Recently, Shanghai No.1 Intermediate People's Court held a concentrated hearing on three appeals of dispute over prepaid card service contracts of photo shooting and announced the judgments in court that the issuer of the prepaid cards shall refund the card balance to the three consumers.
[Case Review]
In 2013, Ms. Shen went to a photography workshop and had a set of photos taken for her kid. When she went to pick up the photos, the salesperson recommended that she apply for a prepaid card for children photography issued by Jiying Company, saying that if she charges RMB 1,500 yuan into the card, she can get the flash videos and negatives for free and be exempted from the payment for the first shooting, namely RMB 388 yuan; besides, her card will get an extra RMB 388 yuan for free and she can use the prepaid card in any of the 13 franchisees affiliated to Jiying Company without time limit.
"The discount is hard to resist, and there are many franchisees to choose from." Ms. Shen was talked into buying a prepaid card with a charge of RMB 1,500 yuan. Plus the extra 388 yuan, there was an amount of RMB 1,888 in total in the card. The workshop issued a bill of fees, specifying that the card can be used in the 13 franchisees without time limit and a discount 30% off shall apply in future.
In 2014, Ms. Shen spent RMB 598 yuan on her child's photos, with RMB 1,290 yuan left in the card.
In 2015, Ms. Shen wanted to take her kid for photo shooting again and so she called to make an appointment. She was shocked to find that all of the 13 franchisees had shut down. She hastily logged in the prepaid card website to capture and save the prepaid card balance page.
The same thing happened to Ms. Yao and Ms. Wu. They bought prepaid cards for children photo shooting from different franchisees of the same workshop. Ms. Yao charged RMB 3,000 yuan and used the card only once, leaving RMB 2,401 yuan in the card; Ms. Wu charged RMB 2,000 yuan and also used the card only once, leaving RMB 2,650 yuan in total plus the extra RMB 1,000 yuan from the workshop.
They complained to the Industry & Commerce Department and found that the prepaid cards weren't filed on record. Ms. Shen, Ms. Yao and Ms. Wu sued to the court respectively, requesting the court to safeguard the legitimate rights and interests of consumers and order the issuer, Jiying Company, to refund all the balance (1,290 yuan, 2,401 yuan and 2,650 yuan respectively) in the prepaid cards and pay 20% of the balance as compensation.
[Case Study]
The court of first instance held that Ms. Shen, Ms. Yao, and Ms. Wu established a service contract relationship with Jiying Company by buying prepaid cards for children photo shooting. Existing evidence indicated that the company was incapable of continuing to perform the contract, and in this case the parties may terminate the contract according to the law. Ms. Shen, Ms. Yao, and Ms. Wu's request for refund should be supported. As to the amounts of refund, the court held that the card balance consisted of actual recharge amount and virtual complimentary amount; the amount consumed can be regarded to have been deducted from the virtual amount preferentially, but the remaining virtual amount shall not be supported. To sum up, the court supported the claim for refund based on their actual loss, i.e. 1,290 yuan (Ms. Shen), 2,401 yuan (Ms. Yao) and 2,000 yuan (Ms. Wu) but rejected their claim for 20% of the balance as compensation without contract or legal basis.
Jiying Company appealed to Shanghai No.1 Intermediate People's Court against the judgment. It argued that one of its 13 franchisees could continue to perform the contract, and the three consumers had no right to rescind the contract; the three consumers failed to provide sufficient evidence to prove the balance in their cards, and such evidence as screenshots submitted in the first instance didn't meet the requirements of the law with regard to electronic evidence.
After the trial, Shanghai No.1 Intermediate People's Court held that although Jiying Company declared that one of the 13 franchisees could continue to provide services, it failed to provide relevant evidence. Even if it was true, as declared by Jiying Company, that one franchisee could offer services, the service quality was too low to meet its promise at the time of signing of the contract. Besides, it was justified for the consumers to question its ability to continue to perform the contract in consideration of its poor operation. Meanwhile, Jiying Company didn't provide any guarantee on restoring its performance ability. In this case, the consumers should be allowed to exercise the right to rescind the contract timely to retrieve their loss.
On top of that, as the prepaid card issuer, Jiying Company should have properly preserved the consumption information of the prepaid cards it sold, and bear the burden of proof in the event of any dispute with consumers over the balance in the cards. The three consumers had provided screenshots of their final balance before the website was closed. Although Jiying Company denied the probative effect of the evidence, it failed to offer the consumers' identity and balance information saying that its website was no longer accessible. If so, Jiying Company should bear the adverse consequences of lack of evidence according to the law.
Shanghai No.1 Intermediate People's Court announced in court to dismiss the appeal of Jiying Company and affirm the original judgment.
In recent years, the infringements on prepaid card operators' rights and interests have seen an upward spiral and become a great concern of the whole society. In order to strengthen effective supervision over operators, regulate card issuance, protect the legitimate rights and interests of consumers effectively and build a good market environment, Regulations of Shanghai Municipality on the Management of Single-purpose Prepaid Card was officially implemented from January 1, 2019, which not only broadens the definition of prepaid card and clarifies the competent authorities, but also defines a whole set of regulatory system for information docking, risk warning and credit governance, etc. involved in the management of prepaid cards.
The court suggests that when purchasing prepaid cards, the consumers should log on the unified platform for co-supervision of single-purpose prepaid cards of Shanghai to check such information as docking, risk warning and credit rating, etc. of operators, while enhancing their awareness of self-protection and spend wisely; on the other hand, the operators shall be honest and provide premium services. Dishonest operators will eventually be weeded out from the market.
[Relevant Laws]
1. Contract Law of the People's Republic of China
Article 60 Each party shall fully perform its own obligations as agreed upon.
The parties shall abide by the principle of good faith, and perform obligations of notification, assistance, and confidentiality, etc. in accordance with the nature and purpose of the contract and the transaction practice.
Article 94 The parties to a contract may terminate the contract under any of the following circumstances:
(1) it is rendered impossible to achieve the purpose of contract due to an event of force majeure;
(2) prior to the expiration of the period of performance, the other party expressly states, or indicates through its conduct, that it will not perform its main obligation;
(3) the other party delayed performance of its main obligation after such performance has been demand, and fails to perform within a reasonable period;
(4) the other party delays performance of its obligations, or breaches the contract in some other manner, rendering it impossible to achieve the purpose of the contract;
(5) other circumstance as provided by law.
Article 107 If a party fails to perform its obligations under a contract, or its performance fails to satisfy the terms of the contract, it shall bear the liabilities for breach of contract such as to continue to perform its obligations, to take remedial measures, or to compensate for losses.
2. Civil Procedure Law of the People's Republic of China
Article 253 Where the party against whom enforcement is sought fails to perform any obligation of pecuniary payment during a period specified in a judgment, ruling or any other legal instrument, the party against whom enforcement is sought shall pay double interest for the debt for the period of deferred performance. If the party against whom enforcement is sought fails to perform any other obligation during a period specified in a judgment, ruling or any other legal instrument, the party against whom enforcement is sought shall pay a late fee for deferred performance.
3. Regulations of Shanghai Municipality on the Management of Single-purpose Prepaid Card
Article 17 Where the honor of single-purpose card is affected due to reasons such as suspension of business, closure or relocation of the business premises, the operator shall issue a notice 30 days in advance and notify the registered card holders by telephone, short message or e-mail, etc. Card holders shall have the right to demand continued performance or return of the balance in accordance with the Charter or contract agreement.
(Author: Li Danyang, Shanghai No.1 Intermediate People's Court)
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