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CISG CASE PRESENTATION

China 27 June 2005 High People's Court [Appellate Court] of Shadong Province (Norway Royal Supreme Seafoods v. China Rizhao Ocean Food Company et al.) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/050627c1.html]

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

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Case identification

DATE OF DECISION: 20050627 (27 June 2005)

JURISDICTION: People's Republic of China

TRIBUNAL: High People's Court [Appellate Court] of Shadong Province

JUDGE(S): Yu, Xifu (Chief judge); Wu He and Yang, Jie (Agent judges)

CASE NUMBER/DOCKET NUMBER: Unavailable

CASE NAME: Norway Royal Supreme Seafoods v. China Rizhao Jixiang Ocean Food Company and China Rizhao Shanfu Food Company

CASE HISTORY: 1st instance Civil Decision of the Intermediate People's Court of Rizhao City, Shandong Province (affirmed)

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

BUYER'S COUNTRY: Norway (plaintiff)

GOODS INVOLVED: Frozen lobster tails


Classification of issues present

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

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 29(1) ; 35 ; 36 ; 39(1)

Classification of issues using UNCITRAL classification code numbers:

29A [Modification or termination of contract by agreement];

35A [Conformity of goods: quality, quantity and description required by contract];

36A [Conformity determined as of time when risk passes to buyer];

39A [Requirement to notify seller of lack of conformity: buyer must notify seller within reasonable time]

Descriptors: Modification of contract ; Conformity of goods ; Lack of conformity notice, timeliness

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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): CISG-China Case [HPC/20]: <http://aff.whu.edu.cn/cisgchina/en/news_view.asp?newsid=81>

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

Unavailable

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Case text (English translation)

Queen Mary Case Translation Programme

High People's Court of Shandong Province [27 June 2005]

(Norway Royal Supreme Seafoods v. China Rizhao Jixiang Ocean Food Company
and China Rizhao Shanfu Food Company
)

Translation [*] by Xu Meihua [**]

Edited by John Zhu [***]

[PROCEEDINGS]

PARTIES AND COUNSEL. Appellant (Plaintiff in trial at Court of First Instance): Norway Loyal Supreme Seafoods (hereafter, [Buyer]); Address: #38 __ 0571, Oslo, Norway; Legal Representative: Yuan, Jiaguo; Agent, President of the Board; Huang, Baisheng, Date of birth: 22 December 1961, Professor of Law Department of Huazhong Technology Institute; Address: 4-901-10A, Shiji Jiayuan 45, Xiaoguan Beili, Chaoyang District, Beijing; Appellee (Defendant in trial at Court of First Instance): Rizhao Jixiang Ocean Food Company (hereafter, [Seller A]); Address: Taishan Hotel, 20 Haibin 5 Road, Rizhao City, Shandong Province; Legal Representative: Liu, Hongwei, President of the Board; Representative: Li, Yeyou, Manager of Import & Export Department of [Seller A]; Appellee (Defendant in trial at Court of First Instance): Shandong Rizhao Shanfu Food Company (hereafter, "[Seller B]"); Address: 86 Haiqu Mid-road, Rizhao City, Shandong Province; Legal Representative: Present, Liu, Hantao, President of the Board; Attorney: Tai, Yugong, Lawyer of Shandong Dongfang Taiyang Law Firm; Representative: Meng, Xiangwei, vice-president of Shandong Rizhao Shanfu Food Company.

TRIAL PARTICULARS. [Buyer] appealed to this court because it took objection to the (2002) Ri Jing Chu Zi No. 14 Civil Decision of the Intermediate People's Court of Rizhao City, Shandong Province, on the international sales contract it entered into with [Seller A] and [Seller B] for purchase of Lobster tail meat. The High People's Court established the tribunal and held an open hearing. Representatives, Huang, Baisheng for the [Buyer], Li, Yeyou for [Seller A], and Qin, Yugong and Meng, Tingwei for [Seller B] attended the court session. The case has been concluded.

