Reference: (2017) Yue 01 Min Chu 114 Hao
Issued By: Guangzhou Intermediate People’s Court of Guangdong Province
Plaintiff: Wu Hua Engineering Tech Co. , Ltd.
Plaintiff: Commerce & Tourism Group Co. , Ltd.
Defendant: 9 Air Co. , Ltd.
In respect of the dispute arising from the contract between the plaintiff Jiangsu Wuhua Engineering Technology Co., Ltd. (hereafter referred to as Jiangsu Wu Hua) and Commerce & Tourism Group Co., Ltd. of Hong Kong (hereafter referred to as Hong Kong Commerce and Tourism) and the defendant 9 Air Co., Ltd. (hereafter referred to as 9 Air), the court accepted this case on April 13, 2017 and overruled the jurisdiction objection on August 18, 2017 which was raised by the defendant on June 7, 2017. On September 1, 2017, the defendant refused to accept the ruling and lodged an appeal and Higher People’s court of Guangdong Province ordered rejection of the appeal and affirmed the ruling of the court hereinabove on December 25, 2017. This court applied the ordinary procedure according to law and held public hearing afterwards. The trial of this case has now been concluded.
On the issue of application of the proper law in this case, the plaintiffs claimed that the law of the mainland of China should be applied as the applicable law in this case.
Reasons are as follows:
In the Letter of Intent (hereafter referred to as LOI) of the case, both the buyer (the plaintiffs) Jiangsu Wuhua and Hong Kong Commerce and Tourism and the seller (the defendant) 9 Air are Chinese companies. The object of this trade is civil aircraft and the aircraft in the case was initially registered as Chinese nationality and it never changes up till now. Considering that the dispute between the parties in the case are arising from the trade of civil aircraft, in accordance with the provision of Article 185 of Civil Aviation Law of the People's Republic of China, the law of the State in which the nationality of a civil aircraft is registered shall be applicable to the acquisition, transference and extinction of the ownership of the civil aircraft. Therefore, the law of Mainland China should be applied as the applicable law in this case. The agreement in the "LOI" involved in the case that "this LOI shall be governed by English law and interpreted in accordance with English law" should be an invalid agreement.
The defendant 9 Air answered as follows:
I. Whereas the agreement in the LOI that the case shall apply English law is lawful and valid, English law shall be the applicable law in this case.
II. Pursuant to English law, the deposit collected by the seller may not be refunded. Details refer to the Report of Law Ascertainment submitted by the defendant.
III. Even if the case applies China’s law, the defendant also has the right not to refund the deposit.
(I) There is no circumstance in which the LOI should be rescinded or dissolved. According to the provision of Article 54 of Contract Law of People’s Republic of China (hereafter referred to as Contract Law), any contract which is made under substantial misunderstanding, any contract the making of which lacks fairness, or any contract which is entered into as a result of deceit, coercion or taking advantage of a party’s difficulties is a voidable contract. Substantial misunderstanding generally refers to a party’s wrong understanding on the subject matter, or the quantity and quality of the subject matter. There is no substantial misunderstanding, for the plaintiffs know precisely the model and specification of the civil aircraft in the trade. The price of the civil aircraft in this case is also a normal market price, and both parties are professional businessmen engaged in commercial transactions. There was no obvious unfairness in the price at which the plaintiffs sold the aircraft to the defendant. The LOI is an agreement reached by both parties and their lawyers through multiple rounds of discussion and negotiation. The LOI is a consensus reached by both parties and their lawyers after multiple rounds of discussion and negotiation, hence there is no deceit, coercion or taking advantage of a party’s difficulties. Therefore, the LOI is the true expression of intention of both parties, and the plaintiffs have no error in expression of intention or cognition. In a word, the plaintiffs’ claim has no factual basis in that there is no situations where the contract could be rescinded in the case. Meanwhile, the clauses in the LOI which are not legally binding has been terminated at the expiration of the agreed term and they cannot be dissolved again. And the clauses of costs and expenses, confidentiality, LOI Deposit and governing law which are legally binding should not be dissolved because there is no statutory ground for cancellation as stipulated in Article 94 of the Contract Law. The LOI aims to urge both parties to perform in good faith and finally conclude a sales contract. The case is not under the circumstance that aim cannot be attained because of force majeure. As the observant party, the defendant has never indicated that it would not perform the obligations specified in the LOI or delayed the performance of relevant obligations. Instead, the defendant always actively bears its responsibility of the Letter. It has urged the plaintiffs to conclude a sales contract since December 2016, and promised to satisfy all demands of the the plaintiffs. Nevertheless, the plaintiffs unilaterally terminated the trade on December 12, 2016 and refused to conclude a contract. In the case, the failure of the aim of the LOI is entirely due to the plaintiff’s unilateral unwillingness to continue the trade. In consequence, the plaintiff’s claim for dissolution of the binding clauses in the LOI for the reason that both parties could not reach an agreement on concluding a contract is baseless.
(II) Considering that the deposit specified in the LOI in the case is covenant deposit in law, after the plaintiffs refused to conclude the principal contract, they have no right to demand the refund of the deposit. Under the provision of Article 115 of Interpretation of the Supreme People’s Court on Certain Issues Concerning the Application of the Guarantee Law of the People’s Republic of China, where the parties agree to pay a deposit to secure the conclusion of a principal contract, if the party paying the deposit refuses to conclude the contract as agreed, she or he shall not have the right to demand a refund of the deposit; where a party receiving the deposit refuses to conclude the contract, she or he shall refund twice the amount of the deposit. In the case, for the reason that the aim of the deposit specified in the LOI is to secure the conclusion of the principal contract, its legal character is covenant deposit stipulated in the above article. The plaintiffs have no right to demand the defendant to refund the deposit due to its unilateral refusal to conclude a formal sales contract of civil aircraft. The court shall dismiss its claim for refund of the deposit. Furthermore, in accordance with the provision of Paragraph 1 of Article 120 of Interpretation of the Supreme People’s Court on Certain Issues Concerning the Application of the Guarantee Law of the People’s Republic of China, the penalty rule of deposit may be applied when the purpose of the contract cannot be fulfilled due to one party’s delay in performance or other breach of the contract, except as otherwise stipulated by laws or agreed by the parties. In the case, in the light of termination clause of LOI and explicit agreement of deposit, when and only when “the civil aircraft is completely destroyed prior to the delivery” or “not later than December 15, 2016, after the pre-inspection of the aircraft, buyer reasonably informs seller in writing that the aircraft (and its technical support) do not meet the conditions under the LOI”, the plaintiff’s could demand the defendant to refund the deposit and no refund in other cases. During the relevant period as agreed in the LOI, whether No. MSN61355 civil aircraft which is originally agreed in the LOI or the No. MSN61356 civil aircraft which is agreed to change by both parties by mail after the concluding of the LOI, the subject matter is salable and deliverable without any damage. The defendant notified the plaintiffs of pre-inspection of the civil aircraft on December 12, 2016 and December 14, 2016 respectively, but the plaintiffs refused twice and they had never notified in writing that the civil aircraft does not meet the delivery conditions before December 15, 2016. In consequence, the conditions of refund agreed in the deposit clause of the LOI is not met and the defendant has never prevented the fulfillment of the conditions. On the contrary, the plaintiffs refused to perform the obligations specified in the LOI. They waived the pre-inspection of the civil craft and refused to conclude a formal sales contract. Based on this, the plaintiffs have no right to demand the refund of the deposit.
