The "Guiding Opinions on Several Issues Concerning the Trial of Civil and Commercial Contract Disputes Cases under the Current Situation" issued by the Supreme People's Court in 2009 mentioned that "In the current situation of breach of contract by market entities is more promine

Li Weibin Law Firm

Generally speaking, if one party fails to perform the contractual obligations or performs the contractual obligations inconsistent with the agreement, the losses that may be caused to the other party include (1) the actual losses incurred by the other party and (2) the benefits that can be obtained after the contract is performed (hereinafter referred to as "loss of obtainable benefits"). The " Guiding Opinions on Several Issues Concerning the Trial of Civil and Commercial Contract Disputes Cases under the Current Situation" issued by the Supreme People's Court in 2009 mentioned that "In the current situation of breach of contract by market entities, breach of contract usually leads to losses of gainable profits. According to factors such as the nature of the transaction and the purpose of the contract, losses of gainable profits are mainly divided into types such as production profit losses, operating profit losses and resale profit losses. In the breach of sales contracts such as production equipment and raw materials, the loss of gainable profits caused by the seller's breach of contract usually belongs to production profit losses. Loss. In contract management, lease operation contract and contracts for providing services or services, the loss of gains caused by one party's breach of contract usually belongs to the loss of operating profit. In a series of series of sales contracts, the loss of gains caused by the breach of contract of the original contract seller usually belongs to the loss of resale profit. "The principle of foreseeable loss of loss by

means that the amount of loss compensation that the breach of contract should pay to the other party due to breach of contract shall not exceed the loss that the breach of contract for foreseeable or should have foreseeed when the breach of contract concluded. This article aims to study the application of the principle of predictable loss in international goods transactions. According to Article 595 of the Civil Code of the People's Republic of China, a sales contract is a contract in which the seller transfers the ownership of the subject matter to the buyer and the buyer pays the price. Referring to the "Guidelines for the New Interpretation and Application of Civil Cases (Second Edition) (Volume 1)" [1], international goods sales contract disputes refer to disputes arising from parties whose business places are in different countries or regions regarding the signing of goods sales contracts. In international goods sales contract disputes, the parties involved are mainly sellers (hereinafter referred to as "seller") and buyers (hereinafter referred to as "buyer") who signed the international goods sales contract, and may involve relevant goods carriers, testing institutions, etc.; if the buyer resells the goods purchased, it may also involve the buyer of the resale contract (hereinafter referred to as "downstream buyers") and other relevant entities.

In international goods sales contract disputes, if the buyer concludes an international goods sales contract to resell goods, the buyer may lose profits of reselling due to the seller's late delivery of the goods or the delivery of goods with quality defects; if the buyer purchases raw materials, accessories or semi-finished products from the seller for processing products, the buyer may lose profits of production, price difference losses, storage fees and/or labor costs of reselling other products; if the currency of the buyer's payment of the price is inconsistent with the currency used by the seller in production and operation, the seller may lose exchange rate losses due to the buyer's late payment, etc. Below we will discuss whether the aforementioned related losses meet the principle of predictable loss.

. Legal provisions

The Civil Code of the People's Republic of China, which came into effect on January 1, 2021, continues to use the original " Contract Law of the People's Republic of China" on the principle of foreseeable losses. For details, please refer to the table below:

"Civil Code of the People's Republic of China"

Article 584 If one party fails to perform the contractual obligations or performs the contractual obligations in compliance with the agreement and causes losses to the other party, the amount of compensation for losses shall be equivalent to the losses caused by the breach of contract, including the benefits that can be obtained after the performance of the contract; however, it shall not exceed the losses that may be caused by the breach of contract that the breach of contract is foreseen or should have foreseen when the breach of contract concluded.

"Contract Law of the People's Republic of China" (repealed on January 1, 2021)

Article 113 Paragraph 1 If one party fails to perform the contractual obligations or performs the contractual obligations in compliance with the agreement and causes losses to the other party, the amount of compensation for losses shall be equivalent to the losses caused by the breach of contract, including the benefits that can be obtained after the performance of the contract, but shall not exceed the losses that the party breach of contract is foreseen or should have foreseen when concluding the contract.

