Buyer Sues for CNY 92,800 Refund for Undelivered Goods
A dispute over a contract for surge protectors led a buyer to sue for the return of a prepayment of CNY 92,800. The buyer, a company based in Eastern China City, claimed that the seller, from Southern China City, accepted payment but never shipped the goods. The seller argued that the buyer had cancelled the order and should instead compensate the seller for financial losses. The court examined the contract, payment records, and communications to determine liability.
The buyer and seller had an ongoing business relationship. In March 2011, the buyer ordered 800 sets of surge protectors at CNY 232 per set under a written contract, with total value of CNY 185,600. The contract required full prepayment before delivery, with the seller to issue a VAT invoice. On March 3, the buyer paid CNY 92,800, which was 50% of the total price. The next day, the seller placed a corresponding order with a third-party supplier, paying CNY 108,000. The buyer then sent a fax stating that its customer had made a mistake and asked to cancel the order, but requested that the already-paid amount be used for a future order. The seller never delivered any goods, but did issue a VAT invoice for the full amount.
During the hearing, both parties presented evidence. The buyer submitted the contract, bank transfer receipts, the VAT invoice, and a statement from its end customer. The seller introduced its own purchase contract with the third-party supplier, payment records, a notice from the third party suspending supply, a penalty notice, and a criminal judgment against the buyer for trademark infringement. The court reviewed all documents, including the fax from the buyer that referenced the cancellation request. Both parties confirmed the authenticity of that fax.
The court held that the contract was valid and legally binding. It found that the buyer had paid for 400 sets of the goods (part of the 800-set order), and the seller had failed to deliver those 400 sets. The seller’s defense focused on two main reasons for non-delivery. First, the seller claimed the buyer unilaterally cancelled the contract, causing the seller to pay its own supplier and incur tax penalties. Second, the seller argued that the buyer’s trademark infringement led the third-party supplier to block all future sales to the buyer, making delivery impossible.
According to relevant law, a party that fails to perform its contractual obligations must bear liability. The court analyzed whether the buyer’s fax amounted to a valid cancellation. The fax said the order was cancelled but that the prepayment should be used for a later order. The buyer argued this was not a final cancellation, and the seller did not respond with a confirmation. The court noted that the seller did not deliver the goods or return the money. On the seller’s counterclaim for losses, the court found no sufficient evidence that the buyer’s actions directly caused the seller’s penalties or the third party’s supply suspension. The criminal case against the buyer involved separate conduct and did not alter the contractual obligations between the parties.
The court therefore ordered the seller to refund the CNY 92,800 payment to the buyer. The seller’s request for compensation from the buyer was rejected. This case illustrates that a seller cannot retain a prepayment after failing to deliver goods, even if the buyer expressed an intent to cancel. Clear written confirmation of any order modification is essential. Parties should document all communications and obtain express agreement before treating an order as cancelled.
Disclaimer: This article is for informational purposes only and does not constitute legal advice.