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The case of XXX Company v. XX Company on dispute over the computer sales contract
Jurisdiction: Arbitration; CIETAC
Date of Decision: June 18, 2000
1.Case brief
The claimant claimed the following in his application form:
On January 31, 1996, the claimant and the respondent entered into the contract stipulating that the respondent purchased computers from the claimant, including 400 OLIVETTI-ORS VECTORs, 150 OLIVETTI PCs, and one mini. On February 28, 1996 and June 7, 1996, the claimant delivered the entire goods and relevant fittings respectively as stipulated in the contract to the respondent, and the total value was 1,123,447.55 USD. On February 28, 1996, the respondent paid the claimant 223,202.79 USD, and on June 13, 1996, on June 28, July 17, 1996, on January 7, April 12, and May 31, 1997, the respondent just partially paid the remaining sum of the contract. With the deposit of the contract added, the paid sum was 430,154.64 USD while the rest sum of 693,292.91 USD had never been paid till now.
The reasons why the respondent refused to pay the price were as follows: the respondent agreed to conclude the contract with the claimant on the condition that he purchased the goods under the contract for XX Group. Article 3 of the contract stipulated that: "Party A (the respondent) shall pay Party B 20% of the total sum of the contract only when Party A received the deposit of the XX Group, and then when the goods arrived in Beijing, Party A shall pay 10% again after obtained the payment from XX Group. Party A shall pay Party B 60% after obtaining the payment from XX Group within 3 months' formal operation, and the rest 10% shall be paid within 6 months after Party A received the payment from XX Group." Since XX Group failed to perform the whole obligation to pay to the respondent, the respondent could not receive each batch of payment from XX Group within the promissory time, therefore: (1) according to article 3 of the contract, the respondent possessed the excuses to refuse to pay; (2) the respondent signed the contract with the claimant as the agent of XX Group, thus the obligation to pay should be assumed by XX Group ultimately.
Aiming to the aforesaid excuses of the respondent to refuse to pay, the claimant argued:
(1) The relationship between the respondent and XX Group was purchase and sale other than agency.
On February 15, 1996, the respondent and XX Group concluded the purchase and sale contract, in which, the respondent was the supplier and XX Group was the purchaser. In addition, what the respondent earned from this dealing was price difference between the contracts other than the agency commission.
(2) The respondent signed the contract on behalf of himself other than XX Group; therefore, he should independently assume the entire obligation to pay under the contract.
(3) The respondent should not take whether XX Group had paid as the condition of paying to the claimant. The stipulation of article 3 under the contract should be changeable or revocable, since:
(a) The claimant had significant misconception about this stipulation probably. The claimant held that the respondent had promised he could receive the total payment from XX Group.
(b) The stipulation of article 3 under the contract was obviously unfair to the claimant if it was not coherent with the claimant's understanding. In accordance with the provision of the Article 59 of the General Principles of the Civil Law, the claimant requested the arbitral tribunal to render an award on altering or revoking the Article 3 of the contract.
The claimant presented claims in his application form as follows:
(1) The respondent should pay the claimant the remaining sum of 693,292.91 USD;
(2) The respondent should pay the claimant the interest for delayed payment of approximate 8,184 USD from the last day when the respondent paid to the claimant (May 31, 1997) to the day when the arbitral tribunal awarded (according to the current annual rate of 8.5% USD in a HK bank);
(3) The respondent should pay the retaining fee that the claimant had afforded, approximately converted to 13,865.86 USD;
(4) The respondent should assume all arbitration fee.
The respondent depicted the background of concluding the contract with the claimant in his statement of defense, and rebutted as follows:
(1) The course of concluding the contract between the claimant and the respondent indicated that:
(a) In order to obtain this dealing, the claimant assumed the risk of installments from XX Group by using discount as a cost ;
(b) The reason the claimant sought for the respondent as the cooperator was that he did not find any more appropriate partner. The claimant considered that since the respondent provided software to XX Group, compared to the claimant, the respondent was more convenient to receive the payment and the respondent could also benefit a lot from such receipt. The claimant had no reason to doubt that the respondent would not pick up the payment.
(c) The respondent explicitly showed the attitude to the claimant before they established the contract, and the claimant agreed, which was indicated in the articles of the contract.
