Issuing Body: Guozun Cathay Associates, French Office
Date of Case Closure: 25 August 2026
Core Outcome: The case was settled through non-litigation means throughout the proceedings. The full amount of liquidated damages was secured for the client, and the 13-year cross-border exclusive consignment sales cooperative relationship was terminated amicably.
I. Case Background and Engagement Process
A domestic perfume compound trading company (hereinafter referred to as the "Client") served as the long-term exclusive distributor in China for a French perfume compound manufacturer. The two parties established a stable cooperative relationship in 2013, with standardised transaction practices and strong mutual business trust built over more than a decade. In 2023, the French manufacturer was wholly acquired by a large British consumer goods group. Following the completion of the acquisition, the French company unilaterally and substantially raised product supply prices without fulfilling any prior notification obligations or consulting with the Client. This move directly eroded the Client’s entire profit margin in the domestic market, rendering the purpose of the consignment sales contract impossible to fulfil.
The Client travelled to France in April 2026 in an attempt to hold face-to-face negotiations with the other party’s management, but the other party persistently refused to meet without just cause, completely blocking all channels for negotiation. Faced with the inevitable breakdown of cooperation and the economic losses already incurred, the Client formally proposed to terminate the cooperation and claim compensation for breach of contract. In May 2026, the Client was connected to the French Office through the Beijing Head Office of Guozun Cathay Associates.
Given that the case involved three core challenges – the validity of contracts under both Chinese and French jurisdictions, the succession of contractual obligations following cross-border mergers and acquisitions, and the service of legal documents and negotiation advancement across judicial jurisdictions – the French Office activated the Sino-French Emergency Collaborative Case Handling Mechanism on the same day. A dedicated case handling team was established in conjunction with the foreign-related commercial dispute resolution team of the Beijing Head Office, comprising 2 locally licensed French commercial lawyers and 3 members of the Foreign-Related Lawyers Talent Pool of the Beijing Lawyers Association. The team was fully authorised to handle this special legal matter concerning cross-border contract termination and damage claims.
II. Full Process of Sino-French Joint Case Handling
This case adopted a standardised collaborative model: the Beijing Head Office is responsible for constructing the evidence system under Chinese law, coordinating the overall claim scheme, and liaising with the Client on its demands; the French Office is responsible for local legal implementation, exerting pressure on the opposing party, and driving negotiation progress. All procedural nodes were controllable and documented in writing throughout the process.
1. 22 May 2026 – 28 May 2026: Dual-Jurisdiction Case Risk Assessment
Beijing Head Office: The team comprehensively retrieved and sorted all purchase contracts, order emails, historical quotation records, payment vouchers and correspondence between the two parties over the past 13 years, completed preliminary fixation of the breach facts, and issued the Assessment Report on the Legitimacy of Contract Termination and Claims under Chinese Law. The report confirmed that the other party’s unilateral price increase constituted a fundamental breach of contract, the Client holds the statutory right to terminate the contract and the right to claim damages, and the claimed amount has sufficient legal basis.
French Office: Relying on the French commercial registration public system and local enterprise credit investigation network, the team verified the French target company’s industrial and commercial registration information, official filing documents of the British group’s acquisition, and property clues such as real estate and bank accounts under the enterprise’s name within 3 working days. Meanwhile, it retrieved the EU regional compliance and risk control framework and litigation records of the British group, ruled out the risk of the other party’s inability to pay compensation, and accurately identified weak links in the parent company’s compliance review, laying the foundation for the subsequent pressure strategy.
2. 29 May 2026 – 18 June 2026: Consolidation of Evidence System and Preparation of Bilingual Legal Documents
Beijing Head Office: In accordance with the Several Provisions of the Supreme People's Court on Evidence in Civil Proceedings, the team classified and organised all transaction documents and communication records to build an evidence chain, focusing on fixing core breach facts such as "no prior notice" and "unilateral price adjustment". Combined with the Civil Code of the People's Republic of China, a comprehensive legal opinion was issued, clarifying the legal path for contract termination and the calculation standards for the scope of compensation.