[FACTS DETERMINED BY THE COURT OF FIRST INSTANCE]

The Court of First Instance noted that on 31 August 1999, the [Buyer] and [Seller A] entered in to Sales Contract JX990831, by which the [Buyer] was to purchase three containers of frozen peeled and cooked lobster tail meat on the following terms:

   -    Price: The unit price is US $4,950/ton, totaling US $300,000;
   -    Quality and Specification: The meat shall be cooked, skimmed, cleaned, and frozen by blocks without break; 45% U 100/lb and 55% 100~200/lb;
   -    Destination: Oslo, Norway;
   -    Claims: [Buyer] shall raise any objection to the quality of the goods within seven days after receiving the goods at the destination by providing an inspection certificate issued by an authorized organization.

After the conclusion of the contract, [Seller A] entrusted [Seller B], which had European Union Export Code (3700/02317) (hereafter "the EU Code"), to prepare the goods. During the manufacturing and delivery of the goods, the [Buyer] sent Lu, Yaozhong, a professional inspector, to inspect the goods and supervise the loading. Under his supervision, the goods were radiated at Qingdao Radiation Center. On 6 December 1999, Shandong Import and Export Commodity Inspection Bureau inspected the goods, and issued Inspection Certificate No. C991216015 and Export Permission No. C991216015. On the next day, the goods were shipped from Rizhao through Qingdao to Goteborg, Sweden by the Qingdao Office of Japan Shipping Company. The [Buyer] paid the entire price for the goods based on the contract, and received the goods delivered by [Seller A] in accordance with the contract. However, the [Buyer] refused to provide the time of arrival of the goods. According to the shipping record, the ship arrived at Hamburg on 18 January 2000.

After receiving the goods, the [Buyer] resold the goods to Polar Seafood Norway A/S (hereafter, "Polar Company"), and Polar Company resold the goods to many clients separately.

On 22 March 2000, Polar Company's final client, __ Company in Oslo, asked SGS Norge Company [SGS] to inspect the goods. SGS issued Inspection Certificate No. 9940102 on 22 March 2000, indicating that part of the lobster tail meat had become mincemeat. On 19 July and 20 July 2000, the [Buyer] asked SGS to inspect the goods again, and the Inspection Certificate No. 0034198 issued by it on 21 July 2000 concluded that, among the three containers of goods delivered by [Seller A], one container of 1,664 cases, totaling 19.968 tons of goods, did not conform to the contract.

On 23 March 2000, the [Buyer] informed [Seller A] and [Seller B] of the lack of conformity of the goods, providing SGS's inspection report, and negotiated the compensation issue with [Seller A]. On 23 March and 18 May 2000, [Seller A] faxed to the [Buyer], promising that if there was a quality problem with the goods, and it was caused by [Seller A], it would take the responsibility, and asked the [Buyer] to seal the goods and help [Seller A] to go to Norway to inspect the goods together with the [Buyer]. However, the [Buyer] failed to issue an invitation letter to [Seller A], which caused [Seller A] to be unable to inspect the goods.

The [Buyer] asserted that [Seller A]'s aforesaid promise and request was a modification on the compensation period stipulated in the contract, which was that "the [Buyer] shall submit any compensation claim within seven days after the goods arrive at the destination". On 2 December 2001, the [Buyer] filed a lawsuit with the court, asking the court to rule that [Seller A] and [Seller B] pay the price for the goods of renminbi [RMB] 878,392.32, the SGS inspection fee of RMB 8,300, a freezer rental fee of RMB 14,995, [Buyer]'s loss of profit of RMB 12,696, the compensation paid to the [Buyer]'s client of RMB 46,480, and the entire litigation fee.

[REASONING OF THE COURT OF FIRST INSTANCE]

The Intermediate People's Court of Rizhao City, Shandong Province [Court of First Instance] noted that this was an international sales dispute and that the addresses of [Seller A] and [Seller B] were within the jurisdiction of this court. Therefore, the court had jurisdiction over this case. The place of contract performance was in China, and the [Buyer] and [Seller A] did not stipulate the applicable law in the contract. The court ruled that:

   -    According to Article 145 section 2 of the General Principles of the Civil Law of the PRC, the law of the country which has the closest connection with the contract, which is Chinese law, shall be applied.
 