(d) The claimant was quite clear about the terms and words of the contract. Since the contract was through confirmation for many times, the matter of misconception would not exist.
(2) The respondent entirely performed the obligation under the contract and did not breach the contract. It is stipulated in Article 3 of the contract that the obligation that the respondent should pay the claimant after he received the payment from XX Group, which was seriously performed by the respondent. Once the respondent obtained one batch of payment from XX Group, he would fax the check or incoming account to the claimant, and notified the claimant the exact sum. The claimant had never proposed objections. Usually, as soon as the claimant noticed the respondent whom he should transfer money to, the respondent paid never exceeding the period as provided in article 3 of the contract. In addition, during the course of implementation, the respondent timely reminded the claimant to take measures to reduce the risks while the claimant disrupted the chance due to inside dissensions.
(3) When implementing the contract, the claimant did the following breaching conducts:
(a) delaying to deliver the goods
(b) failing to provide the spare parts according to the contract
(c) failing to perform the obligation to donate equipment as presented in Article 5
(4) The respondent also suffered losses because XX Group did not perform the obligation to pay. The claimant should assume the responsibilities due to its faults.
In a word, the respondent held that the contract signed between the both parties reflected the true will, did not violate the law and public interest, did not take method of duress and fraud, as well as obeyed the provisions of the Foreign Economic Contract Law of the People's Republic of China, thus it should be valid. The respondent did not consent to the requirement unilaterally claimed by the claimant that the Article 3 of the contract should be changed or revoked. The claims of the claimant did not possess bases of contract and law, thus the respondent requested the arbitral tribunal to overrule the claims.
The preceding arguments were restated and further indicated by both parties during the tribunal hearing and in the supplementary materials provided by them. And both parties argued on the matter of goods delivery under the contract. The claimant held that the claimant delivered the goods to a HK XX company appointed by the respondent in HK, and the direct beneficiary should be the respondent not XX Group. While the respondent argued that it is stipulated in Article 2 of the contract that the claimant should deliver the goods to XX Group after the goods arrived in Beijing, and the fact was just like this. The fact that the claimant entrusted the HK XX Company to carry the goods to the XX Group was in no relation to the respondent. The respondent and the HK XX Company were two independent legal persons and there was no joint liability.
2.Award
(1)
All the claims of the claimant shall be overruled.
(2)
The arbitration fee shall be assumed by the claimant.
3.Comment
The matters in relation to this case are mainly as follows:
(1)
Law application
Since the place where the contract is concluded, the place where the goods are delivered and where the arbitration is made as stipulated in the contract were Beijing, and the claimant quoted the law of China in its arbitration documents and the respondent did not show any demurral. In light of the principle of close relationship, the arbitral tribunal held that this case shall apply the law of China.
(2)
The scope of hearing
The arbitral tribunal noticed that the claimant and the respondent referred to the matter of the relationship between the claimant and XX Group and the relationship between the respondent and the XX Group many times during the hearing and in the written materials respectively presented by the two parties. The arbitral tribunal held that the power of the arbitral tribunal to hear this case depended on the general authorization by the both parties in the arbitration agreement and the specific right authorization by the two parties in the course of arbitration. However, XX Group was not one party in this case; thus, the arbitral tribunal had no right to hear the issues relating to XX Group. The arbitral tribunal just heard and solved the disputes over the implementation of the contract between the two parties subject to the legal relationship deriving from the contract.
(3)
The matters concerning the implementation of the contract
(a) The obligation to deliver goods of the claimant
The claimant stated that on February 28, 1996 and on June 7, 1996, he had delivered the whole goods and relevant fittings under the contract to the respondent, and the total sum of the payment was 1,123,447.55 USD. While the respondent argued that the claimant had delayed to deliver the goods, and failed to deliver the 1G hard disk of mini, as well as failed to provide the spare parts and donate the equipment under the contract until now to which the claimant did not rebut. The arbitral tribunal confirmed that the claimant had performed almost its entire obligations as stipulated in the contract.
