Data
- Date:
- 16-07-2018
- Country:
- China
- Number:
- (2017) Hu 0105 Min Chu No. 19401
- Court:
- People’s Court Shanghai Changning District
- Parties:
- Jaxtal Imports Pty Ltd v. Shanghai Xinlian Textile Import & Export Co., Ltd.
Keywords
DELIVERY OF GOODS UNDER 'FOB' TERM - RISK ON THE BUYER ONCE THE GOODS HAVE PASSED THE SHIP'S RAIL
Abstract
[Abstract prepared by Li Zheyu, Li Zhuyang and Bai Yifa, ZUEL-Sur School of Law and Economics, Wuhan]
On 16 January 2017, an Australian buyer issued a proforma invoice to a Chinese seller under which the seller would supply three models of candle sticks and tea wax. The buyer paid the price, and the seller made the delivery. However, upon receipt of the goods, the buyer found that the four types of candles delivered by the seller were different from the ordered candles as they were in the form of canisters rather than the column candles and tea waxes indicated in the order. The buyer then accused the seller of breach of contract and sued it before the Court.
The Court had to resolve the issue of whether the Chinese company was a party to the contract, and who should bear the risk of loss or damage to the goods during the carriage.
Regarding the application of the law, both parties agreed during the litigation proceedings that the CISG should prevail and that those issues not covered by CISG should be resolved under Chinese law as well as the Incoterms 2010, as the parties had referred in the contract to the FOB term (Free on board). The court confirmed that CISG should apply, as the parties had their place of business in two Contracting States, and they had not explicitly excluded its application. Also, the Court determined that Chinese law would apply as a supplementary source.
As to the liability of the seller, the Court found that under the term FOB, the seller is considered to have fulfilled delivery when the goods cross the ship’s rail at the named port of shipment; as a result, the buyer bears the risks to damage or loss to the goods as soon as the goods are loaded onto the transport vessel at the port of departure.
Therefore, where a clean bill of lading is issued, as it happened in the case at hand, indicating that the goods were in good apparent condition at the time of handing over to the carrier, the seller could not be considered liable. The Court noted that the same conclusion was confirmed by Art. 67 CISG as well as Article 76 of the Maritime Law of the People's Republic of China, which provides that if the carrier or the person issuing the bill of lading on its behalf fails to annotate the surface condition of the goods on the bill of lading, the goods are presumed to be in good condition.
Besides, the Court ascertained that the Chinese seller was not a party to the contract. The examination report, issued by a third company on behalf of the buyer, evidenced that the supplier of the goods was a company registered in the Seychelles that used the Chinese company to ship the goods overseas. Consequently, the Court rejected all claims of the buyer.
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