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CISG CASE PRESENTATION

China 29 June 2005 Shanghai No. 1 Intermediate People's Court [District Court] (Yiwu Ma Jia Li Import & Export Co. Ltd. v. Y&Q International Group) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/050629c2.html]

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

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Case identification

DATE OF DECISION: 20050629 (29 June 2005)

JURISDICTION: People's Republic of China

TRIBUNAL: Shanghai No. 1 Intermediate People's Court [District Court]

JUDGE(S): Unavailable

CASE NUMBER/DOCKET NUMBER: (2005) Hu Yi Zhong Min Wu (Shang) Chu Zi Di No. 22

CASE NAME: Yiwu Ma Jia Import & Export Co. Ltd. v. Y&Q International Group

CASE HISTORY: Unavailable

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

BUYER'S COUNTRY: United States (seller)

GOODS INVOLVED: Women's shirts


Classification of issues present

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

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Articles 53 ; 62 ; 78

Classification of issues using UNCITRAL classification code numbers:

53A [Buyer's obligation to pay price of goods];

71A [Suspension of performance];

78A [Interest on delay in receiving price or any other sum in arrears]

Descriptors: Price ; Suspension of performance ; 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 Chinese text of case; see also CISG-China Case [IPC/22]: <http://aff.whu.edu.cn/cisgchina/en/news_view.asp?newsid=56>

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

Shanghai No. 1 Intermediate People's Court

Yiwu Ma Jia Li Import & Export Co. Ltd. v. Y&Q Internat'l Group

29 June 2005

Translation [*] by Zheng Xie [**]

Plaintiff [Seller], Yiwu Ma Jia Li Import & Export Ltd. Corp., filed a lawsuit against Defendant [Buyer], Y & Q International Group, with this Court. On 25 January 2005, this Court formed the collegial bench, and on 25 May 2005, held a public court session. The [Seller]'s and the [Buyer]'s representatives attended the court session. The case is concluded.

[Seller's claim]

The [Seller] alleged that on 1 April 2004, the [Seller] and the [Buyer] signed four Sales Confirmations, No. M-YQ04001, M-YQ04002, M-YQ04003 and M-YQ04004, for sales of women's shirts. The payment method was sight L/C.

   -    Sales Confirmations No. M-YQ04001 and M-YQ04002 stipulate a unit price of US $2.30;
 
   -    Sales Confirmations No. M-YQ04003 and M-YQ04004 stipulate a unit price of US $2.90;
 
   -    The total price of the four Sales Confirmations is US $148,871.60.
 
   -    On April 2 of the same year, the [Seller] and the [Buyer] signed an agreement stipulating that the unit price was changed to US $ 2.50, and the total price was increased by US $4,018.40.

After signing the Contract, the [Seller] shipped the goods in accordance with the Sales Confirmations, but the [Buyer] did not provide the L/C and B/L, so the bank refused to make the payment under the L/C.

   -    After negotiations, the [Buyer] provided four Letters of Indemnity to the [Seller] alleging that because of the [Buyer]'s problem, the [Seller] failed to submit documents complying with the L/C, and the [Buyer] promised to make the payment.
 
   -    As per the [Buyer]'s request, the [Seller] paid for hangers in the amount of renminbi [RMB] 18,270 on behalf of the [Buyer].
 
   -    On September 3 of the same year, the [Buyer] issued a Letter of Indemnity to the [Seller] confirming that it owed the [Seller] US $148,871.60 and RMB 18,270 stipulating the payment date. However, the [Buyer] failed to make the payment when the payment time expired.

The [Seller] asked the Court to rule that the [Buyer] should pay US $152,890 and RMB 18,270, and interest from 1 June 2004 to the day when the payment was actually made.

   -    During the hearing, the [Seller] confirmed that it disclaimed the claim for the increased amount of US $4,018.40 stipulated in the Agreement, and claimed the contract price in the amount of US $148,871.60 and the price of the hangers in the amount of RMB 18,270 stipulated in the four Sales Confirmations and interest on the outstanding amount.
 
   -    After reviewing this claim, the Court sustained it.

[Buyer's defense]

In its defense, the [Buyer] had alleged that:

   -    The [Seller]'s performance, i.e., delivery by installments, was not in accordance with the specification and quality of the goods specified in the L/C, which violated the need for strict consistency between the documents and the L/C;
 
   -    The [Seller]'s performance defects caused the [Buyer]'s US customers to refuse to pay the contract price, so the [Buyer] could not pay the [Seller];
 
   -    The [Seller] did not deliver the last installment of 25,000 units of No. 1914 women's shirts.

