Hangzhou XX Network Technology Co., Ltd. v. Li Xiang, Jiang Xie, Huludao XX Culture & Film Media Co., Ltd., and Cui Xiliang—Dispute over a Service Contract

Keywords: Online live-streaming services; contractual counterparties; agency; single-member limited liability company

Counseling Attorney: Liu X

Key point of contention:

1. Who is the counterparty to the “Live Streaming Service Contract” involved in the case?
2. Does XX Company’s failure to arrange for Jiang Xge to reseed as requested by the plaintiff constitute a breach of contract?

Outstanding features:

The signing of online live-streaming service contracts is often irregular, leading to ambiguities in identifying the parties involved and interpreting the contract’s content. As a result, the legal relationships in these cases are intertwined, diverse, and highly complex.

Basic Facts of the Case:

Plaintiff’s claims: 1. The defendant shall be ordered by law to refund the service fee of RMB 8,226,681.5 and pay delay damages totaling RMB 294,379.96 from February 3, 2021, calculated provisionally through January 21, 2022, for a period of 353 days (calculated at the Loan Market Quote Rate published by the National Interbank Funding Center for the same period, from February 3, 2021, until the date of actual performance). The total amount claimed provisionally is RMB 8,521,061.46. 2. The defendant shall bear the litigation costs and preservation fees in this case. Facts and Grounds Alleged by the Plaintiff: On October 2, 2020, the legal representative of XX Company, after consulting with the defendant Li Xiangqiang, arranged for Li Xiangqiang, acting as the broker for Jiang Xie, to plan and organize a live-streaming promotion event for XX Company. Following Li Xiangqiang’s planning and communication, Li Xiangqiang and the plaintiff agreed that the livestreamer “fangzhang Fangzhang” (formerly known as Jiang Xie) would provide the livestreaming services, and it was stipulated that a deposit of RMB 2 million should be paid before the event planning commenced. Between October 19 and October 21, 2020, XX Company paid a total of RMB 2 million in deposits to Li Xiangqiang via bank transfers and Alipay. On October 21, 2020, Li Xiangqiang, Jiang Xie, and others established a WeChat group, where all parties confirmed that “the defendant Fangzhang (Jiang Xie) would receive a fee of RMB 10 million for this livestream,” and “all expenses related to Xiaodian Tong would be borne entirely by the defendant Fangzhang (Jiang Xie).” Additionally, Jiang Xie authorized Li Xiangqiang to negotiate with the plaintiff on his behalf. At the same time, during their communications, the parties agreed that, in addition to the livestreamer “Fangzhang,” the plaintiff requested that Jiang Xie invite other livestreamers to participate jointly in product sales or video promotions. Ultimately, the parties prepared to cooperate by conducting livestreaming sales. Subsequently, after further discussions, XX Company, Li Xiangqiang, and Jiang Xie jointly determined the cooperation model for the livestreaming event: XX Company would advance RMB 10 million for this livestreaming sales event and take charge of supply chain management; Jiang Xie and Li Xiangqiang would be responsible for selling goods via livestreaming on the Kuaishou platform. On November 2, 2020, at the request of Li Xiangqiang and Jiang Xie, the plaintiff transferred the remaining RMB 5 million to Shangrao HeX Technology Co., Ltd. (hereinafter referred to as HeX Company), which then credited the promotion fee into Jiang Xie’s Kuaishou account No. 77225978, ultimately resulting in a total promotion fee of RMB 6.1 million for Jiang Xie. Thereafter, the plaintiff transferred the remaining RMB 3 million to Li Xiangqiang’s account and to an account designated by Li Xiangqiang under the name “Li X.” After receiving the full RMB 10 million, Li Xiangqiang provided a “Livestreaming Service Contract,” which he signed on behalf of XX Company. The contract stipulated that if, after deducting the RMB 5 million appearance fee and the RMB 5 million Xiaodian Tong promotion fee, XX Company had recovered its total expenditure of RMB 10 million plus other operational expenses (based on actual expenditures), and there remained a profit, the net profit would be equally divided between the two parties. If XX Company incurred a loss, Party B would make up for the lost livestream sessions within three months through other means. On November 3, 2020, Jiang Xie conducted the livestreaming event. During the livestream, the plaintiff repeatedly urged Li Xiangqiang to notify other livestreamers to join the event as soon as possible; however, Li Xiangqiang replied that he was unable to contact any other internet celebrities to participate. After the livestream concluded, the plaintiff made a preliminary estimate of a loss of RMB 8 million. From November 4 to November 3, 2020, the plaintiff proposed holding an additional livestream on November 11 to offset the loss; however, on November 8, Li Xiangqiang explicitly refused to fulfill his obligation to hold the supplementary livestream. Despite repeated attempts by the plaintiff to communicate with him, Jiang Xie eventually held another livestream on December 6, but the event still resulted in a loss. As of...

On February 2, 2021, the plaintiff repeatedly requested that the defendants Li Xiangqiang and Jiang Xiechrom provide the contractual obligations for making up the live broadcasts. However, defendant Li Xiangqiang consistently refused. The plaintiff then sent a lawyer’s letter to the defendants, demanding that they submit a specific plan for making up the live broadcasts to offset the losses. According to preliminary statistics, through two collaborations, the plaintiff earned commission income of 1,773,318.5 yuan and incurred losses totaling 8,226,681.5 yuan.

