Court Orders Payment of CNY 48,200 for Stone Supply Dispute
A court in Eastern China City has ruled that a construction company must pay CNY 48,200 to a stone supplier for materials delivered to a building site. The dispute arose after the supplier, Mr. Zhang, provided stone to a commercial and residential project managed by a project department but operated by an individual builder. The court found that the builder acted with apparent authority on behalf of the construction company, making the company liable for the unpaid debt.
Mr. Zhang, a farmer from Eastern China City, supplied stone to the Dongyue Temple Comprehensive Service Area project starting in February 2010. The project was owned by the Dongyue Temple Project Department and contracted to Rui Construction Company. However, the actual construction was carried out by Mr. Shen, who had a partnership with Mr. Xue under a name-lending arrangement with Rui Construction. Mr. Xue later withdrew. Mr. Zhang arranged the supply through a friend, Mr. Xia, and agreed orally with Mr. Shen. After a settlement in February 2010, Mr. Shen issued an IOU for CNY 55,700. Mr. Shen paid only CNY 7,500, leaving CNY 48,200 unpaid. Mr. Zhang sued Rui Construction, Mr. Shen, and the project department.
During the hearing, Mr. Zhang presented the IOU, his identity documents, business registration records for the defendants, and several contracts and a court mediation order showing the relationship between the parties. Rui Construction argued that Mr. Shen was not its employee and that the debt was personal. It submitted its contract with the project department and a separate name-lending agreement with Mr. Xue. Mr. Shen admitted the debt but insisted it was his personal obligation. The project department acknowledged the debt but denied liability, noting that the stone was used on site but purchased by Mr. Shen personally. All parties accepted the authenticity of the key documents.
The court found that Mr. Zhang relied on Rui Construction’s name as the listed contractor when he agreed to supply stone. Mr. Shen, as the actual site supervisor, appeared to have authority to make purchases on behalf of the company. The stone was entirely used for the project. The court held that Mr. Shen’s actions constituted apparent authority under Chinese contract law. Therefore, Rui Construction was the true contracting party and must pay the remaining CNY 48,200. The court rejected Mr. Zhang’s claim for joint liability from Mr. Shen and the project department.
Key legal reasoning centered on the doctrine of apparent authority, as stated in Article 49 of the Contract Law. The court noted that even though Mr. Shen lacked actual authority, Mr. Zhang reasonably believed he was dealing with Rui Construction based on the company’s name on the site and Mr. Shen’s role in directing work. Allowing individuals to use a company’s name for construction without proper oversight creates legal risk. The company cannot avoid payment by claiming the individual acted alone. The court also cited the General Principles of Civil Law on debt obligations and the requirement to honor contracts.
This case highlights the risk for construction companies that permit individuals to use their name for projects. A third-party supplier who delivers materials to a site may hold the named contractor liable if the individual purchaser appears to act for the company. Here, the court focused on the reasonable belief of the supplier and the actual use of materials. The ruling reinforces that companies cannot escape payment by disclaiming responsibility for a site manager’s orders. The judgment against Rui Construction means the company must pay the debt, while the individual builder and the project department are not jointly liable.
Disclaimer: This article is for informational purposes only and does not constitute legal advice.