CNY 90,780 Awarded in Processing Contract Dispute
In a recent judgment from a court in Southern China City, a dispute over unpaid processing fees for mold components was resolved. The plaintiff, Mr. Zhang, operated a hardware mold parts business and claimed that Defendant Company A owed him 90,780 CNY for work performed between January and September 2011. A check issued by Defendant Company B for 14,800 CNY as partial payment was returned unpaid due to insufficient funds. The court found in favor of the plaintiff on the main claim and ordered both defendants to pay.
Mr. Zhang began processing mold components for Company A in September 2010 under an oral processing contract. The business arrangement required Mr. Zhang to deliver parts to Company A, which would sign delivery notes as proof of receipt. Payment was due 60 days after the end of each month, with monthly cutoff on the 25th. Company A would verify amounts by faxed statements, then issue checks after collecting the original delivery notes and statements. Between January and September 2011, Company A failed to pay for several months, accumulating a total of 90,780 CNY in overdue processing fees. In an effort to settle the January 2011 amount of 14,800 CNY, Company A gave Mr. Zhang a check drawn on Company B’s account. When Mr. Zhang deposited the check, it was dishonored because Company B’s account lacked sufficient funds.
During the hearing, Mr. Zhang presented delivery notes signed by Company A, monthly statements, the bounced check, and a detailed list of unpaid amounts. Company A’s legal representative attended but offered no substantive defense, stating that the company had ceased operations and would defer to the court’s judgment based on the evidence. Company B argued that it had no contractual relationship with Mr. Zhang and that the check was issued merely as an accommodation for Company A. Company B did not appear in court, and the court proceeded with a default judgment against it.
The court determined that a valid processing contract existed between Mr. Zhang and Company A. The evidence—delivery notes, statements, and the unpaid list—formed a consistent chain that proved the debt. The court held that Company A, as the party ordering the processing work, was obligated to pay the full amount of 90,780 CNY. Because the parties had not expressly agreed on a specific payment date, interest would run from the date the lawsuit was filed (January 9, 2012) at the benchmark lending rate set by the People’s Bank of China for the same period. Regarding Company B, the court found that by issuing a check for 14,800 CNY, it had voluntarily undertaken to pay that portion of the debt. Although Company B was not a party to the original processing contract, its conduct created a joint liability for the check amount.
Under the Contract Law of the People’s Republic of China, a party must fully perform its contractual obligations. Failure to pay entitles the other party to demand payment and claim damages, including interest. The court also applied the Civil Procedure Law to allow a default judgment against Company B, which did not appear at trial. The legal reasoning confirmed that a third party’s issuance of a check can give rise to secondary liability, even in the absence of a direct contractual link. The court ordered Company A to pay 90,780 CNY plus interest, and Company B to be jointly liable for 14,800 CNY of that sum.
This case highlights the importance of maintaining clear evidence in processing and supply contracts, such as signed delivery notes and reconciled statements. It also illustrates that a bounced check from a third party may create additional liability beyond the original debtor. Businesses should ensure that payment terms are explicitly stated and that any alternative payment instruments, like third-party checks, are carefully evaluated. The judgment reinforces the principle that contractual debts must be honored, and that parties cannot avoid liability by ceasing operations or failing to appear in court.
Disclaimer: This article is for informational purposes only and does not constitute legal advice.