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CISG CASE PRESENTATION

China 19 November 2005 Guangzhou Intermediate People's Court (Ginger case) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/051119c1.html]

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

Case Table of Contents


Case identification

DATE OF DECISION: 20051119 (19 November 2005)

JURISDICTION: China

TRIBUNAL: Guangzhou Intermediate People’s Court

JUDGE(S): Unavailable

CASE NUMBER/DOCKET NUMBER: Unavailable

CASE NAME: Bao De Li Ltd. v. China Electronic Import and Export Guangdong Corp.

CASE HISTORY: Unavailable

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

BUYER'S COUNTRY: United States (plaintiff)

GOODS INVOLVED: Ginger


Classification of issues present

APPLICATION OF CISG: Yes

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Article 39(2)

Classification of issues using UNCITRAL classification code numbers:

39B [Requirement to notify seller of lack of conformity (buyer must notify seller within reasonable time): cut-off period of two years

Descriptors: 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): Click here for pdf of Chinese text; see also CISG-China Case [IPC/05]: <http://aff.whu.edu.cn/cisgchina/en/news_view.asp?newsid=73>

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

English: Jun Wang, "Rejecting Chinese goods: New reasons for sound contract management", Law Society Journal (November 2007) 72-74

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Case text (English translation) [second draft]

Queen Mary Case Translation Programme

Guangdong Intermediate People's Court

Bao De Li Ltd. v. China Electronic Import & Export Guangdong Corp.

Hiu Intermediate Civil III Trial No. 297 (19 November 2005)

Translation [*] by Zheng Xie [**]

-   Particulars of the proceeding
-   Facts and position of the parties
-   Award

PARTICULARS OF THE PROCEEDING

Plaintiff (Defendant in the counterclaim): Bao De Li ltd; Address: 10 Floor, 11 Broadway, New York, U.S.; Legal Representative: Chen Weifu, President; Litigation Agent: Wang Tianfu, Attorney, Guangdong Jin Ling Law Firm. Defendant (Plaintiff in the counterclaim): China Electronic Import and Export Guangdong Corp.; Address: 18-21 Floor, Guang Lian Building, 750 Dong Feng Rd., Guangzhou, Guangdong Province; Legal Representative: Wen Guosheng, President; Litigation Agent: Yang Ruihua, Counsel; Litigation Agent: Yang Yanping, Staff.

FACTS AND POSITION OF THE PARTIES

On 16 November 2000, Bao De Li Ltd., the [Buyer], and China Electronic Import and Export Guangdong Corp., the [Seller] signed Sales Contract No. 2000EMDC481US (the "Contract"), which stipulates:

   -    Goods: The [Seller] shall supply and the [Buyer] shall purchase a quantity of fresh ginger;
   -    Total price: US $16,579.20 FOB Guangzhou;
   -    Destination port: New York;
   -    Shipping time: The first container shall be shipped at the end of November 2000; the second container shall be shipped within one week after the first is shipped;
   -    Payment: After signing the Contract, the [Seller] shall prepay 30% of the total contract price as deposit, and pay the remaining amount within seven (7) days when the goods are examined after arrival;
   -    Documents: The [Seller] shall deliver the following shipping documents: Bills of Lading or other transportation documents, packaging lists and invoices;
   -    Quality: The fresh ginger shall comply with the food sanitary standard; the fresh ginger shall not be rotten, or in petty pieces, or germinating; the fresh ginger shall be in large pieces, and the minimum piece shall be not less than 100g.

In the Contract submitted by the [Buyer], Article 10 Quality Requirements was added following the printed words by handwriting. The handwritten words are

"The [Seller] shall guarantee the ginger is conforming to the U.S. food sanitary standard after arriving at the destination port; each piece of ginger shall be more than 100g, and shall not be rotten, or in petty pieces, or germinating, or fermenting."

The parties negotiated the Contract via fax; some faxes submitted by the [Seller] also contain handwritten quality requirements, which are consistent with those described in the final Contract submitted by the [Seller].

