Excavator Operator Loses Appeal Over CNY 29,000 Payment Claim
The Eastern China City Intermediate People’s Court upheld a lower court ruling that a subcontractor, not the main construction company, was personally liable for unpaid excavator work fees of CNY 29,000. The case arose from a dispute over a water pipeline renovation project. The court found that the individual who hired the excavator operator and signed the payment note acted in his personal capacity, not as an agent of the company. The decision reinforces the principle that only parties to a contract are bound by its terms.
In 2007, a construction company in Zhejiang won a bid for a drinking water pipeline project in Eastern China City. The company immediately transferred the project to Mr. Chen under an internal economic contract. Mr. Chen then orally hired Mr. Yang, an excavator operator, to provide machinery and labor for the digging work. Mr. Yang completed the work, but Mr. Chen failed to pay. In May 2008, Mr. Chen issued a handwritten note acknowledging a debt of CNY 29,000 for the excavator work. The note stated that payment would come from the construction company only if Mr. Chen agreed. Despite repeated demands, Mr. Chen did not pay. Mr. Yang sued both Mr. Chen and the construction company for joint liability.
At the first trial, neither Mr. Chen nor the construction company appeared. The lower court accepted the debt note as evidence but rejected Mr. Yang’s claim against the construction company, ruling that only Mr. Chen was liable. Mr. Yang appealed. During the second hearing, the construction company submitted an internal subcontract agreement and an economic contract, showing that it had transferred the project to Mr. Chen. Mr. Yang argued that these documents proved the work was done for the company. Mr. Chen did not attend or file a response. The appellate court reviewed all evidence, including the debt note and the subcontract documents.
The court found that Mr. Chen and Mr. Yang had a valid oral contract for excavator services. The key legal question was whether Mr. Chen’s act of issuing the debt note amounted to a corporate action binding the construction company. The court noted that the note was signed only by Mr. Chen, without any company or project stamp. It also contained a condition that payment would come from the company only if Mr. Chen gave consent. Mr. Yang admitted that Mr. Chen had not presented any authorization letter, power of attorney, or other evidence of authority when hiring him. Therefore, the court concluded that Mr. Chen was acting in his personal capacity.
Under relevant law, a person’s conduct can bind a company only if there is actual or apparent authority. In this case, the evidence showed no basis for apparent authority, or “table appearance agency,” as recognized in Chinese civil law. Mr. Chen’s internal relationship with the construction company did not extend to external contracts with third parties like Mr. Yang. The court applied the principle of privity of contract, holding that only Mr. Chen, the direct counterparty, was responsible for the debt. The construction company had no direct dealings with Mr. Yang and was not liable for the unpaid fees.
The appellate court dismissed Mr. Yang’s appeal and affirmed the original judgment. Mr. Chen was ordered to pay CNY 29,000 plus overdue interest within ten days, and to bear both trial and appeal costs. The construction company was released from liability. This case highlights the importance of verifying a contractor’s authority before entering into agreements. Workers and small operators should ensure that payment promises are clearly linked to the entity that controls the project. The ruling confirms that internal subcontracting arrangements do not automatically extend liability to the main contractor.
Disclaimer: This article is for informational purposes only and does not constitute legal advice.