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CISG CASE PRESENTATION

China 19 March 2009 Shanghai First Immediate People’s Court [District Court sitting as Appellate Court] (Salem Street North American LLC v. Shang Shang Stainless Steel Pipe Co. Ltd.) [Case 2] [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/090319c2.html]

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

Case Table of Contents


Case identification

DATE OF DECISION: 20090319 (19 March 2009)

JURISDICTION: People's Republic of China

TRIBUNAL: Shanghai First Immediate People’s Court [District Court]

JUDGE(S): Unavailable

CASE NUMBER/DOCKET NUMBER: Unavailable

CASE NAME: Salem Street North American LLC v. Shang Shang Stainless Steel Pipe Co. Ltd.

CASE HISTORY: Unavailable [Lower court affirmed]

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

BUYER'S COUNTRY: United States (defendant)

GOODS INVOLVED: Stainless steel pipe


Classification of issues present

APPLICATION OF CISG: Yes

APPLICABLE CISG PROVISIONS AND ISSUES

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

Classification of issues using UNCITRAL classification code numbers:

53A [Seller's right to require payment of price of goods];

62A [Seller may require performance of any of buyer's obligations];

78B [Rate of interest]

Descriptors: Burden of proof ; Price ; 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 (No. 2) [IPC/40] <http://aff.whu.edu.cn/cisgchina/en/news_view.asp?newsid=129>

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 First Intermediate People's Court

Salem Steel North America LLC
v.
Shanghai Shang Shang Stainless Steel Pipe Co. Ltd.

19 March 2009 [Case 2]

Translation [*] by Jing Li [**]

Appellant (the original Defendant, hereinafter the "[Buyer]"), Salem Steel North America, LLC [of the United States of America] refused to accept the Civil Judgment by the Shanghai Pudong New Area People's Court's (2007) Pu Min Er Shang Chu Zi No. 4724 on the dispute arising out of the sales contract with the Appellee, Shanghai Shang Shang Stainless Steel Pipe Co. Ltd. (the original Plaintiff, hereinafter the "[Seller]"), and appealed to this Court. On 6 January 2009, this Court accepted the case and a collegial bench was formed according to the relevant law. A public court session was held on 18 February 2009. All parties and their respective representatives were present at the court session. This case is now closed.

RULING OF THE COURT OF FIRST INSTANCE

The Court of First Instance ascertained the following facts:

      On 17 April 2007, the [Buyer] and the [Seller] concluded Order No. SH07007. Thereafter, the parties modified it and the [Seller] received the signed modified order from the [Buyer] on 20 April 2007 and returned the order signed and sealed via facsimile (hereinafter, the "Contract"). The Contract provided that the [Buyer] purchased Seamless stainless steel pipes from the [Seller]. The Contract included the following terms.

   -    Quantity: 40,000 pounds;
   -    Unit price: US $3.35 per pound;
   -    Total contract price: US $134,000;
   -    Overload: 0-10% overload was allowed;
   -    Delivery terms: FOB Shanghai;
   -    Place of delivery: Shanghai;
   -    Delivery date: 15 July 2007;
   -    Payment terms: 60% of the contract price shall be paid upon presentation of documents, with the remaining 40% paid within fifteen days after arrival of the goods;

The [Seller] performed its obligation under the Contract by shipping the goods totaling 44,116.25 pounds in four installments from Shanghai Port Waigaoqiao Port Area and sent the [Buyer] the relevant bills of lading, invoices, packing lists, and inspection reports via express mail. The invoice amount was US $147,789.44. The containers with the above-mentioned goods arrived in Long Beach, California on 6 July 2007.

In June and July of 2007, the President of the [Seller]'s firm and its employee Harrison Yu went to the U.S. to negotiate with the [Buyer] on lamination problems with the pipes under other Orders claimed by the [Buyer]'s clients (Greenville Tube Corp. and Plymouth Tube Co.). The [Buyer] refused to make payment of the contract price under the Contract in the amount of US $147,789.44. The [Seller] filed a lawsuit with the Court of First Instance on 21 November 2007.

