China December 1994 Fujian High People's Court (San Ming v. Zhanzhou Metallic Minerals) [translation available]
[Cite as: http://cisgw3.law.pace.edu/cases/941200c1.html]
DATE OF DECISIONS:
CASE NUMBER/DOCKET NUMBER: Minjingzhongzi No. 123
CASE HISTORY: 1st instance Xiamen Intermediate People's Court August 1994 [reversed in part]
SELLER'S COUNTRY: Peoples' Republic of China (defendant)
BUYER'S COUNTRY: Japan (plaintiff)
GOODS INVOLVED: Granite stones
APPLICATION OF CISG: Yes
APPLICABLE CISG PROVISIONS AND ISSUES
Key CISG provisions at issues:
Classification of issues using UNCITRAL classification code numbers:
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CITATIONS TO ABSTRACTS OF DECISION
(a) UNCITRAL abstracts: Unavailable
(b) Other abstracts
CITATIONS TO TEXT OF DECISION
Original language (Chinese): Zhongguo Shenpan Anli Yaolan (1995) 1261-1266; CISG-China Case [HPC/02]: <http://aff.whu.edu.cn/cisgchina/en/news_view.asp?newsid=99>
Translation (English): Text presented below
CITATIONS TO COMMENTS ON DECISION
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Case text (English translation) [second draft]
Queen Mary Case Translation Programme
Translation [*] by Wu Dong [**]
FIRST INSTANCE. Xiamen Intermediate People's Court August 1994; (1993) Xiajingchuzi No.124; (1994) Xiajingchuzi No. 24. Judges: Chief Judge: Chen, Zongjie; Judge: Zhang, Dongsheng; Agent Judge: Ke, Yaling. Date: August 1994
PARTIES AND COUNSEL. Plaintiff (Defendant of the Counterclaims; Appellee): Japan San Ming Trade Co. Ltd. Legal Representative: Liu, Daochang, President of the Board of Directors. Attorney: Liao, Kaizhan, Lawyer of Fujian Foreign Economy Law Firm; Zhu, Guoliang, Employee of Fujian Baite Computer Software Co. Ltd. Defendant (Plaintiff of the Counterclaims; Appellant): Fujian Zhangzhou Metallic Minerals Import and Export Company. Legal Representative: Zheng, Kunyuan, Chief Manager. Attorney: Huang, Jianming, Fujian Zhangzhou Law Firm.
[POSITION OF THE PARTIES]
[Buyer]’s position. San Ming Trade Co. Ltd. (hereinafter "[Buyer]") asserted that, from 13 April 1992, [Buyer] and Fujian Zhangzhou Metallic Minerals Import and Export Company (hereinafter "[Seller]") concluded Contracts 92FL-001, 012, 015, 016 and 020 with "Letters of Confirmation of Deal" in succession. [Buyer] bought granite stones from [Seller]. In the implementation of the aforesaid contracts, there were breaches of contracts as follows: non-conformity of the quality of the stones, shortage of the quantities, non-delivery, refusing to pay commissions, and so on. These caused great losses to [Buyer]. [Buyer] petitioned the court to direct [Seller] to pay US $79,277.51 and interest as damages and that the suit fees should be borne by [Seller].
[Seller]’s position. In response, [Seller] asserted that the alleged "defects in quality" should have been found during inspection of the goods at the yard. The goods that were to be delivered were examined by Liu Daochang, President of Buyer’s Board of Directors; [Buyer] had no commodities inspection certificate to support its claim; and [Buyer] did not raise this question in reasonable time. Moreover, only four pieces of goods were not delivered, not six. Under Contract 92FL-012, when delivering the second installment of goods, [Seller] suffered direct losses of US $15,850.385 due to [Buyer]’s refusal to pay. Based on this, [Seller] submitted its counterclaim and requested [Buyer] to pay US $8,903.135 and interest (with the amounts pertaining to the shortage in quantity and commissions deducted). The suit fees should also be borne by [Buyer].
In response to [Seller]’s counterclaim, [Buyer] argued that during the implementation of the second installment under Contract 92FL-012, it did not pay because [Seller] did not deliver the Bill of Lading [B/L]. [Buyer] requested the court to dismiss [Seller]’s counterclaim.