When calculating the amount of losses compensation for the buyer or seller, the people's court shall, in addition to deducting the unforeseen losses of the breacher from the total amount of compensation claimed by the non-breaking party from the total amount of available benefits claimed by the non-breaking party, may also apply the deduction rules, profit and loss offset rules, and negligence offset rules , etc., deduct losses that are improperly expanded by the non-breaking party, the benefits obtained by the non-breaking party due to the breach of contract, and the non-breaking party also has negligence. For losses and necessary transaction costs, please refer to the following provisions:

Interpretation of the Supreme People's Court on the Application of Laws in Trial of Sales Contract Disputes Cases (2020 Amendment)

"Civil Code of the People's Republic of China"	Article 591 After one party breaches the contract, the other party shall take appropriate measures to prevent the expansion of the losses; if the losses are not taken, the loss shall not be compensated for the expanded losses. 　　The reasonable expenses incurred by the parties to prevent the expansion of losses shall be borne by the defaulting party. Article 592 If all parties violate the contract, they shall each bear the corresponding responsibilities. 　　If one party breaches the contract and causes losses to the other party, and the other party is at fault for the occurrence of the loss, the corresponding amount of compensation for losses can be reduced.
Article 23 If one party to a sales contract has gained benefits due to the other party's breach of contract, and the breach of contract claims to deduct the part of the benefits from the amount of compensation for losses, the people's court shall support it.

Due to space limitations, the following article will mainly discuss the principle of predictable loss.

2. Case study

In order to further explore the application of the principle of "foreseeable losses" in international goods sales contract disputes, the author used "Article 113" on the "No lawsuit" platform (because the Civil Code of the People's Republic of China" has been implemented for a short time, so the terms and serial number of the "Contract Law of the People's Republic of China" is the keyword), "International goods sales contract disputes", "Foreseeable" and "html" on the "No lawsuit" platform (because the Civil Code of the People's Republic of China has been implemented for a short time, so the terms and serial number of the "Contract Law of the People's Republic of China" are the keywords), "International goods sales contract disputes", "Foreseeable" and "html" 1High People's Court " was searched as a keyword, and 7 related cases were retrieved, and the following disputes were sorted out and discussed:

(1) Loss of cabin fees caused by overdue delivery or failure to deliver goods, price difference losses caused by repurchasing substitute goods

(2) Loss of product replacement, freight and storage fees caused by product quality defects

(3) Price reduction losses caused by product quality defects Loss of

(4) Expected resale profit loss

(5) Product infringes on other patent rights

(6) Exchange rate loss

(7) Attorney's fees or other rights protection fees

(8) Interest interest in fees incurred by non-party

2.1 overdue In the case of the loss of cabin fees caused by delivery or failure to deliver, the price difference loss caused by the repurchase of substitute goods

In the case of the appeal of the international cargo sales contract dispute between Jiangsu Yulong Steel Pipe Co., Ltd. and Metal International Co., Ltd. [Case No.: (2010) Su Shang Wai Zhong No. 0031], both the Jiangsu Higher People's Court and the first instance court believed that the seller should compensate the buyer for the loss of cabin fees caused by the overdue delivery or failure to deliver, the price difference loss caused by the repurchase of substitute goods.

The first instance court held that: "On the basis that the contract exists and is legal and valid, the party that fails to perform the contract according to the law shall bear the liability for breach of contract such as compensation for losses.In this case, Yulong Company failed to deliver the goods as agreed upon by the metal company after the metal company paid the advance payment according to the order 09728, resulting in the metal company temporarily canceling the ship date. In the mailing of the ship date, the metal company had informed Yulong Company and explained the consequences of the failure to load the ship according to the time. Therefore, Yulong Company should fully foresee that the metal company would have to pay the loss of the cabin fee due to the temporary cancellation of the reservation space. The shipping company Huatai Shipping Sdn Bhd (PACIFICORIENTSEATRANSPORTPETLTD.) and the next Capita, the metal company's company, should be foreseeable. lSteel's invoices, written instructions, remittance transaction certificates of metal companies, and their emails can confirm that the metal company has paid the loss fee. At the same time, in order to complete the order with its buyer CapitalSteel, the metal company ordered the goods that Yulong Company failed to deliver at a higher price in the short term, resulting in the price difference loss. Yulong Company also knew that the metal company is an trading company, and the goods purchased for resale and not for self-use. It can be seen that Yulong Company's breach of contract directly caused the loss of the metal company's cabin fee and price difference. The metal company has provided sufficient evidence to prove the above losses. Its request for Yulong Company to compensate is factual and legal basis and should be supported. "

