Court Orders Payment of CNY 6.87 Million for Project Advances
A construction company brought a civil action against an individual who served as the economic responsibility person for a building project. The plaintiff sought repayment of 6.87 million yuan in advances made during the project, plus interest. The court ultimately ruled in favor of the plaintiff on the principal amount but adjusted the interest calculation.
The plaintiff, a construction company based in Eastern China, had undertaken a residential project in Central China. The defendant was designated as the economic responsibility person for part of that project. During construction, the plaintiff advanced funds on behalf of the defendant. On April 28, 2009, the defendant issued a written commitment letter confirming that he owed the plaintiff 6.87 million yuan and promising to repay the amount. Despite repeated demands, the defendant failed to make any payment. The plaintiff then filed a lawsuit on November 23, 2011, seeking repayment of the full amount plus interest from the day after the commitment letter was signed.
At the hearing, the plaintiff submitted the commitment letter as key evidence. The document stated that the defendant confirmed a red-ink balance of 6.87 million yuan owed to the plaintiff’s Central China City branch and agreed to repay it. The defendant was properly served with court documents but did not appear in court or submit any defense. The court deemed that the defendant had waived his rights to contest the claims and to challenge the evidence. After reviewing the commitment letter, the court accepted its authenticity and probative value.
The court found that the underlying relationship was an internal contracting arrangement for the construction project. The funds advanced by the plaintiff were project-related payments made on behalf of the defendant. After settlement, the defendant acknowledged the debt in writing. The court held that the commitment letter constituted a valid acknowledgment of the debt and a promise to repay. Therefore, the plaintiff was entitled to recover the principal amount of 6.87 million yuan. However, because the commitment letter mentioned that a separate repayment plan would be established, and no such plan or repayment date was provided, the court rejected the claim for interest starting the day after the commitment. Instead, interest was awarded from the date the lawsuit was filed.
Under the Contract Law of the People’s Republic of China, parties must fulfill their obligations as agreed. The court applied Articles 60, 109, and 113, which require performance of contractual duties and compensation for losses. Since the defendant failed to appear, the court entered a default judgment. The court ordered the defendant to pay 6.87 million yuan plus interest calculated at the benchmark loan rate set by the People’s Bank of China from November 23, 2011, until the date of payment. The plaintiff’s additional claim for earlier interest was dismissed. The defendant was also ordered to bear the majority of the litigation costs.
This case illustrates that written acknowledgments of debt can be strong evidence in disputes over project advances. However, when a commitment letter references a separate repayment plan without specifying a due date, courts may limit interest to run only from the date legal action is initiated. Parties should ensure that any agreement on repayment terms is clear and complete to avoid ambiguity on interest. The judgment also underscores that failure to appear in court does not prevent a ruling based on the available evidence.
Disclaimer: This article is for informational purposes only and does not constitute legal advice.