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Chinese Court's Views on Family Farming and CISG's Scope of Application

Sat, 31 Jul 2021
Categories: China Legal Trends

On 25 Apr. 2021, Dezhou Intermediate People's Court of Shandong Province pronounced its judgment in Yang Jianbing v. Yucheng Huayu Machinery Manufacturing Co., Ltd. (2021) Lu 14 Min Zhong No. 1052, a case involving the scope of application of the United Nations Convention on Contracts for the International Sale of Goods (CISG). In this case, the Court held that "sales of goods bought for personal, family or household use" excluded from the scope of application of CISG referred to the purchase of goods for consumption, and that if the goods were used for home business, they should still be deemed as for commercial purpose and thus should fall within the CISG’s scope of application.

In March 2019, the plaintiff Yang Jianbing in Canada negotiated, through social software, with the salesperson of the defendant Yucheng Huayu Machinery Manufacturing Co., Ltd. (禹城华禹机械制造有限公司) to buy agricultural equipment. The plaintiff bought one piece of agricultural equipment manufactured by the defendant and asked for its shipment to Canada. The agricultural equipment, together with other goods bought by the plaintiff through the online shopping platform Taobao, were shipped from Qingdao by a Chinese freight forwarding company. The customs declarations indicated that the transaction was concluded on FOB terms. Upon arrival in Canada, the goods could not be cleared for quarantine reasons and were returned to Hong Kong for auction, therefore the plaintiff filed a lawsuit with a court to request the termination of the contract of sale with the defendant and the return of payment.

In this case, the plaintiff claimed that the shipping address for the transaction was a home address, and he bought the goods for household use, which did not fall with the CISG. The Court believed that in addition to meet personal and household needs, the plaintiff bought the agricultural equipment in bulk for the production and operation of his farm, indicating a commercial purpose. Therefore, such circumstances did not comply with Article 2 of the CISG which stipulates that "This Convention does not apply to sales: (a) of goods bought for personal, family or household use.....". The two parties signed an international contract for the sale of goods, and China and Canada, where the business of the parties located, are both members of the CISG, so the Court applied the CISG in this case.

In this case, according to the trade term FOB, the buyer should bear the risk after the seller delivers the goods to the carrier. The plaintiff, as the buyer, claimed to terminate the contract of sale of goods on grounds that the purpose of the contract was not achieved, which did not satisfy the statutory conditions for termination of the contract. Therefore, the Court did not support the claims of the plaintiff.

 

 

Cover Photo by Zhaoyang Chai (https://unsplash.com/@johnny_chai) on Unsplash

 

Contributors: CJO Staff Contributors Team

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