Jiangsu Higher People's Court held that "due to Yulong Company's failure to deliver the goods under the contract to the metal company as agreed, the metal company paid CapitalSteel the actual loss of US$77,938.22. The loss was caused by Yulong Company's breach of contract, and Yulong Company should be compensated by Yulong Company according to law. Yulong Company also appealed that there was no evidence that the metal company purchased the goods separately and fulfilled the contract between it and foreign companies, so the price difference loss claimed by the metal company has no factual basis. This court believes that when Yulong Company cannot fulfill its delivery obligations as agreed, the Metal Company instead signed an order with Guoqiang Company on April 15, 2008 with the same number, type of goods, specifications, quantity, delivery location, etc. as the order No. 09728 involved in the case, but the price rose to US$178,510.2. On April 16, 2008, the Metal Company wired the advance payment of Guoqiang Company of US$17,851. On May 20 of the same year, the Metal Company paid the remaining payment to Guoqiang Company by wired. Based on the above facts, since Yulong Company was unable to fulfill its delivery obligations, in order to complete the order with the subscriber, the metal company turned to purchase goods from Guoqiang Company, resulting in a price difference loss of US$30,097.6. The loss was caused by Yulong Company's breach of contract, and Yulong Company should also be compensated by Yulong Company according to law. ”

2.2 Loss of replacement products, freight and storage fees caused by product quality defects

In the second instance case of the international goods sales contract dispute between Inotachi Technology Co., Ltd. and Ningbo Poplarson Digital Technology Co., Ltd. [Case No.: (2019) Zhejiang Minzhong No. 944], Zhejiang Higher People's Court agreed to the first instance court's determination, believing that the seller knew that the buyer purchased the product For the manufacture of other products, the losses of replacement products, freight and storage fees due to product quality defects fall within the foreseeable range.

First instance court held: "The focus of the dispute is 4. Because the 1st-5th batch of goods provided by Inotachi Company has no touch quality problem in the upper left corner of the touch screen, Poplax has promptly raised quality objections to Inotachi Company, so Inotachi Company should compensate for the losses caused by this. Regarding the amount and scope of the loss compensation, Poplarx has applied for loss assessment. 1. The cost of replacing the advertising touch screen (including artificial auxiliary materials fees). The first evaluation of the evaluation agency is RMB 4731,500. This fee is the appraised price obtained by purchasing the same type of domestic advertising touch screen plus the cost of artificial auxiliary materials. However, the advertising touch screen involved in the case was purchased by Poplax from Inota Chi Society. The purchase price of the advertising touch screen (US$108/unit) in the unit price is more reasonable. Based on this, it is determined that the cost of replacing the advertising touch screen is US$1022,004, and the artificial auxiliary materials cost is RMB 946,300. 2. Round-trip freight, the first evaluation of the assessment agency was RMB 399,261. The assessment agency later stated that it should add additional MPF fees (cargo handling fees) and HMF fees (port maintenance fees) charged by US customs.After calculation, MPF expenses = 0.3464% of the goods value, that is, US$17424.78; HMF expenses = 0.125% of the goods value, that is, US$6287.80, so the two expenses should be added in total. 3. The warehousing fee during the installation period, the evaluating agency's assessment fee is 22,400+300 yuan/day. The specific days are not specified and 90 days are determined as appropriate. Based on this, the corresponding warehousing fee is RMB 49,400 (22,400+27,000 yuan). As for other losses claimed by Poplanx, they will not be supported. "

Zhejiang Higher People's Court held: " Regarding whether Poplax should take measures to reduce the occurrence of damage results and whether the losses exceed the scope for foreseeable when entering into the contract, Inota Chi Company is clear about the fact that Poplax purchased touch screen manufacturing products, and Inota Chi Company did not provide evidence to prove that the losses caused by Poplax's behavior and the replacement products still have residual value , so the above losses should be borne by Inota Chi Company. "

2.3 Price reduction losses caused by product quality defects

In Zhejiang Wanbang Pulp and Paper Group Co., Ltd., Liguo and Jiangsu Liwen Paper Co., Ltd. International Goods Sales Contract Dispute Second Instance Case [Case No.: (2011) Zhejiang Shang Waizhong No. 70], the Zhejiang Higher People's Court agreed to the determination of the first instance court, believing that the quality inspection report should be made by a testing agency with inspection qualifications, and the price reduction losses must also be considered for the factors of market price fluctuations.

