{"id":2066,"date":"2025-09-11T17:20:09","date_gmt":"2025-09-11T09:20:09","guid":{"rendered":"https:\/\/www.zhenghan.com\/research\/2066.html"},"modified":"2026-01-30T00:50:28","modified_gmt":"2026-01-29T16:50:28","slug":"piercing-the-delivery-lie-hongqiao-zhenghan-helps-supply-chain-intermediary-achieve-retrial-reversal","status":"publish","type":"research","link":"https:\/\/www.zhenghan.com\/en\/research\/2066.html","title":{"rendered":"Piercing the ‘Delivery’ Lie: Hongqiao Zhenghan Helps Supply Chain Intermediary Achieve Retrial Reversal"},"content":{"rendered":"

Have you ever felt helpless in a situation like this?<\/strong><\/p>\n

In a chain transaction, the upstream party claims the goods were shipped, and the downstream party claims they received the goods. You, as the intermediary, never saw the goods from start to finish, yet the upstream party demands payment from you. Even the “back-to-back” payment clause in the contract (which conditions payment on the performance of a third party) is disregarded by the court. With the upstream and downstream parties presenting a closed loop of consistent statements and documentary evidence, you feel trapped in a setup. How do you prove the *negative fact* of non-delivery when the upstream and downstream are colluding? How do you convince the court that mere partial documentary evidence is insufficient to prove delivery? How do you argue for the validity of the “back-to-back” clause when it seems under siege from all sides? Witness how Hongqiao Zhenghan handles it!<\/p>\n

In a complex chain sales contract dispute in the Greater Bay Area involving tens of millions, the upstream party, in collusion with the downstream party and considering factors like the weak solvency of the downstream private company, shifted their claim and sued the stronger, state-owned listed company serving as the intermediary.<\/p>\n

Hongqiao Zhenghan’s lawyers represented the state-owned listed company client, which was the intermediary. Despite facing the extreme disadvantage of malicious selective recourse by both upstream and downstream parties and an initial loss in the first instance, they successfully appealed. They persuaded the second-instance court that the transactions in question were suspicious and that no actual delivery had occurred, resulting in the case being remanded for retrial. During the retrial, Hongqiao Zhenghan’s team, through relentless effort, once again thoroughly demonstrated to the newly formed collegiate panel that the transactions blatantly contradicted normal commercial practices. By applying the “high probability” standard of proof in civil litigation, they convinced the panel that the evidence presented by the plaintiff was still insufficient to prove the actual fulfillment of the delivery obligation. Simultaneously, they effectively argued that the “back-to-back” clause involved in the case was valid and that payment was not due as the condition precedent had not been met. Ultimately, they secured the latest victory: a retrial court judgment dismissing all of the plaintiff’s claims.<\/p>\n

Keywords<\/strong>: Remand for Retrial, Turn Defeat into Victory, Chain Transaction, Paper-Only Transactions (No Physical Goods), High Probability Standard, Back-to-Back Clause<\/p>\n

Basic Facts of the Case<\/h2>\n

The upstream plaintiff (a pharmaceutical group company), the intermediary defendant (a state-owned listed pharmaceutical company, our firm’s client), and a downstream third party (the final consignee, added during retrial) were involved in a chain transaction within the Greater Bay Area. According to the agreement, the plaintiff sold goods to the defendant, and the defendant sold goods to the third party. The goods were to be delivered directly by the plaintiff to the third party. Subsequently, after the third party paid the defendant, the defendant would then pay the corresponding amount to the plaintiff (the underlined section constitutes the back-to-back clause). Later, when the third party failed to pay the defendant as agreed, preventing the defendant from paying the plaintiff, the plaintiff, relying on the sales contract with the defendant and a *Receipt Confirmation Form* signed\/sealed by the third party, claimed it had fulfilled all delivery obligations and sued the defendant for payment of the relevant\u8d27\u6b3e.<\/p>\n

