How verbal agreements for delivery from China cost the buyer 14.7 million rubles

My name is Yulia Solodkova, I am a business lawyer. My job is to help entrepreneurs, including importers of goods from China, not lose money and protect their interests.

Today I want to make a real case out of my practice. The arbitration court made a decision that clearly shows why it is impossible to neglect the documentation of claims when accepting goods. The court ordered the buyer to pay for motorcycles he said came with marriage. Why? Because the buyer was negligent in accepting the goods, and verbal agreements in court did not work. 

The plot of the case: a large deal, high expectations

My client, the company Yi (in the case – Plaintiff, Supplier), is engaged in the supply of motorcycles from China to Russia. The plaintiff entered into a major contract with the buyer, Company B (in the case – the Defendant, the Buyer), for the supply of a batch of motorcycles from China with a total value of more than 14.7 million rubles.

The delivery was carried out in three batches. Company B accepted the goods from the first and second batches, signing universal transfer documents (UPD) without comment, thereby confirming the proper quality of the goods and full equipment. 

During the acceptance of the third batch, the Buyer began to refuse to pay for the goods, citing its inadequate quality, including in previous batches. 

What Happened in Court: The Battle of Word vs Document

Thus, we, representing the interests of the supplier and appealed to the court with the requirement to recover the debt and penalty for late payment.

The buyer tried to prove the existence of verbal agreements and the inadequate quality of the delivered goods. It was alleged that the supplier's representative had promised to remedy the deficiencies. However, the defendant’s arguments were not documented.

The first key argument in defense of the interests of our client was the signing of transfer documents. UPD for the first batches were signed without comment, which confirmed the proper quality of the goods. The supplier presented a complete set of documents for the transaction.

The second reason was the lack of timely claims. The buyer did not issue acts of discrepancy at acceptance. The claim came in breach of deadlines.

The main mistake of the buyer was the lack of written evidence. Examination reports, expert opinions or correspondence on deficiencies were not submitted. The court did not take into account references to telephone conversations.

Results of the case

The court is on our side:

• The judges were guided by the provisions of the Civil Code of the Russian Federation on the written form of transactions. Oral statements have no legal force without documentary evidence. Particular importance was attached to the timely filing of claims.
• The decision underscores the importance of adherence to formal procedures. Even if there are real shortcomings of the product, they must be fixed. properly. Signing of acceptance documents without comments is considered to be an agreement with the quality of delivery.

The result for our client: The court ordered the defendant to pay:

• more than 14.7 million rubles principal debt.
• about 130 thousand rubles penalty for delay.
• 373 rubles as a reimbursement of state duty costs.

As a result, the buyer is not only obliged to pay the entire amount of the debt, but also suffered additional losses in the form of penalties and court costs.

The main conclusions for your business when working with China

1. The word is not a sparrow, but a document is armor. All agreements must be documented. Any agreements on completion, replacement of defective goods or provision of discounts must be recorded in writing as additional agreements to the contract. .
2. Acceptance of goods is a sacred ritual. If you see even the slightest discrepancy, DO NOT sign the UPD as is. If any discrepancies are found, a universal transfer document should not be signed without appropriate marks. In such cases, it is necessary to immediately draw up an act of discrepancies with a detailed description of all identified shortcomings, fix them. The act must be signed by representatives of both parties.
3. Not to pay unilaterally is the way to lose. If there are claims to the quality of the goods, you should act within the framework of the contract: send an official claim and offer a proportionate reduction in value. Unauthorized termination of payments is a violation of contractual obligations.

Cooperation with Chinese suppliers requires special attention to detail. As practice shows, errors in documentation can lead to significant financial losses.

Are you having trouble delivering? Does the supplier fail or does the buyer fail to pay? Don’t wait until the situation becomes critical. Write to me and we will develop a strategy that will protect your money and business.

Expert contact:

Julia Solodkova

Founder and Managing Partner of Legal Status Group Yulia Solodkova

Fair lawyer

Author of legal articles

Co-author of the book “Without what can not business”

The heroine of the cover of the magazine “Woman-Entrepreneur”

Phone: +7 (926) 814 96 01

Mail: info@ys-lsg.ru

Telegram: @Yulya Solodkova