The first instance court analyzed the following:

" Therefore, for some wood pulp under contract No. 703 and contract No. 705, Wanbang Company did not provide sufficient evidence to prove that there are quality defects, so Liguo Company does not need to compensate for the losses. Regarding the quality defects of some wood pulp under contract No. 705 delivered by Liguo Company and the amount of losses caused to Wanbang Company, Wanbang Company signed with a third party. However, from the sales contract, on the one hand, some of the contracts state that the wood pulp under the contract meets the product technical indicators or quality requirements of the wood pulp manufacturer, and does not show that the price reduction caused by the quality defect of the wood pulp; on the other hand, in some contracts that state that the price reduction of the price reduction due to quality defects of the same wood pulp ranges from RMB 480 to RMB 1,080 per ton, which cannot be fully reflected in the degree of value deduction caused by quality defects. Therefore, this court will comprehensively consider the following factors and determine the amount of losses as appropriate: 1. The number of wood pulp with quality defects indicated by the test report is 5946.427 tons; 2. The wood pulp involved in the case is lower than the agreed index standard in terms of physical characteristics such as tensile index, tear index and breakage resistance index; 3. Wanbang Company will sell the wood pulp involved to a third party, and the reasonable part of the price reduction caused by quality defects; 4. The losses of Wanbang Company that Liguo Company may foresee when entering into the contract. In addition, for short-weight losses, due to unclear moisture testing standards, Wanbang Company has sufficient evidence to prove that the empty dry weight of wood pulp delivered by Liguo Company is short, so this is not supported. "

Zhejiang Higher People's Court specifically analyzed:

" 2. Whether there are defects in the quality of the wood pulp involved in the case and the specific amount of loss of Wanbang Company. Wanbang Company and Liguo Company have signed 8 contracts for the wood pulp sale. Wanbang Company believes that the wood pulp under the eight contracts has quality problems, but the claim report for the unqualified wood pulp quality provided by it for the failure of contracts No. 447 and 448 is not the original. Therefore, the original judgment did not accept this and rejected Wanbang Company's claim for the quality of wood pulp under the two contracts.

Regarding the quality of some wood pulp under contracts No. 703 and 705, Wanbang Company provided the "Qualified Product Processing Report" issued by Sun Group and the "Test Report" issued by the Inspection and Quarantine Technology Center of the Shandong Entry and Exit Inspection and Quarantine Bureau. Since Sun Group does not have the corresponding inspection qualifications, the "Test Report" was made based on the samples sent by Wanbang Company. The report states that the results are only for the samples. Therefore, the original court found that Wanbang Company was correct inability to provide evidence on the quality of some wood pulp under contracts No. 703 and 705.

Shanghai Entry and Exit Inspection and Quarantine Bureau made a "Testing/Appraisal Report" on the quality of some wood pulp under contracts No. 609, 610, 706, 707 and 705. Liguo Company and Liwen Company believe that the "Testing/Appraisal Report" was unilaterally commissioned by Wanbang Company and the testing standards adopted exceeded the scope of the statutory testing standards allowed by the Testing Technology Center, so it should not be used as a basis for finalization. After review, although Wanbang Company and Liguo Company agreed on the grade of wood pulp in the contract, there was no agreement on the specific inspection method. The Shanghai Entry and Exit Inspection and Quarantine Bureau has nationally recognized qualifications in the field of wood pulp testing. Therefore, the "Testing/Appraisal Report" made by the Shanghai Entry and Exit Inspection and Quarantine Bureau in accordance with the TAPPI testing standards on independent sampling can be used as the basis for the finalization of this case. The original court determined that the quality of some wood pulp under contracts No. 609, 610, 706, 707 and 705 is correct, and Liguo Company shall bear the responsibility for the losses caused by Wanbang Company. As for the specific amount of losses, Wanbang Company claimed that it should be determined according to its third-party contract with and , but it also recognized that the market price of wood pulp involved in this period decreased; while Liguo Company believed that the compensation unit price of Wanbang Company should be compensated according to Wanbang Company's claim of the unit price of compensation of US$15 per ton in contracts No. 447 and 448, but it did not provide evidence to prove that the quality defects of some wood pulp under contracts No. 609, 610, 706, 707 and 705 are the same or similar to those of contracts No. 447 and 448. The original court held a discretionary loss of 2.5 million yuan after comprehensively considering various factors, and this court maintained it. ”

2.4 Expected resale profit loss

(1) In the second instance case of the dispute between BaojiaSun and Shanghai Huili Flooring Products Co., Ltd. International Sales of Goods Contract [Case No.: (2010) Shanghai Gaomin II (Business) Final No. 81], the Shanghai No. 1 Intermediate People's Court held: "As for the expected profit loss, since the calculation basis is only the so-called financial statements produced by themselves, it cannot reflect whether there are actual orders that have not been fulfilled, and the "International General Distribution Agreement" does not stipulate the performance period of the agreement, the quantity of transactions or the turnover limit, etc. for the calculation of expected profits, so this claim is not supported. ” The Shanghai Higher People's Court believes that the evidence provided by the buyer cannot reflect whether there are indeed other contracts that have not been actually performed, so this court does not support the claim of the expected profit.

