Go to Database Directory || Go to CISG Table of Contents || Go to Case Search Form || Go to Bibliography
Search the entire CISG Database (case data + other data)

CISG CASE PRESENTATION

China 20 July 1999 Supreme Court of the People's Republic of China (Zheng Hong Li Ltd. Hong Kong v. Jill Bert Ltd. Swiss) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/990720c1.html]

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

Case Table of Contents


Case identification

DATE OF DECISION: 19990720 (20 July 1999)

JURISDICTION: People's Republic of China

TRIBUNAL: Supreme Court of the People's Republic of China

JUDGE(S): Unavailable

CASE NUMBER/DOCKET NUMBER: (1998) Jing Zhong Zi Di No. 208

CASE NAME: Zheng Hong Li Ltd. Hong Kong v. Jill Bert Ltd. Swiss

CASE HISTORY: 1st instance Jinjiang Autonomous High People's Court

SELLER'S COUNTRY: Switzerland (defendant)

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

GOODS INVOLVED: Steel


Classification of issues present

APPLICATION OF CISG: No

APPLICABLE CISG PROVISIONS AND ISSUES

Key CISG provisions at issue: Article 95 [Also cited: Articles 53 ; 85 ; 87 ; 88 ]

Classification of issues using UNCITRAL classification code numbers:

1B22 [Reservation under art. 95 to exclude art. 1(1)(b)]

Descriptors: Declaration, Art. 95

Go to Case Table of Contents

Editorial remarks

EDITOR: Albert H. Kritzer

This was a contract for the international sale of goods between a Seller of Switzerland and a Buyer from Hong Kong in which, during the proceedings before the Court of First Instance, the parties elected to apply "the laws of the PRC" to their contract. The Court of First Instance applied the CISG. The Supreme People's Court ruled that this was inappropriate stating that, instead, the PRC Law on Economic Contracts Involving Foreign Interest should apply.

The CISG is a law of the PRC. The parties were from different States, one of which (Switzerland, the Seller's State) is a CISG Contracting State. The other party, the Buyer, was from Hong Kong. The contract was dated 1996. At that time, the sovereignty of Hong Kong was under the United Kingdom. The UK is not a party to the CISG. Accordingly, the only way the CISG might have been applicable in accordance with its terms would have been pursuant to Article 1(1)(b). However, Article 95 states that:

"Any State may declare at the time of the deposit of its instrument of ratification, acceptance, approval or accession that it will not be bound by subparagraph (1)(b) of article 1 of the Convention."

The People's Republic of China has so declared. Accordingly, although Article 95 was not mentioned in the ruling by the Supreme People's Court of China, it would seem that this provision of the CISG might be regarded as a logical basis for the application by that court of the PRC Law on Economic Contracts rather than the CISG.

Go to Case Table of Contents

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 [SPC/02]: <http://aff.whu.edu.cn/cisgchina/en/news_view.asp?newsid=104>

Translation (English): Text presented below

CITATIONS TO COMMENTS ON DECISION

Unavailable

Go to Case Table of Contents

Case text (English translation) [second draft]

Queen Mary Case Translation Programme

Supreme Court of the People's Republic of China
Zheng Hong Li Ltd. Hong Kong v. Jill Bert Ltd. Swiss

20 July 1999

Translation [*] by Zheng Xie [**]

-   Facts of the case
-   Pleadings of the parties
-   Proceedings before the Court of First Instance
-   The appeal and the position of the parties
-   Ruling of the Supreme Court

[FACTS OF THE CASE]

The Appellant, Zheng Hong Li Ltd. Hong Kong [Buyer], objected to the Xinjiang Autonomous High People's Court's Civil Judgment (1996) Xin Jing Chu Zi Di No. 15 on the dispute on the contract for the sale of steel with the Appellee, Jill Bert Ltd. Swiss [Seller], and appealed to the Supreme Court. This Court formed a collegial bench according to the relevant law.