(III) Even if the court doesn’t identify the deposit as covenant deposit, it also belongs to the liquidated damages for an pre-contract. Whereas the failure of concluding a formal sales contract is entirely due to the plaintiffs’ fault, the plaintiffs shall bear the liability for breach of the pre-contract. Pursuant to the provision of Article 2 of Interpretation of the Supreme People’s Court on Issues Concerning the Application of Law for the Trial of Cases of Disputes over Sales Contracts, where both parties have signed pre-contract such as purchase offers, purchase orders, subscription books, letters of intent, and memorandums, and have agreed that a sales contract is to be concluded within a certain period of time, if one party does not perform the obligation of concluding a sales contract and the other party requests that it bear liability for breach of the pre-contract or demands the dissolution of the pre-contract and claims compensation for damages, the people’s court shall support such claims. The content of the LOI in the case is that both parties agrees to conclude a formal sales contract within a certain period of time, therefore it is a pre-contract by law and the deposit clause thereof could be deemed as the clause concerning the liability of breach of the pre-contract. In the case, after signing the LOI, the defendant has demonstrated a high degree of contractual spirit and a strong willingness to actively urge the conclusion of a sales contract in its own deed. It fully performed its obligations specified in the LOI, and has got everything ready for concluding a sales contract of the civil aircraft and the delivery hereof at any time. During the period from the signing of the LOI by both parties’ to December 21, 2016, the defendant has actively fulfilled the contents of the LOI. It constantly urged the plaintiffs to conclude a sales contract of the civil aircraft and modified the trade text several times according to the plaintiffs’ requests, while the plaintiffs prevaricated, delayed and refused to sign the final trade text for various reasons and excuses. Wherefore, this case is not the situation that both parties failed to reach an agreement on concluding a sales contract, but the fact that the plaintiffs unilaterally refused to conclude a sales contract without any reason after the defendant had satisfied all of their requests. The failure to conclude a sales contract is completely due to the plaintiff’s fault. According to the provision of Article 2 of Interpretation of the Supreme People’s Court on Issues Concerning the Application of Law for the Trial of Cases of Disputes over Sales Contracts, the plaintiffs shall bear the liability for breach of the pre-contract. The agreement concerning deposit in the LOI plays a role in assessing the loss given default and guaranteeing the performance of the contract, and it is punitive and redemptive when related situations of breach of contract occur. The fact that the defendant has the right to not refund the deposit, is exactly the reflection of the plaintiff’s bearing of the liability for breach of contract. The defendant has spend plenty of manpower and material resources for this aircraft transaction. Under the circumstances that the plaintiffs obviously violated the principle of good faith and constituted a breach of contract, it’s apparently contrary to the principle of fairness and reasonableness regulated in Article 6 of General Rules of Civil Law if the court orders the defendant who has performed in good faith to refund the deposit. Therefore, the court shall reject the plaintiff’s claim concerning demanding the refund of the deposit.
(IV) Even if the court identifies the deposit of the LOI as charges in the nature of advance payment, China’s law and judicial practice respect and protect the autonomy of the parties concerning the deposit and the court shall support the defendant’s right to retain the deposit according to agreements of the LOI. At the very least, even if the court identifies the deposit as advance payment, the advance payment may not be returned under what circumstances, China’s law fully respects the agreements and autonomy of will of both parties. Therefore, even if the charges specified in the LOI is identified as advance payment in legal character, in accordance with the explicit agreements in the LOI, there is no situation in which the deposit must be refunded, thus the plaintiffs have no right to demand the refund of the deposit. In addition, in the field of international trade of aircraft, it is a international trade practice and business rule prevailing in the industry that the buyer and the seller sign a letter of intent prior to concluding a formal sales contract and then the seller receives a certain amount of money from the buyer and both parties agree not to refund it where the concluding of a formal sales contract is failed. In the case, the fact that the defendant has the right not to refund the deposit, is not only the embodiment of trade convention, but also the necessity of maintaining trade safety and encouraging contractual spirit.
In conclusion, the defendant requested that this court shall support its claims and reject all the claims by plaintiffs according to law.
Legal Ascertainment
In accordance with the “applicable law” clause of the LOI, saying that “the LOI shall be regulated by British Law and shall be interpreted in line with British Law”, both the plaintiffs and the defendant provided the “Legal Ascertainment Report”. 9 Air first entrusted Benchmark Chambers International (now renamed as Benchmark Chambers International & Benchmark International Mediation Center) (BCI &BIMC) to issue the “Legal Ascertainment Report”.
At the trial of the case, the plaintiffs Jiangsu Wuhua and Hong Kong Commerce and Tourism applied for the lawyer Yang Peicai of Holman Fenwick Willan (HFW) who issued the “Legal Ascertainment Report” to testify as an expert witness. The defendant 9 Air also applied for the barrister Liao Yuling hired by BCI&BIMC for issuing the “Legal Ascertainment Report” to appear in court as an expert witness.
At the trial of the case, the plaintiffs Jiangsu Wuhua and Hong Kong Commerce and Tourism applied for the lawyer Yang Peicai of Holman Fenwick Willan (HFW) who issued the “Legal Ascertainment Report” to testify as an expert witness. The defendant 9 Air also applied for the barrister Liao Yuling hired by BCI&BIMC for issuing the "Legal Ascertainment Report" to appear in court as an expert witness.
The Content of the Ascertainment:
(a) The provisions and precedents of British law regarding the force of law of the LOI.
(b) The provisions and precedents of British Law regarding the circumstances under which a "LOI Deposit" received by the seller may not be returned in the LOI.
(c) The provisions and precedents of British Law regarding the legal liability that the parties may undertake when failing to sign a formal sales contract after the LOI is signed.
