Refusal to pay 4 million based on the contract? Court ruling: No!
2026-01-15
At the end of the year and the beginning of the year, the chill grew stronger. A concrete company in Hubei province is experiencing a surge of enthusiasm in its factory area: the mixer is roaring and the transport vehicles shuttle back and forth, creating a busy production scene. The payment was fully received last year, and the stone in my heart finally fell. Now we have more confidence in accepting orders and production. ”The company leader's face showed a relieved smile. This "confidence" is due to the judgment of a sales contract dispute case concluded by the Intermediate People's Court of Wuhan City, Hubei Province - this judgment has built a barrier of substantive equal protection with judicial power. As early as 2021, a construction company purchased concrete from the concrete company and stipulated in the purchase and sales contract that the construction company would pay for the goods after receiving third-party payments, and based on the project payment situation, pay for the goods in the same proportion. From then on until May 2023, the concrete company continued to supply as agreed, with a cumulative settlement amount of over 12 million yuan. However, the construction company did not pay the full amount of the goods and consistently delayed payment of the remaining 4 million yuan under the pretext of "not receiving payment for the project". Despite repeated reminders, the concrete company filed a lawsuit with the People's Court of Hanyang District, Wuhan City, Hubei Province. Our company has fully fulfilled its contractual obligations, and the other party should make the payment. Now the company is facing pressure such as bank loans expiring and employee salary payments, which are related to the survival and development of the enterprise. ”In the "Economic Impact Assessment Form for Enterprise Related Cases" issued by the Hanyang District Court, the concrete company wrote down its most urgent demands. This table is a key component of the "Economic Impact Assessment" mechanism for enterprise related cases in Wuhan courts. Through the two-way evaluation of "enterprise self-evaluation+court judgment", the court accurately identified the difficulties faced by the enterprise, classified this case as a "blue" level, and quickly scheduled the court hearing. During the trial, the construction company argued that according to the contract, it had the right to temporarily withhold payment of the remaining amount until it received payment from a third party. After trial, the Hanyang District Court found that although the contract was a true expression of intention by both parties, the construction company failed to provide evidence to prove that it had actively claimed its creditor's rights and repayment ratio from the third party. Furthermore, it is pointed out that using this as a payment condition will keep the contracting purpose of the concrete company in a state of uncertainty for a long time, and essentially impose adverse consequences of third-party negligence on the concrete company, which violates the principle of fairness. Therefore, the construction company is ordered to pay the remaining payment and interest. This is a voluntary agreement reached by both parties. ”The construction company believes that the payment terms have not been fulfilled yet and has filed an appeal, emphasizing the clause in the contract that "payment shall be made in proportion to the reference project payment situation". Business dealings should be based on the principle of 'cash on delivery, no debt owed'. But such clauses in the contract bind the right holder's right to receive payment with third-party collection behavior. On the surface, it may seem like a free agreement, but in reality, it is a tool for powerful companies to transfer risks. When one party uses its advantageous position in the transaction to impose such terms on the cooperating enterprise, the latter not only has to fulfill its contractual obligations, but also indirectly "endorses" the payment risk of the former. How to achieve substantive equal protection for business entities? In August 2024, the Supreme People's Court issued the "Reply on the Validity of Terms and Conditions for Large Enterprises and Small and Medium sized Enterprises to Agree on Third Party Payment as a Prerequisite for Payment" (hereinafter referred to as the "Reply"), clarifying that such terms and conditions violate the "Regulations on Guaranteeing Payment for Small and Medium sized Enterprises" and should be deemed invalid. In the second instance stage of the case, Wuhan Intermediate People's Court strictly implemented the spirit of approval and conducted a substantive review of the clause of "paying the goods in proportion to the reference project payment situation", pointing out that this clause transfers the third-party payment risk to downstream suppliers, which is obviously unfair to the compliant party, and determines that this clause is invalid. This case was also included in the work report of the Supreme People's Court due to its typical significance. In the process of handling the case, we found that some companies still have many confusions in contract signing, risk prevention, and other aspects. ”Introduction by the presiding judge of the second instance. To this end, Wuhan's two levels of courts organized judges to visit parks and enterprises, conduct face-to-face legal Q&A sessions, and help enterprises build a strong legal "firewall". At the same time, Wuhan Intermediate People's Court has also jointly established a "Private Enterprise Conflict and Dispute Mediation Connection Service Station" with the Municipal Federation of Industry and Commerce, providing more efficient and convenient dispute resolution channels. In the past two years, more than 300 disputes have been efficiently resolved, and enterprises have gained a greater sense of gain. On May 20, 2025, the Private Economy Promotion Law officially came into effect, further clarifying in legislative form the equal protection of the legitimate rights and interests of private economic organizations and their operators in accordance with the law, injecting stronger impetus into equal protection. Liu Taiping, Secretary of the Party Group and President of Wuhan Intermediate People's Court, stated: "Wuhan courts will focus on their judicial functions and continue to optimize the legal business environment. In the next step, we will provide equal judicial protection for all types of business entities through more accurate judicial guidance, more practical service measures, and higher quality legal supply, effectively solving urgent and difficult problems in enterprise development, and helping enterprises to move forward with ease and stability
Edit:Wang Shu Ying Responsible editor:Li Jie
Source:People's Court Daily
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