An engineering company v. a trading company et al., a sales contract dispute
-- Where there is still the will and conditions for continued performance after violating the contract, performance may be continued
keyword
- civil
- Sales and Purchase Contract
- Contract Changes
- Acceptance is expressed by act
- Actual fulfillment
- deposit
Basic facts of the case
The plaintiff, an engineering company, claimed that: in October 2007, the plaintiff and the defendant signed a No. SC300186 Contract for the Sale of Goods, stipulating that the plaintiff would sell 16 valves to the defendant, and the defendant should pay the plaintiff RMB 288,000 (the same currency below); Of the above payment, the 30% deposit of $86,400 was due within one week after the signing of the contract, i.e. by 31 October 2007, and the balance of $201,600 was due within 14 weeks from the date of payment of the deposit, i.e. before 14 February 2008. However, after the above contract was signed, the defendant never fulfilled its payment obligations as agreed. The plaintiff failed to collect money several times, so it filed a lawsuit and requested an order that: 1. the defendant should pay the plaintiff the arrears of RMB 288,000; 2. The defendant paid the plaintiff a principal amount of RMB 86,400, which was calculated from November 1, 2007 to the effective date of the judgment; and liquidated damages of 2/10,000 per day in the principal amount of RMB 201,600 from February 14, 2008 to the effective date of the judgment.
The defendant, a trading company, argued that: 1. The relationship between the plaintiff and the defendant was originally that of an agency, the defendant was the plaintiff's secondary agent, the plaintiff was responsible for signing a technical agreement with the customer, and the defendant was responsible for the sales business. In 2009, the plaintiff disqualified the defendant from acting as an agent when the time was ripe for sales, and the plaintiff directly traded with customers, and the defendant could only act as an agent for other brand products. Due to the existence of a competitive relationship between the brands, the defendant could not continue to sell the plaintiff's products, so the defendant could not continue to perform the contract with the plaintiff; 2. Although the contract was signed, it was not actually performed, the plaintiff did not deliver the goods, and the defendant did not pay, and the termination of the contract would not cause losses to the plaintiff; 3. The plaintiff has been demanding payment from the defendant, but has never fulfilled its obligations, the plaintiff should prepare the goods and notify the defendant to pick up the goods; 4. According to the agreement, if the defendant fails to perform, it has no right to demand the return of the deposit, so the plaintiff can only claim the deposit from the defendant, and there is no basis for requiring the defendant to pay all the money under the contract.
A third party, an electromechanical company, stated that it agreed to the plaintiff's claim.
After trial, the court ascertained that on April 2, 2007, an electromechanical company (supplier) and a trading company (buyer) signed Contract No. 969, and the two parties agreed: 1. The buyer purchased 3 valves of specification and model 3"-657-ET-DVC2000 from the supplier, with a unit price of RMB 40,530 and a total amount of RMB 121,590; 3 sets of specifications and models 6"-667-ET-DVC2000 valves, the unit price is 74,011 yuan, and the total amount is 222,033 yuan; 8 sets of 4"-657-EZ-67CFR valves, the unit price is 45,780 yuan, and the total amount is 366,240 yuan; 12 sets of specifications and models 4"-667-EZ-67CFR valves, the unit price is 59,310 yuan, and the total amount is 711,710 yuan; The total amount of the above amount is $1,421,573; 2. The delivery (pick-up) time is 12 weeks to 14 weeks; 3. The acceptance must meet the name, model and quantity of the ordered product, and the supplier shall provide the product instruction manual and quality certificate at the same time; 4. The settlement method is 30% prepayment and 70% payment to delivery.
