Construction Company Held Liable for Unpaid Cement Supplies in USD 9,800 Building Materials Dispute

Construction Company Held Liable for Unpaid Cement Supplies in USD 9,800 Building Materials Dispute

CASE OVERVIEW

A Chinese civil court ruled that a construction company must pay a sole trader approximately 65,550 RMB (about USD 9,800) for cement supplied to a residential project, holding the company liable for the actions of its internal project manager and site personnel. The court dismissed the claim against the individual project manager, finding that his conduct in ordering and settling the account was performed within the scope of his employment.

CASE BACKGROUND AND FACTS

In 2007, Zhejiang Ningteng Construction Company (Ningteng) undertook the construction of a residential community project in Eastern China. The company assigned Mr. Le as the internal contractor and technical person in charge of the project site. During the construction period, Mr. Le and site personnel arranged for the purchase of cement from Mr. Wang, a local sole trader. The total value of the cement delivered to the site amounted to 65,550 RMB.

On January 19, 2009, Mr. Le issued a handwritten IOU on behalf of the project department, confirming the debt. The document stated that the project department owed Mr. Wang the sum of 65,550 RMB for cement. Despite repeated demands, neither the company nor Mr. Le paid the outstanding amount. Mr. Wang subsequently filed a lawsuit seeking payment of the principal plus interest from the date of filing.

COURT PROCEEDINGS AND EVIDENCE

The plaintiff, Mr. Wang, presented several key pieces of evidence. He submitted a prior court judgment confirming that Ningteng was the contractor for the residential project and that Mr. Le served as its internal contractor and technical person in charge. He also provided business registration records showing that the company had changed its name from its predecessor to Ningteng in September 2008. The most critical evidence included a materials receipt signed by a site storekeeper, Mr. Cai, dated June 2008, which recorded the receipt of cement valued at 65,550 RMB. Mr. Wang also submitted the IOU signed by Mr. Le and 11 delivery dockets.

Ningteng argued that it had no direct purchase relationship with Mr. Wang. The company claimed that Mr. Le was not authorized to purchase materials on its behalf and that it had never ratified the transaction. Mr. Le argued that he was merely a staff member acting on instructions and should not bear personal liability.

The court examined the evidence carefully. Mr. Le confirmed the authenticity of the IOU and the materials receipt. He also identified Mr. Cai as the site storekeeper. The court accepted a prior judgment as conclusive proof that Mr. Le was the internal contractor and technical person in charge for Ningteng. The court found that the materials were delivered to and used in the Ningteng project. Because Ningteng failed to produce any evidence to challenge the accuracy of the amounts or to show that Mr. Le exceeded his authority, the court accepted Mr. Wang’s version of events.

COURT FINDINGS AND JUDGMENT

The court held that Mr. Le’s actions in receiving the materials and issuing the IOU constituted performance of his duties on behalf of Ningteng. Under Chinese civil law, a legal person is liable for the business activities of its representatives and employees. Since the cement was used for the company’s project and Mr. Le was acting within his role as internal contractor, his conduct bound the company.

The court found that Mr. Wang had fulfilled his obligation to deliver the goods. Ningteng failed to pay for the cement and therefore breached the contract. The court ordered Ningteng to pay Mr. Wang the full amount of 65,550 RMB. The court also awarded interest calculated from the date of the lawsuit filing at the benchmark loan rate set by the People’s Bank of China. The court dismissed the claim against Mr. Le personally, finding no legal basis for holding him jointly liable.

KEY LEGAL PRINCIPLES

This case illustrates the principle that a company is liable for the acts of its employees and internal contractors when those acts are performed within the scope of their duties. Under Article 43 of the General Principles of Civil Law, a legal person bears civil liability for the business activities of its representatives. Under Articles 107 and 159 of the Contract Law, a buyer who fails to pay for goods must bear liability for breach, including payment of the principal and compensation for losses. The court emphasized that a company cannot avoid liability by claiming that an internal contractor lacked specific authorization when the materials were clearly used for the company’s project.

PRACTICAL INSIGHTS

Suppliers should retain clear documentation of deliveries, including receipts signed by site personnel, to establish that goods were used in a specific project. When dealing with construction companies, it is prudent to confirm the authority of the person placing orders. A prior court judgment confirming a person’s role in a project can serve as powerful evidence. Companies should be aware that they may be held liable for purchases made by internal contractors or project managers, even without explicit written authorization, if the goods are used for the company’s benefit.

LEGAL REFERENCES

General Principles of Civil Law of the People’s Republic of China, Article 43.
Contract Law of the People’s Republic of China, Articles 107 and 159.

DISCLAIMER

This article is for informational purposes only and does not constitute legal advice. Laws and regulations may vary by jurisdiction. Readers should consult a qualified legal professional for advice specific to their situation.