Court Orders Refund of CNY 15,575 in Prepaid Goods Dispute

The Eastern China City People’s Court has ruled in favor of a plaintiff who sought the return of a prepayment for goods that were never delivered. The defendant company failed to appear at trial or submit any defense. The court ordered the defendant to refund the full amount of 15,575 yuan within seven days of the judgment taking effect.

The plaintiff, Mr. Hu, a farmer, had an ongoing business relationship with the defendant, Yuhua Textile Co., Ltd, a company based in Eastern China City. In February 2012, after a mutual account reconciliation, the defendant acknowledged that it still held 15,575 yuan in prepaid funds from Mr. Hu. Despite this, the defendant did not deliver the corresponding goods. Mr. Hu then filed a lawsuit demanding the immediate return of the prepayment, plus litigation costs.

At the court hearing, Mr. Hu appeared in person and submitted a written account statement issued by the defendant as evidence. The defendant, although properly summoned by the court, did not attend the hearing and did not provide any written答辩 or evidence. The court reviewed the account statement and found it to be authentic, lawful, and relevant to the case. Accordingly, the court accepted the evidence as proof of the claimed facts. The defendant’s absence led to a default judgment.

The court found that a valid sales contract existed between the parties. Mr. Hu had fulfilled his obligation by making the prepayment, but the defendant failed to deliver the goods. The court held that this non-performance constituted a ground for contract rescission. Under Chinese contract law, when one party’s breach makes the contract’s purpose unattainable, the other party may terminate the agreement. After rescission, the party that received performance must return what was received.

According to relevant law, specifically Articles 94 and 97 of the Contract Law, a party may rescind a contract when the other party fails to perform its main obligations, and upon rescission, the parties must restore the original positions. The court reasoned that Mr. Hu’s request for repayment was essentially a claim for restoration after contract termination. Since the defendant did not deliver the goods despite receiving payment, the plaintiff was entitled to demand the return of the prepayment. The court also noted that the defendant’s absence did not affect the validity of the proceedings.

This case highlights the importance of fulfilling contractual obligations, especially in prepaid transactions. The court’s decision reinforces the principle that a seller cannot retain prepayments without delivering goods. The judgment also serves as a reminder that default judgments can be entered against parties who ignore court summons. The defendant must now pay the refund plus double the interest for any delayed payment. Litigation costs were also assessed against the defendant.

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