Court Orders Payment of CNY 90,780 in Processing Contract Dispute
In this case, a small business owner who processed mold parts for a manufacturer sought payment for work completed over nine months. The court awarded a total of CNY 90,780 in unpaid processing fees, plus interest, and held a second company partially liable for a bounced check of CNY 14,800. The ruling clarifies the obligations of parties in a processing contract and the liability of a third party that issues a check for another’s debt.
The plaintiff, Mr. Chen, operated a hardware mold parts workshop in Southern China City. Starting in September 2010, he processed and supplied mold components for Company A, a manufacturer. The parties’ practice was monthly billing with 60-day payment terms. Mr. Chen would deliver parts, Company A would sign delivery notes, and after monthly reconciliation, Company A would issue checks in exchange for the original documents. Between January and September 2011, Company A fell behind on payments, accumulating a total of CNY 90,780 across eight months. Company B, a separate entity, issued a check for CNY 14,800 to cover one month’s fee, but the check bounced due to insufficient funds.
During the hearing, Mr. Chen presented delivery notes, reconciliation statements, the bounced check, and an unpaid balance list. Company A’s legal representative appeared, but Company B did not attend despite proper notice. The court proceeded with a default judgment against Company B. The evidence showed that Company A’s employees had confirmed the amounts on monthly faxed statements, and the delivery notes matched the outstanding figures. The bounced check from Company B was also entered into the record, establishing that Company B had attempted to pay part of the debt.
The court held that a processing contract existed between Mr. Chen and Company A. Under relevant law, Company A, as the party ordering the work, was obligated to pay for the completed processing. The delivery notes, unpaid balance list, and reconciliation statements formed a complete evidence chain proving Company A’s debt of CNY 90,780. Because the parties had not specified a payment deadline, the court ordered interest at the Chinese central bank’s benchmark lending rate from the date Mr. Chen filed the lawsuit until payment is made. In addition, Company B, though not a party to the original contract, issued the check as a voluntary undertaking to pay the CNY 14,800 portion. Therefore, Company B was held jointly and severally liable for that amount.
According to relevant law, contracts must be performed in good faith. A party that fails to pay price or remuneration is liable for continued performance and damages. Here, Company A’s non-payment was a clear breach. The court also applied the principle that issuing a check for another’s debt constitutes a binding promise to pay, even without a direct contractual relationship. The interest calculation followed standard practice for debts with no fixed due date. The court further noted that if Company A or Company B delayed payment after the judgment, they would face additional interest for late performance.
This case serves as a practical reminder that processing and supply agreements must be documented clearly, and that all invoices and delivery receipts should be preserved. Companies that accept checks from third parties should verify that funds are available before relying on them. The ruling also shows that courts will hold a check issuer liable for the face amount even if the check was meant to cover another party’s debt. Business owners in similar situations should ensure they maintain accurate records of all transactions and communications with both customers and any third parties involved in payment.
Disclaimer: This article is for informational purposes only and does not constitute legal advice.