- (2005) HaiMinChuZi no. 10353
- Beijing Haidian District People’s Court
- Qian Binzhen v. Huhhot Economic Technology Development Zone Mengniu Wine Co., Ltd.
LONG-TERM CONTRACTS - SALES AGENCY CONTRACT - BETWEEN TWO CHINESE COMPANIES - GOVERNED BY CHINESE LAW
"COMMENTS" BY CHINESE JUDGES ON THEIR DECISIONS - NOT LEGALLY BINDING - AVOIDANCE OF THE AGREEMENT FOR FRAUD - REFERENCE IN THE COMMENTS TO ARTICLE 3.11 OF THE UNIDROIT PRINCIPLES
Qian Binzhen ("Qian") and the Beijing Branch ("Beijing Branch") of Huhhot Economic Technology Development Zone Mengniu Wine Co., Ltd. ("Mengniu") signed a sales agency agreement ("the Agreement") on 5 June 2004, appointing Qian as agent for the sale of Mengniu wine. The Beijing Branch failed to fulfill its obligations under the Agreement. In particular, it did not prepare a sales license for Qian. Qian checked with the Industrial and Commercial Administration Office ("the Office") and found that with the permission of Mengniu, the Beijing Branch had applied to the Office for cancellation of registration as early as 1 June 2004 (i.e., before the conclusion of the Agreement), and had its registration cancelled on 24 June 2004. Qian considered itself as having been led to conclude the Agreement by the Beijing Branch's fraudulent representation, and commenced proceedings in the Beijing Haidian District People’s Court ("the Court") against Mengniu, seeking to revoke the Agreement. The Court invoked the Contract Law of the People's Republic of China and decided in favour of Qian.
Branches of companies do not enjoy legal personality under Chinese law, and thus the Agreement can only be considered as one between Qian and Mengniu rather than its Beijing Branch. However, in a "case comment" written by a judge of the Court (but not the judge who rendered the judgment), the commentator mistakenly considered the Beijing Branch as a third "person" to whom fraud was imputable, and referred to Art. 3.11 UNIDROIT Principles – which was not expressly mentioned in the judgment - in discussing whether Mengniu should be responsible for the acts of this "person". It is interesting to see that the UNIDROIT Principles were relied upon to analyze this purely domestic case. The reference to the Principles indicates that they are considered as having some degree of persuasive value. However, although "case comments" of this type are circulated among the courts, often published and intended as guidelines for the judges (particularly those of lower courts) who may be in charge of similar cases, it should be noted that they are not legally binding under Chinese law, and hence are unlikely to be cited by other Chinese judges or attorneys.