Key Words: establishment of a contract, burden of proof, standards of proof
Key Points in Judgment: Where there is no direct evidence to prove the establishment of the international cargo purchase and sales contracts (“the Contract”), evidence regarding the contract having been performed and the counterparty having accepted said performance, such as, delivery notes, cargo-received notes, settlement statement, invoice, account reconciliation letter, or confirmation letter creditor’s rights, could be submitted to prove said establishment.
Applicable Provisions
Article 1 of the Interpretations of the Supreme People’s Court on Issues Concerning Application of Laws for Trial of Cases of Disputes over Purchase and Sales Contracts, Article 64.1 of the Civil Procedure Law of the People’s Republic of China, Article 90 of the Interpretations of the Supreme People’s Court on Application of the Civil Procedure Law of the People’s Republic of China, Articles 2, 5, 11, 66,and 73 of Regulations of the Supreme People’s Court on Certain Issues Concerning Evidence in Civil Proceedings.
Case Index
Judgment in first instance: Civil judgment [(2015) Shen Qian Fa She Wai Chu Zi No.12] issued by Shenzhen Qianhai Cooperation Zone People’s Court (“the Court”)(dated June 2, 2015)
Case Details
Plaintiff’s claim: Plaintiff began to trade with Defendant in 2008 by selling electronic products to Defendant, who then sold them to overseas buyers. Since October 25, 2008, Defendant has purchased from Plaintiff monitoring equipments and derivative products many times in Shenzhen but paid US$82,855 only, with 1,097,530.45 yuan outstanding. Plaintiff has urged Defendant to pay many times but was rejected every time. As a result, Plaintiff pleas to the Court to order that (1) Defendant immediately pays Plaintiff the cargo payment of 1,097,530.45 yuan and interest thereof US$324,207 (Said interest is based on the capital of1097530.45 yuan and calculated at the overdue payment interest rate of the People’s Bank of China from February 1, 2010 to the date of filing the suit for temporary, and will be calculated to the date when all payment is paid up.), and (2)litigation cost shall be borne by Defendant.
Defendant’s arguments: 1. Defendant has not owned Plaintiff any cargo payment. Plaintiff’s arguments are untrue, as Defendant has never purchased from Plaintiff any monitoring equipment as shown in evidence submitted by Plaintiff. All invoices submitted by Plaintiff are faked with counterfeited signatures and stamps of Defendant. Defendant has never bought or received any above-mentioned products from Plaintiff. Therefore, Plaintiff’s claims are not based on any facts. 2. The names and stamps shown in the invoices submitted by Plaintiff are company’s names and stamps, and thus counterparty sued by Plaintiff is wrong. 3. The facts alleged by Plaintiff happened in 2009, and it has been about 5 years since then, which is beyond the prescribed time limit for civil action. By reasons of foregoing, Plaintiff’s claims are not based on any facts or legal grounds, and thus Defendant pleas to the court to dismiss Plaintiff’s claims.
Judgment
On June 2, 2015, the Court concluded the Civil judgment [(2015) Shen Qian Fa She Wai Chu Zi No.12] (“the Judgment”) which rules that, in accordance with Article 1 of the Interpretations of the Supreme People’s Court on Issues Concerning Application of Laws for Trial of Cases of Disputes over Purchase and Sales Contracts, Article 64.1 of the Civil Procedure Law of the People’s Republic of China, Article 90 of the Interpretations of the Supreme People’s Court on Application of the Civil Procedure Law of the People’s Republic of China, the claims of Plaintiff are dismissed.
Ratio Decidendi
The Judgment taken effect holds that, Article 522 of the Interpretations of the Supreme People’s Court on Application of the Civil Procedure Law of the People’s Republic of China provides that when one party is foreigner or the facts giving rise to, changing, or terminating civil relationship happen out of the territory of the People’s Republic of China (“PRC”), the people’s court could judge it as a foreign-related civil case. The Reply of High People’s Court of Guangdong Province of PRC on Designation of the People’s Court of Shenzhen Qianhai Cooperation Zone to Exclusively Hear the Foreign/Hong Kong/ Macao/Taiwan-related Cases of First Instance in Shenzhen provides that, the Court now is the only court responsible for hearing the foreign/Hong Kong/ Macao/Taiwan-related cases of first instance in Shenzhen which are used to be responsible by courts at basic level. In this case, Defendant is a Turkish citizen, and disputes focuses on whether Defendant has purchased products from Plaintiff or not, and whether Defendant has duly paid Plaintiff or not. Therefore it is a foreign-related case and the Court has the jurisdiction over this case.
