- (2007) HaiMinChuZi No. 1839
- Beijing Haidian District People’s Court
- Beijing Tongwei Fangyuan Ceramics Trade Centre v. Beijing Hongjian Decoration Engineering Co., Ltd.
SALES CONTRACT - BETWEEN TWO CHINESE COMPANIES - GOVERNED BY CHINESE LAW
'COMMENTS' BY CHINESE JUDGES ON THEIR DECISIONS - NOT LEGALLY BINDING - SELLER’S RIGHT TO WITHHOLD PERFORMANCE IN CASE OF BUYER’S NON-PERFORMANCE - REFERENCE IN THE COMMENTS TO ARTICLE 7.1.3 UNIDROIT PRINCIPLES IN A "COMMENT" CO-AUTHORED BY MEMBER OF THE COURT
Beijing Tongwei Fangyuan Ceramics Trade Centre (“Seller”) and Beijing Hongjian Decoration Engineering Co., Ltd. (“Buyer”) signed a contract for sale of ceramics. Under the contract, delivery of the goods and payment of the price were both to be made in instalments. After the contract was concluded, the Seller fulfilled its obligations with respect to the first two instalments. However, the Buyer failed to pay for these deliveries. When the third instalment arrived at the designated place of delivery, the Buyer was unable to pay for the first two deliveries. Consequently, the Seller withdrew the third instalment of goods, and withheld its performance with respect to the following instalments. Subsequently, the Seller commenced proceedings in the Beijing Haidian District People’s Court against the Buyer, seeking payment for the delivered goods and damages resulting from the Buyer’s failure to fulfill its obligations. The Court held that the Seller was entitled to withhold its performance under the Contract Act of the PRC. Hence, the Court decided in favour of the Seller.
Note: This case was later selected for a 'case comment' co-authored by the presiding judge of the Court. The comment referred to Article 7.1.3 of the UNIDROIT Principles of International Commercial Contracts (2004 edition) – which was not cited in the judgment – in discussing the justifiability of the Seller’s withholding performance under the Contract Act of the PRC. Interestingly, the UNIDROIT Principles were relied upon to analyze this purely domestic case. The reference to the UNIDROIT Principles suggests that they are considered as having some degree of persuasive value. Case comments of this type are circulated among the courts, often published, and intended as guidelines to judges who may be in charge of similar cases. Nevertheless, these comments are not legally binding under Chinese law, and hence are unlikely to be cited by other Chinese judges or counsel.