The outcome of the Ascertainment:
I. The provisions and precedents of British law regarding the force of law of the LOI. According to the British Law, whether the parties reach a legally binding agreement does not depend on the subjective intentions of the contracting parties but depends on the language and behavior of the parties’ communication between each other. It shall be considered from an objective point of view to find out if the parties agree to reach a legally binding intention. Therefore, it is necessary to objectively consider the contents which clearly stated and signed by the parties in the document when considering the legal effect of the LOI in this case. In the third paragraph of the LOI, it is specifically stated that several clauses are legally binding, namely:
(a) cost and expenses;
(b) confidentiality;
(c) LOI Deposit;
(d) governing law.
The parties agree that these four items shall have full legal effect and bind the parties.
In addition, other provisions of the LOI do not have any binding force, and do not constitute any commitment by the buyer to purchase the aircraft or the seller to sell the aircraft. In the "Termination of LOI", it is specifically stated that if the LOI is terminated, the LOI has no further effect. The seller, buyer and the parent company of the buyer are not liable to other parties, except in the paragraph entitled (a) cost and expenses; (b) confidentiality; (c) LOI Deposit; (d) governing law. Thus, these three parties agree that although the LOI is not legally binding due to the termination, the above four agreements listed in the LOI are valid and legally binding among all parties. For instance, ＪＳＤＣｏｒｐｏｒａｔｉｏｎＰｔｅＬｔｄｖＡＬＷａｈａＣａｐｉｔａｌＰＪＳＣ,ＳｅｃｏｎｄＷａｈａＬｅａｓｅＬｔｄ［2009］ＥＷＨＣ583 case. This case involved an aircraft sale agreement, and the facts are similar to this case (but not totally identical). In this case, the parties (JSD as the buyer, and Wa ha as the seller) signed a non-binding LOI of purchase the aircraft (which is named as “the first LOI"). JSD paid a refundable deposit of USD 1 million. The parties finally did not reach a formal aircraft sales contract, and the seller returned the deposit based on the first LOI. At that time, JSD expressed its interest to purchase another aircraft, and the parties therefore signed another LOI (which named as “the new LOI”). The new LOI stipulates that except for three clauses (including deposit, confidentiality and out-of-pocket costs), the rest clauses have no effect. The main agreement of the new LOI in JSD case (the sale of aircraft) is not legally binding and is ultimately cancelled due to the failure to sign a formal contract, but some specific provisions (including deposit arrangements) of the new LOI are not therefore deemed automatically void.
II. The provisions and precedents of British Law regarding the circumstances under which a "LOI Deposit" received by the seller may not be returned in the LOI. The provisions of LOI Deposit in the LOI in this case are as follows:
(I) The buyer or the parent company of the buyer shall pay seller LOI Deposit of USD 2 million no later than three business days after the seller and the buyer accept the LOI.
(II) The LOI Deposit is non-refundable, but there are some exceptions as follows: (i) the aircraft is completely destroyed before delivery; (ii) the buyer reasonably informs the seller in writing no later than 15 December 2016 after the aircraft is pre-checked that the aircraft (and its technical support) does not meet the conditions under the LOI. As mentioned earlier, the LOI deposit clause of the LOI has legal force, and non-binding agreement does not necessarily prevent the seller from keeping the deposit paid under the agreement (see Sharmav Simposh Ldd [2013] Ch23). The court will consider the terms of the agreement and the actual situation to decide whether the deposit will not be saved since the consideration has not been fulfilled at all. The Judge, Viscount Simon LC has made an explanation for the non-performance of the consideration in the case ＦｉｂｒｏｓａＳｐｏｌｋａＡｋｃｙｊｎａｖＦａｉｒｂａｉｒｎＬａｗｓｏｎＣｏｍｂｅＢａｒｂｏｕｒＬｔｄ［1943］ＡＣ32: according to British Law, a valid contract must exist that one party makes certain commitment to the other party. But with considering whether there is a “unfulfilled consideration” and therefore whether the amount paid has to be returned, it shall depend on whether the relevant commitments have been fulfilled or not. The “Sharma” case involved real estate trading, the developer and the buyer entered into a non-binding property purchase agreement and the buyer paid a deposit to obtain the developer’s commitment that the developer will not sell the property or provide the property for sale in the market during the related period. Since then, the parties failed to reach a formal agreement, and the sale ends with failure. The buyer claimed for the return of the deposit by the developer. The buyer claims that the agreement based on deposit payment had been cancelled and had no legal effect, so that the developer had no legal basis to collect the deposit. The court rejected the buyer’s request, holding that the buyer had obtained the right that the developer shall not sell the real estate to a third party after his payment, so there was no unfairness for the buyer even without the deposit payback. In the JSD case, the judge held that the deposit payment was supported by consideration. Waha’s liability was to perform the confidentiality clause and not to sell the aircraft on the market during the valid period of the new LOI. In the case of ＴａｎｄｒｉｎＡｖｉａｔｉｏｎＨｏｌｄｉｎｇｓＬｔｄｖＡｅｒｏＴｏｙＳｔｏｒｅＬＬＣ，ＩｎｓｕｒｅｄＡｉｒｃｒａｆｔＴｉｔｌｅＳｅｒｖｉｃｅＩｎｃ［2010］ＥＷＨＣ40, Tandrin sold an aircraft valued USD 31.75 million to ATS, the defendant. In line with the aircraft sale agreement, ATS must deliver the deposit of USD 3 million to a third party to keep. When the aircraft is delivered, ATS shall pay the above-mentioned deposit and the balance of the selling price to Tandrin. ATS did not participated in the pre-delivery procedure as what regulated by the agreement. Tandrin argued that ATS breached the agreement and thus refused to accept the delivery of the aircraft. Tandrin cancelled the agreement and required to obtain the deposit according to the agreement. The court accepted Tandrin’s testimony that non-refundable deposit agreements are common in general aircraft sale transactions. A deposit of 10% of the total sale price is also customary. Considering the terms of the agreement and other facts in the case, it is considered that the deposit in this case is non-refundable.
In this case, the fact that the 9 Air has reserved the aircraft to the plaintiffs after receiving the LOI Deposit, and the fact that 9 Air informed the plaintiffs of the aircraft information and arranged for the buyer to pre-inspect the aircraft, will prove that 9 Air has fulfilled the LOI Deposit’s consideration.
III. The provisions and precedents of British Law regarding the legal liability that the parties may undertake when failing to sign a formal sale and purchase contract after the the signing of the LOI.
The paragraph “Termination of LOI” in the LOI that provides for failure to enter into a formal contract of sale and purchase after the signing of the LOI. In accordance with the agreement, if the formal sale and purchase contract cannot be signed in line with the clauses of the LOI, or any other clearly stipulated “prior conditions” in the LOI cannot be completed before 20 December, 2016 (unless the buyer and seller agree to extend with written consent), the buyer and seller shall first discuss whether to terminate the LOI. If the LOI is terminated, it will not be valid any longer. However, the agreements in the paragraph whose titles named (a) cost and expenses; (b) confidentiality; (c) LOI Deposit; (d) governing law are exceptions. According to the above mentioned regulations in the LOI, the parties must be liable for those four agreements (see the case cited above).