The procedure law at the place where the court is located shall be applied. This case is about foreign-related contract dispute tried by the PRC court, and thus the Civil Procedure Law of the People’s Republic of China, the Interpretations of the Supreme People’s Court on Application of the Civil Procedure Law of the People’s Republic of China, and the Regulations on Certain Issues Concerning Evidence in Civil Proceedings and other applicable laws regarding civil procedures shall be applied.
In accordance with the Interpretations of the Supreme People’s Court on Application of the Civil Procedure Law of the People’s Republic of China, the nature of foreign-related civil relationship shall be determined by the law at the place where the court is located. The parties could choose applicable law over the contract at issue through agreement. If parties do not do so, the law at the habitual residence of the party whose performance to the greatest extent manifests the features of the contract at issue, or the law which has the closest relation with the contract at issue shall be applied. In this case, there is no evidence proving both parties have reached an agreement on applicable law over the Contract. Plaintiff is the seller, and its obligation is to deliver cargo and transfer the ownership thereof, which to the greatest extent embodies the features of the Contract. The habitual residence of Plaintiff is in the territory of the PRC, and both parties raised no objection to the application of the PRC law. By reason of forgoing, the Contract Law of the People’s Republic of China and related judicial interpretation shall be applied to this case.
Regarding the dispute between both parties on whether Plaintiff has provided and delivered goods, in accordance with provisions of the Interpretations of the Supreme People’s Court of the People’s Republic of China on Application of the Civil Procedure Law of the People’s Republic of China, unless otherwise specified, any party shall provide evidence to prove the facts which its claims or counterclaims are based on. Where any party fails to provide evidence or the evidence is not sufficient enough to prove the facts which its claims are based on, any adverse consequences shall be borne by the party with the burden of proof. The party with the view of existence of legal relation shall be responsible for proving the basic facts which the legal relation is based on. The Regulations of the Supreme People’s Court of the People’s Republic of China on Certain Issues Concerning Evidence in Civil Proceedings provides that, if whether the contract has been performed is in dispute, the party is obliged to perform the contract shall bear the burden of proof. Where the evidence submitted to the court by the parties is formed beyond the territory of PRC, said evidence shall be notarized by notary organizations in that country and acknowledged by Chinese embassy stationed in that country or proved in accordance with treaties entered into between the PRC and that country. Where the parties provide the court with documents or statements written in foreign language, Chinese-translated version of said documents or statements shall be affixed. In this case, Plaintiff argues there exists contractual relationship between Plaintiff and Defendant, and that Plaintiff has delivered products to Defendant, therefore, Plaintiff shall be responsible for proving above arguments. The commercial evidences and proforma invoices provided by Plaintiff have not been notarized or acknowledged, and no original copies thereof are provided for verification. The bills of lading, airway bills, and the payment records of US$15,000 and US$400,000 all submitted by Plaintiff have not been translated into Chinese, or notarized, or acknowledged, and no original copies thereof are provided for verification. Defendant has denied above evidence. Therefore, the court could not verify the authenticity of above evidence. Even though the commercial invoices, proforma invoices, the payment record of US$15,000 are authentic, the name of customer listed in the invoices, and the name of payer shown in above payment record are IOMA ELEKTRONIK Company instead of the name of Defendant. Therefore, it could not prove that Defendant is the buyer. Even though the bills of lading and the airway bills are authentic, the name of consignee stated in the bills of lading and the airway bills is IOMA GüWENLIK Company instead of the name of Defendant. It could not prove that the products under said bills are the products at issue or the products received by Defendant. Plaintiff’s argument that it has sold and delivered products to Defendant is not sufficiently supported by evidence and should thus be responsible for adverse consequences due to failure on presenting evidence. Plaintiff’s claim that Defendant shall pay overdue payment of 1,097,530.45 yuan and the interest thereof is not based on facts and thus shall be dismissed.
Remarks
Ways to prove the establishment of the Contract
Where the party files a lawsuit based on the contract, said party’s right of claim is based on said contract. Therefore, the first step in the civil proceedings is to prove the existence and establishment of said contract. There are two ways to do so, (1) to prove all legal requirements for establishment of a contract have been fulfilled; (2) to prove the contract has been performed and the counterparty has received said performance. The requirements for establishment of the Contract generally include (1) there are two or more than two contracting parties, to wit, the actual contracting parties, which could be the party himself/herself/itself or the agent of the party. (2) The contracting parties enjoy civil rights and have civil capacity to enter into contracts. (3) Agreement has been reached on main terms and conditions. In judicial practice, disputes usually focus on whether the counterparty is the contracting party or whether the parties have reached agreement on certain issues. For instance, the counterparty could argue that it is not it to sign the delivery notes, goods-received notes, settlement statement, or invoices, and thus argues that it is not the party of the contract. The counterparty could also argue that there is no creditor’s name in the document or vouchers such as the account reconciliation letter, confirmation letter of creditor’s rights, and thus holds that the party alleging the establishment of the Contract is not party of the Contract. Objectively, without written contract, it is hard for the party to present evidence proving that buyer and seller have reached an agreement.
