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Online shopping: Non-delivery and refund not equivalent to termination of contract

english.bjinternetcourt.gov.cn | Updated: 2022-01-27


Case summary:

On Jan 27, 2020, the plaintiff surnamed Yang bought a pair of Kobe Bryant (the late NBA player) co-branded gym shoes from a Taobao (an online shopping website) store owned by the defendant surnamed Li. The purchase details showed the commodity would be delivered within 45 days. During that period Kobe Bryant died in an accident, which caused the price of the shoes to rise. Li contacted Yang and said he did not have the shoes in stock and could not deliver them as contracted, and asked Yang to apply for a refund online. Yang declined Li’s request. One year later, Li had still not delivered the shoes. In accordance with Taobao’s policy on delivery timeout, the order was automatically closed by the Taobao platform on Jan 27, 2021 and the payment was returned to Yang's account. Claiming that the transaction contract between Yang and Li was still in place, Yang sued Li in the Beijing Internet Court (BIC), requesting that the defendant fulfill his delivery obligations according to the contract.

Li defended by saying that the unexpected death of Kobe Bryant caused a price jump of the shoes involved. Li said he had contacted Yang in a timely manner to say he could not deliver the shoes. According to Taobao's transaction regulations, a transaction will automatically close if the seller does not click on the "delivery" button 365 days after the buyer's payment, and Taobao will return the payment to the buyer. As Li did not deliver and the payment was returned to Yang, the contract became "invalid" and he did not need to perform the delivery obligation. 

After hearing, the BIC concluded that:

As stipulated in Clause 1, Article 49 of the  of the People's Republic of China, a contract is established when the commodity or service information released by the e-commerce operator meets the conditions of the offer, and the user selects the commodity or service and submits the order successfully. If the parties have agreed otherwise, such agreement shall prevail. In this case, Yang submitted the order and made the payment, thus an information network sales contract relationship was established between the two parties. The parties were required to perform their obligations in accordance with the agreement and were not able to alter or terminate the contract without agreement. 

As stipulated in Article 562 of the Civil Code, the parties may rescind the contract upon agreement through consultation. In this case, Yang declined Li’s request for refund on the payment day. They did not reach a consensus. The purchase order was closed by Taobao’s automatic operation based on its platform regulations, not on Yang’s instructions. In addition, there was no other cause for legal dissolution of the contract involved. Therefore, the contract was not dissolved. 

As stipulated in Article 577 of the Civil Code, where a party fails to perform his contractual obligation or his performance does not conform to the agreement, he shall bear default liability such as continuing to perform his obligations, taking remedial measures, or compensating for losses. In this case, Li should have fulfilled his delivery obligation within the contracted time limit. But he failed to deliver until Taobao eventually closed the order. Li thus breached the contract.

Upon the court's inquiry, Li acknowledged that the shoes involved were still available in the market, so it was possible to continue to perform the contract. The court supported Yang's claim for contract performance. 

Details of the judgment:

The BIC's first instant judgment ruled that Li should perform his delivery obligation after Yang paid for the gym shoes.  

Tips from the judges:

With online shopping getting popular, online shopping platforms tend to formulate their own rules to maintain their business orders, which provides flexibility in response to various situations. But those rules do not overrule the autonomy of will between the parties and related legal provisions.

If a seller refuses to deliver goods, the buyer can actively communicate with the seller to understand why. If the failure of delivery is caused by insufficient inventory or the seller's intention to hoard the goods for a higher price, the buyer can continue to claim performance or look into other remedies for breach of contract. If any loss occurs to the buyer, the buyer can also claim compensation from the seller.

Sellers should also abide by the principle of good faith when selling goods on e-commerce platforms. All product information should be truthful and promises such as delivery time limits should be kept. Meanwhile, sellers should also check their commodity inventory in a timely way to ensure supply and good faith.