Steel Supply Dispute: Court Rules on Payment of CNY 154,145.7 in Unpaid Contract Balance

Steel Supply Dispute: Court Rules on Payment of CNY 154,145.7 in Unpaid Contract Balance

Case Overview
In a commercial dispute over unpaid steel supply, an appellate court in Eastern China overturned a lower court decision and ordered the buyer to pay the seller CNY 154,145.7 plus interest. The case centered on whether a reconciliation statement signed by both parties reflected a final agreed account or merely a starting point for further verification. The appellate court found the buyer failed to prove additional payments, shifting the burden of proof under contract law.

Case Background and Facts
The seller, a metal materials company based in Eastern China, and the buyer, Mr. Zhang, entered into a steel supply relationship in 2007. The seller delivered steel products upon the buyer’s requests, and the buyer made partial payments over time. On December 28, 2008, Mr. Zhang prepared a reconciliation statement addressed to the seller for verification. The statement listed three points: a prior year balance of CNY 18,312, total purchases in 2008 of CNY 1,008,346.3, and total payments made as of December 18, 2008, of CNY 759,764.6, leaving an outstanding balance of CNY 266,893.7. The seller reviewed this statement and noted agreement with points one and two but disputed point three, asserting the actual amount owed was CNY 383,453.7. After this reconciliation, Mr. Zhang made an additional payment of CNY 229,308. The seller then sued for the remaining balance of CNY 159,185.7 plus interest.

Court Proceedings and Evidence
The seller filed its lawsuit in a local court in Eastern China on March 3, 2010, seeking payment of CNY 159,185.7 plus interest. Mr. Zhang argued that the reconciliation statement represented a final settlement, reducing the debt to only CNY 37,585.7 after the subsequent payment. The trial court accepted Mr. Zhang’s position and ruled in his favor. The seller appealed, claiming procedural errors and challenging the trial court’s interpretation of the reconciliation document. During the appeal, Mr. Zhang submitted additional receipts and a return slip as evidence of further payments. The appellate court reviewed the documentary evidence and found that the reconciliation statement was explicitly labeled as a unilateral calculation submitted for the seller’s verification, not a final agreed account.

Court Findings and Judgment
The appellate court held that the trial court erred in treating the reconciliation statement as a conclusive settlement. The court noted that the document’s header clearly stated it was prepared by Mr. Zhang for the seller’s review, and the seller’s handwritten response specifically disputed the payment amount. Under relevant evidence rules, Mr. Zhang bore the burden of proving the payments he claimed. Since he failed to provide adequate evidence of additional payments beyond the CNY 229,308 already acknowledged, the court accepted the seller’s version of the outstanding balance. The court calculated the debt as follows: total owed of CNY 383,453.7 minus the post-reconciliation payment of CNY 229,308, resulting in a balance of CNY 154,145.7. The court ordered Mr. Zhang to pay this amount plus daily interest at 0.021 percent from the date of the lawsuit until full payment. The court also adjusted the allocation of litigation costs between the parties.

Key Legal Principles
The court applied the principle that when a party disputes the performance of a contract, the party claiming performance has the burden of proof. In this case, Mr. Zhang asserted he had made certain payments, but he failed to produce sufficient evidence to support his claim. The court also emphasized that a document labeled as a draft for verification does not constitute a final settlement unless both parties explicitly agree to its terms. The seller’s notation of disagreement preserved its right to challenge the payment figures.

Practical Insights
This case highlights the importance of clearly documenting the nature of reconciliation statements. Business parties should ensure that any document intended to serve as a final settlement is explicitly labeled as such and signed by both parties without reservations. When one party disputes specific figures in a reconciliation, the other party must be prepared to provide supporting evidence for its claimed payments. The burden of proof for payment rests on the party asserting it, not on the party disputing it.

Legal References
Supreme Peoples Court Provisions on Evidence in Civil Proceedings, Article 2, Paragraph 1; Article 5, Paragraph 1. Civil Procedure Law of the Peoples Republic of China (2007 Revision), Article 153, Paragraph 1. Contract Law of the Peoples Republic of China, Articles 107, 109, and 159.

Disclaimer
This article is for informational purposes only and does not constitute legal advice. Consult a qualified attorney for specific legal matters.