(2) In the second instance case of the international goods sales contract dispute between Qingdao Huahui Kinetic Energy International Trade Co., Ltd. and Oriental Technology Co., Ltd. [Case No.: (2019) Lumin Zhong No. 1414] (In this case, this issue applies to " United Nations Convention on International Sales of Goods Contracts ", which is not the "Contract Law of the People's Republic of China", but the court's analysis can be used as a reference), Shandong Province Higher People's Republic of China The People's Court believes that when calculating the expected profit loss, the difference between the contract price between the buyer and the downstream buyer and the contract price between the buyer and the seller can be used as a reference, but the expected cost must also be considered. In the case where the expected cost lacks sufficient evidence, the amount of damages can be determined by referring to the commission ratio in the agency agreement. The court's specific analysis is as follows:

"The fault of the contract cannot be actually performed mainly lies in Oriental Technology Company. Oriental Technology Company should foresee the losses caused to Huahui Company by breach of the contract, so Oriental Technology Company should pay Huahui Company the loss of gains. The loss of gains claimed by Huahui Company is the difference between the contract subject amount signed by Huahui Company and Oriental Technology Company of US$948,000 (equivalent to RMB 7.32 million after value-added tax) and the price difference between Huahui Company and a third party (RMB 9.66 million), that is, 2.34 million yuan. However, according to the contract agreement between Huahui Company and Oriental Technology Company, the above-mentioned price difference is not the expected benefit of Huahui Company. Huahui Company also has to bear the inland transportation and related insurance costs of the equipment transported from the Chinese factory of Oriental Technology Company to the end user, China Customs tariffs and value-added tax, etc. After court, Huahui Company converted it based on the exchange rate and compared its expenses in Tianwan project, it calculated the cost to be spent if the contract is to be actually performed, thereby calculating its expected benefits.However, the above expenses are all unilateral statements by Huahui Company, and the project in this case is different from the Tianwan project objectives, the place of performance is different, and the costs are also different. The materials provided by Huahui Company to prove its cost are only reference functions and cannot prove its actual expected cost, and therefore cannot prove its expected benefits. Oriental Technology Company claims that there is an agency agreement between the two parties. Although the agreement was not signed between Huahui Company and Oriental Technology Company, Huahui Company also recognizes that the signing entity is a company established in the name of the former legal representative of Huahui Company, and the agency agreement is also incorporated into the contract between Huahui Company and a third party. Huahui Company and Oriental Technology Company also mentioned the agency agreement many times during the contract conclusion and performance process, and it should be determined that both parties are bound by the agency agreement. In the defense, Oriental Technology Company also stated that if the court determines that Oriental Technology Company has breached the contract, Oriental Technology Company should also bear the liability for breach of contract that does not exceed 10% of the contract price, that is, RMB 732,000. In summary, based on the evidence, cross-examination and trial statements of both parties, and the court, taking into account the uncertainties in the performance of the contract, the first instance court believed that the expected profit claimed by Huahui Company was appropriate to determine the discretion of RMB 732,000.

…

Question whether the amount of losses claimed by Huahui Company should be supported. Huahui Company appealed that its gainable profit loss was US$948,000 in the subject matter of the contract signed with Oriental Technology Company (US$7.32 million after value-added tax) and the subject matter of the contract signed with China National Nuclear Power Company (RMB$9.66 million), that is, RMB2.34 million. According to Article 74 of the Convention on the Sales of Goods: "The amount of damages that one party should bear for breach of the contract shall be equal to the amount of losses that the other party suffered, including profits, suffered by him for breach of the contract. Such damages shall not exceed the possible losses that the party who violated the contract, and according to the facts and circumstances that he already knew or should have known at the time, in accordance with the facts and circumstances that he knew or should have known at the time, he would have expected or should have expected for the breach of the contract." During the trial of this case, Oriental Technology Company claimed that Huahui Company had never disclosed to it the subject amount of the contract concluded between Huahui Company and China Nuclear Power Company. Huahui Company also did not provide evidence to prove that it had disclosed to Oriental Technology. Therefore, this court does not support the above-mentioned amount of loss of profits claimed by Huahui Company. In this case, the evidence submitted by Huahui Company showed that Oriental Technology Company issued a power of attorney to Huahui Company on November 20, 2009, which stated that it granted Huahui Business Company (also known as Qingdao Huahui Kinetic Energy International Trade Co., Ltd.) a long-term exclusive agency to sell Oriental Technology Company products in China. During the trial, Huahui Company and Oriental Technology Company confirmed that Qingdao Huahui Kinetic Energy International Trade Co., Ltd. in the authorization letter is Huahui Company. The authorization letter is also included in page 23 of the contract signed by Huahui Company and China National Nuclear Power Company. On December 30, 2015, Huahui Company sent a notice letter to China National Nuclear Power Company, saying that after careful consideration, Huahui Company decided not to renew the agency agreement with Oriental Technology Company that expired on December 31, 2015. In summary, both Huahui Company and Oriental Technology Company agreed to the agency agreement involved in the case, and both parties knew the content of the agreement and were binding on both parties. The first instance court considered the uncertainties in the performance of the contract and determined the amount of damages to Oriental Technology Company based on the commission ratio in the agency agreement, without any improper use."