On October 24, 2007, an engineering company (seller) and a trading company (buyer) signed Contract No. 186, in which the two parties agreed: 1. The buyer purchased 16 FISHER valves with specifications and models of 4"-EZ from the seller, with a unit price of RMB 18,000 and a total amount of RMB 288,000; 2. The delivery time is 14 weeks from the date when the buyer pays off the 30% deposit; 3. Payment: After the signing of this contract, the buyer shall pay a deposit of 30% of the total price of the goods within one week, which can be used as the price or recovered when the buyer pays all subsequent payments; If the buyer fails to perform any of its obligations under the contract or unilaterally terminates the contract, it shall not be entitled to the return of the deposit; Notwithstanding the foregoing, the Buyer shall pay all the purchase price before requesting the Seller to deliver the goods or to take delivery or to entrust a third party to take delivery of the goods; If Buyer fails to make payment within the payment deadlines set forth in the above two paragraphs, Seller shall be entitled to, and this shall be without prejudice to any other rights or remedies of Seller: (a) rescind the Contract; and/or (b) suspend further delivery of goods to Buyer until Buyer has paid all of the purchase price; and/or (c) claim liquidated damages from Buyer at the rate of 2/10,000 per day for unpaid amounts from the date of due payment to the date of actual payment; 4. The annex "Technical Agreement" is an integral part of this contract. Other rights and obligations are also stipulated in the contract.
On October 24, 2007, a trading company faxed a "ordering instructions" to a staff member of an electromechanical company and an engineering company, saying that due to the order error of your company's contract No. 969 4"-EZ valve body, our company is now re-ordering a batch of 4"-EZ valve body, and the original valve body is used as spare parts. The following situation of the valve body ordered in this batch is hereby explained as the basis for future delivery. 1. The valve body shell part of the contract No. 186 is ordered in accordance with the CLASS300 RF Flanged WCC material, and the valve trim part is ordered in accordance with the standard valve trim, see the parameter table for details, 2. After the arrival of this batch of valves, please assemble the valve shell of the No. 186 contract to the 4 "-EZ valve in the original No. 969 contract, and deliver it to our warehouse, 3. The remaining standard valve parts, and the valve shell assembly in the original No. 969 contract (the connection method of the shell part is welded), as our spare parts. Please attach this note to the contract.
After receiving the fax of the above-mentioned ordering instructions, an electromechanical company and an engineering company assembled the valves according to the contents of the fax, and successively delivered 16 valves to a trading company as a delivery obligation to fulfill the products under Contract No. 969. The staff of a trading company signed for the receipt of 16 valves.
On January 14, 2009, a trading company issued a payment plan to an electromechanical company and an engineering company to confirm the amounts owed in a number of arrears. Among them, the amount of arrears under the No. 969 contract of an electromechanical company was confirmed as follows: the total amount of the procurement contract was 1,421,573 yuan, 1,033,473 yuan had been paid, and 388,100 yuan was to be paid, and the unit number 4"-EZ (657-2 units were not paid, 667-5 units were not paid), and the payment date was arranged as T/T before January 25, 2009; The amount of arrears under Contract No. 186 of an engineering company was confirmed as follows: the total amount of the procurement contract was 288,000 yuan, 0 yuan had been paid, and 288,000 yuan was to be paid, and the payment date was arranged to pick up the goods in batches according to the project situation.
22 January 2009 and 5 November 2009. On behalf of an engineering company, Mr. Yan sent a lawyer's letter to a trading company demanding the payment of RMB 288,000 and liquidated damages under Contract No. 186, and the trading company confirmed receipt.
In the lawsuit, an engineering company confirmed that 16 valves that had not yet been delivered were at the plaintiff's premises.
On November 22, 2010, the Shanghai Minhang District People's Court rendered the (2010) Min Min Er (Shang) Chu Zi No. 1216 Judgment: (1) The defendant trading company shall pay the plaintiff an engineering company RMB 288,000 within 10 days from the effective date of this judgment; 2. Within 10 days from the effective date of this judgment, the defendant trading company shall pay the plaintiff an engineering company a liquidated damages of RMB 86,400 as the principal, calculated from November 1, 2007 to the effective date of the judgment, calculated at the rate of 2/10,000 per day; 3. The plaintiff's other litigation claims are rejected. After the first-instance judgment was pronounced, neither the plaintiff nor the defendant appealed. The judgment of the first instance has entered into force.
