Monday, November 26, 2007

Move Over, Administrative Regulations!

Mr. Ma wanted to tour some of the most beautiful places in central China with his son. He always wanted to visit those places himself, and he longed for his son to tag along so that he may appreciate the natural and historical beauty of these places too. The only time to go is, of course, during the week long May Day holiday when the entire country travels and vacations. Mr. Ma knew that the trip would be expensive, tiresome, and crowded, but he did not care, because he really wanted to go and figured this year would be the year. So, he called a traveling agency and booked the tour for two. Upon paying the necessary amount to and signing a contract with the traveling company, Mr. Ma was pregnant with excitement about touring the sites with his son, despite the inconveniences that he foresaw.

The tour lived up to its hype for the most part, and Mr. Ma enjoyed almost all the sites he visited, except for two. His tour guide, an agent of the traveling agency—Shanghai Chunqiu Huangpu Traveling Agency, had decided that visits to those two sites would be replaced by a shopping trip instead. When Mr. Ma confronted the agent and the agency about skipping the two sites, they pretty much thumbed their noses at him, telling him that a distant glance at those two places would be just as gratifying as walking through them with thousands of people. Mr. Ma insisted that those two sites were included in the contract, but to no avail.

Mr. Ma was outraged and decided to sue under the contract for damages. But the real issue was what laws/regulations should apply to determine the appropriate amount of damage. The plaintiff argued the Contract Law of China should apply since the parties had a valid contract governing their relationship, while the defendant averred that the Standards for Compensation on Traveling Quality Guarantee (Provisional) (“Compensation Standards”), issued by the National Tourism Administration in 1997.

Plaintiff pleaded for specific performance of the contract, i.e. tour of the sites skipped by the defendant. In the alternative, he asked for monetary damages in the amount of 5,890 Yuan (amount that it would cost the plaintiff to travel to those sites in an alternative tour), in addition to attorney’s fees totaling 4,000 Yuan. The defendant, on the other hand, answered that the proper damage under the Compensation Standards should be 280 Yuan, the value of admissions to the two sites plus relevant compensation.

The Court ruled in favor of Mr. Ma, but denied all that he desired. It held that the Contract Law should apply, and the defendant should compensate Mr. Ma for the economic damages resulting from the breach of contract. Specific performance of the contract, given the nature of the contract and the circumstances, is not the proper remedy. Rather, the defendant should pay Mr. Ma 2,400 Yuan, on account of the contractual provisions regarding transportation, admission tickets, lodging, and tour guide fees. And the Court specifically pointed out that it came out with the amount because the parties did not stipulate the method and amount of damages in case of breach by either party.

That is the story, but it does not end here.

Although insignificant in the amount of damages, this case is very significant in a few aspects:

1. The Court refused to apply the Compensation Standards even though they were directly applicable to the facts of this case. So, it can be inferred that in case of a direct conflict between the Contract Law and an administrative regulation the former prevails. Theoretically, it has always been the case, but it is less obvious in reality. The Court made the theory alive, which entitles the Court a pat on the back.

2. More consumers are choosing to exercise their legal rights and are not afraid of doing so in courts. Mr. Ma represents one of those individuals that do not let a wrongdoer walk free without putting up a fight. His attorney’s fees are probably more than the compensation he received. But that is kinda beside the point here.

3. The Court was very competent in reaching its decision. It looked at the plain language of the contract, excluded force majeure as an excuse for the breach, and reached an equitable decision for lack of contractual provisions on damages.

Remember that China currently has more than 10,000 regulations of various hues? If Chinese courts start to follow the example of this Shanghai court, those regulations that conflict with Chinese laws might have to really MOVE OVER. And that might not be a bad thing at all.

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