On 28 November 2000, the Entry-Exit Inspection and Quarantine Bureau of the PRC examined two installments of fresh ginger submitted by the [Seller], concluded that the examined ginger was qualified, and issued Phytosanitary Certificates No. 441800200001573-1 and No. 441800200001573-2. These two installments of ginger were shipped from Huangpo Port Guangzhou to New York, U.S., on 6 and 13 December 2000, respectively. After receiving the goods in New York, on 1 January 2001 the [Buyer] applied to the Department of Agriculture of the U.S. to examine the first installment of ginger. The inspection showed that the ginger was soft rotten 0-33% and dried rotten 15-90% at early stage, which affected the freshness of root as deep as inch; the goods in most containers were wet; roots of the ginger were germinating and or fermenting; and the ginger in many containers was dry and had wrinkles. On 17 January 2001, the [Buyer] applied to the Department of Agriculture to inspect the second installment of ginger, This inspection showed that all goods in the containers were wet, and most of the ginger was fermenting in white, blue, green, or black; most ginger was soft rotten or dried rotten, and some was germinating at 1/10-1/8 inch; the ginger in many containers was dry and had wrinkles. The [Buyer] then disposed of the ginger as trash, and paid A trash disposal fee and other relevant charges.

On 5 August 2003, the [Buyer]'s counsel sent an attorney's letter to the [Seller] alleging that the goods delivered by the [Seller] were not in compliance with the Contract, and that the [Seller] breached the Contract and should be held liable, and requesting the [Seller] to bear the liability for breach. In this letter, the quality requirements were described as:

"On 16 November 2000, you ([Seller]) and our client ([Buyer]) signed the Contract for sales of ginger. Article 10 of the Contract stipulates, 'The [Seller] shall guarantee the ginger complies with the food sanitary requirements, and shall not be rotten, in petty pieces ...'."

In addition, the [Buyer] paid the deposit, 30% of the total contract price, i.e., remninbi [RMB] 20,550 and RMB 20,541.60, on 16 November and 3 December 2000, respectively, and the [Seller] issued two invoices. On 5 December 2000, the [Seller] issued two invoices for US $8,289.60 each without the [Seller]'s seal.

The [Buyer] alleged that on 16 November 2000, the parties signed a Contract for sales of ginger. After signing the Contract, the [Buyer] paid the contract price, transportation charges and other expenses listed in the third claim. However, the ginger delivered by the [Seller] after arrival did not conform to the U.S. food sanitary standards. The ginger was rotten and had to be disposed as trash. The [Buyer] paid the trash disposal fee and other charges, totaling US $13,236.

[Buyer]'s claim

The [Buyer] requests the Court to rule that:

1.  The [Seller] shall refund the principal of the contract price, i.e., US $16,579.20 plus interest, about US $2,400, (calculated at the rate of bank's loan interest from 5 December 2000 to the date when the payment is actually made, and currently to the date when the lawsuit was filed), equal to RMB 155,627.80.

2.  The [Seller] shall compensate the [Buyer] for the loss, US $13,226, plus interest, about US $2,000 (calculated at the rate of bank's loan interest from 9 January 2001 to the date when the payment is actually made, and currently to the date when the lawsuit was filed), equal to RMB 108,535.2.

3.  The [Seller] shall pay the following fees:

(1) New York power of attorney for certificate fee, US $250 and US $625;
(2) New York attorneys' fee for certificate fee, US $250;
(3) Tax, US $35.36;
(4) Customs declaration charge, US $95;
(5) Disposal fee charged by Department of Agriculture, US $25;
(6) Inspection fee charged by Department of Agriculture, US $484;
(7) Inland transportation charges in the U.S., US $355;
(8) Sample inspection fee charged by Department of Agriculture, US $40;
(9) Inspection fee charged by Department of Agriculture, US $299;
(10) Inspection fee charged by the U.S. Customs, US $35;

The total above amount is US $2,493.36 (equal to RMB 20,445.55).

