, 2016 and December 14, 2016 respectively, but the plaintiffs refused twice and they had never notified in writing that the civil aircraft does not meet the delivery conditions before December 15, 2016. In consequence, the conditions of refund agreed in the deposit clause of the LOI is not met and the defendant has never prevented the fulfillment of the conditions. On the contrary, the plaintiffs refused to perform the obligations specified in the LOI. They waived the pre-inspection of the civil craft and refused to conclude a formal sales contract. Based on this, the plaintiffs have no right to demand the refund of the deposit.
(III) Even if the court doesn’t identify the deposit as covenant deposit, it also belongs to the liquidated damages for an pre-contract. Whereas the failure of concluding a formal sales contract is entirely due to the plaintiffs’ fault, the plaintiffs shall bear the liability for breach of the pre-contract. Pursuant to the provision of Article 2 of Interpretation of the Supreme People’s Court on Issues Concerning the Application of Law for the Trial of Cases of Disputes over Sales Contracts, where both parties have signed pre-contract such as purchase offers, purchase orders, subscription books, letters of intent, and memorandums, and have agreed that a sales contract is to be concluded within a certain period of time, if one party does not perform the obligation of concluding a sales contract and the other party requests that it bear liability for breach of the pre-contract or demands the dissolution of the pre-contract and claims compensation for damages, the people’s court shall support such claims. The content of the LOI in the case is that both parties agrees to conclude a formal sales contract within a certain period of time, therefore it is a pre-contract by law and the deposit clause thereof could be deemed as the clause concerning the liability of breach of the pre-contract. In the case, after signing the LOI, the defendant has demonstrated a high degree of contractual spirit and a strong willingness to actively urge the conclusion of a sales contract in its own deed. It fully performed its obligations specified in the LOI, and has got everything ready for concluding a sales contract of the civil aircraft and the delivery hereof at any time. During the period from the signing of the LOI by both parties’ to December 21, 2016, the defendant has actively fulfilled the contents of the LOI. It constantly urged the plaintiffs to conclude a sales contract of the civil aircraft and modified the trade text several times according to the plaintiffs’ requests, while the plaintiffs prevaricated, delayed and refused to sign the final trade text for various reasons and excuses. Wherefore, this case is not the situation that both parties failed to reach an agreement on concluding a sales contract, but the fact that the plaintiffs unilaterally refused to conclude a sales contract without any reason after the defendant had satisfied all of their requests. The failure to conclude a sales contract is completely due to the plaintiff’s fault. According to the provision of Article 2 of Interpretation of the Supreme People’s Court on Issues Concerning the Application of Law for the Trial of Cases of Disputes over Sales Contracts, the plaintiffs shall bear the liability for breach of the pre-contract. The agreement concerning deposit in the LOI plays a role in assessing the loss given default and guaranteeing the performance of the contract, and it is punitive and redemptive when related situations of breach of contract occur. The fact that the defendant has the right to not refund the deposit, is exactly the reflection of the plaintiff’s bearing of the liability for breach of contract. The defendant has spend plenty of manpower and material resources for this aircraft transaction. Under the circumstances that the plaintiffs obviously violated the principle of good faith and constituted a breach of contract, it’s apparently contrary to the principle of fairness and reasonableness regulated in Article 6 of General Rules of Civil Law if the court orders the defendant who has performed in good faith to refund the deposit. Therefore, the court shall reject the plaintiff’s claim concerning demanding the refund of the deposit.
(IV) Even if the court identifies the deposit of the LOI as charges in the nature of advance payment, China’s law and judicial practice respect and protect the autonomy of the parties concerning the deposit and the court shall support the defendant’s right to retain the deposit according to agreements of the LOI. At the very least, even if the court identifies the deposit as advance payment, the advance payment may not be returned under what circumstances, China’s law fully respects the agreements and autonomy of will of both parties. Therefore, even if the charges specified in the LOI is identified as advance payment in legal character, in accordance with the explicit agreements in the LOI, there is no situation in which the deposit must be refunded, thus the plaintiffs have no right to demand the refund of the deposit. In addition, in the field of international trade of aircraft, it is a international trade practice and business rule prevailing in the industry that the buyer and the seller sign a letter of intent prior to concluding a formal sales contract and then the seller receives a certain amount of money from the buyer and both parties agree not to refund it where the concluding of a formal sales contract is failed. In the case, the fact that the defendant has the right not to refund the deposit, is not only the embodiment of trade convention, but also the necessity of maintaining trade safety and encouraging contractual spirit.
