Prepaid Supplier Stopped Shipping? How a Chinese Court Set the Refund

Some supplier relationships run for years on quotes, chat messages and bank transfers. Nobody keeps a clean ledger. That is fine until the supplier stops shipping. Then you have to work out how much of your money the supplier still has.

I acted for the overseas buyer in a case that depended on exactly that. The court ordered the supplier to return the prepayment for goods it never delivered. It also had to pay interest for the time it held the money. The court did not accept my client's first figure. I find out who has your money and whether you can get it back, before any letter or lawsuit.

The facts

My client, an overseas business, had bought from a Chinese trading company before. It then placed a series of orders for industrial supplies. Some orders were confirmed only by a quotation and a bank transfer. Others had a purchase order signed and stamped by both sides. Over time, my client prepaid a large sum.

The supplier delivered part of the goods. Then it kept pushing back the rest. Its emails checking the accounts showed that the two sides had set payments and deliveries off against each other across different orders. This is called netting. When my client chased, the supplier admitted it had not delivered goods for a large part of the money. It gave no new date.

My client gave notice ending the unperformed orders and sued for a refund.

What the supplier said

It did not produce a ledger that explained each order, delivery and payment. It only said that my client's total mixed in other deals.

How the court decided

A long trading relationship does not need one complete contract. Quotations, purchase instructions, bank payments, delivered goods and the supplier's replies to chasers formed an unbroken chain. That was enough to prove the sales. The supplier held the production and shipping records. My client had worked out its figure order by order. The supplier offered nothing that could be checked against it. So the supplier bore the consequence.

The refund followed the proof. The court took the payments that were proved. It took off the value of deliveries both sides accepted. That gave a figure lower than my client's first claim. The court awarded that figure.

The contract could be ended. The supplier had stopped delivering for a long time. It still did not perform after being chased. So my client had the right to end the orders that were still open and ask for its money back (Civil Code art. 563).

Interest ran from a reasonable time after the chaser. It did not go back to the dates of payment.

Why the headline figure shrank

This is the part buyers find hardest. You know roughly what you paid and roughly what arrived. A court needs each payment tied to an order. It needs a value for each delivery. If emails netted payments across orders, somebody has to rebuild the account. If you only rebuild it when you sue, you will argue about it in court. Every gap makes the number smaller.

Keep a running account

Part of my guide to supplier disputes in China.

Has a Chinese supplier stopped shipping after you already paid? Send a short summary and the company names. Documents follow after the conflict check. Discuss your supplier dispute →

This article is based on matters I handled. Names, products, places, dates, amounts and other identifying details have been removed or changed, and some facts have been combined. It describes how one court dealt with one set of facts. It doesn't predict the result in any other case.