FINDINGS OF THE COURT OF FIRST INSTANCE
The Court of First Instance found that:
On 13 April 1992, [Seller] and [Buyer] concluded a "Letter of Confirmation of Deal" under Contract No. 92FL-001, which provided that [Buyer] would deliver a variety of specifications of G623 granite stones. The amount was 215 pieces and 179.28 steres. The total price was US $56,916. The delivery time was the end of May. In late May, Liu Daochang, the representative of [Buyer], came to the yard in which the goods were stored and looked them over. But with time limited, he could not inspect each piece and each side of the goods. On May 22, Liu Daochang faxed to [Seller] and suggested that: "1) if you have confidence, you may deliver the goods; 2) after careful inspection, deliver until the next voyage." He also requested [Seller] to deal with the matter after prudent discussion. [Seller] considered that to cancel the voyage would cause the loss of freight and thus decided to load the goods at once. After the goods arrived in Japan, [Buyer]’s clients found defects in quality (e.g., "stone-gallbladder", "nail-grains") in 80.784 steres when they were processing them. [Buyer] compensated its clients 3,560,568 yen for this. With the import duty, consumer tax, profits and so on, the total loss was US $40,558.81. On 15 August 1992, [Buyer] immediately listed the non-conforming stones and sent this notice to [Seller]. [Seller] confirmed it in its telex reply on 20 August and promised to compensate [Buyer] in the following transactions progressively.
On 15 August 1992, [Seller] and [Buyer] concluded a "Letter of Confirmation of Deal" under Contract No. 92FL-012, which called for [Seller] to deliver 600 steres of G666 granite stones at the price of US $CNF450 per stere. The total price was US $270,000. The delivery would be divided into three installments respectively in the end of October of 1992, in the end of January, and in the end of June of 1993. The payment should be in Sight Letter of Credit [L/C]. When implementing the first installment under Contract 92FL-012, [Seller] notified [Buyer] that due to an accident of the truck turning over, it was hard to check the quantity. [Seller] itself had found four pieces were missing and asked [Buyer] to check it advising that [Seller] would supplement the missing amount in the next installment if the shortage was confirmed. After [Buyer] received the goods, it found six pieces were missing, whose amount was 5.064 steres and value was US $2,278.8. [Buyer] immediately informed [Seller] of the specific serial numbers and quantity. When implementing the second installment, [Buyer] on 22 December 1992 notified [Seller] that due to certain reasons it could not set a letter of credit in time and requested to pay in telegraphic transfer. [Seller] consented to this and loaded the goods on 3 January 1993 requesting [Buyer] to pay as soon as possible so that it could deliver the bills of lading. On 12 January, when the goods arrived in Japan, [Seller] refused to hand over the bills of lading to [Buyer]. Meanwhile, the two parties could not reach any agreement on whether [Seller] should deliver the bills of lading first or [Buyer] should pay first. At last, [Seller] sold the goods at a lower price with losses of US $7,673.985, storage fees of US $7,485.75 and interest loss of six months which was US $690.65. The total loss was US $15,850.385.
It was found that the contracts between [Seller] and [Buyer] were contracts with commissions. The commission fee percentage under Contracts 92FL-012, 016 and 020 was 5%; under Contract 92FL-015, it was US $40 per stere. The commissions were respectively US $3,191.60 under 92FL-012, US $1,809 under 92FL-015, US $364.10 under 92FL-016 and US $150 under 92FL-020. The sum was US $5,515.70. [Buyer] asked for the commissions several times and [Seller] also answered several times to pay, but it had not been done.
The aforesaid facts were proved by the following evidence:
Based on the aforesaid facts and evidence, the Xiamen Intermediate People’s Court held:
The several "Letters of Confirmation of Deal" on the sale of granite stones between [Seller] and [Buyer] indicated the meeting of intents of the two parties and conformed to the Law of the People’s Republic of China on Economic Contracts Involving Foreign Interest [Translator’s note: This law has since been repealed by the Contract Law] and international customs, so they were concluded validly. [Buyer] is a company established and registered in Japan.