[Seller]'s defense and counterclaim

The [Seller] alleged:

1.  The [Buyer] neither provided an English version of the Contract nor provided a translation of Article 10 of the Contract. The parties did not sign and confirm Article 10, which were added by the [Buyer] unilaterally after signing the Contract; therefore, the [Seller] requests the Court to hold the [Buyer] legally liable for forging evidence;

2.  The [Buyer] did not pay the contract price, US $16,579.20, and paid only 30% of the contract price as deposit; thus, the [Seller] counterclaimed for the remaining amount of the contract price;

3.  The [Seller] had performed its contractual duty; the ginger which the [Seller] exported was in compliance with the requirements of export inspection and quarantine of the PRC; the insured temperature for the transportation was confirmed by the [Buyer];

4.  The risk had passed to the [Buyer], and the [Seller] is not liable for any quality problems, because the delivery term stipulated in Article 1 of the Contract is F.O.B. Guangzhou. According to INCOTERMS 2000, the risk passed to the [Buyer] at the loading port, and the [Seller] had no liability anymore;

5.  The period for the [Buyer] to file claims had expired, so the [Buyer]'s claims are not legally protected anymore. The [Buyer] alleged that the goods had defects, but it did not file claims with the [Seller] within two years after receiving the goods according to Article 39 of the United Nations Conventions on Contracts for International Sales of Goods. Therefore, the [Buyer] lost the right to claim for damages.

6.  All evidence submitted by the [Buyer] was obtained out of the PRC, and was neither notarized nor authenticated by the embassy, so the evidence does not satisfy the legal formality requirements, and cannot be admitted;

7.  The [Buyer] had no evidence to prove the ginger had defects.

The [Seller] counterclaimed:

In November the [Seller] and the [Buyer] signed the Sales Contract. After signing the Contract, the [Buyer] paid 30% of the contract price, i.e., US $4,973.76, equal to RMB 41,091.63. The [Seller] delivered the ginger with the total value of US $16,579.20 and the shipping documents in accord with the Contract. After the goods arrived in New York, the [Buyer] unreasonably refused to pay the remaining 70% of the contract price, i.e., US $11,605.44, equal to RMB 95,852.47. After urging the [Buyer] to pay many times, the [Seller] did not receive the payment, so it requests the Court to rule that the [Buyer] shall pay the [Seller] the contract price, US $11,605.44, equal to RMB 95,852.47.

[Buyer]'s response

The [Buyer] argued:

1.  The [Buyer] had already paid the total contract price;

2.  The statute of limitation had expired for the [Seller] to file claims.

AWARD

After hearing this case, Guangzhou Intermediate People's Court holds that this case is a dispute related to a contract for international sales of goods. The Contract did not stipulate the court for the dispute. According to Article 24 of the Code of Civil Procedure of the People's Republic of China, if a lawsuit is filed based on a dispute under a contract, the People's Court where the Defendant is domiciled or the contract is performed, has jurisdiction. Because the place where the Defendant [Seller] is domiciled and where the Contract was performed is in Guangzhou, Guangdong Province, this Court has jurisdiction. Because the parties did not stipulate the applicable law in the Contract, according to the principle of proximate connection, the Court decides that the laws of the People's Republic of China where the [Seller] was domiciled and the Contract was performed apply to this case. The [Buyer]'s place of business is in the U.S. and the [Seller]'s place of business is in China; both the U.S. and China are Contracting States of the CISG; the Contract signed by the [Seller] and the [Buyer] is not within the exclusion of application stipulated in Article 2 or Article 3 of CISG; in addition, China's domestic law has no definite stipulation on international sales of goods. According to Article 142 Clause 2 of the General Principles of Civil Law of the PRC:

"If any international treaty concluded or acceded to by the People s Republic of China contains provisions differing from those in the civil laws of the People s Republic of China, the provisions of the international treaty shall apply, unless the provisions are ones on which the People's Republic of China has announced reservations,"

The CISG applies to this case.

