Clarify the priority application of international treaties

Facts: The United States buyer reached a glove sales contract with the Chinese seller, agreeing that the United States buyer would purchase gloves from the Chinese seller. The United States buyer claims that the Chinese seller has committed breach of contract such as defective payment and delayed payment, and files a lawsuit to declare the contract invalid, return the payment and interest, and compensate for the losses caused by the Chinese seller’s breach of contract.

[Judgment result]
The Fourth Intermediate People’s Court of Beijing held that both China and the United States, where the parties have their places of business, are contracting parties to the United Nations Convention on Contracts for the International Sale of Goods. There is no non application of the provisions of the Convention in this case, and both parties have not ruled out its application. Therefore, the provisions of the Convention should be applied in this case. More than half of the goods delivered by Chinese sellers have defects that do not meet the agreed quality standards, making them completely unsuitable for the usual use of medical gloves of the same specification. The Chinese seller has not yet delivered some of the goods, which has seriously exceeded the delivery time stipulated in the contract. The contract in this case was signed during the “COVID-19” epidemic. The United States buyer bought gloves from China and sold them to its domestic customers, which was a business opportunity. However, the breach of contract by the Chinese seller was enough to make the United States buyer’s purpose of making profits through the contract involved in the case frustrated, which constituted a fundamental breach of contract. The United States buyer sent a lawyer’s letter to the Chinese seller on May 20, 2021, notifying them to terminate the Glove Sales Contract. Although the letter was only signed for by the Chinese seller on May 22nd, the convention does not adopt the principle of “effective upon arrival” for this type of notification, but rather the principle of “effective upon mailing”. Therefore, the Glove Sales Contract in question was invalid on the date of issuance of the letter. Based on this, the sales contract involved in the judgment case was declared invalid on May 20, 2021. The Chinese seller returned the payment of $945000 and paid interest to the United States buyer, and compensated the actual loss of $18882.12.

Typical significance
Termination of a contract can extinguish its effectiveness, disrupt the existing transaction order, and have a significant impact on the rights and obligations of both parties. Therefore, the United Nations Convention on Contracts for the International Sale of Goods not only stipulates the system of declaring contracts invalid, but also makes corresponding provisions on the elements and time of exercise. The convention adopts different effective principles for notification in the formation of the second part of the contract and the sale of goods in the third part. The effectiveness, withdrawal, and revocation of an offer or acceptance all adopt the principle of “delivery takes effect”, that is, it takes effect only when it is delivered to the other party. Article 27 of the Convention stipulates that the notice of invalidation of a contract shall take effect as long as it is issued “by a suitable method”, and the risk in the process of transmission shall not be borne by the person with the right to terminate. This is different from the “effective upon arrival” principle stipulated in Article 565 of China Civil Code. This case accurately applies the United Nations Convention on Contracts for the International Sale of Goods. If there are different provisions between the international treaties concluded by China and the laws of the People’s Republic of China, the provisions of the international treaties shall prevail. This reflects the comprehensiveness and accuracy of the application of international treaties by Chinese courts, and has a demonstrative role in the trial of such cases.