Intermediate People’s Court Ningbo, Zeijang Province renders decision on non-conformity of masks

In 2021, the Intermediate People’s Court Ningbo, Zeijang Province decided the case MaRa Medical-Technical-Aid GmbH v. Ningbo Laida Automotive Technology Co. Ltd. The decision’s full text, originally written in Chinese, has now been translated into English by Jie Ouyang, PhD candidate and lecturer at the University of Groningen. We are very grateful for his translation that can now be accessed via the case presentation about CISG-online 6203 (see below).

The dispute underlying the decision arose from an international sales contract for the sale of 10.5 million of FFP2 face masks for a total price of $ 5,295,000, signed on 3 April 2020. After the German buyer had paid the entire purchase price, the Chinese seller failed to deliver a part of the masks. A total of 4,351,192 masks had not been delivered as they had been seized by Chinese customs authorities for being «unqualified». On 29 April 2020, the buyer notified the seller that it should stop delivering the remaining masks and demanded for repayment of the purchase price. Subsequently, the parties agreed to terminate their sales contract. However, the seller only partially refunded the purchase price and refused to repay the outstanding amount. It argued that it was not at fault since the masks in dispute were seized by the customs due to the fact that the buyer requested that CE («Conformité Européene») marks should be printed on the box – which led the Chinese customs authorities to believe that these masks required specific inspection, according to the seller.

The Court held that the CISG is to be applied since both parties were located in Contracting States (Germany and China), and the parties did not exclude the Convention’s applicability. It further stated that the seller was liable for the undelivered masks in light of Art. 35 CISG: The parties had agreed that the masks should comply with EU standards. Yet, they were seized by Chinese authorities for their subpar quality, in particular the breaking strength of the mask strap and the connection between mask strap and mask body. According to the Court, the Chinese authorities applied Chinese standards that were equivalent to the contractually agreed on EU standards. Moreover, the Court decided that the buyer was entitled to demand repayment of the overpaid amount of the purchase price for the undelivered masks in accordance with Art. 51(1) CISG.

As to the applicable interest rate, the Court stated that either the interest rate at the seller’s place of business as per Art. 84 CISG and CISG Advisory Council Opinion No. 9 or the interest rate at the creditor’s rate of interest as per Art. 78 CISG and CISG Advisory Council Opinion No. 14 should be applicable. While the Court went into some detail about the rationale of Art. 78 and Art. 84 CISG respectively, it ultimately relied on the interest rate at the creditor’s place of business – i.e. the buyer's place of business (Germany) – as this interest rate was not objected by the Chinese seller during the proceedings.

Finally, the Court rejected the buyer’s claim for legal and notary fees under Art. 74 CISG by relying on CISG Advisory Council Opinion No. 6.