Building Materials Dispute Results in CNY 134,753 Judgment

The Southern China City People’s Court recently ruled on a dispute between a materials supplier and two companies over unpaid construction supplies. The plaintiff, Mr. Li, supplied sand, stone, gravel, bricks and other building materials to a project being built by the first defendant, a construction company, for the second defendant, a pharmaceutical company. The court ordered both defendants to jointly pay the outstanding amount of CNY 134,753.

The case arose from a construction project at an industrial park in Southern China City. The first defendant was the general contractor for a staff dormitory building for the second defendant. In late 2009, the first defendant entered into an internal subcontract with two individuals, Mr. Chen and Mr. Tan, who agreed to manage the project in exchange for a management fee. Between September 2009 and January 2010, Mr. Li supplied building materials worth a total of CNY 196,053 to the project site. On January 31, 2010, the parties conducted a written settlement confirming the total amount, with the first defendant having already paid CNY 61,300, leaving a balance of CNY 134,753. The settlement was signed by a person named Mr. Wu and stamped with a project-specific seal. Subsequently, both defendants issued a promise letter to resolve the outstanding payments, and the first defendant’s deputy general manager, Mr. Chen, acknowledged the wage claims of drivers hired by Mr. Li. Despite repeated demands, the defendants refused to pay, each blaming the other.

The court held a public hearing on February 9, 2012. The plaintiff appeared with his lawyer, while the first defendant was represented by its legal counsel. The second defendant did not appear despite proper service, so the court proceeded in its absence. The plaintiff submitted as evidence the settlement list, a wage summary sheet signed by the deputy general manager, the promise letter, and corporate registration documents. The first defendant challenged the settlement list, arguing that Mr. Wu was not its employee and that the project seal was not registered with the authorities. The first defendant also presented an internal subcontract agreement and a seal verification receipt to support its claim that it should not be held liable.

The court found that a valid sales relationship existed between the plaintiff and the defendants, supported by the settlement list, the promise letter, and the wage sheet. The evidence showed that the materials had been delivered to and used on the project site. The court rejected the first defendant’s argument that the internal subcontract shifted responsibility away from it. According to the terms of that subcontract, the contractor Mr. Chen and Mr. Tan acted in the name of the first defendant, and all project payments had to go through the first defendant’s accounts. The court noted that the first defendant, as the general contractor, bore overall responsibility for the project, including payment for materials. The fact that the first defendant’s deputy general manager signed the wage sheet further confirmed the supply of materials to the project.

The court conducted a legal analysis focusing on agency and internal contracting. Even if Mr. Wu was not a direct employee of the first defendant, the court held that the internal subcontract allowed the project managers to hire workers for the site. The burden of proving that the project seal was forged fell on the first defendant, and it failed to provide sufficient evidence. Regarding the second defendant, as the project owner, it had promised to resolve the payment and had not settled its own account with the first defendant. Therefore, the second defendant was jointly liable for the outstanding amount. The court relied on general civil law principles requiring debts to be repaid.

In its final judgment, the court ordered both defendants to jointly pay the plaintiff CNY 134,753 within ten days of the judgment taking effect. The court also ordered the defendants to bear the case filing fee of CNY 2,995. The court warned that failure to pay on time would result in additional interest for delayed performance