Conclusion:
I. In accordance with the agreement of the LOI, the regulations in four paragraphs whose title named a) cost and expenses; (b) confidentiality; (c) LOI Deposit; (d) governing law has legal effect and can legally bind all parties to the contract. The remaining clauses have no binding force and can be regarded as terminated under the circumstances that the parties do not sign the formal sale contract.
II. The “LOI deposit” clause agreed by parties in the LOI has legal effect itself and is not affected by by dissolution of the main sale agreement of the LOI. And two situations in the LOI that required the return did not occur. There is no non-refundable situation in line with the clauses of the LOI. In addition, 9 Air has provided the buyer with aircraft information and has reserved the aircraft, and also has performed the duty of confidentiality after receiving the LOI Deposit according to the information provided by 9 Air. That is to say, 9 Air has fulfilled the consideration of LOI Deposit. The LOI Deposit non-refundable agreement should not be considered invalid, LOI Deposit should be non-refundable.
III. After the signing of the LOI, the parties did not sign a formal sale contract. According to the provisions of the LOI, (a) cost and expenses; (b) confidentiality; (c) LOI Deposit; (d) governing law, these four paragraphs shall have legal effect, and each party shall bear legal liability for the above four provisions, while the remaining provisions shall be invalid.
Supplementary Ascertainment
BCI & BIMC is entrusted by 9 Air for legal ascertainment on relevant regulations and precedents of the determination of validity of the LOI in the case of the seller has not acquired (or does not enjoy) the ownership of the subject matter under the England law and to issue Supplementary Legal Ascertainment Report.
As noticed on the Supplementary Legal Ascertainment Report, the LOI is a contract signed by the two parties on November 11, 2016, whereby the Seller agrees to transfer the property of the goods (the aircraft) to the Buyer under certain conditions in exchange for money. With reference to Article 2(5) of the Sale of Goods Act 1979, "Where under a contract of sale the transfer of the property in the goods is to take place at a future time or subject to some condition later to be fulfilled the contract is called an agreement to sell". It is clearly stated in Article 5(1) of the Sale of Goods Act 1979 that the goods which form the subject of a contract of sale may be either existing goods, owned or possessed by the seller, or goods to be manufactured or acquired by him after the making the contract of sale. In the case of Kulkarni v. Manor Credit(Davenham)Ltd.[2010]2AllER(Comm)1017, RixLJ has stated in the judgement that at the time of signing the contract of sale, it is a standard practice in the market that the seller can agree to sell the goods not owned or acquired by him at that time, but to be manufactured or acquired after signing the contract of sale and before the agreed date for transfer of property. In the case of Hughes v. Pen dragon Sabre Limited[2016]CTLC9, the Court of Appeal of England has made it clear that Article 5 of the Sale of Goods Act 1979 allows both parties to buy and sell future goods, which including the goods agreed to be sold in the contract that would be acquired by the seller after the conclusion of the contract of sale and would be acquired by the seller depends on the realization of certain conditions which may or may not be realized. There are different rules for the effect on the validity of signing a contract of sale of the subject matter when the seller does not have (that is, has never obtained, will never obtain, rather than have not yet enjoyed) the ownership of the subject matter under the laws of England. (1) With reference to Article 6 of the sale of goods act 1979, where there is a contract for the sale of specific goods, and the goods without the knowledge of the seller have perished at the time when the contract is made, the contract is void. (2) With reference to Article 7 of the sale of goods act 1979, where there is an agreement to sale specific goods and subsequently the goods, without any fault on the part of the seller or buyer, perished before the risk passes to the buyer, the agreement is void. The General Purchase Agreement signed by 9 Air and the Boeing Company means that 9 Air has the right to acquire the ownership of aircraft NO 61355 and NO 61356. With reference to the law of England, the buyer and the seller could also agree to transfer ownership of the subject matter directly from a third party to the buyer. Based on the existing documents, the fact and the reasons for that 9 Air does not enjoy the ownership of the subject matter cannot be concluded. Therefore,the conclusion of the Supplementary Ascertainment Report are as follow: (1) The validity of the LOI signed by the buyer and the seller shall not be void for the reason that the seller did not obtain the ownership of the subject matter at the time of signing. (2) To determine whether it has effect on the validity of the LOI when the seller does not enjoy the ownership of the subject matter, it is necessary to clarify the specific reasons and circumstances for not enjoying the ownership of the subject matter in order to provide appropriate legal opinions based on the facts. There is no factual statement that the seller does not enjoy the ownership of the subject matter.
On December 5, 2018, HFW Law Firm were entrusted by the plaintiffs Jiangsu Wuhua and Hong Kong Commerce and Tourism to issue the Legal Ascertainment Report wherein stated that different legal opinions under the England law were provided based on the documents provided by Jiangsu Wuhua and Hong Kong Commerce and Tourism, especially the Legal Ascertainment Report issued by BCI & BIMC. This Supplementary Report has a different understanding of the background facts of the dispute compared with the Legal Ascertainment Report issued by 9 Air, so it achieves a completely different result in the application of relevant principles and cases. The supplementary background and facts are as follow:
I. The "precondition" of the LOI includes:
Unless both the buyer and the seller agree to postpone in written form, the buyer and the seller and their legal representatives shall discuss, prepare and sign a sales contract which is fully accepted by the buyer and the seller on or before November 22, 2016; Unless the buyer and the seller agree to postpone in written form, the buyer shall accomplish the inspection and satisfaction of relevant documents of aircraft and accomplish the pre-inspection of the aircraft no later than December 15, 2016. However, 9 Air failed to provide any sales contract to the plaintiffs before November 22, 2016. Therefore, 9 Air was the first one to violate the terms of the LOI. Since the beginning of December 2016, the buyer and the seller have begun to discuss the possibility of the aircraft MSN61356 as an alternative to the aircraft MSN61355. In the LOI, the subject matter is refer to the aircraft MSN61355. However, both parties then discussed the reason why the model of the aircraft changed to MSN61356. It is inconsistent with the fact that the general reference of both parties agreed to change the subject matter in the Report issued by 9 Air and blame it on the plaintiffs. The clause of "the pre-inspection of aircraft " in the LOI is specified that the date shall be no later than December 13, 2016. In fact, the pre-inspection and test flight of the aircraft are not carried out on schedule, and the reason is not mentioned in the Legal Ascertainment Report issued by 9 Air.
