[Case Review]

A design company and a furniture company tried to enter into a furniture customization contract. The salesperson of the furniture company led staff of the design company to the factory and exhibition hall of M (a furniture brand), showing them the samples. Staff of the design company selected some furniture samples and styles with the logo of M in the exhibition hall. After that, the two sides discussed in the WeChat group on the style, quantity, color, size, price, etc. of the furniture purchased.

The design company then signed with the furniture company the Purchase and Sale Contract, to which a list of the furniture pictures, names, and colors (along with the color cards, some of which have the logo of M) is attached, but it does not specify that the furniture brand to be purchased is M. After the contract was signed, the design company paid a total of over RMB 480,000 yuan.

As the furniture company started delivering and installing the furniture, the design company complained that the furniture delivered was of poor quality and not produced by M. The furniture company admitted that only 15% of the furniture delivered was produced by M. The design company then filed a lawsuit with the Court, demanding that the Purchase and Sale Contract be terminated, and that the furniture company retrieve the furniture that had been delivered on its own and return the payment, and compensate for its losses.

The furniture company argued that they should continue to perform the Contract as it does not specify the furniture brand; and that it cannot retrieve the furniture delivered because it cannot restore customized furniture to the original state.

[Case Study]

According to the Court, although the Purchase and Sale Contract does not specify the furniture brand that the furniture company should deliver, the furniture company did enough to make the design company believe that furniture it orders is produced by M: showing the latter the factory and exhibition halls of M, indicating or implying many times that M¡¯s factory was owned by it, and letting the design company choose from the color cards marked with M¡¯s logo. And M¡¯s employees also played a role when the design company visited its factory and exhibition halls. Therefore, the furniture company should have delivered M furniture to the design company. However, only 15% of the furniture actually delivered by the furniture company is produced M, which is obviously a breach of contract, and the partial performance of the furniture company is not enough to achieve the contractual purpose of the design company for customized furniture, so the Purchase and Sale Contract should be terminated.

In summary, the design company¡¯s litigation shall be supported.

As customized furniture grew rapidly in recent years, some dealers, with the authorization of larger brands, claim that the furniture they sell are produced by larger brands, but in fact, after receiving an order, they would find a cheaper and smaller factory for production or installation, so as to maximize the profit. Such behavior would, on the one hand, seriously infringe on the legitimate rights and interests of consumers, making it impossible for them to tell whether the products they buy are genuine and to buy things they really want; on the other hand, damage the sales channels and credibility of well-known brands in the industry, hurt their goodwill and interests, and destroy a business environment featuring fairness, justice and integrity.

¡°Fraud in order fulfillment¡± is a typical dishonest behavior in business and the judgment on this case will help regulate and direct the industry of customized furniture and contribute to its healthy and orderly development.

[Relevant Laws]

I. Several Provisions of the Supreme People¡¯s Court on the Retroactivity in the Application of the Civil Code of the People¡¯s Republic of China

Article 1 ...

Cases of civil disputes arising from the legal facts occurring before the Civil Code comes into force shall be governed by the laws and judicial interpretations in force at that time, except as otherwise provided for by any law or judicial interpretation.

...

II. Contract Law of the People¡¯s Republic of China

Article 60 Each party shall fully perform its own obligations as agreed upon.

...

Article 94 The parties to a contract may terminate the contract under any of the following circumstances:

...

(5) Other circumstances as provided by law.

Article 97 After the termination of a contract, performance shall cease if the contract has not been performed; if the contract has been performed, a party may, in accordance with the circumstances of performance or the nature of the contract, demand the other party to restore such party to its original state or adopt other remedial measures, and such party shall have the right to demand compensation for damages.

(By: Qin Ling, Wang Dongjuan, Jin Yutong, and Yan Danchi, Shanghai Yangpu District People¡¯s Court)