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B. Scenarios in Mainland China

Scenario 1

Company A signed a contract with Company B on the following terms:

  1. Company B agreed to deliver 100 tons of wool on or before the specified delivery date.
  2. Company A agreed to pay Company B a deposit of 15% of the purchase price upon signing the contract, and to pay the balance by bank telegraphic transfer upon delivery and presentation of the VAT invoice by Company B.

Ten days before the specified delivery date, Company A sent a letter to Company B saying that it could not pay the balance of the purchase price in full in accordance with the contract, and proposing to pay another 15% of the purchase price upon delivery (which with the deposit would make 30% of the total amount) and then the balance in two instalments within 30 days of delivery.

Company B did not agree with the proposed changes to the payment terms and delivered 30% of the wool before the specified delivery date. Company A refused to accept the partial delivery, but Company B insisted that it would deliver the quantity of wool for which Company A could afford to pay and that Company A would have to present a bank draft before Company B would arrange for the delivery of the rest of the wool. Because of such dispute, Company B took back the delivered wool from Company A.

Ten days after the specified delivery date, Company A sent another letter to Company B stating that they could pay 50% of the purchase price and that Company B should deliver 50% of the wool and present the VAT invoice. Company B replied in writing on the same day that it would agree to deliver 50% of the wool if Company A paid the purchase price on a pro-rata basis in accordance with the payment terms of the contract, and that if Company A failed to take delivery and pay the purchase price in accordance with the said payment terms, then Company B would cancel the contract. Company A presented a guarantee that was issued by the representative office of the intermediary company for the parties. The guarantee stated that the guarantor would give Company B bills for 39.5% of the purchase price that would be negotiable at a bank after 75 days upon presentation of the VAT invoice for 50% of the wool, and that if Company B could not obtain payment from the bank, then the guarantor would pay Company B the stated amount. Company A also stated that if Company B did not present the VAT invoice, then a draft for the amount of 1% of the purchase price would be retained by the guarantor. Company B refused to deliver the wool because Company A did not accept the payment terms of the contract.

Can Company A sue Company B for breach of contract and request Company B to refund the deposit and pay compensation equivalent to the deposit that was paid by Company A in accordance with the PRC Contract Law?

Answer to Scenario 1

Scenario 2

Mr. A bought a brand XYZ car for his personal use from his own funds from a car dealer for RMB55,200. The car dealer issued two invoices (neither of which carried the chop of the car trading market management department of the relevant local administration of industry and commerce), a quality inspection certificate and a temporary car registration licence.

Driving the car home, Mr. A found some serious problems with it. He telephoned the car dealer the next day. On the following day, Mr. A drove the car to the appointed service centre of brand XYZ for inspection and repair. Two days later the service centre reported that the car was not manufactured by the XYZ automobile company.

Mr. A asked the car dealer to take back the car, refund the amount that he had paid, reimburse him for the inspection and repair fee of RMB928 and pay damages of RMB55,200 in accordance with the PRC Consumer Rights Protection Law《中華人民共和國消費者權益保護法》. Can the car dealer take the car back after refunding the amount that was paid by Mr. A and reimbursing the inspection and repair fee, and also to treat the rights and obligations of both parties in respect of the sale and purchase of the car as settled given that Mr. A has not suffered any loss?

Answer to Scenario 2

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