II. The parties have signed a confidentiality agreement on November 1, 2016. Since the confidentiality agreement was signed by Han Lijun on behalf of 9 Air, 9 Air claimed that Han Lijun was the manager of aircraft introduction and was authorized to deal with the aircraft business with the plaintiffs. Since the applicable law of the confidentiality agreement is British law, although 9 Air did not stamp the company seal on the agreement, as long as the documents are signed by the authorized representative and they shall be valid and binding to the company without the company seal under British law. In addition, it is stated in the confidentiality agreement that the fact that 9 Air has stated to the plaintiffs about the aircraft MSN61355 being produced on-line at that time is incorrect. The aircraft was transferred to Huyi Shanghai company on or before November 21, 2016. Since the Boeing company failed or was unwilling to arrange a test flight of a foreign aircraft or a sold aircraft in the United States, the defendant had to propose to the plaintiffs about replacing the aircraft MSN61355 with the aircraft MSN61356. In this case, 9 Air issued the pre-inspection notice to the plaintiffs on December 12th, 2016, the day before the pre-inspection of the aircraft MSN61355, the purpose of which is to prepare for the confiscation of the buyer's $2 million deposit. In terms of the provisions and precedents of the legal effect of the LOI in British law, it is agreed on the statement in the Legal Ascertainment Report issued by 9 Air that "with reference to the British law, whether the LOI is effective regarding to whether both parties have the intention to be legally bound, but could not be determined solely by the name of the document as the LOI "or any subjective will or understanding of either party. It is also agreed that the Legal Ascertainment Report by 9 Air has binding term of consideration in the LOI in this case, but the following opinions must be supportive: (1) Under the British law, the court will not judge the legal rights or responsibilities of both parties solely from the literal contents in the documents or relevant agreements. If any abnormal or unreasonable contents literally exist in relevant provisions, the court will inspect the relevant background and facts to find out the real will of both parties, which is called the principle of implied terms in the British law. (2) 9 Air claims that Jiangsu Wuhua and Hong Kong Commerce and Tourism fail to meet the two conditions to refund the LOI deposit, so 9 Air can confiscate the deposit of $2 million. Based on the principles of British law above, the court will discuss whether the plaintiffs fail to meet the conditions to refund the deposit by his mistake or by other factors in consideration of the background and facts. The two judgments of the case JSD Corporation Pte Ltd v. ALW aha Capital PJS Candanother mentioned in the Legal Ascertainment Report are very similar to this case both in terms of the terms of the LOI, facts and background and the principles of applicable law, and it is agreed that the case and precedent are applicable to this case. In the two judgement of the case, in addition to studying the terms of the LOI, the two judges also discuss whether the behaviour of the plaintiff or the defendant is at fault or constitute breach of contract considering in detail of the relevant backgrounds and facts. The plaintiffs and the defendant of the case signed a LOI to buy and sell the aircraft No. MSN-313 in which indicates it is not binding except for the terms such as the deposit. Since the buyer decided not to buy the aircraft No.MSN-313 after paying the deposit of $1 million so the buyer negotiated with the seller to buy another aircraft No.MSN-345 and signed a second LOI in similar content. The deposit of $1 million that the buyer paid to the seller under the first LOI was also converted into the first down payment under the second LOI, and then the buyer paid another three installments of deposit of $3.5 million in total. When the sale was not carried out due to various reasons eventually, the buyer demanded a total down payment of $4.5 million from the seller. The first judgement involved the recovery of $3.5 million, and the second involved $1 million. In the first judgment, the deposit clause in the case indicates that the deposit would not be refunded unless the aircraft was completely destroyed or the seller was at fault. The judge stated that although the buyer has signed a LOI indicated that the deposit was non refundable, such a clause did not affect the buyer's claim about its invalidity because it could constitute a penalty clause. Studying the behavior of two parties after signing the LOI, the judge sentenced that the seller must return the second to the fourth installments of the total of $3.5 million deposit to the buyer because of the three faults he has committed. In the second judgment of the case, the clause of the first deposit of $1 million is different from the rest of the deposit because it is indicated in the LOI that the deposit is not refundable after both parties sign the LOI. Both the judges stated that the clause is very unreasonable, harsh and abnormal, so in the judgment they explained that such deposit does not constitute a guarantee that the buyer will practice the trading. In both of the judgement of the cases, the buyer was able to recover all deposits successfully. Clearly that even if the LOI indicates that the deposit is not refundable, but if the buyer is at fault, the deposit is not refundable; if the seller is at fault, the deposit shall be refunded. Only such interpretation is reasonable and reflects the true wishes of both parties, and satisfies the provisions of the implied terms in the contract law. In the case, the defendant seller was the first to break the contract or fail to comply with the terms of the LOI for preparation of the sales contract. In addition, because the seller made a mistake and failed to arrange the test flight of MSN61355 in the United States, so offered the buyer to consider buying MSN61356 as an alternative. It is unreasonable that the defendant made a mistake and asked the buyer for considering the alternative plan on one hand, and seize the opportunity to confiscate the buyer's $2 million deposit on the other hand. With regard to the provisions and jurisprudence of English law that the "LOI Deposit" received by the seller in the LOI shall not be returned under any circumstances, under English law, even if the relevant provisions indicate that the deposit shall not be refunded under any circumstances, it is from the relevant case as mentioned in the JSD Corporation Pte.Ltd. v. ALW aha Capital PJSC. case, there are still several ways to make it invalid, including: (a) the relevant clauses belong to the Penalty Clause; (b) there is total failure of consideration for relevant commitments; (c) implied terms are involved, like the case JSD Corporation Pte.Ltd. v. ALW aha Capital PJSC.; (d) there is a Collateral Contract; (e) there is a repudiation of the seller. In this last situation mentioned above, we can quote a case of Alghussein Establishment v. Eton College[1988]1W.L.R.587 in England, it is stated that there is a presumption against taking advantage of own wrong in British law, which can also be applied in this case that the seller cannot use his own wrong behavior to support his practice of forfeiting the plaintiff’s deposit.
Conclusion:
I. Agree on the opinion in the Legal Ascertainment Report issued by 9 Air that "except for the terms with legal effect in explicit expression, the remaining terms of the LOI are not legally binding and can be deemed to be terminated if both parties do not sign a formal sales contract". However, if the supplement of the background facts mentioned in this report is correct, that is, the two parties have not signed a formal sales contract due to the seller’s reason or fault, and the buyer has a legal basis to recover the deposit, the buyer could recover the loss from the seller for his breach of the contract.
II. Although there are two agreed restrictions on returning the deposit, based on the supplement of the background facts, 9 Air, the seller was the first to break the contract, and Jiangsu Wuhua and Hong Kong Commerce and Tourism the buyer cannot conduct the pre-inspection of the aircraft MSN61355 within the time limit. It was because the seller proposed an alternative plan to the buyers. Although the two parties have not made an agreement on the sale of the aircraft MSN61356, the seller cannot confiscate the deposit from the buyers based on his own actions and faults.
