Prepayment Dispute Yields CNY 15,575 Refund Order

A dispute over unpaid prepayments for goods resulted in a court order requiring a company to refund a buyer 15,575 yuan (CNY 15,575). The court found that the buyer had paid in advance but the seller never delivered the products. The ruling came after the seller failed to appear at the hearing or present any defense.

The plaintiff, Mr. Li, a sole trader, had an ongoing business relationship with the defendant, a company registered in Eastern China City and operating as a textile manufacturer. In February 2012, after a reconciliation of accounts, both parties agreed that the defendant still held 15,575 yuan of prepaid funds belonging to Mr. Li. Mr. Li then filed a lawsuit demanding the return of that amount plus court costs. The defendant company did not file any written response or submit evidence within the statutory period.

At the court hearing, the plaintiff appeared in person and produced a single document: an account statement prepared and signed by the defendant. The court reviewed the document for authenticity, legality, and relevance. The defendant had been properly served with notice of the hearing but did not attend without providing any reason. The court therefore proceeded with a default hearing. The evidence was found to be credible and sufficient to prove the plaintiff’s claim.

The court held that a valid sales contract existed between the parties and that both sides were bound to perform their obligations in full. Mr. Li had prepaid the full amount, yet the defendant failed to deliver the corresponding goods. The court interpreted the demand for a refund as an exercise of the right to rescind the contract. Since the seller had not performed its delivery duty, the buyer was entitled to cancel the contract. After rescission, the seller was obliged to return the prepayment.

According to relevant law, a contract that is lawfully formed becomes binding upon the parties upon its creation. The parties must perform their duties in good faith and in accordance with the contract’s terms. When one party’s conduct makes it clear that it will not perform its primary obligation, the other party may terminate the contract. Upon termination, the party that has already performed may claim restitution. In this case, the defendant’s failure to deliver constituted a breach that justified rescission. The court therefore ordered the defendant to refund the full prepayment within seven days of the judgment taking effect.

This case serves as a reminder that prepayments create a legal obligation on the seller to either deliver the goods or return the money if delivery fails. The defendant’s absence did not prevent the court from issuing a default judgment based on the plaintiff’s evidence. Businesses should maintain clear account records and pursue legal remedies promptly when counterparties fail to perform. The ruling also imposes double interest on late payments if the refund is not made on time.

Disclaimer: This article is for informational purposes only and does not constitute legal advice.