Contract Dispute Over Unpaid Equipment Payment: Buyer Ordered to Pay 21,180 RMB Plus Interest

Contract Dispute Over Unpaid Equipment Payment: Buyer Ordered to Pay 21,180 RMB Plus Interest

CASE OVERVIEW

A contract dispute between a buyer and a seller over payment for fire pumps and cooling pumps resulted in the appellate court upholding a lower court decision. The buyer, Double Best Engineering Company, was ordered to pay the remaining balance of 21,180 RMB plus overdue interest to Shanghai Liancheng Group Hangzhou Branch. The dispute centered on whether payment conditions had been met, particularly regarding equipment commissioning and warranty periods.

CASE BACKGROUND AND FACTS

In August 2008, Double Best Engineering Company entered into a sales contract with Shanghai Liancheng Group to purchase fire pumps for a total amount of 190,000 RMB. The payment terms required a 30 percent prepayment, an additional payment to reach 80 percent of the total upon delivery to the construction site, 15 percent upon successful commissioning, and the final 5 percent within one year after the warranty period ended. A contract attachment specified that if commissioning did not occur within three months of delivery, the equipment would be deemed commissioned.

In November 2008, the parties signed a second contract for cooling pumps valued at 240,000 RMB. The parties later modified this contract, reducing the total to 231,180 RMB. Payment terms required 30 percent prepayment, payment up to 95 percent of the total upon delivery, and the remaining 5 percent within one week after one year.

The seller delivered the fire pumps on October 10, 2008, and the cooling pumps on December 23, 2008. The buyer made total payments of 400,000 RMB across three installments but refused to pay the remaining 21,180 RMB, arguing that payment conditions had not been satisfied.

COURT PROCEEDINGS AND EVIDENCE

The seller filed a lawsuit in the local district court seeking payment of the outstanding balance plus interest. The buyer argued that the contract attachment was not authentic, that the equipment had not been properly commissioned, and that the warranty period should begin from the date of commissioning rather than delivery.

The district court ruled in favor of the seller. The buyer appealed to the intermediate court, raising three main arguments. The buyer claimed the contract attachment was a forgery because it was dated one day before the main contract and had different formatting. The buyer also argued that the court incorrectly assumed the equipment had passed fire safety inspection simply because the building was in use. Finally, the buyer contended that the warranty period should start from the date of successful commissioning, not from delivery.

COURT FINDINGS AND JUDGMENT

The appellate court rejected all of the buyer’s arguments and affirmed the lower court decision.

Regarding the contract attachment, the court found that the main contract explicitly referenced the attachment and stated it had equal legal effect. The court noted that the attachment resembled a quotation sheet, making it reasonable that it was prepared before the formal contract. Since the buyer could not produce any alternative attachment, the court accepted the seller’s version as genuine.

On the issue of commissioning, the court pointed to the contract provision stating that equipment would be deemed commissioned if no commissioning request was made within three months of delivery. The seller delivered the fire pumps on October 10, 2008, meaning the equipment was deemed commissioned by January 10, 2009. Even if the buyer’s arguments were accepted, the warranty period would have expired by January 10, 2010, making the final 5 percent payment due.

For the second contract, the payment terms clearly stated that 95 percent was due upon delivery and the remaining 5 percent within one week after one year. Since delivery occurred on December 23, 2008, all payment conditions had been met.

The court ordered the buyer to pay 21,180 RMB plus interest calculated from December 24, 2009, for 9,621 RMB and from December 31, 2009, for 11,559 RMB, at the benchmark interest rate published by the People’s Bank of China.

KEY LEGAL PRINCIPLES

A contract attachment referenced in the main contract and having equal legal effect is presumed authentic unless the opposing party provides contrary evidence. When a contract specifies that equipment is deemed commissioned after a certain period without a commissioning request, the buyer cannot later claim commissioning did not occur. The warranty period for equipment generally begins from the date of delivery unless the contract specifically states otherwise. The burden of proof falls on the party challenging the authenticity of documentary evidence.

PRACTICAL INSIGHTS

This case highlights the importance of clearly documenting commissioning requests and timelines. Buyers who fail to request commissioning within the contractually specified period may be deemed to have accepted the equipment. Sellers should maintain accurate delivery records and payment schedules. Both parties should ensure that all contract attachments are properly executed and dated consistently with the main contract. When making partial payments under multiple contracts, parties should specify which contract each payment applies to.

LEGAL REFERENCES

Civil Procedure Law of the People’s Republic of China (2007 Revision), Article 153, Paragraph 1, Item 1.

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.