Subsequent Cases and Analysis
Full Text of the Guiding Case
Main Points of the Adjudication
1. Where cars are purchased [to meet] consumption needs in family life, fraud disputes occurring in [these purchases] may be handled pursuant to the Law of the People’s Republic of China on Protection of Consumer Rights and Interests.
2. [If] a car seller promises to sell a new car that has not been used or repaired to a consumer, [but] after purchase, the consumer discovers that the car has been used or repaired, [and] the seller cannot prove that he  has performed his duty of disclosure and that [the performance] has been acknowledged by the consumer, [this] constitutes sales fraud. [If] the consumer demands that the seller compensate his losses in accordance with the Law on Protection of Consumer Rights and Interests, the people’s court should offer support.
Related Legal Rule(s)
Article 2 and Article 55, Paragraph 1 of the Law of the People’s Republic of China on Protection of Consumer Rights and Interests ([Article 55, Paragraph 1] was revised on October 25, 2013 and was Article 49 before the revision)
Basic Facts of the Case
On February 28, 2007, plaintiff ZHANG Li (张莉) purchased a Shanghai General Motors Chevrolet Epica sedan from defendant Beijing Heli Huatong Automobile Service Co., Ltd. (北京合力华通汽车服务有限公司) (hereinafter referred to as “Heli Huatong Company”) at the price of RMB 138,000. The two parties signed an Automobile Sales Contract. Article 7 of the contract stipulated:
. . . The seller guarantees that the vehicle purchased by the buyer is a new car that has gone through necessary inspection and cleaning before delivery, [that] the vehicle odometer reads 18 kilometers, [and that the vehicle] conforms with all the specifications and indicators listed in those documents that the seller provided to the buyer and that were delivered with the car . . .
On the day the contract was signed, ZHANG Li paid Heli Huatong Company the vehicle purchase price of RMB 138,000, [and] at the same time paid the vehicle purchase tax of RMB 12,400, a one-package service fee  of RMB 500, and an insurance premium of RMB 6,060. On the same day, Heli Huatong Company delivered a Chevrolet Epica sedan to ZHANG Li, [and] ZHANG Li completed the motor vehicle registration procedure for the car. On May 13, 2007, when ZHANG Li sent the vehicle to Heli Huatong Company for maintenance, [she] discovered that the car had undergone repairs on January 17, 2007.
In the course of handling [the case], Heli Huatong Company stated that the vehicle purchased by ZHANG Li indeed had accrued scratches in transit [and] had undergone repairs on January 17, 2007. The repair items included spray painting the right front fender, spray painting the right front door, spray painting the right rear fender, sheet metal processing of the right front door, sheet metal processing of the right rear fender, and sheet metal processing of the right front fender. During the repair, the side sill clips, fuel tank door, and front fender lamp assembly  were replaced. The person who sent [the vehicle] for repair was an employee of [Heli Huatong Company]. Heli Huatong Company stated that, as for the matter of the vehicle having once undergone repairs, [the company had] clearly informed ZHANG Li during the sale and also, in accordance with this [fact], offered a relatively large discount. The sales price of the vehicle should have been RMB 151,900. After negotiations, the actual sales price of the vehicle was RMB 138,000, and some decorations were offered for free. To prove the aforementioned facts, Heli Huatong Company provided vehicle maintenance records and a vehicle delivery checklist with ZHANG Li’s signature dated February 28, 2007. In the remarks column of the vehicle delivery checklist, there was written:
The car has been 1/4 refueled. The right side of the car had sheet metal and spray paint repairs [and the car] is sold at the agreed price.
Heli Huatong Company expressed that the delivery checklist was kept by the company, [and that] ZHANG Li did not have this checklist in her hands.  With regard to the aforementioned two pieces of evidence provided by Heli Huatong Company, ZHANG Li stated [that she] did not have objections to the vehicle maintenance records, [and confirmed that] the signature on the vehicle delivery checklist was indeed her signature. However, [she claimed that] during the sale, Heli Huatong Company failed to inform [her] that the vehicle had undergone repairs, [and that] when she signed [the checklist], the remarks column did not have the words, “The right side of the car had sheet metal and spray paint repairs [and the car] is sold at the agreed price.”
Results of the Adjudication
In October 2007, the Chaoyang District People’s Court of Beijing Municipality rendered the (2007) Chao Min Chu Zi No. 18230 Civil Judgment:
- [The court] rescinds the Automobile Sales Contract signed by ZHANG Li and Heli Huatong Company on February 28, 2007.
- [The court orders] ZHANG Li to return her purchased Chevrolet Epica sedan to Heli Huatong Company within seven days after the judgment comes into effect.
- [The court orders] Heli Huatong Company to return the vehicle purchase amount of one hundred and twenty-four thousand and two hundred yuan to ZHANG Li within seven days after the judgment comes into effect.
