Copyright 2012 by Stanford University

Shanghai Centaline Property Consultants Limited

v.

TAO Dehua,

An Intermediation Contract Dispute

Guiding Case No. 1

(Discussed and Passed by the Adjudication Committee of the Supreme People’s Court

Released on December 20, 2011)

CHINA GUIDING CASES PROJECT

English Guiding Case (EGC1)

January 9, 2012 Edition*

* The citation of this translation of the Guiding Case is: 《上海中原物业顾问有限公司诉陶德华居间合同

纠纷案》(Shanghai Centaline Property Consultants Limited v. TAO Dehua, An Intermediation Contract Dispute),

CHINA GUIDING CASES PROJECT, English Guiding Case (EGC1), Jan. 9, 2012 Edition, available at

http://cgc.law.stanford.edu/guiding-cases/guiding-case-1.

This document was primarily prepared by DAI Di, Richard Jiang, Christine Qingyu Liu, and Randy Wu.

The document was finalized by Jennifer Ingram and Dr. Mei Gechlik. Minor editing, such as splitting long

paragraphs, adding a few words included in square brackets, and boldfacing the headings to correspond with those

boldfaced in the original Chinese version, was done to make the piece more comprehensible to readers. The

following text, otherwise, is a direct translation of the original text and reflects formatting of the Chinese document

released by the Supreme People’s Court.

The following Guiding Case was discussed and passed by the Adjudication Committee of the Supreme

People’s Court of the People’s Republic of China and was released on December 20, 2011, available at

http://old.chinacourt.org/public/detail.php?id=472158. See also 《最高人民法院关于发布第一批指导性案例的

通知》 (The Supreme People’s Court’s Notice Concerning the Release of the First Batch of Guiding Cases), Dec. 20,

2011, available at http://old.chinacourt.org/html/article/201112/21/472164.shtml.

2012.01.09 Edition

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2

Keywords

Civil Intermediation Contract

Sale and Purchase of Second-Hand Housing Breach of Contract

Main Points of the Adjudication

In an intermediation contract for the sale and purchase of housing, stipulations

prohibiting a buyer from using housing information provided by an intermediary company to

sign a housing sale and purchase contract with a seller while bypassing the intermediary

company are legal and valid. However, when a seller lists the same house for sale through

multiple intermediary companies and the buyer can obtain the same housing information through

other proper means of which the public can learn, the buyer has a right to choose an intermediary

company with a lower quoted price and better service to facilitate formation of a housing sale

and purchase contract. Such acts do not [entail the] use of housing information from the

intermediary company with whom [the buyer] has previously contracted; therefore, [they] do not

constitute a breach of contract.

Related Legal Rule(s)

Article 424 of the Contract Law of the People’s Republic of China

Basic Facts of the Case

Plaintiff Shanghai Centaline Property Consultants Limited (上海中原物业顾问有限公司)

(hereinafter referred to as “Centaline Company”), claimed: Defendant TAO Dehua (陶德华),

used sale information provided by Centaline Company regarding a certain house [located] at

Number X, Zhuzhou Road, Hongkou District, Shanghai Municipality, intentionally bypassed the

intermediary, and directly signed, on his own [accord], a housing purchase contract with the

seller, violating the stipulations of the Written Confirmation of Request to Buy Real Estate[, a

confirmatory contract to purchase real estate through the plaintiff]. [This constituted] an act of

malicious “bypassing”. [Centaline Company] requested that the court order TAO Dehua pay, in

accordance with the [terms of the parties’] contract, liquidated damages of 16,500 yuan.

Defendant TAO Dehua defended his position, claiming: The original property rights

holder of the house involved in this case, a certain LI, had entrusted multiple intermediary

companies with selling the house. Centaline Company neither exclusively controlled the

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Copyright 2012 by Stanford University

3

housing information nor acted as an exclusive agent in the sale. TAO Dehua did not use the

information provided by Centaline Company; there did not exist any act [amounting to] breach

of contract by “bypassing”.

