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Recently, solicitors Tian Qiuying and Zhang Jin, partners at JAVY Law Firm, alongside trainee solicitor Song Weichen, handled a sales contract dispute involving food products, prepaid consumption, standard form contracts, and small claims procedures. Plaintiff Li (pseudonym) sued Defendant Zhang (pseudonym) and a Beijing-based trading company, seeking termination of the unfulfilled portion of the sales contract and refund of the purchase price. Following court hearings and multiple rounds of communication with the judge, the court ultimately upheld the plaintiff's claims, concluding the case at first instance.

Case Summary

Li Mou was introduced to Zhang Mou through an acquaintance. Following offline discussions, Li purchased over ten food items from Zhang, paying the full amount in person. The payment recipient was listed as Zhang's studio (an individual business operator). The delivery arrangement stipulated that goods would be dispatched after Li notified Zhang of the shipment time and quantity. Upon receiving the first two items, Li found the packaging non-compliant. Furthermore, when requesting an invoice, he discovered the studio had delayed issuance and ultimately provided an invoice from an entity other than the payment recipient. Consequently, Li developed concerns regarding food safety. Under these circumstances, Li refused further deliveries and demanded a refund. The seller, however, refused the refund and responded vehemently, stating that customised food items were non-refundable. Upon checking business registration records, it was discovered that the receiving studio lacked food sales qualifications. Li Mou consequently lodged a complaint with the Municipal Supervision Bureau, which ordered the studio to rectify its practices and expand its business scope to include pre-packaged food sales.

Regarding the refund matter, Mr Li initiated legal proceedings. However, the studio arbitrarily deregistered during the litigation process. Consequently, Mr Li filed another lawsuit against the operator, Mr Zhang, as the defendant. During the proceedings, following communication with the court, a Beijing-based company named on the delivery packaging was added as a co-defendant.

During the trial, the defendant argued that the actual seller was the Beijing company, not the individual defendant, and that the defendant had not engaged in illegal business operations. The defendant maintained that the customised food had already been produced and was non-refundable, submitting a signed ‘Membership Handbook’ (containing a physical card stating that cards would not be refunded once delivered). The plaintiff claimed the signature was forged and requested a forensic examination (the court determined that the examination would not affect the case outcome and was therefore unnecessary).

Legal Opinion

Upon accepting the mandate, counsel countered the defendant's defence as follows:

- As a consumer, the plaintiff lacked a written contract at purchase. Without explicit clarification, it was reasonable to assume the payment recipient was the seller. Given the studio had faced administrative measures from the Municipal Administration for Market Regulation, it was evident the studio was an unlawful seller at the time. The consumer had legitimate grounds to lose trust in the defendant, rendering continued performance manifestly unfair; The invoice issued by the Beijing company was non-compliant; it should have been issued by the studio. The food in question was pre-packaged, specifically pre-prepared meals, with a shelf life of only two months. Production and dispatch occurred according to the customer's specified timing, making it impossible for all items to be fully prepared at the time of payment. The amount paid by the plaintiff constituted prepaid stored value, and the plaintiff was entitled to request a refund for the undelivered portion. This contract constitutes a continuing obligation under the Civil Code, allowing the creditor to terminate at any time. Regardless of whether the Membership Handbook was signed by the plaintiff, standard terms restricting consumer rights are invalid.

Judgment Outcome

The court ultimately upheld the plaintiff's claim for a refund, with key findings including:

This contract constitutes an indefinite agreement involving continuous performance, allowing the consumer to terminate any unfulfilled portion at any time, effective from the date of notification to the merchant;

Certain standard terms are invalid: ‘No refunds once delivered’ constitutes an unreasonable restriction on consumer rights and should be deemed void;

Food products possess inherent characteristics rendering it inappropriate to compel consumers to continue contract performance.

Significance of the Case

Though involving a relatively small monetary value, this case addresses common and typical legal issues, primarily concerning the frequent disputes over prepaid refunds. These include matters such as the malicious deregistration of individual businesses, the formation of contracts, the parties involved, the nature of the transaction, the legitimacy and reasonableness of grounds for termination, whether the contract constitutes a bespoke agreement, and the validity of standardised contract terms. Procedurally, it also involved judicial appraisal and small claims procedures, exemplifying the principle that ‘small cases may involve significant matters’. During the trial, significant disputes arose regarding the contract's terminability, causing hesitation among the presiding judge. Following thorough communication between the representative and the court, the final ruling upheld the consumer's claim, with the defendant agreeing to facilitate the refund. The refund has now been completed.

This case holds demonstrative significance for safeguarding consumers' contractual termination rights in food consumption and prepaid transactions. When concluding transactions with consumers, operators should execute written contracts clearly identifying both parties. Contract terms must be designed lawfully and reasonably, with particular attention given to highlighting and documenting clauses restricting consumer rights. The seller, payment recipient, and invoice issuer should align, while invoices and corresponding transactions must reflect genuine dealings to avoid tax compliance issues. When engaging in transactions, consumers should endeavour to sign written contracts that clearly identify the seller. They should carefully review contract terms, particularly those restricting rights, seeking clarification promptly for any unclear provisions and requesting amendments for unacceptable ones. Consumers should also pay attention to the nature of the goods and retain all relevant evidence. Should their rights be infringed, they should seek redress through legal channels.