This court opines that,in combination with the Legal Ascertainment Report submitted by both parties and the cross-examination opinions of both parties, the two parties agreed on the following points: (I) Under English law, even if the LOI is terminated, the provisions in it which are specifically agreed on the validity, such as "LOI Deposit", are not invalidated by the termination of the LOI, and the LOI Deposit is binding on all parties. (II) Whether the seller pays corresponding consideration is a consideration factor for whether the seller should return the deposit or not. The controversial views of two parties are as follows: (I) LOI. Whether the ownership of the subject matter of the transaction affects the validity of the LOI Deposit clause. The defendant holds that at the time of signing the LOI, it was permissible for the seller not to have the ownership of the subject matter of the transaction. The plaintiffs believe that under this circumstance, the validity of the LOI is still pending. (II) Whether "implied terms" (breach of contract) are used as a factor in determining the return of deposit. The defendant believes that under the condition that the "LOI Deposit" clause in the LOI has clearly stipulated the return of LOI Deposit, the conditions for the return of LOI Deposit cannot be arbitrarily increased. The plaintiffs hold the opposite opinion.
This court holds that the plaintiff Hong Kong Commerce and Tourism is a company registered and established in the Hong Kong Special Administrative Region, and when the LOI was concluded and executed, the subject matter involved in the case was located in the United States. According to Article 1 of Interpretations of the Supreme People's Court on Several Issues Concerning Application of the Law of the People's Republic of China on Choice of Law for Foreign-Related Civil Relationships (I) and Article 522 of Interpretations of the Supreme People's Court on Application of the Civil Procedure Law of the People's Republic of China, where the habitual residence or the location of the subject matter of one or both parties are outside the territory of the People’s Republic of China, they are all foreign-related cases, and the applicable law shall be determined in accordance with relevant Chinese laws.
According to Article 3 and 41 of the Law of the Application of Law for Foreign-related Civil Relations of the People's Republic of China and Article 7 of Interpretations of the Supreme People's Court on Several Issues Concerning Application of the Law of the People's Republic of China on Choice of Law for Foreign-Related Civil Relationships (I), parties to a foreign-related case have the right to choose the applicable law applicable to foreign-related civil relations, and such applicable law need not have any practical connection with foreign-related civil relations.The LOI in this case clearly stipulated that it shall be regulated by and interpreted in accordance with British Law, where the applicable law shall be legally binding on the parties. For these reasons, the court holds that the provision of the application of laws is a legal and valid agreement, and this case applies to British Law as applicable law.
The plaintiffs had argued that in accordance with the provisions of Article 185 of the Civil Aviation Law of the People's Republic of China, the law of the mainland of China shall be applied as the applicable law in this case. The Court holds that Article 185 of the Civil Aviation Law of the People's Republic of China provides that the acquisition, transfer and extinction of the ownership of a civil aircraft shall be governed by the laws of the state in which the nationality of the civil aircraft is registered. However, what the parties of this case are disputing is not the property right of the aircraft, but whether the buyer has the right to ask for the return of $2 million Deposit in the case that the sales contract cannot be formally signed after signing the LOI. Therefore, the nature of the dispute in this case belongs to the contract dispute rather than the real right dispute of the aircraft, which does not fall within the scope of adjustment stipulated in Article 185 of the Civil Aviation Law of the People's Republic of China.
The court does not support the plaintiff’s claim that the mainland law is the applicable law in this case for lack of basis. With regards to the validity of the Confidentiality and Non-disclosure Agreement and LOI, as identified above. According to the Confidentiality and Non-disclosure Agreement provided by the plaintiffs, the agreement was signed in handwriting by the representatives of both parties on November 1, 2016. Defendant 9 Air confirmed that Han Lijun was its aircraft introduction manager and took charge of the sale and purchase of the aircraft with the plaintiffs, and that the subject matter of the transaction agreed in the agreement was the same as the type of the subject matter specified in the LOI. Meanwhile, in the subsequent transaction negotiation between the two parties, Han Lijun also appeared as the representative of 9 Air, and 9 Air did not raise any objection to the validity of the agreement signed by Han Lijun. Therefore, the plaintiffs had reasons to believe that the agreement signed by Han Lijun was the genuine intention of 9 Air. The court confirms that the content in the Legal Ascertainment Report issued by the plaintiffs that "in British Law, as long as the signatory has the authority to represent the company, any document signed by the signatory on behalf of the company, even without the company seal, shall be binding on the company", and confirms that the Confidentiality and Non-disclosure Agreement is binding on both parties. The court doesl not support the defendant 9 Air’s claim that the agreement was invalid for lack of basis.
With regards to the LOI, the "Termination" clause of the LOI stipulates that if the Purchase Agreement is not entered into in accordance with the provisions of this LOI, and if any other "preconditions" are not fulfilled on or before December 20, 2016, the seller and buyer should first renegotiate whether the LOI shall be terminated in good faith. If the LOI is terminated, it shall have no further effect. Seller, buyer and the buyer's parent party shall have no obligation to other parties under this LOI. However, the agreements in the paragraph whose titles named cost and expenses, confidentiality, LOI Deposit, governing law are exceptions. Now both parties confirm that the Purchase Agreement has not been signed in accordance with the terms of the LOI. And this status is subject to the termination provision of the LOI. Based on the above stipulations, the court confirms that the LOI is not binding on any party except the clauses of Costs and Expenses, Confidentiality, LOI Deposit and Governing Law.
With regards to the problem of whether the Confidentiality and Non-disclosure Agreement and LOI should be rescinded or dissolved, the Confidentiality and Non-disclosure Agreement stipulates that if the buyer decides not to proceed with the transaction and notifies the seller, this Agreement except the clause of the circumvention period and costs and fees, shall terminate. The plaintiffs confirmed that the negotiation between the parties has been terminated on December 21, 2016. If the parties fail to sign the Purchase Agreement for the transaction involved, the Agreement shall terminate automatically and there is no circumstance of rescission or cancellation through litigation. The LOI stipulates that if the Purchase Agreement is not entered in accordance with the provisions of this LOI, and if any other "preconditions" are not fulfilled on or before December 20, 2016, the seller and buyer should first renegotiate whether the LOI shall be terminated in good faith. Now both plaintiffs and defendant confirmed that they have not signed the Purchase Agreement, and the LOI shall terminate automatically in accordance with the above provisions, and there is no issue of rescission or cancellation through litigation.
