How To Determine The Solution To Contract Disputes

Shanxi, July 2007

In June 2008, the equipment provided by the Japanese company and the Chinese Ding factory arrived at a hospital.

In order to ensure

During the installation and commissioning of the equipment, because the specifications of the ball pipe in the CT equipment provided by Japan's company did not conform to the specifications, and the specifications of the accessories in the Chinese Ding factory could not match the host provided by Japan, the installation of the equipment could not be carried out normally.

Until October 2008, the installation and commissioning work has not been completed.

There was a dispute between a hospital and the Japanese company and the Chinese Ding factory. In November 2008, the Japanese and Chinese Ding factories withdrew the commissioning technicians, resulting in the interruption of the commissioning work.

In February 2009, a hospital filed a lawsuit against a Chinese court. On the grounds that the quality of the CT equipment did not meet the requirements stipulated in the contract, it required: 1. returned to the full set of equipment provided by the Japanese company and the Chinese Ding factory; 2. demanded that the Japanese and Chinese Ding factories provide the full set of CT equipment meeting the contractual requirements; 3., the Japanese company C and the Chinese Ding factory should compensate the loss of a hospital.

According to Japanese company C, according to the contract of sale of goods signed between Japan and China B company, a hospital has signed and sealed the contract as the actual purchaser of the equipment in the contract, and its legal status is clear.

Therefore, a hospital shall be subject to the arbitration clause in the contract.

The installation and commissioning agreement has only agreed on the matters relating to installation and commissioning, and has not touched upon the dispute settlement method, nor has it changed the agreement on the dispute settlement of the goods sold by arbitration. The installation and commissioning agreement is entirely from the contract of the sale of goods. Therefore, a hospital has no right to bring a lawsuit to a Chinese court to solve any disputes arising from the sale of goods.

China's Ding factory contends that the matching device of the CT equipment sold to the hospital is in accordance with the contract stipulate, and there is no inferior quality. The reason why a hospital requests to return is not valid.

Is hospital a right to initiate arbitration?

In this case, is there an independent legal relationship or a principal subordinate relationship between the sale of goods and the installation and commissioning agreement?

The main contract is a contract that is independent of other contracts, and the contract refers to the contract which is based on the effective existence of the main contract.

From the validity of the contract to the main contract, the invalidity of the contract will not affect the validity of the main contract.

The contract for the sale of goods in the case is the Chinese B company and the Japanese company C, a hospital sign on the contract, only as the beneficiary of the contract for the sale of goods, it is an indication of the trustee.

According to China's foreign trade management system and the Provisional Regulations on foreign trade agency system, a hospital is not qualified to be the principal part of a contract for the sale of goods.

The legal fact that the sale of goods contracts depends on the legal relationship between the sale and purchase of CT equipment is based on the legal facts of how to assemble, connect, debug and check the equipment provided by the Japanese company and the Chinese Ding factory.

The main body of the agreement is the four sides, namely, a hospital, China B company, Japan C company and China Ding factory.

From the above analysis, we can see that these two contracts are independent legal relations, and there is no correlation between them.

Therefore, there is no relationship between principal and subordinate contracts between goods sale contracts and installation and commissioning agreements, and each of them has independent rights and obligations.

Based on the above relationship, the terms of arbitration in the sale and purchase contract shall not apply to the settlement of disputes arising from the installation and commissioning agreement. The arbitration provisions of the contract for the sale of goods can only solve disputes in the course of the purchase and sale of goods. In the coordination of installation and commissioning, the contents agreed by the parties "the responsibility of the Japanese company and the Chinese Ding factory" due to the occurrence of the quality of the products is not the scope to be solved by arbitration. Therefore, according to the twenty-third article of the PRC Civil Procedure Law, "a lawsuit arising from a contractual dispute shall be subject to the jurisdiction of the people's Court of the defendant's domicile or the place where the contract is performed", and a hospital shall have the right to institute proceedings against the people's Court of its place.

Since a hospital is responsible for the breach of its obligations by another principal body on the basis of the identity of the principal of the installation and commissioning agreement, the law applicable to settling the dispute should not be the United Nations Convention on Contracts for the international sale of goods.

Since the Japanese company is the principal part of the contract, the foreign economic contract law should be applied as the basis for settling disputes.

The problem of fault liability that the agreement can not fulfill

The eighteenth provision of the foreign economic contract law stipulates that one party who fails to perform the contract or fulfil the contractual obligation does not conform to the agreed conditions, that is, it violates the contract.

In this case, due to the serious problem of the quality of the equipment provided by the Japanese company and the Chinese Ding factory, it is impossible to end the commissioning and obtain the acceptance of the hospital in the time stipulated in the installation and commissioning agreement. The behavior of the Japanese company C and the Chinese Ding factory has constituted a breach of contract and should bear civil liability.

In the absence of installation and commissioning due to the failure of the equipment quality, the Japanese company and the Chinese Ding factory, which had the obligation to install and debug, unexpectedly withdrew technical personnel from the hospital, unilaterally interrupted the implementation of the agreement, and the withdrawal of the technical personnel was also a serious breach of the contract.

Therefore, the fault liability resulting from the failure of the installation and commissioning agreement shall be borne by the Japanese company C and the Chinese Ding factory.

Civil liability for breach of contract

The provisions of the eighteenth article of the foreign economic contract law stipulate that after a party has breached the contract, the other party shall have the right to claim damages or take other reasonable remedial measures.

There are no specific provisions for remedial measures specified in the article.

In the practice of assuming civil liability for breach of contract, the parties to breach of contract shall take various measures to achieve the agreed conditions or minimize losses if the contract is not terminated.

The main remedial measures usually adopted are: actual performance, compensation for damages, payment of liquidated damages, etc.

A party who violates the contract shall take remedial measures in the light of actual needs and possible reasons, and endeavour to reduce losses and meet the needs of the other party.

In this case, a hospital has the right to request the two party to take remedial measures to replace the equipment, which is related to the purpose of the contract. Remedial measures to replace the equipment can make the contractual obligations meet the agreed requirements, thereby ensuring the interests of all parties.

The eighteenth section of the foreign economic contract law stipulates that the other party can still make up for the losses suffered by the other party after taking other remedial measures. The other party still has the right to claim damages.

In this case, a hospital has the right to assume responsibility for all the economic losses incurred by the two party in breach of the contract prior to the replacement of the equipment. This reflects the principle of fairness.