Reasons for the Adjudication
The effective judgment of the court held that the No. 969 contract signed by the defendant and the third party and the No. 186 contract signed by the defendant and the plaintiff were both expressions of the true intentions of the parties, and the content did not contradict the provisions of the law, and were valid contracts, and all parties should exercise their rights and perform their obligations in accordance with the contract. The "Order Instructions" sent by the defendant to the plaintiff and the third party on October 24, 2007 were changes in the defendant's performance of the contracts No. 969 and No. 186. The plaintiff and the third party delivered 16 valves to the defendant after assembling the valves according to the defendant's requirements, indicating that the plaintiff and the third party accepted the defendant's request to change the way of performing the contract. The plaintiff made delivery vouchers for the 16 valves delivered as fulfillment of contract obligations under Contract No. 969, and the defendant signed on the corresponding delivery vouchers, indicating that the defendant recognized them. The 16 valves that have not yet been delivered shall be considered the subject matter of Contract 186. The defendant issued a payment plan to the plaintiff, confirming that it still owed the plaintiff RMB 288,000 for the goods under Contract No. 186, but had not paid for the goods so far, which was obviously improper performance, and the plaintiff's claim for the defendant to pay the goods price of RMB 288,000 to the plaintiff was based on law and was upheld by the court. After the defendant made the payment, the plaintiff should deliver 16 valves to the defendant as agreed.
The plaintiff and the defendant agreed in Contract No. 186 that 30% of the initial payment, i.e., RMB 86,400, should be paid within one week after the contract came into effect, i.e., before October 31, 2007. Therefore, the plaintiff's claim that the defendant should pay the defendant a principal amount of RMB 86,400 and liquidated damages calculated at 2/10,000 per day from November 1, 2007 to the effective date of the judgment was based on the law and was upheld by the court. As for the remaining 70% of the purchase price, i.e., RMB 201,600, the contract stipulated that payment should be made before delivery of the goods, and the defendant had not yet taken the goods away, so there was no overdue payment, so the plaintiff's request for the defendant to pay liquidated damages calculated based on the principal amount of RMB 201,600 lacked basis and was not supported by the court.
With regard to the defendant's defense that the relationship between the plaintiff and the defendant was an agency contract rather than a sales contract, the court held that the authorization certificate provided by the defendant was not the same legal relationship as the contract at issue in this case, and the defendant's defense lacked factual basis and was not accepted by the court. With regard to the defendant's defense that the defendant demanded the termination of the contract after paying the deposit to the plaintiff, the court held that, first, the deposit contract was a practical contract, and the defendant did not actually pay the deposit, and the deposit contract did not take effect; Second, the defendant failed to take delivery of the goods as agreed, violated the contract, and as the breaching party, it had no right to demand the termination of the contract; Thirdly, the plaintiff confirmed that the 16 valves that had not yet been delivered were still with the plaintiff and that the contract was eligible for continued performance. Therefore, the court did not accept the defendant's defence.
Summary of the trial
1. After the conclusion of the contract, one party to the contract wishes to change the contract through its unilateral intention, and the other party accepts it by its own behavior, which can produce the legal consequences of the contract modification, and both parties shall perform their respective rights and obligations in accordance with the modified contract.
2. The actual performance of the contract is an important way to remedy breach of contract. When both parties have the subjective and objective conditions for continued performance, the plaintiff's claim for actual performance of the contract should be supported.
3. As a form of guarantee, the deposit has practical characteristics, that is, the actual delivery of the deposit is used as a precondition for the legal effect of the agreed terms of the deposit liability, and when one party does not actually pay any deposit, the argument that it only recognizes the responsibility within the deposit law cannot be established.
Associate indexes
Article 140 of the People's Republic of China Civil Code (Article 107 of the People's Republic of China Contract Law, which came into force in 1999)
First instance: Shanghai Minhang District People's Court (2010) Min Min Er (Shang) Chu Zi No. 1216 Civil Judgment (November 22, 2010)