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Win case of international purchase steel pipe quality dispute

On behalf of client, we have won the case of steel pipe quality case. The focus of the case is whether the supplier delivered the qualified goods to buyer. We argued in the case from the points of the agreed brand name of steel pipe, and inspection report of the goods.

For the detail of our opinion to court as following:

  1. basic legal facts of the case.

On may20,2008, the plaintiff, the defendant I (Liaocheng Weiye Steel Pipe Co., Ltd.) and the defendant II (China Power East China Import and Export Corporation) signed a sales contract with the contract number of 20080520a. It was agreed that the defendant would provide the plaintiff with 235t +/10% of 16Mn seamless steel pipe in accordance with GB8163-1999, and the manufacturer was Chengdu Seamless Steel Pipe Co., Ltd. The contract price is 231350.00 euros, the port of shipment is Qingdao, and the shipment period is within 60 days after receiving the advance payment. After the contract was signed, on May 21, 2008, the defendant 2 issued a proforma invoice with the proforma invoice number of 20080605030. Item B of the payment method was that the buyer should remit the payment to the seller’s following account by telegraphic transfer: the bank was Pudong branch of Bank of China, the bank address was No. 838 Zhangyang Road, Pudong New Area, Shanghai, China, the account was 044188-805006112808093014, and the payee was China Power East China Import and Export Corporation. On May 30, 2008, the plaintiff remitted 20% of the advance payment (46270.00 euros) to the payee’s Bank as agreed, with the same account as above.

Later, the defendant 1 sent the factory quality guarantee to the plaintiff in the form of email attachment. After inquiry, the plaintiff found that the factory quality guarantee provided by the defendant was forged, and the steel pipe provided by the defendant was not produced by Chengdu Seamless Steel Pipe Co., Ltd. And the steel pipe has serious defects. As the defendant failed to perform the contract and ship the brand steel pipes agreed in the contract in accordance with the provisions of the contract, and the purpose of the plaintiff’s conclusion of the contract could not be realized, the plaintiff requested to terminate the sales contract No. 20080520a and return the advance payment, but the defendant has not returned the advance payment of 46270.00 euros to the plaintiff, nor compensated for the economic losses caused to the plaintiff.

  1. Application of law in this case

The plaintiff in this case (mareg Co., Ltd.) is a legal person incorporated in Italy. This case is a foreign-related commercial dispute. According to Article 126 of the contract law of the people’s Republic of China, the law of the people’s Republic of China shall apply according to the principle of the closest contact.

  1. The defendant seriously breached the contract.

3.1 the defendant failed to provide the brand steel pipe agreed in the contract.

The buyer and the seller clearly agreed in the contract to provide steel pipes manufactured by Chengdu seamless steel pipes manufacturing Co., Ltd. On July 31, 2008, the defendant 1 sent the factory quality guarantee to the plaintiff in the form of email attachment. On August 29th, 2008, the plaintiff pointed out that it was not sure that the steel pipes were produced by Chengdu steel pipe factory, because when the plaintiff’s inspector went to inspect the steel pipes, the defendant’s reply to the manufacturer was not satisfactory. On September 1, the plaintiff clearly pointed out that after inquiry, the factory quality guarantee provided by the defendant was not issued by the Chengdu manufacturer, and the quality guarantee was false, forged and deceptive. On September 9, the defendant 1 said that he had contacted the superior agent company about the factory quality assurance, but they didn’t give a definite reply. Since then, the quality assurance certificate of Chengdu Seamless Steel Pipe Co., Ltd. has not been submitted so far.

3.2 the quality of the counterfeit steel pipe to be provided by the defendant is defective.

According to Item 4 of Article 17 technical and mechanical properties of Contract No. 20080520a, ultrasonic testing shall be carried out according to sep1921, and the result must be c/c grade. Why didn’t the plaintiff find the quality assurance record in the factory on August 1, 2008? Has ultrasonic testing been carried out according to sep1921 C / C? On August 5, the defendant replied that the special steel pipe agreed in the contract was too thick for level-1 ultrasonic testing and could not reach level-1 ultrasonic testing, but it was the defendant’s own fault that he had not told the plaintiff before. We know that the inspection standard specified in the steel pipe sales contract is very important. It is the basis for the manufacturer to produce and deliver. Only according to this standard, the products that have passed the inspection after production can be delivered from the factory. The defendant claimed that the steel pipe could not meet the first-class ultrasonic testing agreed in the contract at the time of delivery, which was obviously a failure to perform the contract in accordance with the contract. Later, in the e-mail of defendant 1 on August 13, 2008, we can see that SGS inspection company inspected the counterfeit steel pipes according to sep1921 class c/c, and three steel pipes had defects exceeding the standard, one steel pipe had nine defects, and the other two steel pipes had one defect respectively.

  1. The plaintiff’s application for termination of the contract and compensation for losses is reasonable and legal.

According to Item 4 of Article 94 of the contract law, if one party delays in the performance of its obligations or commits other breach of contract so that the purpose of the contract cannot be achieved, the other party has the right to terminate the contract. Due to the defendant’s violation of the contract, the steel pipes produced by the plaintiff Chengdu Seamless Steel Pipe Co., Ltd. could not be provided within the delivery period agreed in the contract. Moreover, the counterfeit steel pipe had serious quality defects, which made the plaintiff unable to achieve the purpose of purchasing the steel pipe produced by Chengdu Seamless Steel Pipe Co., Ltd. On march16,2009, the plaintiff sent a lawyer’s letter to notify the defendant to terminate the contract, return the advance payment and compensate for the losses. Therefore, the contract No. 20080520a shall be terminated according to law.

According to Article 97 of the contract law, if the contract has not been performed after the termination of the contract, the performance shall be terminated; If the contract has been performed, according to the performance and the nature of the contract, the parties may require restitution and other remedial measures, and have the right to claim compensation for losses. The plaintiff has the right to require the defendant to compensate for the interest loss of the advance payment of 36071.89 yuan (from May 30, 2008 to July 20, 2009). And compensate for the loss of expected benefits of EUR 231350.00 × 10% = 23135.00 euros (equivalent to 249330.52 yuan).

To sum up, after both parties signed the contract, the defendant should fully perform the obligations specified in the contract and deliver the subject matter agreed in the contract. However, the defendant violated the contract and provided the plaintiff with steel pipes not manufactured by Chengdu Seamless Steel Pipe Co., Ltd., and the counterfeit steel pipes had serious quality defects, so that the plaintiff could not achieve the purpose of the contract. The defendant shall be liable for breach of contract. We sincerely request the court to make an order to terminate the contract, return the payment for goods to the plaintiff, and compensate for economic losses.



Liaocheng intermediate people’s court



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