After the hearing, the Court found that on 15 January 1996 the [Buyer] and the [Seller] signed Contract No. 96/0040 for sales of steel (including Attachments 1 and 2), which included the following provisions:

Goods. The [Seller] shall supply the [Buyer] 10,000 tons of cold rolled steel and 2,000 tons black steel strapping, more or less: 5%;
Price: Cold rolled steel US $338/ton; black steel strapping US $400/ton;
Delivery date: January-February 1996 delivered to A La Shan Kou Stop;
Delivery term: To the order of the [Buyer];
Payment: The [Buyer] shall apply to a bank in Zurich to issue an irrevocable L/C, and pay in US dollars; the amount in the L/C shall equal the contract price;
Installments: Permissible;
Modification: Any modification or supplement to the Contract should be confirmed by the parties' authorized persons in writing before taking effect, or takes effect by telegram confirmation;

After signing the Contract, the [Buyer] did not issue the L/C in accordance with the Contract and the [Seller] did not deliver the goods.

The subsequent chronology of events was:

   -    On 25 March 1996, the [Seller] sent a facsimile to the [Buyer] stating that:

    "The relevant contract price will increase by US $3/ton from 15 April 1996 for additional transportation charges. Please confirm the following proposals on payment condition: (1) by L/C; (2) by T/T within three days after receiving the documents."

   -    On 27 March, the [Buyer] responded to the [Seller] agreeing that the additional transportation charges, i.e. US $3/ton, would be included in the contract price, that the other provisions remained unchanged with the payment to be made by T/T, and requested the [Seller] to arrange the transportation. On 20 and 21 May 1996, the [Seller] delivered the steel to A La Shan Kou.
 
   -    On 24 May, the [Buyer] sent a facsimile to the [Seller] requesting [Seller] to change the consignee in the rail bill of lading as Ningbo Ke Ren Trade Ltd. ("Ke Ren"), and the notifying party as Xinjiang Steel and Iron Ltd.

   -    On 4 and 16 June 1996, the New Public Bonded Warehouse of A La Shan Kou Stop made four declarations to A La Shan Kou International Rail Carrier Union of the 36 units of cold rolled steel and black strapping with the consignee as Shanghai Bao Tie Storage and Transportation Co. and the destination of Shanghai Yanghang Stop. On 7 June, Hu Yi Company authorized Shanghai Bao Tie Storage and Transportation Co. to arrange receipt of the steel transported from A La Shan Kou to Shanghai Yanghang.

   -    On 25 June, Ke Ren sent a facsimile to Zheng Wei of Ai La Shan Kou Ne Public Bonded Warehouse stating, "Regarding the units of steel at A La Shan Kou, please receive and declare 36 units. Please do not receive other units until we instruct further."

Because the parties disputed over the performance of the Contract, the [Seller] filed a petition to Wulumuqi Intermediate People's Court for property preservation before litigation, and the Wuhumuqi Court attached 9 units of the 36 units of steel at A La Shan Kou (the demurrage was renminbi [RMB] 209,224.51); this Court also attached the 26 units which the Shanghai Bao Tie Storage and Transportation Co. was entrusted to receive at the warehouse of Shanghai Foreign Transportation Land Transportation Department (transportation fee, storage charges, etc., totaling RMB 896,566.73, were incurred).

[PLEADINGS OF THE PARTIES]

On 25 February 1997, the [Buyer] filed a lawsuit with the Xinjiang Autonomous High People's Court requesting the Court to rule that the [Seller] should compensate the [Buyer] for direct loss of RMB 4,860,000, indirect loss of RMB 600,000, storage charges of RMB 896,566.73 caused by the wrong preservation petition, loss of quality of RMB 1,509,470, attorneys' fee of RMB 160,000, authentication fee of RMB 30,000, and all litigation fees.

On 18 May 1997, the [Seller] filed a counterclaim with the Xinjiang Autonomous High People's Court requesting the Court to rule that the [Buyer] should pay the contract price of US $608,904.40, and compensate for economic loss of expenditures, interest, demurrage, return, etc., totaling US $311,643.53.