2.5 The goods infringe on other parties' patents

(1) The compensation paid by the buyer to the patent owner for the goods infringe on other parties' patents

In the second instance case of the dispute between the international goods sales contract between BaojiaSun and Shanghai Huili Flooring Products Co., Ltd. [Case No.: (2010) Shanghai Gaomin II (Business) Final No. 81], the Shanghai Higher People's Court and the Shanghai No. 1 Intermediate People's Court both believed that the goods infringe on third parties' patents violated the seller's so-called "rights defect guarantee liability" The seller shall bear corresponding civil liability for compensation for losses and other reasons, and the analysis is as follows:

" According to Article 150 of the Contract Law of the People's Republic of China, the seller shall have the obligation to guarantee that the third party shall not assert any rights from the buyer for the delivered subject matter, that is, the seller in the sales contract shall bear the so-called "rights defect guarantee liability". In this case, based on the Australian Patent Publication Document No. 713628 submitted by Sun Baojia and Zhang Gongdao, Huili Floor, Shanghai Huili Floor DELAYFLOOR Floor Manual, [2006] FCA1634 judgment, and [2007] FCA1615 judgment, the fact that the floor sold by Shanghai Huili Group and Shanghai Huili Floor infringes on other people's patent rights in Australia was confirmed. Shanghai Huili Group and Shanghai Huili Flooring violated the obligations stipulated in the above laws and should bear corresponding civil liability such as compensation for losses. ”

(2) In the case where the product infringes other parties’ patents, downstream buyers claim damages to the buyer for the product infringes other parties’ patents

In the case of the international goods sales contract dispute between BaojiaSun and Shanghai Huili Flooring Products Co., Ltd. [Second instance case number: (2010) Shanghai Gaomin II (Business) Final No. 81], the Shanghai Higher People’s Court held that the product infringes other parties’ patents In the case of this case, the downstream buyer of the buyer claims damages to the buyer for the infringement of other parties' patents due to the product infringement of other parties is a loss that the seller could not foresee when signing the contract, and the analysis is as follows:

"As for the scope of compensation in this case, this court believes that the amount of damages that one party should bear for breach of the contract should be equivalent to the amount of losses that the other party suffered, including profits, suffered by the other party, but shall not exceed the losses that the party foresees or should have foreseeed when concluding the contract. The compensation of GEREMOSHOLDINGSPTYLTD is an unforeseen loss that Shanghai Huili Group had when signing the agreement, so this court does not support the compensation amount. As for the expected profit, since the evidence provided by Sun Baojia and Zhang Gongshu cannot reflect whether there are indeed other contracts that have not been actually performed, this court does not support the claim of the expected profit. "

2.6 Exchange rate loss

(1) In the appeal case of the international goods sales contract dispute between Jiangsu Yulong Steel Pipe Co., Ltd. and Metal International Co., Ltd. [Case No.: (2010) Su Shang Wai Zhong No. 0031], the Jiangsu Higher People's Court recognized the following analysis of the first instance court:

" The claim for exchange rate loss is often in the sales contract. Since the buyer did not pay the payment in time as agreed, and the actual payment rate was lower than the exchange rate of the payment time agreed in the contract, the seller can claim compensation for the exchange rate loss. In this case, the metal company is the buyer, and its claim that the exchange rate loss does not meet the above conditions and requirements and will not be supported in accordance with the law. "

(2) In the second instance case of the international goods sales contract dispute between Nanjing Bosi International Trade Co., Ltd. and Argentina Adano Company [Case No.: (2013) Su Shang Wai Zhong No. 0047], the Jiangsu Higher People's Court held that the buyer who paid the late payment should compensate the seller for the exchange rate loss, and the specific analysis was as follows:

