How to prove the loses in Chinese court procedure

Author of this article: attorney of Win and Win Law Firm

*The original text is Chinese and has been translated into English for reference only. If there is any inconsistency or ambiguity between the Chinese version and the English version, the Chinese version shall prevail.

The case of the Canada TEDA Enterprise Co., Ltd as plaintiff and buyer over the sales contract dispute with the shanxi Food Co., Ltd as seller, focuses on the criteria for the establishment of the contract and the compensation for breach of contract. In this case, because the buyer as plaintiff did not provide legal and effective evidence to prove that it had incurred actual losses, otherwise the defendant’s breach of contract will lead to serious consequences.

Basic facts:
TEDA Company (the buyer, the plaintiff) and shanxi company (the seller and the defendant) reached a sales contract through e-mail. After that, the seller failed to deliver the goods, so the buyer asked the seller for compensation.

The court ruled:
The defendant’s failure to perform the contract constitutes a breach of contract, but the plaintiff did not provide evidence of actual losses, so it does not support the plaintiff’s claim for compensation.

Practical reference:
1. The trading party shall be cautious when issuing contract offer, and carefully consider whether the transaction (offer and acceptance) is reached in the exchange of e-mail.
2. After the contract is signed, the goods shall be delivered on schedule. If the goods cannot be delivered in time, a longer performance period shall be reserved in the contract. Otherwise, in case of breach of contract, it is necessary to compensate the other party for the expected loss of interests, etc.
3. As buyer, it needs to provide all evidence for proving their actual loses because violation of seller, such as resale contract, payment evidence, otherwise the court will not support their opinions.
4. It is better for buyer to write down the compensation articles in contract, if the seller violates contract during performance of contract, then the compensation article will be very useful for determine the loses.

The court judgment of this case:

The court of first instance found that on October 13, 2004, TEDA and Shanxi signed an export sales contract, agreeing that Shanxi would export 72 tons of walnut white Third Road (LP) to TEDA at a price of US $3080 per ton FOB Newport. Later, the parties agreed to increase the price to US $3280 per ton FOB Newport. In June 2005, both parties agreed by e-mail that Shanxi would export 24 tons of walnut to TEDA in August, and Shanxi failed to perform the contract. On December 29, 2005, TEDA sent a claim letter to TEDA, claiming that TEDA failed to provide 24 tons of walnut, so it claimed against TEDA at the price of US $5200 per ton and waited for TEDA’s confirmation. On January 2, 2006, TEDA claimed to Shanxi the loss of USD 42240 caused by Shanxi’s failure to deliver 24 tons of walnut white third road.

In order to prove their claims, TEDA submitted to the court of first instance the contract signed with Shanxi on October 13, 2004, the contract signed with John Wens food company of Canada, the e-mail exchanged with Shanxi to modify the contract price, the e-mail about the delivery of 24 ton walnut in August 2005, the documents of Canadian customs inspection in Vancouver, the claim letter to Shanxi, the claim letter from the customer to TEDA, totaling ten pieces of evidence; Shanxi submitted to the court of first instance a total of 20 e-mails exchanged between Shanxi and TEDA from October 13, 2004 to September 6, 2005.

The court of first instance held that:
This case is a foreign-related case, and the applicable law for handling substantive disputes shall be determined according to law. Since Canada, where TEDA is located, and the people’s Republic of China, where Shanxi is located, are both parties to the United Nations Convention on Contracts for the international sale of goods, the sales agreement reached by both parties does not explicitly exclude the application of the United Nations Convention on Contracts for the international sale of goods, nor does it choose the law of a certain country as the law applicable to the contract, Therefore, the relevant provisions of the United Nations Convention on Contracts for the international sale of goods should be applied in this case.

The two parties in this case have reached an agreement on Shanxi’s export of 24 tons of walnut kernel white third road to TEDA in August 2005. The agreement is legal and valid, and Shanxi is obliged to perform the obligation of delivery to TEDA. Due to Shanxi’s breach of contract, TEDA has the right to require Shanxi to compensate TEDA for the economic losses caused by Shanxi’s breach of contract. However, during the trial of this case, TEDA only submitted the letter of claim issued to TEDA by its final customer, John Wens food company of Canada, and did not submit other evidence to prove that it had paid compensation to the company. Therefore, it could not prove that TEDA had suffered losses. According to Article 2 of several provisions of the Supreme People’s Court on civil litigation evidence, “the parties shall be responsible for providing evidence to prove the facts on which their claims are based or the facts on which their claims are refuted. If there is no evidence or the evidence is insufficient to prove the factual claims of the parties, the parties bearing the burden of proof shall bear the adverse consequences. “TEDA claims against Shanxi only based on the claim proof from the third party, which is not supported by the court of first instance. In accordance with Articles 18, 19, 23 and 74 of the United Nations Convention on Contracts for the international sale of goods and Article 2 of the provisions of the Supreme People’s Court on evidence in civil proceedings, the court of first instance ruled that TEDA’s claim was rejected.