[PROCEEDINGS BEFORE THE COURT OF FIRST INSTANCE]

After hearing this case, Xinjiang Autonomous High People's Court held that:

      Contract No. 96/0040 between the [Seller] and the [Buyer] definitely stipulated the time of performance and payment term, which were binding on both parties. Because the [Buyer] did not issue an irrevocable L/C with a validity period of 45 days within the stipulated time, according to the United Nations Convention on Contracts for the International Sales of Goods, the [Seller] was entitled to suspend the performance of the Contract; the [Buyer] incurred the economic loss of RMB 480,000, because it could not perform the contract with Ke Ren; this was caused by the [Buyer]'s breach, so the [Buyer]'s claims should be dismissed.

      The [Buyer] did not provide sufficient evidence to prove its claim that the [Seller] should compensate for the loss of profits of RMB 600,000 and the loss of quality of RMB 1,509,470, so the Court dismissed this claim. As to the storage fees incurred due to the [Seller]'s preservation petition, the additional fee was incurred because the [Seller] did not take reasonable measures to avoid enlarging the loss; therefore, it would be unfair to require the [Buyer] to bear the entire fee; the [Seller] should bear part of the storage fee.

      The [Buyer] accepted the goods according to the revised Contract, so it should pay the contract price and receive the goods; however, the [Buyer] violated international customs and refused to make the payment and caused the litigation, so the [Buyer] should pay the contract price of the goods which it had already accepted, and bear the main party of civil liability.

      As to the [Seller]'s counterclaim for the demurrage of nine units of steel, because the demurrage was incurred by its preservation petition, and the [Seller] did not claim the relevant contract price, this counterclaim was not related to this case, and the Court did not sustain this counterclaim. As to the [Seller]'s other counterclaims, because the [Seller] did not submit sufficient evidence, the Court did not sustain them. Each party should bear its own litigation fee. According to Articles 238, 240 and 249 of the Law of Civil Procedure of the PRC and Articles 53, 85, 87 and 88 of CISG, the Court handed down the following judgment:

1. The [Seller] should compensate the [Buyer] for 30% of the storage charges of RMB 896,566.73 incurred due to preservation, i.e., RMB 268,970.02;

2. The [Buyer] should pay the [Seller] the contract price of US $608,904.40; the [Buyer]'s other claims were dismissed;

The litigation fee of the first instance was RMB 50,290.18; the litigation fee for the counterclaims was RMB 49,469; the fee for property preservation before litigation was RMB 32,530; the total above amounts were RMB 132,289.18, of which the [Buyer] should bear 80%, i.e., RMB 105,831.34, and the [Seller] should bear 20%, i.e., RMB 26,457.84.

[THE APPEAL AND THE POSITION OF THE PARTIES]

[The Buyer's position]

The [Buyer] objected to the above judgment, and appealed to the Supreme People's Court alleging:

      (1) The Court of First Instance did not correctly identify the facts. When the [Seller] and the [Buyer] signed Contract No. 96/0040 (including Attachments 1 and 2), the parties added Attachment 1 as per the [Buyer]'s request. In Attachment 1, the [Buyer] requested the [Seller] to change the payment method from L/C to T/T, but the Court of First Instance did not identify this fact;

      (2) The [Seller] did not deliver the goods within the period stipulated in the Contract, and this caused the [Buyer] to be unable to perform its contracts with its customers, so the [Seller] should be held liable. The Court of First Instance ruled that because the [Buyer] did not issue the L/C within the stipulated period, the [Seller] did not deliver the goods, and the [Buyer] should bear the liability. This ruling was incorrect. Because the payment method of Contract No. 96/-0040 was changed, the [Buyer] could make the payment only after the [Seller] delivered the goods.

      (3) The [Buyer] requested the [Seller] to compensate for the loss of profits of RMB 600,000 and loss of quality of RMB 1,509,170 and the [Buyer] submitted sufficient evidence to prove this claim. It was therefore inappropriate for the Court of First Instance to fail to sustain this claim.

