- Shanghai First Intermediate People's Court
- Shanghai Anlili International Trading Co. Ltd. v. J & P Golden Wings Corp.
AVOIDANCE IN CASE OF NON-CONFORMITY OF PART OF THE GOODS - AVOIDANCE OF CONTRACT IN ENTIRETY WHEN NON-CONFORMITY AMOUNTS TO A FUNDAMENTAL BREACH (ART. 51(2) CISG)
EFFECTS OF AVOIDANCE - SELLER'S DUTY TO REFUND THE PRICE PAID (ART. 81(2) CISG)
SELLER'S KNOWLEDGE OF LACK OF CONFORMITY (ART. 40 CISG) - LOSS OF RIGHT TO RELY ON ARTS. 38 AND 39 CISG
A Chinese seller and a French buyer concluded a contract for the sale of a certain number of bottles of six different types of liquor to be delivered in two instalments. The buyer paid half of the purchase price as a down payment and, after taking delivery of the first instalment, paid the relevant outstanding amount. Thereafter, the buyer discovered that the goods did not satisfy the quality requirements agreed upon in the contract. The buyer then refused payment of the second instalment and filed suit against the seller, claiming termination of the contract as well as a refund of the paid purchase price plus costs. In response, the seller denied the alleged lack of conformity and argued that in any case the buyer had not given notice thereof to the seller within the time fixed by the contract (i.e., ten days after delivery).
As to the applicable law, the Court held that the contract was governed by CISG (Art. 1(1)(a)).
As to the merits of the case, the Court held that the buyer was entitled to terminate the contract in its entirety as the defects, although regarding only part of the goods, amounted to a fundamental breach of contract (Arts. 25 and 51(2) CISG).
Furthermore, the Court held that the seller was not entitled to rely on the provisions of Arts. 38 and 39 CISG as it knew or could not have been unaware that the delivered goods were different from those agreed upon in the contract (Art. 40 CISG). As a result, the Court ruled in favour of the buyer, acknowledging its right to recover the purchase price plus costs (Art. 81(2) CISG).
Original in Chinese:
- available at the Wuhan University Institute of International Law,
- available at the University of Pace website, http://www.cisg.law.pace.edu}}