Key points of a continuous buying and selling transaction

In practice, it is very common for a buyer to purchase products from the same supplier for many years. The characteristics of this transaction are continuous trading and continuous settlement. When there is a debt dispute, both parties may argue over the inconsistence of payment, or delivery and so on. The disputes stem from the following key points.

Firstly, the agreement is unclear. Many parties may not have signed an agreement or a comprehensive agreement, or some orders have been missed, therefore, it is difficult for the plaintiff to find provisions to prove the agreement regarding acceptance, payment settlement, breach of contract liability, etc. Article 510 of the “Civil Code” stipulates: “Where, after a contract becomes effective, there is no agreement in the contract between the parties on the terms regarding quality, price or remuneration or place of performance, or such agreement is unclear, the parties may enter into a supplementary agreement; if no supplementary agreement is reached, the relevant terms of the contract or trading practices shall govern.” Therefore, in the absence of an agreement, the plaintiff has to interpret those unclear provisions by clarifying transaction customs. Such interpretation shall be supported by the previous transaction documents.

Secondly, the accounts receivable and payable are unclear. For example, the amount of payment is different from the amount of the corresponding order, the information in the delivery notes is different from the corresponding order, and so on. The consequence is that it is difficult for the plaintiff to prove the relevant order, delivery note and acceptance certificate, by which the seller may refuse to pay the payment on the grounds that the corresponding transaction has exceeded the statute of limitations. 

Therefore, from the perspective of the seller, for continuous buying and selling transactions, the following aspects shall be noted:

It is important to ensure that a comprehensive and standardized contract is signed before the transaction begins. In addition to payment of the goods, the acceptance provision and the provision of breach of contract liability are important.

It is recommended to retain evidence during the performance process, including delivery and receipt records, acceptance certificates, and so on. The correspondence of payment is very important. Because the cash flow could demonstrate many transaction customs, such as unit price, delivery time, payment terms, and so on. Especially in the absence of a provision on breach of contract liability related to late payment, such cash flow is the key evidence to explain the transaction customs. Therefore, the seller should ensure that the payments and orders are matched one-to-one. If the amount paid by the buyer is irregular and cannot form a one-to-one correspondence, it is recommended to reinforce it by confirmation letters, statements, and other measures. If it is not appropriate to use the aforementioned formal measures, it is recommended to use corporate email, corporate WeChat to confirm with the buyer.

In the Lufa case [2024] No.066, the buyer and seller signed multiple contracts continuously over several years, and the buyer paid multiple amounts one after another. The transfer only vaguely noted the payment for goods or equipment, and most of the invoices issued by the seller did not indicate the corresponding contract or construction. There is a lack of clear correspondence between the payment and the goods, so it is impossible to distinguish the performance of each contract, the consequence is that the statute of limitations for litigation becomes complicated.

However, if this case were to occur in Beijing, according to the “Guiding Opinions on Several Issues Concerning the Trial of Sales Contract Disputes by the Beijing Higher People’s Court (Trial)” (Jinggao Fa Fa [2009] No. 43), the judgment might be different. The opinion stipulates that, “Under certain conditions, the court shall conduct a comprehensive trial to clarify the facts, and the statute of limitations for litigation shall be recalculated from the day after the last payment of the debt by the buyer”. The situations that meet certain conditions include: there is a long-term and continuous buying and selling relationship between the parties without written contract; and there is a framework agreement between the parties, and multiple contracts or performance behaviors have been signed afterwards. However, the opinion also explicitly states that “if there is no framework agreement and only multiple independent contracts exist, and there is confusion in the performance of facts, this guidance cannot be applied because the situation may be too complex and the guidance cannot be exhaustive.

The timely collection of accounts is also important. Due to the 3-year statute of limitations for litigation, enterprises should establish rules for regularly sorting out outstanding debts and timely written collection.