Eastern China Court Rules on 11.25 Million Yuan Crane Defect: Buyer Wins Refund

Eastern China Court Rules on 11.25 Million Yuan Crane Defect: Buyer Wins Refund

Case Overview
A Chinese construction company purchased a heavy crane for 11.25 million yuan and discovered serious manufacturing defects within the first year of use. The buyer sued both the seller and the manufacturer for damages and a full refund. The court in Eastern China ruled that the product had a manufacturing quality defect and ordered the seller to refund the full purchase price and pay for the appraisal costs. However, the court denied claims for lost profits and rejected the claim against the manufacturer under product liability law.

Case Background and Facts
In November 2007, a construction company (the plaintiff, referred to as Mr. Feng’s company) signed a contract with a local car trading company (the seller, referred to as Yi Bang Company) to purchase one QAY240 all-terrain truck crane. The purchase price was 11.25 million yuan. The crane was actually delivered to the buyer in August 2007, before the contract was signed. The crane was manufactured by a heavy machinery company (the manufacturer, referred to as Heavy Machinery Company).

Shortly after taking delivery, the buyer experienced three major technical problems with the crane. The transfer case in the chassis overheated to abnormal temperatures. The engine exhaust brake failed to function properly. The crab steering system, which allows diagonal movement, also malfunctioned. The buyer repeatedly contacted both the seller and the manufacturer for repairs, but the issues were never fully resolved. The crane became unusable for continuous work. The buyer then filed a lawsuit demanding a full refund of the purchase price, compensation for lost profits of 4.8 million yuan (calculated at 200,000 yuan per month), and reimbursement of 100,000 yuan in appraisal fees.

Court Proceedings and Evidence
The court held three public hearings. Both the seller and the manufacturer disputed the claims. The seller argued that the crane met contractual quality standards and was being used normally. The manufacturer argued that the problems were repairable and did not affect safe operation. The manufacturer also denied any contractual relationship with the buyer.

During the trial, the court appointed the Zhejiang Special Equipment Inspection and Research Institute to conduct a forensic appraisal of the crane. The appraisal report concluded that the crane had a manufacturing quality defect. Specifically, the transfer case overheating problem could not be fixed without redesigning the original system. The report also found that the total weight of the vehicle exceeded the approved public listing weight by 34.62 percent, a significant deviation from regulatory standards.

Both sides presented extensive evidence. The buyer submitted the purchase contract, service records, correspondence with the manufacturer, the appraisal report, and the fee receipt. The seller and manufacturer submitted photographs, usage logs, user service cards, and technical manuals to argue that the crane was still being used and that the defects were minor.

Court Findings and Judgment
The court held that the crane did not meet the performance standards required by law. Evidence showed that the transfer case overheating problem appeared within the first year of use and was never fully resolved. The manufacturer itself admitted in a letter that it was still experimenting with a solution. Usage records showed the crane was only used for 27 days between March and July 2010, confirming it could not be used continuously.

Based on the appraisal report and the facts, the court found that the crane had a manufacturing quality defect. The court ruled that the seller must accept the return of the crane and refund the full purchase price of 11.25 million yuan. The seller was also ordered to pay the buyer 100,000 yuan for the appraisal costs.

The court rejected the buyers claim for lost profits because there was insufficient evidence to prove the amount of economic loss. The court also dismissed the claim against the manufacturer. The court explained that the manufacturers liability under the Product Quality Law applies only when a product defect causes personal injury or damage to property other than the defective product itself. Since the buyers claim was about the cranes own defects and economic losses, the manufacturer was not directly liable.

Key Legal Principles
This case applies the principle that a seller must ensure the products it sells meet required performance standards. Under the Product Quality Law, if a product lacks the performance it should have and the seller did not disclose this beforehand, the seller must repair, replace, or accept a return. The buyer is entitled to a refund when a defect is serious and cannot be fixed without redesign. The case also clarifies that a manufacturers product liability is limited to harm caused to persons or other property, not to the defective product itself.

Practical Insights
Buyers of heavy industrial equipment should document all defects and repair attempts in writing. Service records and correspondence with the manufacturer are critical evidence. When a product defect prevents normal use, a professional forensic appraisal can help establish the existence and severity of the defect. Buyers should be aware that claims for lost profits require clear proof of actual financial loss. Additionally, the right to seek a refund typically lies against the seller, not the manufacturer, unless personal injury or damage to other property has occurred.

Legal References
Product Quality Law of the Peoples Republic of China (2000 Revision): Article 26, Paragraph 1; Article 40, Paragraph 1; Article 43.
Measures for the Payment of Litigation Costs: Article 12, Paragraph 1.

Disclaimer
This article is for informational purposes only and does not constitute legal advice. Consult a qualified attorney for specific legal matters.