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Referee Gist

The agreement between the two parties on the implanted products in the "Cooperation Agreement on Implanted Advertising" is that "the implanted brand/product in the play is a series of products of the RENA brand (logo: RENA)" "Party A will, before April 17, 2016, provide products and derivatives with Party A's product logo", other than that, there is no specific agreement on the variety and model of the product. That is, the agreement does not stipulate that the products of Rena that have not been filed and reviewed by the relevant administrative authorities must be used as props. Therefore, from the point of view of the purpose, content and form of the contract between the two parties, there is no mandatory provision in violation of laws and administrative regulations.

Case Introduction

On April 22, 2016, Rena Company (a U.S. company) and Shangmei Company signed the "Advertising Cooperation Agreement", stipulating that in the TV series "Beijing Meets Seattle", the plaintiff Rena Company's brand should be placed in advertisements in the form of ad placement. and its products for promotion. After the contract was signed, Rena Company paid 60% of the total advertising fee, or 4.8 million RMB, to Shangmei Company as agreed. However, Shangmei did not broadcast the TV series "Beijing meets Seattle" before the end of December 2017 as agreed. The behavior of still charging for each company without providing advertising services caused huge economic losses to Rena, so it filed a lawsuit to the court, requesting the court to support Rena's claim.

Legal Claims

Rena Company requested the court to order: 1. Shangmei Company will return 4.8 million yuan of advertising fees; 2. Shangmei Company will pay liquidated damages of 1.44 million yuan; 3. Shangmei Company will pay from January 1, 2018 to the date of actual payment. The interest is temporarily calculated to be 301,020 yuan until June 4, 2019, and the interest is calculated at 4.35%.

Defendant's Rebuttal

Shangmei Company responded and filed a counterclaim: Rena Company’s claim was not recognized, and the products that Rena Company provided to us for embedding in TV dramas did not comply with relevant Chinese laws and regulations, involving a total of 15 products, of which 2 were filed in The Food and Drug Administration of China , 5 models have expired, and the remaining 8 models have not been filed. Rena Company's behavior is concealed and suspected of fraud. Shangmei Company believes that the "Advertising Cooperation Agreement" is invalid.

Shangmei Company filed a counterclaim, requesting the court to order:

1. The "Advertising Cooperation Agreement" signed by Shangmei Company and Rena Company is invalid;

2. Rena Company compensates Shangmei Company for the loss of 800,000 yuan in service fees, and due to The loss of operating income caused by the lawsuit was 1.6 million yuan, and the loss of brand reputation was 10,000 yuan, with a total of 2.41 million yuan;

3. In response to the fact that “some actors used unreviewed products during the filming of TV dramas”, Rena Company in its A statement was issued on the official WeChat account and 10 central news media, stating that the fault had nothing to do with Shangmei, and fully explained the facts and the whole story.

Verdict

First instance:

1. Shangmei Company returned the advertising fee of 4.8 million yuan and compensated 1.44 million yuan of liquidated damages within ten days after the judgment came into effect;

2. Rejected other claims of Reina Company;

3. Rejected Shangmei Company’s claims all counterclaims.

Second instance: The appeal was dismissed and the original judgment was upheld.

Case Analysis

In this case, the focus of the dispute between Rena Company and Shangmei Company is: 1. Whether the "Advertising Cooperation Agreement" is an invalid contract; 2. Whether Shangmei Company should be liable for breach of contract. Regarding the validity of the "Advertising Cooperation Agreement". Shangmei Company claimed that 8 out of 15 implanted products provided by Rena Company had not been filed, and Rena Company had not informed them when the contract was signed, that there was fraudulent behavior, and the products were advertised without being recorded, which damaged the public interest. It violated the provisions of the "Regulations on Hygiene Supervision of Cosmetics", "Detailed Rules for the Implementation of the Regulations on Cosmetics Hygiene Supervision" and the "Advertising Law of the People's Republic of China". Therefore, the "Advertising Cooperation Agreement" violated Article 52 of the "Contract Law of the People's Republic of China". The provisions of (1), (4) and (5) will be deemed invalid.

The court held that, first of all, the "Advertising Cooperation Agreement" signed by Rena Company and Shangmei Company stipulated that Rena Company's brand and its products should be promoted in the form of advertisement content in order to enhance the corporate image and brand awareness. There is no agreement on the specific products to be implanted in the agreement, and Shangmei has not submitted evidence to prove that the two parties have reached an agreement on the implantation of the 15 products after signing the "Advertising Cooperation Agreement".