   -    Contract No. JX990831 signed by the [Buyer] and [Seller A] on 31 August 1999 reflected the true mind of the two parties, was in compliance with law and regulations, and was legal.

After the conclusion of the contract, [Seller A] delivered conforming goods to the [Buyer], and the [Buyer] paid the entire price for the goods. After the performance of the contract was completed, on 23 March 2000, the [Buyer] raised objections on the quality of the goods to [Seller A] and [Seller B], but refused to provide the arrival time of the goods, without which, it could not be ascertained whether the objections were raised within seven days after receipt of the goods. Therefore, the court held that the [Buyer] shall be liable for its failure to provide evidence.

The [Buyer] asserted that [Seller A]'s promise and request was a modification to the period recited in the Claims provision of the contract. However, the court stated that this could not be established because a modification to the contract is a change or supplement to the contract which should be conducted before the contract was performed or performed completely. However, [Seller A]'s promise and request were made after the contract was performed completely; therefore, the court did not accept the [Buyer]'s assertion. On the other hand, the [Buyer]'s assertion that there was a modification of the period for filing claims could prove that the [Buyer] failed to raise quality objections within seven days after receipt of the goods; therefore, it should be concluded that the goods delivered by the [Seller] were conforming.

The [Buyer] entrusted SGS Norge Company to inspect the goods unilaterally and rejected [Seller A]'s request to co-inspect and seal the goods; therefore, it could not be concluded that the goods inspected were the goods delivered by [Seller A]. Regarding the issues on the radiation on the goods and the EU Code, even though it was not stipulated in the contract, the [Buyer]'s representative, Lu, Yaozhong, supervised the manufacturing, inspection, packaging, and radiation process, which should be considered that the [Buyer] confirmed the goods; therefore, the [Buyer]'s aforesaid assertion was not accepted.

The [Buyer] alleged that the [Seller] violated the contract by delaying in delivery, however, [Buyer] failed to submit any claim regarding this in detail, nor did [Buyer] provide the time for receipt of the goods. Moreover, the contract did not stipulate the responsibility for contract violation, and the contract violation fee lacked basis; therefore, the [Buyer]'s claim could not be accepted due to lack of evidence and proper reasons.

[DECISION OF COURT OF FIRST INSTANCE]

The Court of First Instance held that the contract was formed before the Contract Law of the PRC (hereafter, "the Contract Law") became effective, however, the Contract Law is applicable if there is no stipulation in the Law of the PRC on Economic Contracts Involving Foreign Interest. Therefore, in accordance with Articles 157 and 158(1) of the Contract Law, and Articles 1, 2, and 34 of the Several Provisions of the Supreme People's Court on Evidence in Civil Procedure, the court ruled that:

   -    [Buyer]'s claim shall be dismissed;
   -    [Buyer] shall bear the case application fee of RMB 14,619, litigation fee of RMB 5,324, preservation fee of RMB 5,320, totaling RMB 25,263.

[POSITION OF THE PARTIES DURING APPEAL]

[Buyer]'s position

The [Buyer] took objection to the aforesaid award, appealing that:

   1.    The facts ascertained by the Court of First Instance were wrong.
 
   -    First, it was improper that the Court of First Instance did not confirm the inspection certificate issued by SGS Norge Company, which clearly indicated that the goods delivered by [Seller A] were not conforming;
 
   -    Second, the [Buyer] provided the approximate arrival time of the goods, which was several days prior to the SGS inspection. Meanwhile, [Seller A] made a promise to the [Buyer] to compensate for the quality defect. Therefore, this negated the fact that the Court of First Instance concluded that the [Buyer] refused to provide the arrival time of the goods.
 