" The first instance court ruled that Adano Company paid the exchange loss to Bosi Company without any improperness. First, the exchange rate varies according to time. Exchange loss is the loss that will occur due to exchange rate adjustment under the circumstances at that time if foreign exchange is converted into RMB. This loss is objectively present regardless of whether the foreign exchange is actually converted into RMB. Therefore, Adano Company believes that under the voluntary foreign exchange settlement system, there is no basis for the reason for the absence of exchange losses. Secondly, this is the actual loss of the party that adheres to the agreement, not the profit.Again, there is no contradiction between exchange losses and interest losses. Exchange losses are losses caused by Boss due to exchange rate adjustments between the date on which Adano Company pays and the date on which the goods are denominated in US dollars are not paid and the actual payment is actually paid. This requires measuring the exchange relationship between the US dollar and the RMB in two times. The interest on US dollar is generated based on the US dollar itself. This does not require measuring the relationship between the US dollar and the RMB. There are no contradictions or conflicts between the two. Therefore, Adano Company believes that the reasons for the two are contradictory, and this court does not support it. Finally, the ways in which court judgments are fulfilled are diverse. Adano Company assumes responsibility for paying foreign exchange losses in accordance with the court's judgment and is not affected by the foreign exchange management system of Argentina's country. "

2.7 Attorney's Fees or Other Rights Protection Fees

(1) In the second instance case of the dispute between Beijing Ginos Science and Technology Co., Ltd. and Co., Ltd. GINO International Sales of Goods Contract Dispute [Case No.: (2011) Gaomin Zhongzi No. 1851], Beijing Higher People's Court believes that attorney's Fees fall within the scope of the loss compensation stipulated in the Contract Law of the People's Republic of China, and the analysis is as follows:

" The focus of the dispute in the second instance of this case is whether Ginos should compensate GINO Co., Ltd. for $19,978 attorney's Fees. In this regard, this court believes that GINO Company should compensate GINO Co., Ltd. for US$19,978 for attorney fees, for the following reasons:

• First, GINO Co., Ltd. has paid attorney fees to its attorneys in accordance with the valid " agency contract ". This expense should be regarded as property losses arising from the dispute in this case, and Ginoth Company shall compensate for this part of the losses. Therefore, GINO Company does not assume the payment obligations arising from the "Agent Contract" between GINO, Co., Ltd. and its attorneys, but instead compensates for property losses caused by GINO, Co., Ltd. for the payment of the attorney fees.
• Secondly, the lawyer's fees actually paid by GINO, Co., Ltd. fall within the scope of the loss compensation stipulated in the Contract Law of the People's Republic of China. The compensation loss stipulated in Article 113 of the Contract Law of the People's Republic of China refers to the compensation loss for breach of contract. It is the compensation for one party to cause property and other losses to the other party in violation of the contract. The nature of this compensation loss is of compensation, that is, to make up for the losses suffered by the non-breaching party. This attribute determines the application of compensation for losses. The premise for the breach of contract causes losses such as property. In this case, GINO, Co., Ltd. filed a lawsuit in court for failing to pay the goods by GINO, because of the breach of contract by GINO, Co., Ltd. The actual attorney's expenses incurred due to the lawsuit are property losses of GINO, Co., Ltd., and the property losses were entirely caused by GINO's breach of contract. Therefore, according to Article 113 of the Contract Law of the People's Republic of China, "If one party fails to perform its contractual obligations or performs its contractual obligations in compliance with the agreement and causes losses to the other party, the amount of compensation for losses shall be equivalent to the losses caused by breach of contract, including the benefits that can be obtained after the performance of the contract, but shall not exceed the losses that may be caused by breach of contract that the party breach of contract is foreseen or should have foreseeed when entering into the contract." The first instance court ruled that Ginos Company shall bear the attorney fees of GINO Co., Ltd., which is legally based and there is no improper effect.
• Finally, the attorney fees requested by GINO of the Co., Ltd. fall within a reasonable range. In this case, GINO, Co., Ltd. paid the corresponding translation fee, notarization and certification fee, travel and communication fee, document review and copy fee, etc. due to the litigation of this case. However, the first instance court only ruled that GINO, Co., Ltd., compensated GINO, Co., Ltd. for the actual attorney fees incurred by GINO, which falls within the scope of compensation for losses and complies with the principle of fairness. Therefore, Ginos appealed that it should not bear the GINO attorney fee of US$19,978, which the court did not support.”