Key Issues and Challenges<\/h2>\n

1. Losing the First Instance, Facing a Passive Situation<\/strong><\/p>\n

In the original first-instance trial, the court, relying solely on written documents such as the contract, invoices, and the *Receipt Confirmation Form*, determined that delivery had been completed. Simultaneously, citing the “principle of fairness,” the court invalidated the back-to-back clause and ruled against our client. This outcome placed immense pressure on our side to overturn an established judicial determination during the second instance and subsequent proceedings.<\/p>\n

2. Evidentiary Barriers, Difficult to Breach<\/strong><\/p>\n

The documentary evidence held by the opposing party, such as the *Receipt Confirmation Form* acknowledged with the downstream party’s seal, did to some extent preliminarily prove the delivery of goods. In terms of burden of proof, establishing the existence of something is easier than proving its non-existence. Therefore, the greatest challenge in this case was how to argue, in the absence of direct contradictory evidence, the negative fact that beneath the appearance of “goods received,” no actual delivery had taken place.<\/p>\n

3. The Nature of the Transaction, Hard to Distinguish Truth from Falsehood<\/strong><\/p>\n

The core dispute in this case lies in the authenticity of the transaction. Our side maintained that there was no actual delivery of goods underlying the case\u2014while named a sale, it lacked the corresponding substance. However, to fully argue this point and have the court accept it required “meticulously unraveling” a vast array of transactional details, placing extremely high demands on logical and commercial common sense arguments. Simultaneously, regarding the acquisition of these numerous transactional details, because the upstream and downstream parties were far more familiar with each other than we were and had erected information barriers against us, it necessitated a detective-like\u654f\u9510\u55c5\u89c9. We needed to conduct in-depth\u6316\u6398\u548c\u5206\u6790 based on our client’s own retained materials, information from interactions\/exchanges with the other party, and even information obtained from visiting\/investigating third parties further along the supply chain. This was to puncture the falsehoods in the statements of the plaintiff and the third party and reduce the level of trust the judge might place in them.<\/p>\n

4. Legal Application, Subject to Dispute<\/strong><\/p>\n

The validity of the “back-to-back” payment clause in the case (i.e., the stipulation that the defendant pays the upstream plaintiff only after receiving payment from the downstream party) was one of the focal points of contention between the parties. Accurately applying the spirit of relevant judicial interpretations and judges’ meeting summaries to clarify to the court that this clause should be valid in this instance and constituted a conditional agreement was also one of the challenges in this case.<\/p>\n

Highlights of Representation<\/h2>\n

The original first-instance judgment was devastating news for the client. However, upon receiving the judgment, the representation team refused to “accept fate,” firmly believing that justice might be delayed but would not be absent.<\/p>\n

1. Perseverance, Counterattack in the Second Instance<\/strong><\/p>\n

Hongqiao Zhenghan’s representation team worked day and night to review all details of the case. They thoroughly revealed to the second-instance court numerous\u7591\u70b9 in the transaction that contradicted commercial common sense from multiple dimensions, including the transaction model, profit margins, delivery locations, and nature of the goods. Employing strategies such as\u987a\u52bf analyzing the other party’s rationale and using *reductio ad absurdum* to disprove the apparent impossibility of the other party’s conclusions, they ultimately successfully persuaded the second-instance court to adopt our viewpoint. The court recognized issues such as unclear facts regarding delivery in this case and remanded it for retrial, securing a crucial turning point for the eventual victory.<\/p>\n

2. Delving into Details, Revealing the Truth of the Transaction<\/strong><\/p>\n

After the case was remanded, Hongqiao Zhenghan’s representation\u56e2\u961f, riding on the momentum of their success, further refined their analysis of the entire event. By investigating the actual situation of the so-called “delivery location,” analyzing the extremely unreasonable profit margins within the transaction chain, and presenting\u53cd\u5e38\u4ea4\u6613 arrangements such as the upstream supplier providing guarantees for the downstream purchaser, they vividly reconstructed for the judge the complete picture of the transaction, allegedly orchestrated by the upstream and downstream parties, involving suspected “false” delivery. This effectively punctured the other party’s narrative and proved that the existing documentary evidence in this case alone was insufficient to establish the genuine delivery of goods.<\/p>\n