- [The court orders] Heli Huatong Company to compensate ZHANG Li the purchase tax of twelve thousand and four hundred yuan, the service fee of five hundred yuan, and the insurance premium of six thousand and sixty yuan within seven days after the judgment comes into effect.
- [The court orders] Heli Huatong Company to pay ZHANG Li a compensation that doubles the vehicle purchase amount, which is one hundred and thirty-eight thousand yuan, within seven days after the judgment comes into effect.
- [The court] rejects ZHANG Li’s other litigation claims.
After the judgment was pronounced, Heli Huatong Company appealed. On March 13, 2008, the No. 2 Intermediate People’s Court of Beijing Municipality rendered the (2008) Er Zhong Min Zhong Zi No. 00453 Civil Judgment: [the court] rejects the appeal and upholds the original judgment.
Reasons for the Adjudication
In the effective judgment, the court opined:  plaintiff ZHANG Li purchased the car for personal use [to meet] the needs of [daily] life. Defendant Heli Huatong Company did not have evidence to prove that ZHANG Li purchased the car for business operation or other consumption unrelated to the needs of [daily] life. Thus, ZHANG Li’s act of purchasing the car was a type of consumption necessary to [daily] life, [and] the Law of the People’s Republic of China on Protection of Consumer Rights and Interests should apply.
In accordance with the stipulations in the Automobile Sales Contract signed by both parties, the vehicle delivered to ZHANG Li by Heli Huatong Company should be a new car without maintenance records, [but] the vehicle sold had in fact undergone repairs before delivery. These were the facts that both parties acknowledged, [and] thus the focus of this dispute was whether or not Heli Huatong Company had performed its duty of disclosure beforehand.
Lowering sales prices of vehicles or [offering] discounts and providing complimentary decorations were sales strategies commonly used by sellers. [Both were done here] as the result of the parties’ negotiations. [Nonetheless, one] could not infer from [this alone] that Heli Huatong Company had lowered the price and [offered] discounts on the basis of informing ZHANG Li that the car had defects. [As for] the vehicle delivery checklist with ZHANG Li’s signature submitted by Heli Huatong Company, because it was kept solely by Heli Huatong Company and [because] the [pertinent] contents in the remarks column were written by different personnel of the company and [that the pertinent contents] were not recognized by ZHANG Li, the delivery checklist was not sufficient to prove that ZHANG Li was aware that the vehicle had undergone repairs before. Thus, Heli Huatong Company’s defense, claiming that it had performed its duty of informing ZHANG Li of the [car’s] defects, was not accepted. [It] should, therefore, be determined that Heli Huatong Company concealed the preexisting defects of the vehicle when it was sold [and that] there was a fraudulent act. [Thus,] the car and vehicle purchase amount should be returned and compensation for ZHANG Li’s losses should be added [to the amount to be paid by the seller].
* The citation of this translation of the Guiding Case is: 《张莉诉北京合力华通汽车服务有限公司买卖合同纠纷案》(ZHANG Li v. Beijing Heli Huatong Automobile Service Co., Ltd., A Sale and Purchase Contract Dispute), China Guiding Cases Project, English Guiding Case (EGC17), Feb. 4, 2014 Edition, available at https://cgc.law.stanford.edu/guiding-cases/guiding-case-17.
This document was primarily prepared by JIANG Runzhou, LIANG Lili, Lisa Lin, Michael Schmale, and SUN Yayuan. The document was finalized by Alyssa King, Jordan Corrente Beck, Dimitri Phillips, and Dr. Mei Gechlik. Minor editing, such as splitting long paragraphs, adding a few words included in square brackets, and boldfacing the headings to correspond with those boldfaced in the original Chinese version, was done to make the piece more comprehensible to readers. The following text, otherwise, is a direct translation of the original text and reflects formatting of the Chinese document released by the Supreme People’s Court.
The following Guiding Case was discussed and passed by the Adjudication Committee of the Supreme People’s Court of the People’s Republic of China and was released on November 8, 2013, available at http://www.chinacourt.org/article/detail/2013/11/id/1150419.shtml. See also最高人民法院关于发布第五批指导性案例的通知 (The Supreme People’s Court’s Notice Concerning the Release of the Fifth Batch of Guiding Cases), Nov. 8, 2013, available at http://www.chinacourt.org/law/detail/2013/11/id/147238.shtml.
 Translators’ note: “he” and “his” as used herein are, unless the context indicates otherwise, gender-neutral terms that also refer to “she”, “her”, and “it”.
 Translators’ note: the term “一条龙服务费” translated here as “one-package service fee” suggests that the fee covers a series of services the details of which are not clear from the original text.
 Translators’ note: the term “板灯总成” translated here as “lamp assembly” refers to the entire headlamp or taillight unit of a car, as opposed to just the bulb, the reflector, or the covering.
 Translators’ note: while the phrase “手中” literally translates to “in [her] hands”, here it likely means “in [her] possession”.
 Translators’ note: the Chinese text does not specify which court opined. Given the context, this should be the No. 2 Intermediate People’s Court of Beijing Municipality.