A v. B – Dispute over a Sales Contract

Keywords: Sales fraud; duty to disclose; punitive damages

Counseling Attorney: Jin Lu

Basic Facts of the Case:

On X month X, X year, A purchased cosmetics from a Taobao online store operated by B. The cosmetics were manufactured in South Korea, and their outer packaging did not bear any Chinese labels. Specifically, the packaging failed to provide information in Chinese regarding the product’s name, the manufacturer’s name and address, or the expiration date. After placing the order, B arranged for the goods to be picked and packed on the same day and shipped to A via a logistics provider. Upon receiving the package, A claimed that the absence of Chinese labeling on the cosmetics constituted sales fraud and filed a lawsuit with the court, requesting: 1. That B be ordered to refund the purchase price of X yuan and pay damages equal to ten times the purchase amount; 2. That B be ordered to compensate A for emotional distress damages in the amount of X yuan; 3. That B bear all litigation costs.

Key point of contention: Whether B’s sales behavior constitutes fraud.

Judgment Rationale: The court of first instance held that online shopping, as a product of the information age, brings considerable convenience to people. When conducting transactions via online platforms, individuals should more strictly adhere to the principles of fair trade and good faith and credit. Sellers are obligated to sell products that comply with national standards and relevant regulations. In this case, A purchased cosmetics from B’s Taobao online store, thereby establishing a sales contract relationship between the two parties via the internet. However, the cosmetics sold by B to the plaintiff A were manufactured in South Korea, and their outer packaging lacked Chinese labels. Moreover, the product did not bear Chinese markings indicating the product name, manufacturer’s name, or factory address—information required under the “Product Quality Law of the People’s Republic of China” and the “Consumer Rights Protection Law of the People’s Republic of China.” Consequently, these cosmetics do not meet the legal requirements and should be prohibited from circulation within China. The plaintiff argues that the defendant’s sales practices constitute fraud and requests the defendant to refund the purchase price and pay compensation equal to three times the purchase amount. The plaintiff’s claim is well-founded and is supported by law. Accordingly, the court of first instance ruled that the defendant shall refund the purchase price and pay triple damages.

Second-instance court: Although A was aware that the product in question was a purchased item and could not provide Chinese labeling, A still proceeded with the purchase and sought punitive damages. Therefore, A’s claim—based on fraud under the relevant provisions of the Food Safety Law of the People’s Republic of China—lacks both factual and legal basis. Consequently, this court does not support A’s litigation request. Second-instance judgment: The first-instance judgment is reversed, and the case is remanded with a ruling dismissing A’s litigation request.

Case Highlights: In this case, Party B did not engage in any fraudulent conduct. Fraud, by definition, involves intentionally deceiving another party, causing the other party to form a mistaken judgment, and inducing that party to make a declaration of intent based on such a mistaken judgment. During the trial, the defense focused closely on demonstrating and providing evidence that the seller had not engaged in fraud. First, the Taobao online store is named “XX Personal Shopping Store,” specializing in the sale of personally purchased goods, and its name prominently displays the Taobao “Global Buy” logo. Second, the product details page on the Taobao store explicitly state the origin of the products at issue as South Korea, the place of procurement also in South Korea, as well as the product’s efficacy and usage instructions. At the same time, the Taobao page includes photographs of the personal shopper’s passport, travel permit, and documentation related to the personal shopping process. Third, the store uploaded images of the product’s exterior (without Chinese labels or instructions) and provided detailed explanations in Chinese regarding the product’s name, characteristics, origin, ingredients, and usage methods. All of the above facts clearly demonstrate that Party B has accurately described the product, without fabricating or concealing any material facts, and thus no fraudulent conduct was involved. Therefore, Article 55 of the Consumer Rights Protection Law, which provides for triple damages, should not apply in this case.

Typical significance: Article 55 of the Consumer Rights Protection Law stipulates that punitive damages may be awarded only if the operator has engaged in fraudulent behavior. Fraudulent behavior is established when a party intentionally provides the other party with false information or deliberately conceals true information, thereby inducing the other party to make a mistaken expression of intent. Simply put, fraud refers to the intentional act of deceiving others, causing them to form an erroneous judgment, and then making an expression of intent based on that erroneous judgment. If an operator has already provided a truthful description of the product, there is no fabrication or concealment of facts, and thus the operator should not be held liable for punitive damages.