The Court of First Instance found that:

      The present dispute was an international commercial dispute between parties from China and the United States. These two countries are Contracting States of the United Nations Convention on Contracts for the International Sale of Goods (1980) (hereinafter, the "CISG"). Therefore, the CISG applied to the dispute. The [Seller] had performed its obligation of delivery under the Contract, and thus, the [Buyer] was required to make payment of the contract price. Moreover, the [Seller] was entitled to interest on the unpaid contract price. As for the loss of the interest, the [Seller] claimed that it should be calculated at the rate on the equivalent amount converted into renminbi at the exchange rate of the date on which the payment should have been made. The Court of First Instance found that the parties agreed on payment in U.S. dollars in the Contract, and hence, the [Seller] was only authorized to require the [Buyer] to pay in U.S. dollars, and the loss of interests on the deferred payment should be calculated according to the interest rate on U.S. dollars. The [Buyer] alleged that it refused to make payment of the contract price because the goods under other orders were defective. However, this allegation was neither legally nor contractually supported, and therefore, the Court of First Instance did not uphold the [Buyer]'s allegation.

Therefore, pursuant to Article 142(2) of the General Principles of the Civil Law of the People's Republic of China and Articles 62 and 78 of the CISG, the Court of First Instance handed down the following ruling:

1.   The [Buyer] is responsible to make payment of contract price in the amount of US $147,789.44 within ten days after this ruling takes effect;
 
2.   The [Buyer] is responsible to make payment of the interest on the deferred payment calculated from 21 July 2007 to the date on which the payment is made within ten days after this ruling takes effect; the interest rate shall be calculated at the LIBOR (London Inter-Bank Offered Rate) for one-year US dollars (closing price up by 3%) as of the date on which this ruling takes effect.

Should the [Buyer] fail to make payments within the time limit, the [Buyer] is responsible for paying a multiple interest for the period of delay under Article 229 of the Civil Procedure Law of the People's Republic of China [hereinafter, "Chinese Civil Procedure Law"].

The [Buyer] is responsible for the litigation fee of RMB 15,077 and application fee for the pre-trial custody of property of RMB 5,000, totaling RMB 20,077, which was paid in advance by the [Seller].

POSITIONS OF THE PARTIES ON APPEAL

[Buyer]'s position

      The [Buyer] refused to accept the judgment by the Court of First Instance, and appealed to this Court. In support of its appeal, the [Buyer] claimed that:

1. The Court of First Instance was in error ascertaining the facts

With regard to the material evidence submitted by the [Buyer], i.e., the e-mails, if the Court of First Instance found that it was unable to verify their authenticity, it should have required the [Buyer] to submit supplementary evidence; besides, the original copies of these e-mails shall be submitted by the [Seller]. As for the inspection reports provided by the [Seller], the Court of First Instance should have required the [Seller] to submit more detailed data to support its allegation that ultrasonic testing was performed on the pipes. Moreover, the Court of First Instance should have approved the [Buyer]'s application to extend the time period for adducing evidence in order for the [Buyer] to submit the third party testing report. Therefore, it is the [Buyer]'s position that the Court of First Instance erred in ascertaining the evidence, assigned the burden of proof inappropriately, and did not provide enough time for the [Buyer] to produce evidence.

2. The Court of First Instance was in error applying the law

On 20 July 2007, the [Seller] agreed in its e-mail to the [Buyer] that the [Seller] would compensate the [Buyer]'s loss. This agreement was a supplement and a modification to the Contract. In the e-mail correspondence between the parties on 14 August 2007, the [Seller] did not reject the [Buyer]'s request to hold the payment under the Contract until compensation for the loss arising out of Order Nos. SH07004, SH07005, and SH07006 is agreed upon by the parties.

3. The [Buyer] had filed a lawsuit against the [Seller] in December 2008 in the United States on the quality problems of the pipes at issue for seeking compensation for damages; the [Buyer]'s client, Plymouth Tube Co., had filed a lawsuit against the [Buyer] in December 2008 in the United States on the quality problems of the pipes at issue, and thus, the [Buyer] requested the Court of First Instance to suspend the hearing. In conclusion, the [Buyer] requests this Court to overrule the original judgment and to dismiss the [Seller]'s action or to remand for new trial at the [Seller]'s cost.

[Seller]'s position

In response, the [Seller] alleged that

      The Court of First Instance clearly ascertained the facts and correctly applied the laws. The [Buyer] failed to prove that the pipes in dispute were defective. Moreover, such defectiveness was not relevant to the present case.

Supplementary evidence submitted by the [Buyer] on appeal

The [Buyer] submitted the following supplementary evidence in support of its position:

1. Testimony presented by the [Buyer]'s employee, Dong Sun, with his presence at court, proving that he received e-mails from Harrison Yu [on behalf of the Seller] on 20 June 2007 and 20 July 2007, respectively, and that these e-mails were not modified.