The First Defendant argues: First, in this case, Li Xqiang is merely an agent of the Third Defendant and should not be named as a defendant. Second, the Plaintiff has suffered no actual loss, and the Plaintiff itself engaged in improper conduct such as false advertising; even if the Plaintiff did suffer a loss, it would be unrelated to the First Defendant. Third, the Plaintiff was at fault and has damaged the reputations of the Second and Third Defendants. Fourth, the Plaintiff made numerous false statements in the complaint, thereby violating the truth. Fifth, the WeChat group chat records in this case lack legal validity.

The Second Defendant argues: 1. The Second Defendant is not a proper defendant in this case. The rights and obligations under the “Live Streaming Service Contract” should belong to the Third Defendant and the Plaintiff. 2. The Plaintiff has failed to prove that it suffered any loss; even if there was a loss, it is unrelated to the Second Defendant. 3. The Plaintiff was at fault and has damaged the reputations of both the Second Defendant and the Third Defendant. 4. The facts and grounds stated by the Plaintiff are untrue.

Defendants Three and Four argue as follows: 1. The plaintiff entered into a contract with Defendant Three; no other party was a signatory to the contract, and thus the plaintiff lacks standing as a proper party to the contract. 2. The plaintiff has failed to provide evidence demonstrating that it suffered any actual loss. Moreover, the plaintiff engaged in improper conduct such as false advertising, and even if the plaintiff did suffer a loss, such loss is unrelated to the defendants. The plaintiff has not provided evidence—including a complete sales ledger, accounting records, details of marketing service fees collected, and audit reports—regarding its role as the organizer in the live-streaming event. Relying solely on expenditure records is insufficient to prove that the plaintiff actually incurred a loss. 3. The plaintiff itself was at fault and has damaged the reputations of Defendants Two and Three. 4. The facts and grounds stated by the plaintiff are untrue.

Key points for the referee:

Regarding Issue No. 1, the initial clause of the “Live Streaming Service Contract” in question explicitly identifies Party B as XX Company, and Li Xiangqiang signed the contract as the authorized agent of Party B. The plaintiff signed and confirmed the contract, which should be construed as indicating that the plaintiff had no objection to its contents. Moreover, XX Company explicitly acknowledged its status as a party to the contract. Therefore, this court holds that the counterparty to the contract is indeed XX Company. Consequently, the plaintiff’s claim against the defendants Li Xiangqiang and Jiang Xie, seeking to enforce rights against them, lacks both factual and legal basis, and is thus not supported by this court. As for Issue No. 2, the plaintiff argues that the defendant should continue to provide supplementary live streams until the plaintiff’s losses are fully compensated—that is, Zhangmen Company should guarantee the plaintiff’s “principal recovery.” However, according to the terms of the “Live Streaming Service Contract” at issue, Zhangmen Company “makes no specific guarantee regarding sales revenue,” meaning that Zhangmen Company did not undertake any commitment to “guarantee the principal.” Furthermore, Li Xiangqiang’s chat records do not support such a conclusion either. If the plaintiff incurs losses, XX Company is only required to “provide supplementary live streams in other forms within 3 months.” Thus, the plaintiff’s demand that the defendant continuously provide supplementary live streams until the plaintiff’s losses are fully compensated is inconsistent with the contractual provisions. Regarding the number of supplementary live streams that XX Company should provide, the contract in question does not specify an exact number. Since XX Company provided one supplementary live stream within the three-month period, it should be deemed to have fulfilled its obligation to provide supplementary broadcasts. Even if the plaintiff continues to suffer losses, the plaintiff’s claim that XX Company should bear liability for breach of contract lacks both factual and legal basis, and is therefore not supported by this court.

Referee's decision:

The plaintiff, Hangzhou XX Network Technology Co., Ltd., is dismissed from the lawsuit. The case filing fee of 71,447 yuan shall be borne by the plaintiff, Hangzhou XX Network Technology Co., Ltd.

Lawyer’s Insights:

This case arises from a dispute over online live-streaming services. In this case, the second defendant is a leading internet celebrity on the “Kuaishou” live-streaming platform, with a fan base exceeding 30 million. The case has garnered significant attention and influence on the internet. During the course of handling the case, the attorney representing the plaintiff discovered numerous irregularities within the online live-streaming service industry. From the signing of contracts to their actual performance, all parties involved exhibited various forms of non-compliance. Moreover, much of the evidence is incomplete and difficult to obtain.

The facts of this case are complex. Before proceeding with the specific handling of the case, the attorney representing the client conducted a thorough review and organized the evidence regarding the legal relationships among all parties involved. After clearly delineating the legal relationships among the defendants, the attorney, in light of the “Live Streaming Service Contract” signed between the plaintiff and Defendants One and Three, made a basic factual determination from a legal perspective and analyzed and assessed the legal relationships among the defendants themselves as well as between each defendant and the plaintiff.

Thereafter, the attorney-in-charge and each defendant reviewed the case’s evidence, conducted a focused analysis of the points of contention between the plaintiff and defendants, and made an overall assessment. The attorney-in-charge also guided each defendant in organizing the case’s evidence through various channels, doing everything possible to accurately reflect the true course of events underlying the case. Subsequently, the attorney-in-charge presented thorough defenses from the perspective of each of the four defendants, drawing on both legal provisions and common sense based on the facts. Ultimately, this resulted in a highly favorable outcome for the clients.

This case demonstrates that, in the future, online live-streaming service companies will need high-quality legal services throughout the process of entering into and performing both internal and external contracts, as well as during litigation. Such legal assistance will not only help standardize the online live-streaming service market but also facilitate the further implementation of the nation’s “Clean Internet” campaign.