Eastern China City Court Orders Oil Heater Delivery in CNY 539,027 Dispute
A processing contract dispute between a small manufacturer and an electrical appliance company has been resolved by an Eastern China City court. The court ordered the defendant to deliver 2,643 oil heaters and return 150 packaging cartons, or pay compensation based on agreed unit prices. The case centered on whether the defendant had fulfilled its obligation to deliver goods in lieu of cash payment for processing fees.
The plaintiff, Mr. Li, entered into a five-year processing agreement with Eastern China City Electrical Appliance Co. in June 2009. Under that agreement, the defendant provided workspace while Mr. Li purchased and installed his own spraying equipment to coat the defendant’s products. The parties terminated the agreement in June 2011. On July 13, 2011, they signed a settlement acknowledging the defendant owed Mr. Li processing fees of CNY 789,027.27. The defendant paid CNY 250,000 immediately. For the remaining balance of CNY 539,027.27, the defendant agreed to deliver 4,052 thin-plate oil heaters at CNY 133 each by November 2011. Mr. Li also supplied 4,668 power cords and 4,701 packaging cartons worth CNY 75,544.20 for those heaters. The defendant delivered only 1,963 heaters. Mr. Li claimed the defendant refused to hand over the remaining 2,089 heaters.
During the hearing, Mr. Li submitted the original processing agreement and the payment agreement. He also provided two receipts, each signed by a defendant employee, confirming receipt of the power cords and cartons. The defendant presented four delivery notes showing Mr. Li had personally collected 1,963 heaters. It also submitted photographs showing more than 2,000 heaters bearing Mr. Li’s designated trademark still in its warehouse. The defendant argued that Mr. Li had failed to pick up those heaters. Mr. Li countered that he had attempted further collection but was turned away. The court accepted Mr. Li’s evidence on pricing because a defendant employee had written the unit prices on the receipts. The court declined to accept the photographic evidence, finding it did not reliably establish the quantity of heaters in storage.
The court held that the processing agreement was a valid and binding contract under Chinese law. Both parties had freely entered the arrangement and were obliged to perform their respective duties. The evidence showed the defendant acknowledged the debt and agreed to settle with goods. The defendant had partially performed by paying the cash portion and delivering 1,963 heaters. However, it failed to deliver the remaining heaters as promised. The court also noted that the parties had agreed to treat the value of the power cords and cartons as equivalent to 567 heaters, and that Mr. Li consented to the return of 150 cartons as credit for 13 heaters. Accordingly, the court ruled that the defendant must deliver 2,643 oil heaters (4,052 minus 1,963 minus 13, plus 567) and return the 150 cartons.
According to relevant law, specifically Articles 44, 60, 109, 251, and 263 of the Chinese Contract Law, the court emphasized that contracts formed lawfully take effect upon execution and must be fully performed. The defendant’s failure to hand over the agreed goods constituted a breach of the settlement agreement. The court applied the principle of specific performance, ordering the defendant to deliver the heaters and cartons within three days of the judgment becoming effective. If delivery became impossible, the defendant was ordered to pay Mr. Li compensation at the agreed prices: CNY 133 per heater and CNY 11.80 per carton. The defendant was also ordered to bear the court fees of CNY 3,300.
This case serves as a