French Office: Based on relevant provisions of the French Civil Code and the French Commercial Code, the team conducted legal argumentation on the principle that "changes in company control do not exempt original contractual obligations", and cited similar commercial precedents of the French Supreme Court to strengthen the argument. Chinese and French lawyers jointly drafted a Sino-French bilingual Lawyer’s Letter, which complies with commercial legal document norms of both China and France simultaneously. The letter clearly stated the invalidity of the other party’s price adjustment, the liability for breach of contract it should bear, and the legal consequences of refusal to negotiate, including "dual-jurisdiction litigation + property preservation + public disclosure of commercial dishonesty". On 18 June 2026, the French Office completed local direct service of the document to the French company through the dedicated service channel for French commercial legal documents. At the same time, the Lawyer’s Letter was copied to the Legal Department of the British Group Headquarters and the EU Compliance Officer, officially launching the legal liability investigation procedure.
3. 19 June 2026 – 10 July 2026: Compliance Pressure to Initiate Negotiations
In the initial period after receiving the Lawyer’s Letter, the other party maintained a negative and evasive attitude and refused to provide a formal response. The French Office immediately adjusted its strategy: on the one hand, it submitted a pre-filing of the case to the local French commercial mediation centre and initiated an informal pre-mediation procedure; on the other hand, targeting the compliance weaknesses of the British group, it sent a special reminder letter to its EU Compliance Director, making clear that the subsidiary’s breach of contract would trigger the group’s compliance review risks and damage its brand reputation.
Through the dual effects of "local judicial procedure preparation + group-level compliance pressure", the other party’s attitude shifted. On 10 July 2026, the Legal Department of the British Group appointed an authorised representative to conduct the first round of online non-litigation settlement negotiations with Guozun’s Sino-French joint case handling team.
4. 11 July 2026 – 3 August 2026: Multiple Rounds of Consultations to Finalise the Settlement Plan
The Sino-French joint case handling team participated in three rounds of negotiations. The Beijing Head Office focused on safeguarding the Client’s core demands, the bottom line of compensation amount, and legal boundaries under Chinese law; the French Office was responsible for argumentation on French law application, localised design of commercial arrangements during the transition period, and legal rebuttal of the other party’s defence grounds.
During negotiations, the other party repeatedly asserted the rationality of unilateral price adjustment on the grounds of "change of company control and rising operating costs". The case handling team, combining legal provisions and typical precedents of both China and France, clearly pointed out that changes in shareholders do not affect the independent obligations of the contractual entity, and unilateral modification of core price terms violates the principle of good faith and the binding force of contracts, refuting the other party’s defence arguments one by one. Meanwhile, based on the 13-year cooperative foundation between the two parties, the team proposed a package solution of "amicable contract termination + inventory digestion during transition period + one-time compensation for breach of contract", which balances the commercial interests of both parties.
After multiple rounds of consultations, the two parties reached full consensus on transition arrangements for cooperation termination, inventory disposal methods, the amount of compensation for breach of contract, and payment schedule on 3 August 2026.
5. 4 August 2026 – 25 August 2026: Agreement Signing and Implementation of Compensation
The Chinese and French lawyer teams jointly drafted the official Sino-French bilingual text of the Settlement and Cooperation Termination Agreement. The Beijing Head Office completed compliance and risk review of the agreement under Chinese law, and the French Office completed validity verification of the clauses under French law, ensuring the agreement has full legal effect in both jurisdictions.
On 25 August 2026, the two parties formally signed the settlement agreement, and the French company remitted the full amount of liquidated damages to the account designated by the Client on the same day. After the Client confirmed receipt of the full payment, the case was successfully concluded through non-litigation means.
III. Core Case Handling Difficulties and Authoritative Solutions
The difficulties involved in this case represent common issues in Sino-European cross-border distribution/consignment sales contract disputes. Leveraging dual-jurisdiction practice capabilities and experience in cross-border non-litigation dispute resolution, Guozun’s Sino-French joint team has developed a replicable standardised solution:
1. Determination of Succession of Contractual Obligations in the Context of Cross-Border Mergers and Acquisitions
Professional Basis: Articles 532 and 563 of the Civil Code of the People's Republic of China, Article 1193 of the French Civil Code, and relevant rules of the UNIDROIT Principles of International Commercial Contracts
Solution: Based on the principle of "independent personality of contractual entities" recognised by both Chinese and French laws, it is clarified that changes in company equity and transfer of control do not lead to automatic modification or exemption of original contractual obligations. Meanwhile, breaking through the limitation of privity of contract, the team anchors the compliance responsibility of the overseas parent company, and promotes the subsidiary to negotiate proactively by exerting pressure on the parent company, fundamentally dismantling the other party’s defence logic of "breaching contract on the grounds of merger and acquisition".
