The applicant Harvest China Enterprise Limited (hereinafter “Harvest China”) and the applied party Ningbo Yinzhou Tongli Sports Vehicle Factory (hereinafter “Tongli Sports Vehicle”) signed a Cooperation Agreement on 400cc Karting on October 11, 2006. The Agreement provides that the applied party shall install the 400cc Karting for the applicant and the installation fee shall be 15% of the component purchase cost price for each Karting. After signing the Agreement, the applicant did not place any purchase order with the applied party on the 400cc Karting and the applied party also did not engage in manufacturing thereof.
On February 11, 2007, the applicant proposed once more an order of 30 500cc-engine Kartings and the applied party issued a Proforma Invoice to the applicant. Considering the price issue, the applied party added “invoice to be remade at the price of 3137” to the Proforma Invoice. The applicant then purchased the relevant vehicles from a party other than involved in the case named Dongfang Company. During February to March 2007, the applicant three times remitted payment into the bank account of the applied party. On May 13, 2007, Dongfang Company issued a Proforma Invoice to the applicant, with the description “500cc Karting, 27 pieces, unit price US$3137”; besides it is also provided in the “remarks”: this contract is modified from the contract signed between the applicant and the applied party on February 11, 2007 and the two parties shall perform according to the new contract.
On November 14, 2007, the applicant submitted an application for arbitration to Shanghai Arbitration Commission, alleging that the applicant had changed the product type into 500cc and had completed all payment under the contract while the applied party did not deliver all 500cc Kartings; therefore the applied party had violated the contract and was suspected to have disclosed the trade secret and constituted fraud. So the applicant pleaded that the applied party should return the amount already paid for the Kartings, compensate for direct economic losses caused thereby, together with compensation for disclosure of the trade secrets and damages for contract breaching, to a total amount of RMB 14,000,000.
We held that the nature of the Cooperation Agreement is processing and custom-made work, which was not performed by the applicant. The Proforma Invoice for 500cc Kartings should be deemed as a purchase contract, so the claims of the applicant were irrelevant to the Cooperation Agreement. The Fact and Cause claimed by the applicant was based on the dispute over the purchase contract of 500cc Kartings between the parties, instead of on the dispute over the 400cc Kartings under the Cooperation Agreement. Therefore, the Fact and Cause claimed by the applicant could not stand.
The focus of the dispute in this case is on how to view the Cooperation Agreement, the Proforma Invoice issued by the applied party to the applicant and the Proforma Invoice issued by Dongfang Company to the applicant. The applicant held that the Cooperation Agreement was a framework agreement while every deal had a Proforma Invoice issued by the applied party, so the two should belong to one legal relationship, where the Cooperation Agreement was binding on the Proforma Invoice; the Proforma Invoice issued to the applicant on February 11, 2007 could prove that the applicant had ordered 30 500cc Kartings from the applied party and the only difference should be that the 400cc under the Cooperation Agreement was changed into 500cc. Dongfang Company is a trading agent of the applicant and therefore the Proforma Inovice issued by Dongfang Company should belong to the same legal relationship as the Cooperation Agreement and should form a modification to the Proforma Invoice issued by the applied party.
We held that the Cooperation Agreement had provided processing and assuming work over the 400cc Kartings and the contractual object was the 400cc Karting; its price article provided that the applied party should charge the installation fee in an agreed proportion. According to the Contract Law, where the parties reach an agreement after negotiation, a contract can be modified. However, in this case only the applicant thought the Cooperation Agreement had been modified. We held that the order placed by the applicant for 500cc Kartings was a new invitation and therefore had no relevance to the Cooperation Agreement. When the applied party issued the Proforma Invoice and provided its quotation, the two parties did not reach an agreement and therefore the purchase relationship between the parties was not established. As a result, the Proforma Invoice issued by the applicant and the Cooperation Agreement did not belong to the same legal relationship. Meanwhile, Dongfang Company, as an independent legal person, had no relevant to this case and the Proforma Invoice issued by it to the applicant was actually a purchase contract between the applicant and Dongdang Company. Also, it is marked on the Proforma Invoice the replacement between this invoice and the previous Invoice; the applied party was not involved in this purchase contract and therefore there was no connection between the three parties.
The Tribunal held that the Proforma Invoice issued by the applied party was only an expression; besides the addition of “invoice to be remade” also indicated that no agreement was formed between the parties thereupon. Afterwards, the applied party also did not issue another Proforma Invoice, so this Proforma Invoice should not be deemed as an effective amendment to the Cooperation Agreement. Where there was no other supporting evidence, the claim of the applicant for confirming that the Proforma Invoice was an amendment to the Cooperation Agreement could not be supported by the Tribunal. There was no entrusting relationship between Dongfang Company and the applied party and the Proforma Invoice issued by Dopngfang Company specially provided that it should performed by the applicant “according to the new contract”. This Invoice was different from the Cooperation Agreement both in the contracting parties and in the content, so they could not be deemed as belonging to the same legal relationship.
In the end, the Shanghai Arbitration Commission supported our opinions and awarded that the applied party should return the amount already paid by the applicant; all the other claims of the applicant were not supported.