Secondly, Article 7, Paragraph 3 of the "Cooperation Agreement on Implanted Advertising" stipulates that Rena Company will provide all props and materials and physical products required for filming in accordance with the requirements of Shangmei Company and the crew. The specific list will be provided by Rena Company to Rena Company in writing. According to the above agreement, the products implanted in the TV series are not selected and decided by Rena Company voluntarily. Therefore, Shangmei Company claims that Rena Company’s 8 a products are required to be implanted in the form of advertisements without filing the reason for fraud established. Furthermore, combined with the fact that the TV series "Beijing meets Seattle" has not yet been broadcast, Shangmei's product placement in "Beijing meets Seattle" has not yet produced advertising effects, and there is no harm to social and public interests, and besides the company did not submit sufficient evidence to prove that the "Advertising Cooperation Agreement" violated the mandatory provisions of laws and administrative regulations, so it was invalid for Shangmei's "Advertising Cooperation Agreement", and further demanded Rena Company to compensate the loss of service fee cost 80% 10,000 yuan, a loss of 1.6 million yuan in operating income due to the lawsuit, and a loss of 10,000 yuan in brand reputation, and the counterclaim requesting Rena company to publish a statement on its official WeChat account and 10 central news media cannot be established.

To sum up, the "Advertising Cooperation Agreement" is a legal and valid contract, and both parties should strictly perform the obligations stipulated in the contract. Regarding the liability for breach of contract existing by Shangmei Company. According to Article 9 of the "Advertising Cooperation Agreement", if the drama cannot be broadcast on the agreed platform before the end of December 2017, Party B will refund 50% of the payment; if the drama cannot be broadcast by the end of March 2018 on the agreed platform, Party B will refund 80% of the paid amount. If the play cannot be broadcast on the agreed platform before the end of June 2018, Party B will refund 100% of the payment. During the trial, both parties agreed that "Beijing Meets Seattle" involved in this case was not broadcast on the agreed platform before the end of June 2018. Therefore, Rena Company asked Shangmei to refund the 4.8 million yuan paid, which was based on the contract.At the same time, according to Article 9 of the "Advertising Cooperation Agreement", when either party violates the responsibilities and obligations under this agreement, the breaching party will compensate the other party for the direct economic losses suffered, and at the same time compensate 30% of the total amount of this agreement. The liquidated damages (including but not limited to reasonable attorney fees and other rights protection costs), now Rena Company requires Shangmei to pay 30% of the 4.8 million yuan paid for liquidated damages, which is the party's disposal of his/her own rights. No objection to this.

Lawyer’s view

According to Article 153 of the Civil Code, civil legal acts that violate the mandatory provisions of laws and administrative regulations are invalid. However, unless the mandatory provision does not make the civil legal act invalid. Civil legal acts that violate public order and good customs are invalid. Article 153 of the "Civil Code" refers to a legal act in violation of laws and administrative regulations, which refers to a civil legal act that violates the mandatory provisions of laws and administrative regulations in the purpose, content and form of the parties signing the agreement. The agreement between the two parties on the implanted products in the "Cooperation Agreement on Implanted Advertising" is that "the implanted brand/product in the play is a series of products of the RENA brand (logo: RENA)" "Party A will, before April 17, 2016, “provide products and derivatives with Party A’s product logo”, other than that, there is no specific agreement on the variety and model of the product, that is, the agreement does not stipulate that the company must use Rena’s products that have not been filed and reviewed by the relevant administrative authorities as props. Therefore, from the point of view of the purpose, content and form of the contract between the two parties, there is no mandatory provision in violation of laws and administrative regulations.At the same time, although Rena Company provided some physical products required for filming in the list that have not been filed and reviewed by the relevant administrative authorities, the "Advertising Cooperation Agreement" also stipulates that "Party A is responsible for providing the filming of the drama according to the requirements of Party B and the crew. Therefore, according to the agreement, if Shangmei Company finds that the props products provided by Rena Company do not meet the relevant regulations, it can request Rena Company to provide other products as substitutes, and it has the right not to use this product. That is, the act of Rena Company providing some products that have not been filed and reviewed by the relevant administrative authority does not affect the normal performance of the agreement. Therefore, Shangmei's grounds for appeal for claiming that the "Advertising Cooperation Agreement" is invalid has no factual and legal basis.

Beijing Fourth Intermediate People's Court (2018) Jing 04 Min Chu No. 484 Civil Judgment

Beijing Higher People's Court (2020) Jingminzhong No. 35 Civil Judgment

https://wenshu.court.gov.cn/website/wenshu/181107ANFZ0BXSK4/index.html?docId=54bc959a0f674c518b1aac7f000a2359

Statement:

This article was originally created by lawyers of JAVY Law Firm, and only represents the author's own views, and should not be regarded as a formal legal opinion or suggestion issued by JAVY Law Firm or its lawyers. If you need to reprint or quote any content of this article, please indicate the source.