With regards to whether the provision of the LOI applies to the issue of MSN61356 aircraft, there are two aspects that should be noticed. First, the plaintiffs confirmed that the negotiation between the two parties was transferred from MSN61355 aircraft, the subject of the transaction, to MSN61356 aircraft after signing the LOI. According to the emails between the two parties, they had indeed been communicating about the transaction of MSN61356 aircraft and went to Boeing company to negotiate the transaction issue of MSN61356 aircraft until December 18 to December 21,2016. Second, on December 13 and December 18, 2016, the email sent by the defendant to the plaintiffs recorded the content of replacing MSN61355 aircraft with MSN61356 aircraft, and the attached Supplement of Letter of Intent stated: the words defined in the LOI, when it appears in the attached Supplement of Letter of Intent, is consistent with the LOI. All other terms of the LOI shall apply to MSN61356 aircraft except for the terms on the first page of the LOI, installment payment for the aircraft, balance payment for the aircraft, final deadline, time for aircraft pre-inspection, and time for technical acceptance certificate. Wherever the aircraft is mentioned in the LOI, it shall be referred to as MSN61356 and shall no longer refer to MSN61355.
The court holds that since the subject matter of the transaction negotiated by the two parties has been transferred from MSN61355 aircraft to MSN61356 aircraft, the Supplementary Letter of Intent issued by the defendant to the plaintiffs with the above contents is obviously unreasonable if both parties did not reach a consensus that MSN61355 aircraft was replaced by MSN61356 and the provisions of LOI applied to MSN61356 aircraft directly. Meanwhile, according to the email on December 13, 2016, the defendant has informed the plaintiffs that MSN61356 aircraft was available for preliminary check on December 19, 2016. On December 18, 2016, both parties went to Boeing Company to negotiate the transaction of MSN61356 aircraft. During this period, the plaintiffs did not raise any objection to the Supplementary Letter of Intent. For these reasons, the court confirms that both parties have agreed that the MSN61356 aircraft will replace the MSN61355 aircraft and that the terms of the LOI are directly applicable to the MSN61356 aircraft. The LOI has changed the model of the subject matter of the transaction. Except for the above clauses listed in the Supplementary Letter of Intent, other provisions of the LOI are applicable to the MSN61356 aircraft.
Regarding the question of whether the defendant should return the US$2 million prepaid by the plaintiffs. First, is there any exception in this case that the deposit is not refundable in the "LOI Deposit" clause. The "LOI Deposit" clause in the LOI stipulates that Deposit is not returnable, except in the following cases: (I) The aircraft is completely perished before delivery. (II) The buyer reasonably informs the seller that the aircraft including its technical support does not meet the criterion under the Letter of Intent in writing form after the preliminary check but not later than December 15, 2016. Now both parties confirm that the no preliminary check was conducted. Therefore, there is no such two situations where the Deposit stipulated in the "LOI Deposit" clause should be returned.
Second, whether there are other circumstances where the Deposit should be returned in this case. The plaintiffs believe that from the JSD case, it is known that under English law, the “LOI Deposit” clause in this case should also contain implied terms. Unless the buyer’s fault prevents the transaction from proceeding, the deposit is non-refundable. If the seller is at fault, the deposit must be returned.
The defendant held that in the first judgement of the JSD case, the "LOI Deposit" clause of the involved LOI stipulates that deposit will not be returned "unless the aircraft is completely perished or the seller's fault". This clause refers to "seller's fault" as the condition of return of deposit in an explicit way, so there is no "implied terms". In the second judgement of the JSD case, the "LOI Deposit" clause of the involved LOI stipulates that the deposit cannot be returned after both parties sign the LOI. Despite the fact that the judge applied the rules of implied terms in the judgement, the LOI in this case does not stipulate the circumstances of refund, which is obviously inconsistent with the clause of "LOI Deposit" in the LOI in this case. Thus, the JSD case applied to implied terms while this case does not apply to it.
The court holds that the involved "LOI Deposit" clause in the first judgement in JSD case has referred to "seller's fault" as the circumstance of return of deposit, so there is no "implied terms". And the involved “LOI Deposit” clause in the second judgment in JSD case does not stipulate the circumstances of refund, so the judge applied the implied terms on the ground that the "LOI Deposit" clause was quite harsh and unreasonable. In this case, if the seller has faults, although the "LOI Deposit" clause does not stipulate "seller's fault" in the two exceptions of "Deposit" not to be returned, it is obviously unfair to the buyer that "Deposit" cannot be returned except in the agreed circumstances. Consequently, the court holds that this case applies to the rule of “implied terms”. As for the seller, namely the defendant of this case, whether there is fault, the Court finds as follows:
(I) The plaintiffs contended that the fact that the defendant has not acquired the ownership of the subject matter may cause the defective effectiveness of the LOI. The “Ownership” clause of the LOI stipulates that the seller shall transfer all right, ownership and interest of the aircraft without any liens, charges, rents, claims, rights, interests or encumbrances to the buyer on the delivery date. According to the Supplementary Legal Ascertainment Report submitted by the defendant, Article 5 (1) of the Sale of Goods Act 1979 stipulates that the goods which form the subject of a contract of sale may be either existing goods, owned or possessed by the seller, or goods to be manufactured or acquired by him after the making of the contract of sale.
In Kulkarniv. ManorCredit(Davenham)Ltd.[2010]2AllER(Comm)1017, the court verdict pointed out that at the time of signing the contract of sale, it is a standard practice in the market that the seller can agree to sell the goods not owned or acquired by him at that time, but to be manufactured or acquired after signing the contract of sale and before the agreed date for transfer of property. In Hughesv. Pendragon Sabre Limited[2016]CTLC91, the Court of Appeal pointed out that Article 5 of the Sale of Goods Act 1979 allows both parties to buy and sell future goods, which including the goods agreed to be sold in the contract that would be acquired by the seller after the conclusion of the contract of sale and would be acquired by the seller depends on the realization of certain conditions which may or may not be realized.
The court holds that according to the above content of law ascertainment, it is permissible for the seller not to have ownership of the subject matter temporarily at the time of signing the sales contract, under British Law. In this case, MSN61355 and MSN61356 aircraft are included in the Overall Purchase Agreement between the defendant and Boeing Company. Consequently, the defendant is entitled to obtain the ownership of the two aircrafts eventually.
Both Shanghai Huyi Company and Shanghai Husi Company have issued the Situation Description claiming that although they, as the owners of involved aircrafts, have entered into a Finance Lease Agreement for MSN61355 and MSN61356 aircraft with defendant, they both knew and agreed that the defendant would sell the aircrafts to the plaintiffs, and were willing to cooperate with the defendant in the delivering process. Therefore, even if the defendant did not have the ownership of the aircrafts involved when signing the LOI, this did not affect the transaction involved and the validity of the LOI.