 

The applicant Harvest China Enterprise Limited (hereinafter “Harvest China”) and the applied party Ningbo Yinzhou Tongli Sports Vehicle Factory (hereinafter “Tongli Sports Vehicle”) signed a Cooperation Agreement on 400cc Karting on October 11, 2006. The Agreement provides that the applied party shall install the 400cc Karting for the applicant and the installation fee shall be 15% of the component purchase cost price for each Karting. After signing the Agreement, the applicant did not place any purchase order with the applied party on the 400cc Karting and the applied party also did not engage in manufacturing thereof.
On February 11, 2007, the applicant proposed once more an order of 30 500cc-engine Kartings and the applied party issued a Proforma Invoice to the applicant. Considering the price issue, the applied party added “invoice to be remade at the price of 3137” to the Proforma Invoice. The applicant then purchased the relevant vehicles from a party other than involved in the case named Dongfang Company. During February to March 2007, the applicant three times remitted payment into the bank account of the applied party. On May 13, 2007, Dongfang Company issued a Proforma Invoice to the applicant, with the description “500cc Karting, 27 pieces, unit price US$3137”; besides it is also provided in the “remarks”: this contract is modified from the contract signed between the applicant and the applied party on February 11, 2007 and the two parties shall perform according to the new contract.
On November 14, 2007, the applicant submitted an application for arbitration to Shanghai Arbitration Commission, alleging that the applicant had changed the product type into 500cc and had completed all payment under the contract while the applied party did not deliver all 500cc Kartings; therefore the applied party had violated the contract and was suspected to have disclosed the trade secret and constituted fraud. So the applicant pleaded that the applied party should return the amount already paid for the Kartings, compensate for direct economic losses caused thereby, together with compensation for disclosure of the trade secrets and damages for contract breaching, to a total amount of RMB 14,000,000.
We held that the nature of the Cooperation Agreement is processing and custom-made work, which was not performed by the applicant. The Proforma Invoice for 500cc Kartings should be deemed as a purchase contract, so the claims of the applicant were irrelevant to the Cooperation Agreement. The Fact and Cause claimed by the applicant was based on the dispute over the purchase contract of 500cc Kartings between the parties, instead of on the dispute over the 400cc Kartings under the Cooperation Agreement. Therefore, the Fact and Cause claimed by the applicant could not stand.
The focus of the dispute in this case is on how to view the Cooperation Agreement, the Proforma Invoice issued by the applied party to the applicant and the Proforma Invoice issued by Dongfang Company to the applicant. The applicant held that the Cooperation Agreement was a framework agreement while every deal had a Proforma Invoice issued by the applied party, so the two should belong to one legal relationship, where the Cooperation Agreement was binding on the Proforma Invoice; the Proforma Invoice issued to the applicant on February 11, 2007 could prove that the applicant had ordered 30 500cc Kartings from the applied party and the only difference should be that the 400cc under the Cooperation Agreement was changed into 500cc. Dongfang Company is a trading agent of the applicant and therefore the Proforma Inovice issued by Dongfang Company should belong to the same legal relationship as the Cooperation Agreement and should form a modification to the Proforma Invoice issued by the applied party.
We held that the Cooperation Agreement had provided processing and assuming work over the 400cc Kartings and the contractual object was the 400cc Karting; its price article provided that the applied party should charge the installation fee in an agreed proportion. According to the Contract Law, where the parties reach an agreement after negotiation, a contract can be modified. However, in this case only the applicant thought the Cooperation Agreement had been modified. We held that the order placed by the applicant for 500cc Kartings was a new invitation and therefore had no relevance to the Cooperation Agreement. When the applied party issued the Proforma Invoice and provided its quotation, the two parties did not reach an agreement and therefore the purchase relationship between the parties was not established. As a result, the Proforma Invoice issued by the applicant and the Cooperation Agreement did not belong to the same legal relationship. Meanwhile, Dongfang Company, as an independent legal person, had no relevant to this case and the Proforma Invoice issued by it to the applicant was actually a purchase contract between the applicant and Dongdang Company. Also, it is marked on the Proforma Invoice the replacement between this invoice and the previous Invoice; the applied party was not involved in this purchase contract and therefore there was no connection between the three parties.
The Tribunal held that the Proforma Invoice issued by the applied party was only an expression; besides the addition of “invoice to be remade” also indicated that no agreement was formed between the parties thereupon. Afterwards, the applied party also did not issue another Proforma Invoice, so this Proforma Invoice should not be deemed as an effective amendment to the Cooperation Agreement. Where there was no other supporting evidence, the claim of the applicant for confirming that the Proforma Invoice was an amendment to the Cooperation Agreement could not be supported by the Tribunal. There was no entrusting relationship between Dongfang Company and the applied party and the Proforma Invoice issued by Dopngfang Company specially provided that it should performed by the applicant “according to the new contract”. This Invoice was different from the Cooperation Agreement both in the contracting parties and in the content, so they could not be deemed as belonging to the same legal relationship.
In the end, the Shanghai Arbitration Commission supported our opinions and awarded that the applied party should return the amount already paid by the applicant; all the other claims of the applicant were not supported.

 

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