(b) The obligation to pay of the respondent
The claimant stated that on February 28, 1996 the respondent paid the claimant 223,202.79 USD as deposit, and on June 13, June 28, July 17, 1996, January 7, April 12, and May 31, 1997, the respondent paid partial sum of the contract, and the total paid sum was 430,154.64 USD including the deposit, while the rest sum of 693,292.91 USD had been never paid till now. The respondent argued that he paid the claimant totally of RMB 3,744,187.4 Yuan. The two parties had no contrary opinions on the paid sum the opposite party proved to have paid.
The arbitral tribunal notices that the obligation to pay of the respondent is the focus of the disputes in this case, that is, in accordance with the contract, whether the respondent should assume such obligation when XX Group did not pay for him.
The arbitral tribunal scrutinized the "payment" of Article 3 of the contract, which read: "Party A (the respondent) shall pay Party B 20% of the total sum of the contract only when Party A have received the deposit of the XX Group, and then when the goods arrived in Beijing, Party A shall pay 10% again after obtained the payment from XX Group. Party A shall pay Party B 60% after obtained the payment from XX Group within 3 months' formal operation, and the rest 10% shall be paid within 6 months since Party A received the payment from XX Group." With respect to this term, the claimant held that he might have significant misconception when he made this agreement, that was, the claimant made this agreement on the condition that the respondent had promised to receive the payment from XX Group; furthermore, it seemed obviously unfair to the claimant that the obligation to deliver goods assumed by the claimant were not equal to the right to receive the payment enjoyed by it, if the XX Group, for instance, refused to pay, the claimant might never take back the payment. Therefore, the claimant required to change or revoke the Article 3. While, the respondent argued, the conclusion course indicated that in order to obtain this dealing, the claimant was willing to accept the conditioned payment, significant misconception not existed; and it could not be regarded as unfair that XX Group's failure to pay the respondent resulted in that the respondent failed to pay the claimant. The claimant signed the contract voluntarily, so he ought to assume the risk arising from the contract.
With respect to article 3, the arbitral tribunal holds that
(a) The significant misconception as argued by the claimant in the terms when establishing the term shall not be supported. First, the claimant did not provide any evidence to prove that the respondent had ever promised he could receive the whole payment from XX Group and then transfer to the claimant; second, in accordance with Article 71 in "Opinions of the Supreme People's Court on Several Issues concerning the Implementation of the General Principles of the Civil Law of the People's Republic of China (for Trial Implementation)"(hereinafter referred to as Opinions) concerning the definition of the significant misconception, that is, "In case an actor performs his conducts on the basis of false understanding of the nature of the conduct, the opposite party, the variety, quality, specification and amount of the objects, etc., which leads to the consequence of the conduct going against his own will and results in considerably serious damages, it shall be deemed as significant misconception.", thus, the arbitral tribunal considers that the reorganization of the claimant on the payment ability of the respondent and the condition shall not be considered as significant misconception when the two parties signed the contract.
(b) The obvious unfairness of the terms argued by the claimant shall not be supported. The possible profit both parties may obtain as presented in the contract does not indicate whether the term or the contract is obviously unfair. In accordance with article 72 of the Opinions, which read, "In case any party makes use of his own advantages or takes advantage of the other party's lack of experiences to have the rights and obligations of the two parties obviously violate the principle of fairness and making compensation for equal value，it shall be determined as obviously unfair.", the arbitral tribunal can not support that the terms are obviously unfair. In fact, it was the business risk for the claimant brought by the contract to take that XX Group paid to the respondent as the condition of the payment by the claimant. Since the claimant signed the contract, he shall assume this risk.
Therefore, the terms agreed between the two parties shall not be changed or revoked as prescribed in Article 59 of the General Principles of the Civil Law of the People's Republic of China and shall be bounding to the two parties.
Meanwhile, the arbitral tribunal holds that the terms are those concerning the conditioned payment, and the respondent only performs the obligation when the condition are satisfied, that is, the respondent receives the payment from XX Group. However, the claimant could not provide any evidence to prove that the respondent did not transfer the payment when he received the money from XX Group, thus, the arbitral tribunal holds that the respondent did not breach the contract when performing the obligation to pay.
(4)
The matters concerning the claims of the claimant
Based on the previous demonstration, the arbitral tribunal holds that the claims of the claimant that the respondent should pay for the delayed sum and relevant interest shall be overruled because of lack of contractual and legal foundations. Meanwhile, the claimant shall assume the retaining fee and all arbitration fee in this case.
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