The Contract signed by the [Buyer] and the [Seller] is a contract for the international sale of goods, and is a true expression of the parties, and does not violate the law of the PRC and administrative regulations. Therefore, the Contract is valid.

On 1 and 17 January 2001 the [Buyer] received the two installments of ginger under the Contract, and obtained the inspection certificates issued by the Department of Agriculture of the U.S. However, the evidence submitted by the [Buyer] shows that the [Buyer] did not authorize an attorney to send an attorney's letter to the [Seller] until 5 August 2003; no evidence shows that before this letter was sent, the [Buyer] had informed the [Seller] of the quality problems of the goods.

Article 39 of CISG stipulates:

"(1) The buyer loses the right to rely on a lack of conformity of the goods if he does not give notice to the seller specifying the nature of the lack of conformity within a reasonable time after he has discovered it or ought to have discovered it

"(2) In any event, the buyer loses the right to rely on a lack of conformity of the goods if he does not give the seller notice thereof at the latest within a period of two years from the date on which the goods were actually handed over to the buyer, unless this time-limit is inconsistent with a contractual period of guarantee."

Accordingly, the [Buyer] did not give the notice of the quality problems to the [Seller] in a timely manner, so the [Buyer] lost the right to claim that the quality of the two installments delivered on 1 January 2003 and 17 January 2003, respectively, was not in compliance with the Contract, and it was deemed that the [Buyer] accepted the goods under the Contract. In sum, it lacks factual and legal basis for the [Buyer] to request the [Seller] to refund the contract price and compensate for damages, so the Court does not sustain the [Buyer]'s claim. The Court sustains the [Seller]'s defense that the [Buyer]'s claim of the lack of conformity of the goods was not filed within the two year period.

Regarding the [Seller]'s counterclaim, the Contract stipulates, "after signing the Contract, the [Seller] shall prepaid 30% of the total contract price as a deposit, and pay the remaining amount within seven (7) days when the goods are examined after arrival," and the [Seller] confirmed that the [Buyer] had paid 30% of the Contract price, i.e., US $ 4,973.76 equal to RMB 41,091.63. Although the [Seller] issued two invoices to the [Buyer] before shipping the goods, but the [Seller] did not seal these two invoices; these two invoices are invoices for goods used in international sales of goods, and the effectiveness of proof of these two invoices is different from that of payment certificate described in China's domestic law. The [Buyer] did not submit any other evidence to prove that it had actually made the payments; these two invoices cannot prove that the [Buyer] had already paid the remaining 70% of the contract price, so the [Seller]'s claim that the [Buyer] shall pay the remaining 70% of the contract price, i.e., US $11,605.44 equal to RMB 95,852.47, has legal basis. Accordingly, the Court sustains the [Seller]'s counterclaim. The [Buyer] argued that the [Seller]'s counterclaim was not filed within the statute of limitation, because the parties stipulated that the payment should be made within seven (7) days after the goods arrived at the destination port and were examined. After the goods arrived, the [Buyer] examined them on 1 and 17 January 2001, so the payment should be made on 8 and 25 January 2001. According to Article 129 of the Contract Law of the PRC, the statute of limitation for disputes on contracts for international sales of goods is four years. The [Seller] filed the counterclaim on 8 January 2005, which did not exceed the statute of limitation, so the [Buyer]'s defense is not established, and the Court does not sustain this defense.

According to Article 39 of CISG, Article 109, Article 129, Article 126 and Article 159 of the Contract Law of the PRC, and Article 24 of the Code of Civil Procedure of the PRC, the Court handed down the following award:

1.  The [Buyer] shall pay the [Seller] the remaining contract price, i.e., US $11,605.44 equal to RMB 95,852.47, within ten days after this award is handed down;

2.  The [Buyer]'s claims are dismissed.

After this first instance judgment, neither party appealed, so the first instance judgment has taken effect.


FOOTNOTES

* 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 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].

** 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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