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案例评析

Shipbuilding Contract Dispute

2013-09-05

Appellant (defendant of the first instance and plaintiff of the counterclaim): Ningbo Beilun Hengfa Shipbuilding Company (“Hengfa Company”)

 

Appellee (plaintiff of the first instance and defendant of the counterclaim): Shanghai Huitong Shipping Company (“Huitong Company”) 

 

On 10 November 2009, Huitong Company entered into a shipbuilding contract with the third party, Ningbo Beilun Lantian Shipbuilding Company (“Lantian Company”), by which Lantian Company agreed to build one stainless steel chemical vessel for Huitong Company. The parties agreed the applicable rules, contract price, time for steel cutting, construction period of the vessel in the contract. The contract also provided that if Lantian Company could deliver the vessel ahead of the delivery dated, Huitong Company would pay RMB20,000 per day to Lantian Company as the bonus and if Lantian Company failed to deliver the vessel in accordance with the delivery date, Lantian Company would pay RMB20,000 per day to Huitong Company as the penalty. The calculation of the bonus or penalty mentioned above shall be limited to one month. 

 

Huitong Company and Lantian Company entered into two addenda to the shipbuilding contract on 10 November and 15 November 2009 respectively.

On 16 August 2011, Huitong Company and Hengfa Company signed Shipbuilding Settlement Agreement, Shipbuilding Arrears Agreement, Supplementary

Agreement related to the Warranty Work of the Vessel, Supplementary Agreement for Party A to be Responsible for the Taxation. The above agreements provided that Lantian Company was replaced by Hengfa Company, the construction of the vessel was completed on 8 August 2011 and met the requirements of the classification society and Huitong Company, the total contract price (exclude the taxation, which shall be undertaken by Huitong Company), the preferential price, balance of the contract and its payment and the issuance of invoice. 

 

On 18 November 2011, Huitong Company and Hengfa Company completed the delivery and acceptance of the vessel and signed the PDA.

This is a shipbuilding contract dispute, the legal issues of this matter are as follows: 1. whether Hengfa Company should pay the penalty in sum of RMB600,000 to Huitong Company; and 2. the amount of taxation undertaken by Huitong Company.

 

The second instance court held that, in respect of legal issue 1, the parties agreed in the Shipbuilding Arrears Agreement that the contract price of the vessel was RMB40,800,000. Huitong Company has paid RMB29,000,000, with the remaining RMB11,800,000 unpaid. Huitong Company should pay the balance on or before 12 September 2011. Hengfa Company should deliver the vessel to Huitong Company after it paid the balance contract price. According to the facts found in the first and second instance, Huitong Company has paid off the contract price on 9 September 2011. So, the conditions of delivery of the vessel have been satisfied. However Hengfa Company did not deliver the vessel until 18 October 2011. Therefore, according to the provisions of the shipbuilding contract, Hengfa Company shall pay RMB600,000 to Huitong Company as the penalty.

 

In respect of legal issue 2, the notification submitted by Hengfa Company did not mention the taxation issue. In addition, according to the provisions of Supplementary Agreement for Party A to be Responsible for the Taxation, if in the further, the local tax department levies tax on Hengfa Company, Huitong Company shall be responsible. However, the present evidence could not prove that the local tax department levied tax on Hengfa Company, so Hengfa’s requirement to ask Huitong Company to undertake the taxation lacks legal basis, which shall be returned to Huitong Company. Therefore, the second instance court dismissed the appeal and upheld the judgment made in the first instance.  

 

August 30, 2013
Shanghai International Shipping Institute

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