Custom Manufacturing Dispute: Court Orders Payment of 126,914 Yuan for Unpaid Textile Order

Case Overview: Dispute Over Unpaid Customized Webbing Orders

This article examines a civil appeal case heard by an intermediate court in China, involving a dispute over unpaid customization fees for webbing products. The case, originally decided by a lower court, was appealed by the defendant, a garment manufacturing company, against a textile company. The central issue revolved around identifying the actual buyer of the customized goods and determining the correct amount owed, leading to a partial modification of the original judgment by the appellate court.

Background Facts

The plaintiff, a textile company referred to as Lianxing Company, initiated the lawsuit against two defendants: a garment company named Longxing Company and another company called Yingchang Company. Lianxing claimed that in September and October 2010, it had customized and delivered several batches of webbing upon the request of Longxing. The deliveries were made at the premises of Yingchang Company. Lianxing asserted that the total customization fees amounted to 126,914.39 yuan. Despite repeated demands, neither Longxing nor Yingchang paid the outstanding amount. Consequently, Lianxing sought payment of the principal sum plus overdue违约金 of 8,102.21 yuan, calculated from November 1, 2010, at a daily rate of 0.021% until full settlement, along with litigation costs.

Trial Evidence

To support its claims, Lianxing provided 17 sales product outbound receipts dated September and October 2010. The receipts indicated the consignee as Longxing Company. Among these, two receipts from September 29 and October 5 bore the receiving stamp of a third party, Jiada Garment Company. Another receipt from September 29 showed a stamp from a different company, Denglu Pu Garment Company. Three receipts from September 15, October 4, and October 7 displayed the receiving stamp of Yingchang Company. The remaining receipts all bore Longxing Company’s own receiving stamp. Additionally, Lianxing submitted two reconciliation statements for September and October, listing product codes, color codes, quantities, unit prices, and total amounts in Hong Kong dollars, with a note that the unit prices were in HKD and converted to RMB at a rate of 0.88, plus a 10% tax.

Longxing denied ordering the products and argued that the actual buyer was a Hong Kong company, H&A Garments Factory Limited, referred to as Xianli Company. To support this, Longxing submitted a notarized email exchange showing an attachment titled HA order data, which included order numbers and customer names matching H&A. Longxing also provided a business card for a sales manager of Lianxing, a declaration from Xianli stating it had ordered elastic bands from Lianxing and commissioned Yingchang for processing, and Xianli’s registration documents. Lianxing acknowledged the authenticity of the email and business card but disputed their relevance, questioned the declaration’s validity due to the relationship between Longxing’s legal representative and Xianli, and denied the authenticity of the declaration.

Court Findings

The appellate court focused on two key issues: the identity of the transaction party and the amount of customization fees owed.

Regarding the transaction party, the court noted that no written contract existed. However, Lianxing explicitly identified Longxing as the buyer, and Longxing had stamped its receiving stamp on most of the outbound receipts. The court rejected Longxing’s claim that it was merely receiving goods on behalf of Xianli. The notarized emails were sent after the transactions and did not prove that the HA order data corresponded to the disputed goods. Furthermore, Xianli’s declaration, formed in Hong Kong, did not meet the required legalization procedures under Chinese evidence rules, rendering it inadmissible. Thus, the court concluded that Longxing was the transaction party.

As for the amount, the court examined the receipts. It excluded goods delivered to Jiada and Denglu Pu, as Lianxing could not prove Longxing instructed those deliveries. It also excluded goods received by Yingchang, because Lianxing had acknowledged separate transactions with Yingchang, and the stamps on those receipts indicated Yingchang’s own receipt. Only the receipts bearing Longxing’s stamp were considered. These receipts listed product codes, quantities, and weights but no prices.

Lianxing relied on its reconciliation statements to set the unit prices, totaling HKD 117,020.95 and HKD 9,893.44. Longxing disputed these prices. Lianxing applied for a price appraisal, but Longxing refused to provide samples of the goods it received, claiming it was not the buyer and the goods had been exported. The court applied the adverse inference rule, holding that since Longxing withheld evidence without justification, Lianxing’s claimed prices were presumed correct. Based on the receipts with Longxing’s stamp, the court calculated the owed amount as HKD 92,510.94, after deducting the values for the disputed deliveries.

Legal Analysis

The court’s reasoning demonstrated a methodical approach to evidence evaluation. In determining the transaction party, the court prioritized objective evidence, such as the stamps on receipts, over self-serving declarations. The failure to legalize foreign evidence was a critical procedural flaw that undermined Longxing’s defense. On the amount, the court strictly applied contract and evidence principles. It limited liability to goods directly received by Longxing, rejecting claims for deliveries to third parties without clear authorization. The adverse inference rule was appropriately used to address Longxing’s refusal to cooperate with the appraisal, ensuring fairness.

The court also addressed the逾期付款 issue. Since no payment deadline was agreed, the court held that interest on overdue payments should run from the date the lawsuit was filed, not from an earlier arbitrary date, aligning with contract law.

Summary

The appellate court partially upheld the lower court’s decision. It affirmed the dismissal of claims against Yingchang Company but modified the amount owed by Longxing. Longxing was ordered to pay HKD 92,510.94 with interest from September 2, 2011, at the benchmark loan rate. The court adjusted the allocation of litigation costs accordingly, with Lianxing bearing a portion due to its overclaimed amount.

Disclaimer

This article is for informational purposes only and does not constitute legal advice. The facts have been anonymized to protect privacy. Readers should consult a qualified attorney for guidance on specific legal matters. The author and publisher disclaim any liability for actions taken based on this content.