      (4) The Court of First Instance mistakenly ruled that the [Buyer] should bear the storage charges incurred due to the [Seller]'s preservation; the [Seller] should bear the storage charges caused by its wrongful property preservation. Therefore, the [Buyer] requests this Court to revoke Item 1 of the judgment of the Court of First Instance, and to rule that the [Seller] should bear the entire storage charges of RMB 896,566.73, and compensate for the loss of quality of RMB 150,947, direct loss of RMB 4,860,000, indirect loss of RMB 600,000, and that [Seller] should bear the entire litigation fee, the attorneys' fee and authentication fee.

[The Seller's position]

The [Seller] alleged in its defense:

      (1) Contract No. 96/0040 signed by the [Seller] and the [Buyer] consisted of the main contract and the two Attachments. The main contract set forth the parties' rights and obligations, such as supply conditions, payment terms, etc. The two Attachments stipulated the quantity, price and specifications. Contract No. 96/0040 did not include the attachment alleged by the [Buyer], i.e., changing the payment term from L/C to T/T. The payment term was modified after the performance period stipulated in the Contract had expired.

      (2) After the expiration of the performance period, after many negotiations, the parties determined to perform Contract No. 96/0040 and the [Buyer] promised the make the payment immediately after receiving the documents, but it rejected all of the remaining steel after receiving the 36 units of steel, and arbitrarily held the steel as compensation against the loss due to delayed delivery; obviously, the [Buyer] breached the Contract.

      (3) Because the [Buyer] breached the Contract, the [Seller] tried to negotiate many time, but failed; thereafter, the [Seller] filed the petition to preserve the property, and had no fault. Therefore, the [Seller] should not bear the storage charges during the property preservation. The [Seller] requests this Court to dismiss the [Buyer]'s appeal.

[RULING OF THE SUPREME COURT]

The governing law]

This Court held that the dispute in this case was related to an international sale of goods. In the first instance, the parties elected to apply the laws of the PRC, so the Law on Economic Contracts Involving Foreign Interest should apply; the Court of First Instance inappropriately applied the CISG.

[The substantive issues]

Contract No. 96/0040 was the true expression of the parties, and did not violate the laws of the PRC, so it was valid. The [Buyer] alleged that Attachment 1 revised the payment by L/C, but did not submit sufficient evidence; therefore, this Court does not sustain this allegation.

During the performance of the Contract, because the [Buyer] did not issue the L/C according to the Contract, and breached the Contract, the [Seller] was entitled to suspend the performance. After the performance of the Contract, on 27 March 1996, the parties reached an agreement to revise the payment term and delivery time. This modification was the true expression of the parties, so it was valid.

On 20 and 21 May 1996, the [Seller] delivered the goods to A La Shan Kou, China, and performed the duty of delivery in accordance with the Contract; the [Buyer] did not make the payment in accordance with the Contract, which constituted a breach, so the [Buyer] should be held liable.

The Court of First Instance ruled that the [Buyer] should pay the [Seller] the contract price of US $608,904.40, and this Court sustains this ruling. It was appropriate that the [Seller] filed the petition to the Court for the property preservation because the [Buyer] rejected to make the payment, but the [Seller] did not take reasonable measures to avoid enlarging the loss; thus, this loss should be reasonably shared by the parties; the Court of First Instance ruled that the [Buyer] should bear 70%, and the [Seller] should bear 30%; this Court sustains this ruling.

In sum, the Court of First Instance correctly identified the facts, and mistakenly applied the law. However, the judgment of the first instance was appropriate, and is sustained. According to Articles 18 and 19 of the Law of Economic Contracts Involving Foreign Interest, this Court rules as follows:

   -    The judgment of the first instance is sustained and the appeal is dismissed.
 
   -    The litigation fee is RMB 50,290.18, which the [Buyer] should bear.

This is the final judgment.


FOOTNOTES

* All translations should be verified by cross-checking against the original text. For purposes of this translation, Plaintiff / Appellee of Switzerland is referred to as [Seller]; Defendant / Appellant of Hong Kong 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.

Go to Case Table of Contents
Pace Law School Institute of International Commercial Law - Last updated May 11, 2010
Comments/Contributions
Go to Database Directory || Go to CISG Table of Contents || Go to Case Search Form || Go to Bibliography