(2) In the appeal case of the international goods sales contract dispute between Jiangsu Yulong Steel Pipe Co., Ltd. and Metal International Co., Ltd. [Case No.: (2010) Su Shang Wai Zhong No. 0031], the Jiangsu Higher People's Court held that "the translation fee and notarization and certification fee claimed by the metal company are only its own rights protection fee, notarization and certification fee, and it is not a direct loss caused by Yulong Company's breach of contract, and there is no agreement on this in the contract involved, so it is not supported. "

2.8 Interest for expenses incurred by non-case parties

In the appeal case of the international goods sales contract dispute between Jiangsu Yulong Steel Pipe Co., Ltd. and Metal International Co., Ltd. [Case No.: (2010) Su Shang Wai Final No. 0031], the Jiangsu Higher People's Court recognized the following analysis of the first instance court:

" The interest claimed by Metal Company incurred expenses incurred by non-case parties such as Guoqiang Company, Huatai Shipping Sdn Bundesliga Co., Ltd. and CapitalSteel Company during its repurchase and resale period has exceeded the foreseeable scope of Yulong Company's losses caused by its breach of contract, and lacks contractual basis and legal basis, so it is not supported. ”

. Practical reference suggestions for formulating international goods sales contracts

From the above cases, in the dispute over international goods sales contracts, the loss of infringement damages paid to the patent owner by the seller's goods infringement of other people's patent rights, and the loss of exchange rate caused by the seller's overdue payments will usually be determined by the court to meet the principle of foreseeable loss. For price difference losses caused by the repurchase of alternative goods, price reduction losses caused by the defects of goods, expected profit losses of resale, lawyer fees and other rights protection fees, etc., it is necessary to further document and evidence based on the contract agreements between the two parties, past transaction habits, letters of communication between the two parties, etc. Analysis. To this end, making clear agreements on relevant matters in the contract will help the parties to control the handling of breach of contract. Based on the above analysis, we put forward the following practical reference suggestions for the agreement on foreseeable losses in the international sales contract:

(1) As mentioned above, existing cases believe that the attorney fees spent by the party that abides by the contract are foreseeable losses, and some cases believe that the attorney fees are rights protection costs, which should not be considered as losses without the contract. From the perspective of helping to deter parties to the contract from arbitrary breach of contract, it is possible to consider clearly including attorney fees, translation fees, notarization fees and other rights protection fees in the contract.

(2) claims that the other party breach of contract and causes The price difference losses of additional expenses related to storage fees, freight fees, and repurchase of alternative goods need sufficient evidence to support, otherwise there will be certain uncertainties. Regarding these losses, each party may make suggestions on the arrangement of the contract terms based on its own needs and based on the actual situation of negotiation status. For example, the buyer who intends to purchase goods for reprocessing may consider requiring the contract to clearly stipulate in the contract that the warehousing fees, freight fees, and price difference losses caused by repurchase of alternative goods may occur, and they all fall within the scope of damages; conversely, in order to prevent the buyer from raising unreasonable or malicious losses, the seller may consider requiring the specific expenses to be clearly stated in the contract that the seller does not need to compensate, or agrees to the maximum limit for compensation for the seller.

(3) From the perspective of some courts quoted above, when claiming loss of gains, the court will generally verify whether the breach of contract is aware of the purpose of the abide by the contract. For example, the court will analyze whether the seller is aware of whether the buyer purchases the goods for resale, reprocessing or self-use, thereby further inferring whether the seller can foresee the losses claimed by the buyer. Therefore, the buyer can consider specifying the purpose of the purchase goods in the contract in detail so as to strengthen the evidence that the seller should be aware of the loss that his breach of contract may cause losses to the buyer. Explaining the purpose of the contract in the contract such as the purpose of the purchase goods in the contract will also help all parties resolve issues such as "whether it is conducive to achieving the purpose of the contract" or "whether the purpose of the contract can be achieved" or "whether it meets the specific standards of the purpose of the contract" in the dispute.

[1] "Guidelines for the New Interpretation and Application of Civil Cases (Second Edition) (Volume 1)" (China Legal Publishing House, January 2018, 2nd Edition), Page 214

About the Author

	Li Jizhi Partner of our firm Lawyer Li has rich experience in the fields of domestic and overseas restructuring and listing of enterprises, domestic and cross-border investment and mergers and acquisitions, private equity fund business, and cross-border banking (gang) loans.
	Liang Wenwen Lawyer of our firm Lawyer Liang's main service areas include cross-border investment, corporate listing financing, financial institution asset management business, corporate corporate governance, banking business, international trade, etc.

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