|-||The two parties voluntarily chose the laws of P.R. China, international treaties and customs, which was permitted by the court.|
|-||[Buyer] informed [Seller] immediately after it found the defect in quality of goods under Contract 92FL-001 and [Seller] replied clearly that it would compensate [Buyer] later. [Seller] has now asserted that the goods under Contract 92FL-001 had no defects in quality. This cannot be accepted by the court due to lack of corresponding reasons. Based on this, [Seller] should compensate the [Buyer] for the economic losses to [Buyer] caused by this.|
|-||After receiving the first installment under Contract 92FL-12, [Buyer] checked the quantity according to [Seller]’s notice and informed the result to [Seller]. [Seller] did not raise any objections when it knew the missing amount was not four pieces but six pieces, so it should compensate according to the missing six pieces of stones.|
|-||When implementing the second installment under Contract 92FL-012, the two parties agreed to use telegraphic transfer instead but did not agree upon the time of payment. [Seller] had the goods transported to the destination and bore the main commercial risks, but [Seller]’s request for [Buyer] to pay before [Seller] delivered the bills of lading was obviously unreasonable; thus [Seller] was in breach. So the counterclaims of [Seller] were not supported by the court.|
|-||[Buyer] had reasons to ask for compensation for the losses of commissions and profits, but it could not supply the evidence of the loss of profits. The claim for loss of profits was therefore not supported by the court. Contracts 92FL-001, 012, 015, 016 and 020 between the two parties were with commissions and [Seller] had indicated several times that it would pay. So the claim for payment of commissions of [Buyer] should be supported by the court.|
Pursuant to articles 7, 8, 18 of the Law of the People’s Republic of China on Economic Contracts Involving Foreign Interest, article 30 of the CISG, articles 126, 147, 249 of the Civil Procedure Law of the People’s Republic of China, the court hereby decides:
As to the aforesaid items 1, 2, 3 and 4, [Seller] shall pay [Buyer] in 30 days as of the effective date of this judgment. If [Seller] exceeds the time limitation, the interest during the delay will be at double the rate of the contemporary US dollar lending rate provided by the China People’s Bank.
Lawsuit fee of this case is RMB 12,251. [Buyer] shall bear 3,062 RMB and [Seller] shall bear RMB 9,189. The lawsuit fee of the counterclaim is 2,800 RMB and shall be borne by [Seller].
Appellant [Seller] asserted:
Appellee [Buyer] did not submit any written response.
The facts found in the trial of the appeal are basically the same as those found in the first instance.
[HOLDING OF THE APPELLATE COURT]
The Appellate Court holds that:
The sales contracts for granite stones in are valid economic contracts.
|-||As to the defect in quality under Contract 92FL-001, [Seller] had admitted it in its faxes. Though [Seller] now raises objection to the compensation, it could not provide evidence.|
|-||As to the first installment under Contract 92FL-012, [Seller] voluntarily informed [Buyer] about the shortage in quantity. After [Buyer] notified [Seller] about the quantity and serial numbers of the missing goods, [Seller] did not raise any objection; it thus should be deemed that [Seller] had recognized what [Buyer] told it.|
|-||As to the means of payment for the second installment under Contract 92FL-012, the two parties agreed to use telegraphic transfer instead of letter of credit, so the supervision on the implementation of the contract from the banks was missing in the new means. As there was no explicit agreement, the principle of fairness shall be applied, so that the obligations of [Buyer] and [Seller] shall be treated equally. The Court of First Instance held that [Seller] should perform its obligation so that all the losses were borne by [Seller] only. This is not reasonable.|
|-||As to the second and third installments under Contract 92FL-012, they were not performed at all, [Buyer]’s claim for commissions for these installments cannot be supported.|
Pursuant to article 153 paragraph 1 items 1 and 2 of the Civil Procedure Law of the People’s Republic of China, the Fujian Higher People’s Court hereby:
To sum up, [Seller] shall compensate [Buyer] US $40,427.12. The payment shall be made in 30 days as of the effective date of this judgment; if exceeding the time limitation, the relevant stipulations of the Civil Procedure Law of the People’s Republic of China shall be applied.
The lawsuit fee of the appeal is 15,051 RMB [Renmimbi], 5,075 RMB of which shall be borne by [Buyer] and 9,976 RMB of which shall borne by [Seller]. The lawsuit fee of the first instance shall be implemented according to the appeal. As the lawsuit fee of the appeal has been paid by [Seller] in advance, the part which shall be reimbursed to [Seller] (i.e., those shall be borne by [Buyer]) does not need to be reimbursed by the court and shall be set-off by the payment by [Buyer] during the implementation the decision.
* All translations should be verified by cross-checking against the original text. For purposes of this translation, Plaintiff of Japan is referred to as [Buyer]; Defendants of the PR China are 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].
** Wu Dong, LL.M. candidate, Peking University School of Law, Beijing, P.R. China, 2001 to present; LL.B. Peking University School of Law, 2001.Go to Case Table of Contents