Meanwhile, as for MSN61356 aircraft involved in the financial leasing relationship, on December 6, 2016, the defendant had informed the plaintiffs in the email that he would terminate the finance lease. Therefore, the plaintiffs should have been aware of this.
It must be pointed out that the LOI stipulates that two parties shall sign a separate Purchase Agreement, and from the content, the LOI is not a complete sales contract. Under British Law, since the formal sale contract is signed, the seller is allowed to temporarily not have the ownership of the subject matter of the transaction, it is obviously unreasonable to contend the LOI is invalid because the seller has not acquired the ownership of the subject matter when documents of intention for sales was entered. Moreover, if the defendant cannot transfer the ownership of the trading aircraft to the plaintiffs within the time specified in the sales contract for the ownership transfer, the plaintiffs can bring a lawsuit against the defendant for breach of contract. On this ground, the court confirms that the validity of the Letter of Intent is not affected by the fact that the defendant has no ownership of the aircrafts when the Letter of Intent is entered, nor does it constitute a situation in which the defendant needs to return the LOI Deposit.
(II) The plaintiffs contended that the defendant has breached the contract by failing to provide the contract of sale within the appointed time. The LOI stipulates that the contract of sale shall be entered on or before November 22, 2016 and the draft contract shall be prepared by the seller's legal adviser in accordance with industry standards and submitted to the buyer for approval. On November 23, 2016, the defendant provided the plaintiffs with a draft contract of sale for MSN61355 aircraft but both parties did not sign it. On December 6, 2016, the defendant revised the draft contract from sale of MSN61355 aircraft to sale of MSN61356 aircraft.
In the trial, the plaintiffs confirmed that after the LOI was signed, because Boeing Company proposed that the flight radius of MSN61355 aircraft could not meet the plaintiff's flight demands, it was recommended that the plaintiffs purchase the MSN61356 aircraft, so the later negotiation between the two parties was focused on MSN61356 aircraft while MSN61355 aircraft was shelved. The above situation can be verified by the defendant's revision to the draft contract and the e-mails between the two parties.
Although the time for the defendant to submit the draft contract of sale to the plaintiff was later than the appointed time in the LOI, the plaintiff did not therefore terminate the transaction negotiation with the defendant, but continued communication on changing the subject matter of the transaction. The defendant requested the plaintiffs to sign the revised Aircraft Sale and Purchase Agreement and the Supplementary Agreement of Letter of Intent with MSN61356 as the subject matter of the transaction, via email on 13th, 15th, 16th,17th and 18th of December 2016 respectively, and informed the plaintiffs of the new time of preliminary check. On December 18, 2016, the two parties also went to Boeing to negotiate the sale of MSN61356 aircraft. On this ground, the final failure of the transaction between the two parties cannot be attributed to the plaintiff’s claim that the defendant delayed one day to provide the plaintiffs with the draft contract for sale of MSN61355 aircraft. The court does not support the plaintiff's claim.
(III) The plaintiffs contended that the notification of aircraft preliminary check only included aircraft number without specification, The “Aircraft Reservation” clause of the LOI stipulates that after the seller receives the deposit from the buyer’s LOI, settles the funds, and pays the money to the seller’s designated account, the MSN/fleet number and specifications of the aircraft to be sold shall be submitted to the buyer for inspection. Upon investigation, the specifications in Annex A of the LOI have detailed the specifications of the transaction subject matter involved, and the plaintiffs did not prove that the Annex A was insufficient to explain the specifications of the transaction subject matter. Secondly, the defendant sent the aircraft model list and installed inventory to the plaintiffs by mail on November 15, 2016, and the plaintiffs claimed that the aircraft model list and installed inventory were not exclusive data of the aircraft involved in the case. The plaintiffs should request the defendant separately during the transaction negotiation process, but in the email communication between the two parties, it was not seen that the plaintiffs requested the defendant for the specifications of the subject matter. In view of this, in the case where the specification of the subject matter involved in the case has been specified in the attachment to the LOI and the defendant has sent the above-mentioned model list and installation inventory to the plaintiffs, even if the defendant has not sent other specifications of the subject matter involved to the plaintiffs, the responsibility cannot be attributed to the defendant.
(IV) The plaintiffs claimed that the defendant had not given enough time for the plaintiffs to notify the aircraft for the two pre-inspections, and the defendant was responsible for the failure of the aircraft. According to the facts ascertained above, existing evidence shows that the subject matter of the transaction negotiated by the two parties has been transferred from the MSN61355 aircraft to the MSN61356 aircraft since December 6, 2016, and the two parties have not negotiated on the MSN61355 aircraft transaction since then. The plaintiffs also confirmed this. Since December 13, 2016, the defendant has repeatedly urged the plaintiffs to sign the revised Aircraft Sale and Purchase Agreemen and Supplementary Agreement of Letter of Intent with the subject matter of the transaction being MSN61356, and informed the plaintiffs that the new aircraft pre-inspection time is December 19, 2016. This court holds that the plaintiffs already knows the time of the second pre-inspection of the aircraft. If it has any objections to the pre-inspection time of the aircraft while it has been in communication with the defendant on the aircraft transaction, it can propose to the defendant to change the pre-inspection time, but the plaintiffs did not provide evidence to prove that it had raised objections to the defendant regarding the pre-inspection time of the aircraft, and the day before the pre-inspection time, that is, on December 18, 2016, the plaintiffs and the defendant went to Boeing to negotiate the MSN61356 aircraft transaction. Consequently, the plaintiff's claim that the defendant did not set aside a reasonable time for the pre-inspection of its aircraft and that the responsibility for the failure of the aircraft's pre-inspection should be attributed to the defendant that it lacks basis and is not supported by this court.
For these reasons, according to the Article 1 and 7 of Interpretations of the Supreme People's Court on Several Issues Concerning Application of the Law of the People's Republic of China on Choice of Law for Foreign-Related Civil Relationships (I), Article 3 and 41 of the Law of the Application of Law for Foreign-related Civil Relations of the People's Republic of China and Article 522 of Interpretations of the Supreme People's Court on Application of the Civil Procedure Law of the People's Republic of China, this court rules as follows:
1. To reject all claims of the plaintiffs, Jiangsu Wuhua Engineering Technology Co., Ltd. and Commerce & Tourism Group Co., Ltd. of Hong Kong.
2.. The first instance case acceptance fee is RMB 103,994 and the litigation preservation fee is RMB 5000 shall be borne by the plaintiffs, Jiangsu Wuhua Engineering Technology Co., Ltd. and Commerce & Tourism Group Co., Ltd. of Hong Kong.
Read the original: 蓝海查明案例 ▍双方：均提供了《法律查明报告》，均有专家证人出庭作证