3. Leaving No Stone Unturned, Skillfully Applying Rules of Evidence<\/strong><\/p>\n

Faced with the seemingly irrefutable *Receipt Confirmation Form* presented by the other party, Hongqiao Zhenghan’s representation team skillfully applied the “high probability” standard of proof in civil litigation. Through the\u6709\u673a combination of a substantial amount of circumstantial evidence, they successfully constructed an evidentiary chain for “the plaintiff did not actually deliver the goods,” thereby overturning the plaintiff’s affirmative evidence.<\/p>\n

4. Breaking Out of a Desperate Situation, Shattering “Judicial Convention”<\/strong><\/p>\n

As the third party (the final consignee) lacked the capacity for debt repayment, the plaintiff shifted its claims to our client. In the first-instance trial, the court, based on the surface evidence of the transaction and citing the principle of fairness, directly invalidated the “back-to-back” clause, essentially breaking the contractual chain of rights and obligations and placing all transaction risks on our client. Faced with this adverse “judicial convention,” the representation team mounted a thorough and sharp legal counterargument. Through in-depth analysis and presentation of related judicial interpretations, typical cases, and the legislative intent behind similar clauses, we convinced the court that in the absence of legal prohibitions and when there is no loss of fairness, the “back-to-back” clause should be legally valid. The core of its application lies in accurately identifying the conditions precedent, not arbitrarily negating it. Ultimately, the court accepted our position, recognizing the validity of the clause and determining that the conditions for payment had not been met, thereby breaking the unfavorable “convention” and safeguarding our client’s legitimate rights.<\/p>\n

Key Points of the Judgment<\/h2>\n

Upon review, the retrial court held:<\/strong><\/p>\n

1. In a sales contract dispute, the seller who claims to have delivered the goods bears the burden of proof. The plaintiff, as the seller, submitted only self-produced documentary evidence such as receipt confirmation vouchers signed\/sealed by the downstream third party but failed to provide any goods\u6d41\u8f6c\u5355\u636e such as waybills, warehouse receipts, or bills of lading. Furthermore, numerous details of the transaction were inconsistent with commercial norms. The evidence on record was insufficient to prove that the plaintiff had actually fulfilled its delivery obligation, and therefore, it shall bear the legal consequences of failure to provide sufficient evidence.<\/p>\n

2. Even if it is assumed that a sales contract relationship existed between the plaintiff and the defendant, both the *Sales Contract* between the plaintiff and defendant and the one between the defendant and the third party stipulated that payment would be forwarded to the plaintiff only after the defendant received payment from the downstream customer (the third party). The defendant has provided evidence showing that it paid the plaintiff a small sum it had previously received. The plaintiff failed to prove that the defendant had received other payments from the third party. Therefore, the court does not support the plaintiff’s claim for payment of the remaining\u8d27\u6b3e.<\/p>\n

Based on the above reasoning, the retrial court dismissed all of the plaintiff’s claims.<\/p>\n

Case Implications<\/h2>\n

The successful reversal in this case serves as a significant model for the current wave of frequent disputes arising from “financing trade.” It profoundly reveals that in judicial practice, courts are placing increasing emphasis on conducting a penetrating review of the substantive nature of transactions, rather than merely stopping at a formal review of written evidence. For enterprises engaged in complex supply chain transactions, it is crucial to be highly vigilant against the risks of fictitious trade involving “empty circulation” or “paper transactions only,” and to thoroughly preserve and secure evidence that proves the flow of goods. At the same time, when dealing with unfamiliar upstream and downstream counterparties, a full assessment of the overall transaction model and risks must be conducted prior to involvement to avoid innocently becoming the entity that absorbs risks. For legal practitioners, this case also vividly illustrates the professional spirit of never giving up in adversity, reconstructing legal truth through the exhaustive excavation of factual details, and ultimately achieving fairness and justice.<\/p>\n","protected":false},"excerpt":{"rendered":"

Have you ever felt helpless in a situation like this?
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