2. Efficient Promotion Strategy for Cross-Border Non-Litigation Disputes
Professional Basis: International commercial settlement rules, French commercial mediation procedure norms
Solution: Abandoning the high-cost path of "direct cross-border litigation", the strategy of "non-litigation priority and layered pressure" is adopted. First, legal deterrence is formed through local direct service of legal documents. Then, the risk level is escalated by exploiting weaknesses in the parent company’s compliance and risk control. With far lower time and economic costs than litigation, the strategy quickly pushes the other party back to the negotiating table to achieve efficient rights protection.
3. Validity Guarantee and Service of Legal Documents in Dual Jurisdictions
Professional Basis: Provisions on service of commercial documents in the French Code of Civil Procedure, and relevant rules on extraterritorial evidence in the Civil Procedure Law of the People's Republic of China
Solution: The document preparation standard of "Sino-French bilingual + dual-jurisdiction legal review" is adopted to ensure legal documents comply with commercial norms of both countries. Local direct service is completed by locally licensed French lawyers, which greatly shortens the service cycle compared with traditional diplomatic service (taking 3–6 months on average), while guaranteeing the formal validity of documents under the French judicial framework.
IV. Authoritative Legal Bases Applicable to This Case
(A) Chinese Law
1.Article 532 of the Civil Code of the People's Republic of China: After a contract takes effect, neither party may refuse to perform its contractual obligations on the ground of change of name, or change of legal representative, person in charge, or handler.
2.Article 563 of the Civil Code of the People's Republic of China: A party may rescind a contract under any of the following circumstances: (2) Before the expiration of the performance period, one party explicitly states or indicates by its conduct that it will not perform the principal obligation; (4) One party delays performing the obligation or commits other breach of contract, making it impossible to achieve the purpose of the contract.
3.Article 577 of the Civil Code of the People's Republic of China: Where a party fails to perform its contractual obligations or the performance does not conform to the agreement, it shall bear liability for breach of contract such as continuing performance, taking remedial measures, or compensating for losses.
4.Article 41 of the Law of the People's Republic of China on the Application of Law in Foreign-Related Civil Relations: The parties may choose by agreement the law applicable to the contract; if there is no such choice, the law of the habitual residence of the party whose performance best reflects the characteristics of the contract or other law most closely connected with the contract shall apply.
(B) French Law
1.Article 1104 of the French Civil Code: Contracts must be negotiated, concluded and performed in good faith.
2.Article 1193 of the French Civil Code: A contract may not be modified or revoked except by mutual consent or for reasons provided by law.
3.Article 116 of the French Commercial Code: Parties to a commercial contract shall abide by the principle of good faith and fully perform their contractual obligations.
V. Authoritative Practical Recommendations Based on Case Experience
Drawing on years of experience in Sino-European cross-border commercial legal services from Guozun’s French Office, the following three authoritative practical recommendations are put forward for Chinese enterprises engaged in distribution and consignment sales cooperation in the European market:
1.Refinement of Contract Clauses
When signing cross-border distribution/consignment sales contracts, it is essential to clearly stipulate the triggering conditions and procedures for price adjustment, rules for contract performance following changes in company control, and calculation methods for breach liability and compensation. Meanwhile, the applicable law and dispute resolution body should be clearly specified. It is recommended to prioritise domestic arbitration institutions such as the China International Economic and Trade Arbitration Commission for jurisdiction, to reduce the cost of cross-border dispute resolution.
2.Front-Loaded Risk Prevention and Control
When major events such as mergers and acquisitions, equity restructuring, or changes in actual controllers occur to overseas partners, enterprises should immediately entrust a lawyer team with dual-jurisdiction service capabilities to conduct risk assessment, simultaneously fix transaction evidence, and formulate response plans in advance. This prevents the other party from unilaterally modifying contract clauses by exploiting equity changes, which would cause irreversible economic losses.
3.Professionalisation of Rights Protection Strategies
After cross-border contract disputes arise, avoid blindly initiating overseas litigation. Prioritise law firms with local European offices and dual-jurisdiction practice teams, and adopt a layered strategy of "non-litigation negotiation as the core, litigation procedures as backup". Rely on local resources to exert targeted pressure on the other party, to greatly improve dispute resolution efficiency while controlling rights protection costs.