Sales Contract Dispute｜Wuxi XX Electric Appliance Co., Ltd. v. Changzhou XX Technology Co., Ltd.

Case Overview

The plaintiff, Wuxi XX Electric Appliance Co., Ltd., entered into a Waste Electrical and Electronic Products Acquisition Contract with the defendant, Changzhou XX Renewable Technology Co., Ltd., through public bidding. The contract stipulated that the defendant would purchase the plaintiff’s scrapped washing machines and fully dismantle 100% of the waste equipment in accordance with regulatory requirements. It was explicitly prohibited to resell complete machines or spare parts to third parties. In the event of breach, the plaintiff had the right to forfeit the performance bond of RMB 500,000 and claim liquidated damages at ten times the actual sales amount.

During the performance period, Chen, the legal representative, and Xing, the sales manager of the defendant company, illegally resold the scrapped washing machines to external parties. Subsequently, the waste equipment was refurbished, modified and counterfeited as genuine products and flowed into the market, involving a total value of up to RMB 20 million, which triggered follow-up criminal proceedings and administrative penalties.

The plaintiff initially filed a trademark infringement lawsuit before the Suzhou Intermediate People’s Court and subsequently instituted a sales contract dispute action before the Xinwu District People’s Court of Wuxi. After trial, the court rendered the civil judgment No. (2025) Su 0214 Min Chu XXXX, confirming that the defendant had committed a material breach of contract. The court ordered the defendant to pay contractual liquidated damages of RMB 15 million and ruled that the RMB 500,000 performance bond belonged exclusively to the plaintiff.

Key Case Difficulties

1. Difficulty in Rights Enforcement Path SelectionPrior to the initiation of civil proceedings, multiple decentralized criminal cases had already been heard in different jurisdictions, bringing multiple procedural dilemmas. The case involved complicated cross civil-criminal proceedings, high risks of asset transfer by the defendant, and unclear factual details. The plaintiff faced a critical choice between filing a trademark infringement claim or a contractual breach claim.

2. Difficulty in Confirming the Liable SubjectThe pickup and resale of scrapped washing machines involved multiple parties, including the defendant’s employees, downstream resellers and other participants. The defendant disputed liability by claiming that it had not actually taken delivery of the goods. The core difficulty lay in solidifying evidence to confirm the defendant as the actual selling and liable entity.

3. Difficulty in Cross Civil-Criminal Proceeding HandlingThe case involved an overlap of criminal offenses and civil breach of contract. The defendant argued that the disputes involved crimes of producing and selling counterfeit or substandard products and bribery by non-state functionaries, and claimed that the criminal proceeding first principle should apply to dismiss the civil claim. The key difficulty was to distinguish independent criminal facts from civil contractual breach facts and clarify the applicable boundary of the priority of criminal procedures.

4. Difficulty in Justifying High Liquidated DamagesThe contract stipulated liquidated damages at ten times the sales amount, which the defendant strongly disputed as excessively high. The case contained two major quantification obstacles: the accurate verification of the resale value of scrapped equipment and the precise calculation of the plaintiff’s actual losses caused by counterfeit products. Conventional evidence methods were insufficient to support a high damages claim, requiring multi-dimensional legal argumentation based on material breach nature, the punitive function of contractual liquidated damages, and lost profit quantification to convince the court of the reasonableness of high compensation.

First-Instance Judgment Result

1. Changzhou XX Renewable Technology Co., Ltd. shall pay liquidated damages of RMB 15 million to Wuxi XX Electric Appliance Co., Ltd. within ten days upon the effectiveness of the judgment.

2. The performance bond of RMB 500,000 paid by the defendant to the plaintiff shall be exclusively owned by Wuxi XX Electric Appliance Co., Ltd.

3. All other claims of the plaintiff are dismissed.

Typical Case Significance

1. Establishing a Practical Enforcement Model for Complex Commercial DisputesIn response to decentralized criminal cases, unclear factual details and complex infringement chains, this case adopted an optimized enforcement strategy of priority preservation + flexible cause of action adjustment. The plaintiff first initiated trademark infringement litigation to apply for property preservation, effectively preventing asset transfer and securing enforcement basis. The case was later converted to a contractual breach claim based on clarified facts. Relying on the principle of privity of contract, the litigation simplified trial focuses, eliminating the need to prove subjective intent of multi-layer infringers and focusing solely on the defendant’s core contractual breach. This efficient dispute resolution model provides a replicable enforcement path for multi-subject and multi-link complex commercial disputes, significantly reducing the plaintiff’s evidence burden and enforcement risks.

2. Clarifying Liability Determination Standards for Commercial EntitiesThe defendant attempted to evade contractual liabilities by separating employee conduct from corporate responsibility. The legal team fully sorted out complete evidence including authorization documents, social security payment records, capital flow vouchers and employee court statements, forming an integrated evidence chain. The court confirmed that the resale acts conducted by the defendant’s legal representative and sales manager fell within the scope of job performance and professional agency, and all legal consequences should be borne by the corporate entity. The judgment further clarifies the rules for identifying job-related conduct liability in commercial transactions, emphasizing that enterprises shall be liable for their employees’ operational behaviors and urging market entities to standardize internal management and personnel supervision.

3. Refining Judicial Rules for Civil-Criminal Cross CasesThe judgment clearly distinguishes criminal facts from civil contractual facts. The downstream counterfeiting and internal bribery-related criminal cases involve different liable subjects and legal relationships from the defendant’s contractual breach of illegal resale. The civil dispute can proceed independently of criminal proceedings. This ruling sets clear judicial guidelines for procedural handling of cross civil-criminal disputes, preventing plaintiffs from falling into long-term enforcement deadlock due to delayed criminal trials and ensuring timely and effective civil remedy.

4. Providing a Complete Evidential and Argumentative Template for High Liquidated Damages ClaimsAiming at the common difficulty of loss quantification in commercial disputes, this case established a three-dimensional argumentative system:confirming malicious material breach, clarifying the legal punitive nature of liquidated damages, and quantifying lost profits. By verifying the defendant’s subjective malice and serious breach circumstances, elaborating the legal legitimacy of punitive liquidated damages, and adopting third-party audit data and industrial benchmark standards to quantify economic losses, the case formed a closed-loop argumentation system, breaking the traditional judicial inertia of merely taking actual losses as the sole compensation standard. It provides a mature and replicable litigation template for high-value liquidated damages claims in similar commercial disputes.

5. Refining Judicial Adjudication Rules for the Waste Electrical Disposal Industry and Promoting Industrial StandardizationFocusing on the special regulatory scenario of waste electrical and electronic product dismantling, this case targets the prevalent industry violation where qualified dismantling enterprises illegally resell scrapped equipment. The court confirmed that such illegal resale constitutes a material contractual breach, leads to market circulation of counterfeit refurbished products, violates the Green Principle stipulated in the Civil Code, disrupts fair market competition, and damages consumer rights and public interests. The judgment refines industrial liability determination rules, draws clear behavioral red lines for waste recycling and dismantling enterprises, promotes the standardized and rule-of-law development of the waste electrical disposal industry, and balances multiple judicial values including ecological protection, consumer rights protection and fair market order maintenance.