Court Orders Payment of CNY 540,659 in Supply and Processing Dispute

In this case, a sole trader brought a claim against a company for unpaid sums arising from a supply and processing arrangement. The plaintiff, Mr. Gong, supplied polyester filament yarn to the defendant company and also performed processing work on the defendant’s behalf. After a settlement of accounts, the defendant acknowledged a debt of 540,659 CNY, comprising both the price of goods supplied and processing fees. The defendant failed to pay the outstanding amount, leading to litigation. The court ultimately ruled in favour of the plaintiff, ordering the defendant to pay the full sum.

The plaintiff, Mr. Gong, operated as a farmer and trader. The defendant, Eastern China City Spring Orchid Industrial Co., Ltd., was a company registered in the same region. Starting in March 2011, the parties entered into a business relationship under which Mr. Gong supplied DTY filament yarn to the defendant and also processed polyester filament yarn according to the defendant’s instructions. On 20 February 2012, the parties settled the accounts, and the defendant confirmed that it still owed 430,659 CNY for yarn supply and 110,000 CNY for processing fees, totalling 540,659 CNY. After the defendant failed to make payment, Mr. Gong filed a lawsuit seeking the principal amount plus 50,000 CNY in interest. He later reduced his claim to the principal sum only, dropping the interest request, and asked that the defendant bear the litigation costs.

At the hearing, which took place on 15 March 2012, the plaintiff appeared in person. The defendant, although properly served with notice, did not attend and did not file any written defence. The plaintiff submitted several pieces of evidence: two receipt vouchers and two payment slips showing the defendant’s acknowledgment of the debt, as well as a copy of a purchase contract and six warehouse receipts to prove the existence of the supply and processing relationship. The court also obtained, from its own files, a detailed debt list issued by the defendant that recorded the exact same amounts. The plaintiff confirmed the accuracy of that list. Because the defendant did not appear, it waived its right to challenge the evidence.

The court examined the evidence and found it reliable. The receipt vouchers and payment slips matched each other and were consistent with the debt list obtained by the court. Although the purchase contract was a copy, it was corroborated by the warehouse receipts, so the court accepted it as valid. On the basis of this evidence and the plaintiff’s testimony, the court established the facts as follows: on 12 February 2011, the parties signed a written purchase agreement for the supply of DTY filament yarn, and they also orally agreed that Mr. Gong would process polyester filament yarn for the defendant. Mr. Gong performed his obligations. On 21 January 2012, after making a partial payment, the defendant issued two payment slips and two receipt vouchers confirming the remaining debt. Later, on 18 February 2012, the defendant issued a formal debt list repeating the same figures. The defendant never paid the outstanding 540,659 CNY.

The court held that the purchase contract and the oral processing agreement were both legally valid and binding. Under the Chinese Contract Law, both parties were obliged to fully perform their duties. Mr. Gong had delivered the goods and completed the processing work, so the defendant was required to pay the agreed price and fees. By failing to pay, the defendant breached the contract and became liable for the consequences. The court noted that the plaintiff had voluntarily waived the claim for interest, which did not harm the defendant’s rights, and therefore permitted that change. Since the defendant failed to appear without justification, the court proceeded to a default judgment according to civil procedure rules.

The court applied specific provisions of the Chinese Contract Law. Article 107 establishes liability for breach of contract, requiring the breaching party to continue performance, take remedial measures, or compensate for losses. Article 109 gives the creditor the right to demand unpaid price or remuneration. Articles 159 and 161 require a buyer to pay the agreed price at the agreed time. Articles 251 and 263 govern processing contracts, obligating the customer to pay remuneration upon delivery of the work. The court also applied Article 130 of the Civil Procedure Law, which permits default judgment when the defendant fails to attend without good reason. The judgment ordered the defendant to pay 540,659 CNY within seven days of the judgment becoming effective, and to bear the reduced litigation cost of 4,600 CNY. The defendant was also warned that delayed payment would attract double interest.

This case illustrates the enforcement of payment obligations under both sale of goods and processing contracts in Eastern China. The court relied on documentary evidence, particularly the defendant’s own acknowledgments, to establish the debt. The defendant’s failure to respond or attend the hearing did not prevent a judgment against it. For businesses and individuals engaged in supply or processing arrangements, this case underscores the importance of maintaining clear written records of debts and settlements. While the plaintiff initially claimed interest, the court allowed him to waive it, showing flexibility in civil litigation. The judgment also highlights that default judgments are available when a party ignores court summons. The defendant now faces potential enforcement measures, including seizure of assets, if it does not comply.

Disclaimer: This article is for informational purposes only and does not constitute legal advice.