In view of this, the [Buyer] had requested the Court to verify the facts and dismiss the [Seller]'s claims.

[Seller's evidence]

In order to support its claims, the [Seller] submitted the following evidence to this Court:

  1. The Sales Confirmations, commercial invoices, bills of lading, four (4) Letters of Indemnity, two (2) invoices of L/C notice fee to prove that the [Seller] shipped the goods in accordance with the Sales Confirmations, but that the [Buyer] did not make the payment;

  2. The Agreement to prove that the parties revised the contract price;

  3. The statement of account to prove that the [Seller] paid RMB 18,270 for the hangers on behalf of the [Buyer];

  4. The Indemnity Letter to prove that the [Buyer] confirmed the outstanding amount which it owed to the [Buyer] and the payment date.

After cross-examination, the [Buyer] did not confirm the authenticity of the [Seller]'s second item of evidence but confirmed the authenticity of the other evidence submitted by the [Seller].

[Buyer's evidence]

In order to support its position, the [Buyer] submitted the following evidence to the Court:

  1. Six (6) Sales Confirmations to prove the transactions and six sales between the parties;

  2. Two (2) letters of credit to prove the amount in the letters of credit included contract prices of the six sales;

  3. Two (2) inspection certificates and one (1) letter to prove the [Seller] did not fully perform its contractual duty.

Referring to this evidence submitted by the [Buyer], the [Seller] alleged that it did not confirm the authenticity of Sales Confirmation No. M-YQ04002 with the quantity of 3,108 units and Sales Confirmation No. M-YQ04005, but confirmed the authenticity of the other evidence.

[The Court's verification of the evidence]

According to the cross-examination, the Court verifies the following evidence:

   -   With respect to the [Seller]'s Evidence 2, i.e., the Agreement: because this is a fax copy, and it only had the [Buyer]'s manager's signature, but there is no other evidence to prove the unit price described in the Agreement, the Court did not verify this evidence.
 
   -   Regarding the [Seller]'s other evidence, the Court verifies.
 
   -   As to the [Buyer]'s evidence, Sales Confirmation No. M-YQ04002 with the quantity of 3,108 units and Sales Confirmation No. M-YQ04005, because these are photocopies, and there is no other evidence to support them, the Court does not verify these two Sales Confirmations. The Court verifies the [Buyer]'s other evidence.

According to the above verified evidence, the Court confirmed the following facts:

On 1 April 2004, the [Seller] and the [Buyer] signed four Sales Confirmations, No. M-YQ04001, M-YQ04002, M-YQ04003 and M-YQ04004, for sales of women's shirts. The payment method was sight L/C.

   -    Sales Confirmations No. M-YQ04001 and M-YQ04002 stipulate a unit price of US $2.30;
 
   -    Sales Confirmations No. M-YQ04003 and M-YQ04004 stipulate that a unit price of US $2.90;  
   -    The total price of the four Sales Conformations is US $148,871.60.

After signing the Contract, the [Seller] shipped the goods in accordance with the Sales Confirmations, but the [Buyer] did not provide the L/C and B/L, so the bank refused to make the payment under the L/C.

After negotiations, the [Buyer] provided four Letters of Indemnity to the [Seller] alleging that because of the [Buyer]'s problem, the [Seller] failed to submit documents complying with the L/C, and the [Buyer] promised to make the payment.

As per the [Buyer]'s request, the [Seller] paid for hangers in the amount of RMB 18,270 on behalf of the [Buyer].

On 3 September 3 2004, the [Buyer] issued a Letter of Indemnity to the [Seller] confirming that it owed the [Seller] US $148,871.60 and RMB 18,270, stipulating the payment date. According to the Agreement, the [Buyer] should pay US $46,211.60 and RMB 18,270 before the end of September 2004, US $20,000 in October 2004, and the remaining amount in November 2004. However, the [Buyer] failed to make any payment when the payment time expired.

The Court also confirmed that on 11 and 21 May 2004, the [Buyer] examined the 25,000 units of women's shirts No. 3511 and style 1914. The conclusion of the inspection was that the shirts were badly made, and the [Buyer] did not agree to receive the goods.

[The reasoning of the Court]

According to Article 24 of the Civil Procedure Law of the People's Republic of China, regarding disputes arising out of contract, the courts where defendants are domiciled or where the contracts are performed, have jurisdiction. In this case, the performance place of the contracts is within the jurisdiction of this Court, so this Court has jurisdiction over this case.