   -    Third, the Court of First Instance failed to rule on [Seller A]'s delay in delivery and unlawful use of EU Code.

During the session of the Court of Appeal, the [Buyer] renounced its claim on [Seller]'s A's failure to provide the entire commercial documents.

   -    The Court of First Instance improperly applied the law. Since China and Norway are Contracting States of the United Nations Conventions for the International Sales of Goods (hereafter, "the CISG"), therefore, the CISG shall be the applicable law. Pursuant to Article 36 of the CISG, [Seller A] shall be liable for compensation;
 
   -    The case procedure of the Court of First Instance was illegal. First, the tribunal existed in name only. Except for the Chief Judge, other members of the tribunal were not present at the court session, and the case applied summary procedure; second, the case processing time extremely exceeded the time limitation.

Above all, the [Buyer] asks the Court of Appeal to reverse the decision of the first instance trial and grant the [Buyer]'s claims.

[Seller A]'s position

The [Seller A] defended that:

  1. [Seller A] and the [Buyer] signed a sales contract by which [Seller A] was to sell three containers of frozen lobster tail meat. The dispute arose with respect to the third container that was delivered on 17 December 1999. The [Buyer] raised objection to the quality of the goods about three months later, which violated the contract stipulation that objection shall be raised within seven days after receipt of the goods. Therefore, the [Buyer]'s claim cannot be established;

  2. [Seller A] delivered conforming goods. The contract goods were required to be inspected by law, and the goods were inspected and confirmed by the inspection organizations both in China and in Europe. Therefore, [Seller A] fulfilled its obligation to deliver the goods and should not take the responsibility for compensation.

[Seller B] defended that:

  1. The [Buyer] failed to raise quality objection within the compensation claim period stipulated in the contract, which indicated that the goods delivered were conforming;

  2. It was a processing entrustment relationship between [Seller A] and [Seller B], and there is no EU Code issue present;

  3. The [Buyer] failed to file claims clearly and in detail on [Seller A]'s delay in delivery, failure of providing the entire commercial documents, and radiation of the contract goods, nor did [Buyer] pay the litigation fee, therefore, its reasons for appeal cannot be established. The Court of First Instance ruled on the facts clearly and applied the law properly. Its decision should be affirmed.

After the hearing, the [Buyer] raised no objections to the other facts ascertained by the Court of First Instance except on the Court of First Instance's failure to consider the defects on the goods, [Seller A]'s delay in delivery, and [Seller A]'s use of EU Code illegally. This Court confirms the facts to which the two parties have no objections.

In addition, the [Buyer] alleges that delay in loading equals delay in delivery. [Buyer] alleges that it was stipulated in the contract that the goods for the third delivery were to be loaded no later than 5 November 1999; however, the actual loading date was 17 December 1999. The [Buyer] asserts that the delay in loading caused its loss of profit of RMB 12,696 without providing the basis for the calculation.

The [Buyer] also alleges that the radiation on the goods might have caused damage to the goods; however, [Buyer] failed to provide any evidence to support this allegation.

At the court session, the [Buyer] stated that it received the goods at the destination port on 20 March 2000 without giving evidence, and presented no specific claim on [Seller A]'s use of EU Code. In addition, the court session record clearly noted the members of the tribunal, and the [Buyer]'s representative signed on the record.

[REASONING OF THE COURT OF APPEAL]

This case involves an international sale. The [Buyer] and [Seller A] failed to stipulate the applicable law in their contract. However, China and Norway are Contracting States of the CISG, therefore, according to Article 142(2) of the General Principles of the Civil Law of the PRC, the CISG shall be the applicable law. Thus, the Court of First Instance applied the law improperly, which should be corrected.

Based on the [Buyer]'s appeal and [Seller A] and [Seller B]'s defenses, the Court notes that the dispute in this case focuses on three issues: 1. whether the goods were non-conforming; 2. use of EU Code; 3. whether the Court of First Instance processed this case illegally.