In conclusion, the defendant requested that this court shall support its claims and reject all the claims by plaintiffs according to law.
In accordance with the “applicable law” clause of the LOI, saying that “the LOI shall be regulated by British Law and shall be interpreted in line with British Law”, both the plaintiffs and the defendant provided the “Legal Ascertainment Report”. 9 Air first entrusted Benchmark Chambers International (now renamed as Benchmark Chambers International & Benchmark International Mediation Center) (BCI &BIMC) to issue the “Legal Ascertainment Report”.
At the trial of the case, the plaintiffs Jiangsu Wuhua and Hong Kong Commerce and Tourism applied for the lawyer Yang Peicai of Holman Fenwick Willan (HFW) who issued the “Legal Ascertainment Report” to testify as an expert witness. The defendant 9 Air also applied for the barrister Liao Yuling hired by BCI&BIMC for issuing the “Legal Ascertainment Report” to appear in court as an expert witness.
At the trial of the case, the plaintiffs Jiangsu Wuhua and Hong Kong Commerce and Tourism applied for the lawyer Yang Peicai of Holman Fenwick Willan (HFW) who issued the “Legal Ascertainment Report” to testify as an expert witness. The defendant 9 Air also applied for the barrister Liao Yuling hired by BCI&BIMC for issuing the "Legal Ascertainment Report" to appear in court as an expert witness.
(a) The provisions and precedents of British law regarding the force of law of the LOI.
(b) The provisions and precedents of British Law regarding the circumstances under which a "LOI Deposit" received by the seller may not be returned in the LOI.
(c) The provisions and precedents of British Law regarding the legal liability that the parties may undertake when failing to sign a formal sales contract after the LOI is signed.
(d) governing law.
The parties agree that these four items shall have full legal effect and bind the parties.
In addition, other provisions of the LOI do not have any binding force, and do not constitute any commitment by the buyer to purchase the aircraft or the seller to sell the aircraft. In the "Termination of LOI", it is specifically stated that if the LOI is terminated, the LOI has no further effect. The seller, buyer and the parent company of the buyer are not liable to other parties, except in the paragraph entitled (a) cost and expenses; (b) confidentiality; (c) LOI Deposit; (d) governing law. Thus, these three parties agree that although the LOI is not legally binding due to the termination, the above four agreements listed in the LOI are valid and legally binding among all parties. For instance, ＪＳＤＣｏｒｐｏｒａｔｉｏｎＰｔｅＬｔｄｖＡＬＷａｈａＣａｐｉｔａｌＰＪＳＣ,ＳｅｃｏｎｄＷａｈａＬｅａｓｅＬｔｄ［2009］ＥＷＨＣ583 case. This case involved an aircraft sale agreement, and the facts are similar to this case (but not totally identical). In this case, the parties (JSD as the buyer, and Wa ha as the seller) signed a non-binding LOI of purchase the aircraft (which is named as “the first LOI"). JSD paid a refundable deposit of USD 1 million. The parties finally did not reach a formal aircraft sales contract, and the seller returned the deposit based on the first LOI. At that time, JSD expressed its interest to purchase another aircraft, and the parties therefore signed another LOI (which named as “the new LOI”). The new LOI stipulates that except for three clauses (including deposit, confidentiality and out-of-pocket costs), the rest clauses have no effect. The main agreement of the new LOI in JSD case (the sale of aircraft) is not legally binding and is ultimately cancelled due to the failure to sign a formal contract, but some specific provisions (including deposit arrangements) of the new LOI are not therefore