The [Seller] argued that this testimony was a statement of an interested party, that is lacked evidentiary effect, and could not prove that the problematic pipes after processing by the [Buyer]'s clients were the ones delivered by the [Seller].

2. Report of Judicial Appraisal, proving that on 4 November 2008, Shanghai Stars Digital Forensic Center preserved the saved e-mails in Dong Sun's computer hard drive, proving that Dong Sun had received the e-mails on 20 June 2007 and 20 July 2007, respectively.

The [Seller] argued that this Appraisal was merely a preservation of the e-mails. It could not prove that the e-mails and their attachments were authentic. Moreover, after consulting the relevant institution by telephone, the [Seller] confirmed that whether or not the e-mails had been revised could not be verified.

3. Voice mail record of Harrison Yu and a notarized affidavit of Hua Xu, a telephone interviewer, proving that the e-mail dated 20 July 2007 was sent to the [Buyer] by Harrison Yu on behalf of the [Seller], who admitted that the pipes had severe quality problems.

The [Seller] verified that Harrison Yu had received this telephone call. However, the [Seller] did not confirm the authenticity of the conversation; moreover, the [Seller] argued that the measure taken by the [Buyer] to obtain this evidence was not legal, and that the evidence was formally invalid.

4. The affidavit by Ronald Herman, the President of the [Buyer], proving that the pipes were defective and that the [Buyer] was not able to obtain samples for a third party testing.

The [Seller] alleged that this evidence was a statement of an interested party and that it lacked evidentiary effect.

5. Letters from Greenville Tube Corp., the [Buyer]'s client, proving that the steel pipes were rejected due to the fact that they were defective, and thus, they were treated as waste products.

The [Seller] claimed that this evidence was not relevant.

6. The Statement of Complaint and the respective Affidavit of Service, proving that the [Buyer] had filed a lawsuit against the [Seller] in the United States on the defective pipes.

The [Seller] claimed that this evidence was not relevant.

7. The Statement of Complaint in the case Plymouth Tube Co. v. Salem Steel North America LLC, proving that the [Buyer]'s client, Plymouth Tube Co. had filed a lawsuit against the [Buyer] for damages.

The [Seller] claimed that this evidence was not relevant, and its authenticity could not be confirmed.

Supplementary evidence submitted by the [Seller] on appeal

The [Seller] did not submit supplementary evidence on appeal.

REASONING OF THE APPELLATE COURT

The above-mentioned evidence was submitted concerning the disputes between the parties under Order Nos. SH07004, SH07005, and SH07006, and is not relevant to the present dispute. This Court does not admit the above-mentioned supplementary evidence submitted by the [Buyer].

After investigation, this Court verifies that the Court of First Instance was correct in ascertaining the facts.

In addition, this Court finds that Order No. SH07007 was formed after the [Buyer]'s President Ronald Herman signed the Contract and the [Seller] signed and sealed the Contract via facsimile. This Contract is valid. The [Seller] performed its delivery obligation under the Contract. The [Buyer] took delivery of the goods and verified that the goods conformed to the Contract. The parties did not agree on postponing the payment under the Contract. Therefore, the [Buyer] is responsible for paying the contract price and the interest thereon. The [Buyer]'s allegation that it was authorized to postpone the payment because the goods under other orders were defective is not legally based. Consequently, this Court does not support the [Buyer]'s position.

RULING OF THE APPELLATE COURT

To sum up, the [Buyer]'s reasoning on appeal is not valid. This Court does not support that reasoning. This Court affirms that the Court of First Instance clearly ascertained the facts and applied the laws correctly. In conclusion, according to Item 1 of the first paragraph of Article 153, Chinese Civil Procedure Law, this Court:

(1) Affirms the original judgment; and

(2) Dismisses the [Buyer]'s appeal.

The [Buyer] shall pay the litigation fee of the second instance totaling RMB 15,077.

This is the final judgment.


FOOTNOTES

* All translations should be verified by cross-checking against the original text. For purposes of this translation, Appellant (the original Defendant) Salem Steel North America, LLC, is referred to as [Buyer] and Appellee (the original Plaintiff), Shanghai Shang Shang Stainless Steel Pipe Co. Ltd. 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].

** Jing Li, LL.M., University of Texas at Austin, School of Law; Master of Law, Sun Yat-Sen University School of Law, China; LL.B., Sun Yat-Sen University School of Law, China; Associate, Institute of International Commercial Law, Pace University School of Law.

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