Types of evidence proving the establishment of the Contract
With combination of judicial practice, main evidence to prove the establishment of the Contract include (1) where the contract is concluded through offer-and-promise, evidence goes to letters or data messages proving offer and promise have come into force, such as telegraphs, telexes, faxes, electronic data interchange, emails, etc. (2) Where promise is made by conducts, evidence proving the counterparty has acknowledged said conducts is required. (3) Where the contract has been concluded in writing, the contract with signatures or/and stamps of parties involved are required, which is the direct evidence to prove the establishment of the contract. (4) Where there is no direct evidence to prove the establishment of the contract, evidence proving the contract has been performed and the counterparty has accepted said performance is required, such as delivery notes, cargo-received notes, settlement statements, invoices, account reconciliation letters, or confirmation letter of creditor’s rights, all of which are signed by the parties. Where the party arguing the establishment of the contract provides the delivery notes only signed or stamped by it but without the stamp or signature of the counterparty, such delivery notes could only proves that said party has delivered goods but could not prove that the counterparty has accepted said delivery, and thus it could not prove that the Contract has established. In accordance with Article 1 of the Interpretations of the Supreme People’s Court on Issues Concerning Application of Laws for Trial of Cases of Disputes over Purchase and Sales Contracts, the delivery notes, cargo-received notes, settlement statements, invoices, account reconciliation letters, or confirmation letter of creditor’s rights are all belonged to be the fourth kind of evidence. In light of proving content, said evidence could be classified to be three kinds. The first kind is vouchers for cargo delivery, such as cargo-received notes, or delivery notes; the second kind is vouchers for settlement, such as statements, or invoices; the third kind is voucher for creditor’s rights, such as account reconciliation letter, or confirmation letter of creditor’s rights.
Distribution of evidential burden for establishment of the Contract
The Interpretations of the Supreme People’s Court on Application of the Civil Procedure of the People’s Republic of China provides that, unless otherwise specified, any party shall provide evidence to prove the facts which its claims or counterclaims are based on. Where any party fails to provide evidence or the evidence is not sufficient enough to prove the facts which its claims are based on, any adverse consequences shall be borne by the party with burden of proof. The party which argues the existence of legal relation shall be responsible to prove the basic facts which the legal relation is based on. The Regulations of the Supreme People’s Court on Certain Issues Concerning Evidence in Civil Proceedings provides that, in case of contractual disputes, the party which argues the contract has been established and come into force shall be responsible for proving the facts regarding to the establishment and effectiveness of the contract. The party which argues the contract has been modified, dismissed, terminated, or revoked shall be liable for proving the facts that gives rise to the change of said contractual relation. If there are any disputes on whether the contract has been performed, the party obliged to perform the contract bears the burden of proof.
In the case of dispute over the Contract, the party with argument of establishment of the Contract shall be responsible for proving the facts concerning said argument. Where there are written contracts, the same shall be provided. Where there are no written contracts, the partywith argument of establishment of the Contract shall provide important documentary evidence to prove said argument, such as delivery notes, cargo-received notes, settlement statements, invoices, account reconciliation letters, or confirmation letters of creditor’s rights. When the counterparty denies the connection between said evidence and the establishment of the Contract, how to determine whether the Contract has been established or not? Is it to request the party with argument of establishment of the Contract to provide new evidence? or to request the party denying the establishment of the Contract to provide evidence? or to disfavor the facts of establishment of the Contract?
Regarding issue of whether the Contract has been established, no provision in the PRC has provided inversion of presenting evidence is required. Therefore, it could not distribute the burden of proof to the party denying the establishment of the Contract. It is unfair to require the party arguing establishment of the Contact and presenting delivery notes, settlement statements, or confirmation letters of creditor’s right to present more evidence just due to the counterparty’s denial, as it will enhance said party’s burden of proof. It is provided by the Regulations of the Supreme People’s Court on Certain Issues Concerning Evidence in Civil Proceedings that, where there is no specified provisions, and it could not determine which party shall bear the burden of proof in accordance with this Regulations or other judicial interpretations, the court, following principles of fairness and honesty, could designate proper party to bear the burden of proof in consideration of factors such as the party’s capacity of presenting evidence. Therefore, the court could not deny the argument of establishment of the Contract only due to defendant’s denial. When necessary, the court could require defendant to present evidence to prove the Contract has not established.
Case Officer: Guo Cheng
Compiled by: Guo Cheng, Presiding Judge of Shenzhen Qinhai Cooperation Zone People’s Court