The parties did not set forth in their contract any agreement regarding the applicable law. According to Article 1(1) of the CISG, the CISG applies to this case because:

   -    It involves an international sale of goods; and
 
   -    The parties' places of business are in China and the U.S., respectively, and both countries are Contracting States of the United Nations Convention on Contracts for the International Sale of Goods (CISG).

The Court held that the Sales Confirmations signed by the parties are valid and should be performed.

The [Buyer] alleged that the goods which the [Seller] delivered were not consistent with the Sales Confirmations and had defects. However, the Court stated that the [Buyer] did not provide any evidence to support this allegation, so the Court did not sustain it. Therefore, according to the facts verified in the hearing, the Court held that the [Seller] had performed the delivery duty in accordance with the Sales Confirmations.

Regarding the issue on the payment of the contract price, the Sales Confirmations stipulate that the payment method is sight L/C. Because of the [Buyer]'s problem, the [Seller] could not provide complying documents to the bank, so the disputes arose. Therefore, when the [Seller] performed the delivery duty in accordance with the Sales Confirmations, the [Seller] is entitled to the contract price.

According to Article 53 of CISG, the buyer shall make the payment according to the contract. In this case, the [Seller] had performed the delivery duty, so the [Buyer] should make the payment. Regarding this, the [Buyer] alleged in its defense that except the four Sales Confirmations in this case, the [Seller] and the [Buyer] signed another two contracts, but the [Seller] did not perform the delivery duty under these two contracts, so the [Buyer] has the right to reject paying the contract price under the four Sales Confirmations disputed in this case. As to this defense, the Court held that the four Sales Confirmations disputed in this case were independent legal relationship, but not installments under one contract, so it lacks legal basis for the [Buyer] to reject paying the contract price because the [Seller] did not perform the delivery duty under other contracts.

In addition, the [Buyer] did not prove that there are two other contractual relationships between the parties. Therefore, the Court did not sustain the [Buyer]'s allegation. According to the Letter of Indemnity issued by the [Buyer] to the [Seller] on 3 September 2004, the [Buyer] owed the [Seller] the contract price of US $148,871.60 and the hanger price of RMB 18,270, and the Letter of Indemnity stipulated the payment date. This Letter of Indemnity is the true intent of the [Buyer] and based on the transaction, but the [Buyer] failed to make the payment by installments as promised, so the [Buyer] should pay the contract price and compensate the [Seller] for the damages due to the [Buyer]'s breach.

As to the [Seller]'s claim for interest on the overdue amount, the Court held that according to Article 78 of CISG:

"If a party fails to pay the price or any other sum that is in arrears, the other party is entitled to interest on it, without prejudice to any claim for damages recoverable under article 74."

The [Seller]'s claim for interest is based on facts and law, so the Court sustained this claim.

[The ruling of the Court]

In sum, the Sales Confirmations executed by the parties are true expressions of the parties and should be performed. The [Seller] had performed its duty of delivery, so the [Buyer] should pay the contract price and interest on the outstanding amount. Therefore, according to Article 53 and Article 78 of CISG, the Court handed down the following ruling:

   1.   The [Buyer] shall pay the [Seller] the contract price of US $148,871.60 and interest (at the US dollar loan rate of the Bank of China at the same time; regarding US $46,211.60, the interest from 1 October 2004 to the day when the actual payment is made; regarding US $20,000, the interest from 1 November 2004 to the day when the payment is actually made; regarding the US $82,660, the interest from 1 December 2004 to the day when the payment is actually made) within ten days after the ruling takes effect;
 
   2.   The [Buyer] shall pay the [Seller] for the hanger price of RMB 18,270 and interest (at the loan rate of the People's Bank from 1 October 2004 to the day when the actual payment is made); 
   3.   The [Seller]'s other claims are dismissed.

The litigation fee is RMB 16,747, of which the [Seller] shall pay RMB 413, and the [Buyer] shall pay RMB 16,334.

If there is an objection to this ruling, the [Seller] shall appeal through this Court to the Shanghai High People's Court within 15 days after the judgment is served; the [Buyer] shall appeal through this Court to the Shanghai High People's Court within 30 days after the judgment is served.


FOOTNOTES

* All translations should be verified by cross-checking against the original text. For purposes of this translation, Plaintiff of the People's Republic of China is referred to as [Seller]; Defendant of the United States is referred to as [Buyer]. 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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Pace Law School Institute of International Commercial Law - Last updated May 12, 2010
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