company was entrusted by [Buyer] to take charge of the delivery. Before the goods were delivered, the agent company had faxed the B/L to [Buyer] and [Seller] for confirmation. Illinois was just the address of the consignee appointed by [Buyer], and the delivery place confirmed by [Buyer] was Los Angeles. Therefore, [Seller] had no obligation to deliver the goods to Illinois. The fees claimed by [Buyer] thus should be borne by [Buyer] himself, except that the fuming fee (US $75) should be borne by [Seller] according to the contract.
[Seller] provided the fax dated 9 May 2000 from [Buyer] to [Seller] (Evidence exhibit no. 7) to the Court, which proved the fact that [Seller] did confirm the aforesaid B/L.
FINDINGS AND HOLDINGS OF THE COURT
During trial, the Court summoned the witness Ms. SHI Ruohong. Her attestation proved that:
As to the Evidence exhibits 1, 2, 3, 4, 5, 6 supplied by [Buyer], after the examination in the Court, [Seller] had no objections on them; they were therefore confirmed by the Court. As to Evidence exhibit 7 supplied by [Seller], it was in foreign language, so the Court directed [Seller] to provide its Chinese translation within a specified period of time. But [Seller] did not provide it. During examination, on the basis of Evidence exhibit 7, [Seller] asserted that the B/L was confirmed by [Seller], not by [Buyer]. In combination with the date of the fax, i.e., 5 May 2000, and the attestation of Ms. Shi, Evidence exhibit 7 provided by [Seller] could not prove [Seller]'s assertion, so the Court did not accept it. As to Ms. Shi's attestation, [Buyer] did not raise any objection. [Seller] deemed the address of the consignee provided by [Seller] was specific enough, even without telephone or fax number. As to that, Ms. Shi said there was no specific name of the city so she could not deliver the goods by multimodal transport, [Seller] raised its objection. As to her other attestations, [Seller] did not raise any objection. As to what Ms. Shi said: "there was no specific name of city in the address of the consignee provided by [Seller], so she could not employ the way of multimodal transport as there was no final delivery place", the Court held that it was just Ms. Shi's own opinion, and whether it was true or not would not affect the other evidence. The Court therefore deemed the attestation of Ms. Shi had proof effectiveness.
To sum up, the Court found that:
The Court also found that the aforesaid CNANB 5803634 B/L was confirmed by [Seller] before sent to the consignee, but [Seller] had no evidence to prove that it had been confirmed by [Buyer]. [Seller] admitted that the address of the consignee provided by [Buyer] was clear; though [Buyer] provided the name and address of the consignee to [Seller], he did not provide the telephone number, fax number or other information for prompt contact.
The Court held that:
Pursuant to Article 32(2) of the CISG, Articles 92 and 142 para.2 of the General Principles of the Civil Law of the People's Republic of China, Articles 60, 61, 62 para.1 item 5, 64, 112, 113, 119, 126 para.1, 135 and 141 para.2 item 1 of the Contract Law of the People's Republic of China, the Court hereby decides:
[Seller] should perform the aforesaid items 1 and 2 in seven days as of the effective date of this judgment.
The suit acceptance fee was 2,140 RMB. [Buyer] should bear 1,500 RMB and [Seller] should bear 640 RMB. As [Buyer] had paid the 2,140 RMB of the suit acceptance in advance, [Seller] should pay the 640 RMB directly to [Buyer] when implementing the aforesaid judgment.
If any of the parties is not convinced in this judgment, it may within 15 days after the arrival of the judgment, submit a petition for appeal and copies corresponding to the number of the other party to the Court and appeal before the Zhejing Ningbo Intermediate People's Court.
Chief Judge: Lu, Yu
Judge: Huang, Wenqiong
Judge: Zou, Jianxiang
18 July 2001
Clerk: Shao, Duohao
* All translations should be verified by cross-checking against the original text. For purposes of this translation, Plaintiff of the United States is referred to as [Buyer]; Defendant of the PR China 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].
** 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.Go to Case Table of Contents