1. Whether the goods were non-conforming

It was clearly indicated in the contract that any compensation claim shall be raised within seven days after the [Buyer] receives the goods at the destination port by providing the inspection report issued by an authorized organization. In the instant case, the [Buyer] provided the inspection report issued by SGS Norge Company to prove that the goods did not conform to the contract. Since the [Buyer] did not provide the date of receipt of the goods, the court is unable to determine whether the compensation claim was raised within seven days. However, the [Buyer] alleges that [Seller A] shall be liable for providing evidence. The court deems that the [Buyer] shall be liable for providing evidence showing that its compensation claim was raised within the time stipulated in the contract; therefore, the [Buyer]'s claim that [Seller A] shall provide evidence showing the goods' arrival time is not acceptable.

Even though [Seller A] promised that it would compensate the [Buyer] if there was a quality problem on the goods, the key point is that the [Buyer] cannot prove that there was a problem with the goods which, on the other hand, proves that the [Buyer] failed to raise its compensation claim within the time stipulated in the contract. Therefore, the court rules that the there was no defect in the goods, and the goods delivered by [Seller A] were conforming.

Article 36 of the CISG stipulates that seller is liable for any lack of conformity which exists at the time when the risk passes to the [Buyer]. This is a provision on the [Seller]'s responsibility of performing the contract. Based on this provision, if [Seller A] provided non-conforming goods, it should compensate the [Buyer]. The parties in this case stipulated the period for filing compensation claims. However, the [Buyer] failed to prove that there was a quality problem within the stipulated time. Therefore, the [Buyer]'s assertion that [Seller A] shall be liable for compensation based on the CISG is not acceptable either.

As to the radiation issue, the [Buyer] did not provide evidence showing the causal relationship between the quality defect and the radiation; therefore, the court cannot conclude that radiation infected the quality of the goods.

2. The use of the EU Code

Since the [Buyer] failed to submit any specific claim regarding the use of EU Code, therefore, the court will not make judgment on this.

3. Whether the case procedure of the Court of First Instance was illegal

The court session record noted the members of the tribunal with the [Buyer]'s representative's signature on it. Therefore, this Court deems that the Court of First Instance formed the tribunal to process this case based on the law. This case involves foreign interest, and the Civil Procedure Law of the PRC has no stipulation on processing time. Therefore, the [Buyer]'s assertion that the Court of First Instance processed this case beyond the stipulated time has no legal basis, and is not accepted by this Court.

Above all, the [Buyer]'s appeal cannot be established and this Court does not support the [Buyer]'s claims. The Court of First Instance ascertained the facts clearly, but applied the law improperly, which should be corrected. However, its award is correct and should be affirmed.

[DECISION OF COURT OF APPEAL]

According to Article 35(1) of the CISG and Article 153 section 1(1) of the Civil Procedure Law of the PRC, the Court hands down the following award:

   -    Dismiss the [Buyer]'s appeal, the award of the Court of First Instance is affirmed;
   -    [Buyer] shall bear the cost for appeal of RMB 14,619.

This is the final decision.

Chief Judge: Yu, Xifu
Agent Judge: Wu, He
Agent Judge: Yang, Jie

27 June 2005

Clerk: Lan, Xiaowei


FOOTNOTES

* All translations should be verified by cross-checking against the original text. For purposes of this translation, Appellant of Norway is referred to as [Buyer] and Appellee of the People's Republic of 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].

** Meihua Xu, LL.M. University of Pittsburgh School of Law on an Alcoa Scholarship. She received her Bachelor of Law degree, with the receipt of Scholarship granted by the Ministry of Education, Japan, from Waseda University, Tokyo, Japan. Her focus is on International Business Law and International Business related case study.

*** John Zhu, LL.M. China University of Political Science and Law on a national graduate scholarship. He received his Bachelor of Law degree from Southwest University of Political Science and Law and Double Degree of English Literature from Sichuan International Studies University in Chongqing, China. His focus is on International Economic Law.

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Pace Law School Institute of International Commercial Law - Last updated May 12, 2010
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