The court handled the case and ascertained: In the second half of 2008, the original

property right holder, LI, went to multiple housing intermediary companies to list for sale the

house involved in this case. On October 22, 2008, a certain real-estate brokerage limited

company in Shanghai took TAO Dehua to see the house; on November 23, a certain real-estate

consulting limited company in Shanghai (hereinafter referred to as “a certain real-estate

consulting company”) took TAO Dehua’s wife, a certain Ms. CAO, to see the house; and, on

November 27, Centaline Company took TAO Dehua to see the house and signed the Written

Confirmation of Request to Buy Real Estate with TAO Dehua on the same day.

Clause 2.4 of the Written Confirmation stipulated that [where] within six months of TAO

Dehua’s examining the real estate, TAO Dehua or [any] person associated with TAO Dehua,

including his principal, agent, representative, and undertaker, used information, opportunities, or

other such conditions provided by Centaline Company to reach a sale and purchase transaction

with a third party without going through Centaline Company, TAO Dehua should pay Centaline

Company liquidated damages of 1% of the actual closing price for the sale and purchase of the

real estate. At the time, Centaline Company quoted 1.65 million yuan for the house [in question],

while the [above-mentioned] real-estate consulting company quoted 1.45 million yuan and

actively negotiated with the seller on price. On November 30, under intermediation by this real-

estate consulting company, TAO Dehua and the seller signed a housing sale and purchase

contract with a closing price of 1.38 million yuan. Later, the buying and selling parties

completed the procedure for transferring registration and TAO Dehua paid the real-estate

consulting company a commission of 13,800 yuan.

Results of the Adjudication

On June 23, 2009, the Hongkou District People’s Court of Shanghai Municipality

rendered the (2009) Hong Min San (Min) Chu Zi No. 912 Civil Judgment: Defendant TAO

Dehua should, within ten days of this judgment’s coming into effect, pay plaintiff Centaline

Company liquidated damages of 13,800 yuan.

After the judgment was pronounced, TAO Dehua appealed. On September 4, 2009, the

No. 2 Intermediate People’s Court of Shanghai Municipality rendered the (2009) Hu Er Zhong

Min Er (Min) Zhong Zi No.1508 Civil Judgment:

(1) Repeal the (2009) Hong Min San (Min) Chu Zi No. 912 Civil Judgment of the

Hongkou District People’s Court of Shanghai Municipality.

(2) Centaline Company’s litigation claim requesting that TAO Dehua pay liquidated

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4

damages of 16,500 yuan is not supported.

Reasons for the Adjudication

In its effective judgment, the court opined:1 The Written Confirmation of Request to Buy

Real Estate signed by Centaline Company and TAO Dehua was of the nature of an

intermediation contract, and the stipulation of Clause 2.4 prohibiting “bypassing” was a standard

clause commonly found in intermediation contracts for the sale and purchase of housing. The

intent of [the clause] was to prevent the buyer from using housing information provided by the

intermediary company but “bypassing” the intermediary company to purchase the house so as to

make the intermediary company unable to obtain the commission that it deserved. The

stipulation did not include circumstances that exempted one party from liability, increased the

other party’s liability, or ruled out the other party’s primary rights, and [, thus, it] should be

determined to be valid.

According to this clause, the key to determining whether the buyer breached the contract

by “bypassing” is to see whether the buyer used housing information, opportunities, or other

such conditions provided by the intermediary company. If the buyer did not use the information,

opportunities, or other conditions provided by the intermediary company, but obtained the same

housing information through other proper means of which the public could learn, the buyer had

the right to choose an intermediary company with a lower quoted price and better service to

facilitate formation of a housing sale and purchase contract without constituting a breach of

contract by “bypassing”. In this case, the original property rights holder listed the same house

for sale through multiple intermediary companies; TAO Dehua and his family members

separately came to know the same housing information through different intermediary

companies and [one of these] intermediary companies facilitated formation of the housing sale

and purchase contract. Therefore, TAO Dehua did not use information or opportunities provided

by Centaline Company and [his acts] did not constitute breach of contract. Centaline Company’s

litigation claim was not supported.

1 Translators’ note: The Chinese version does not specify which court opined. But given the context, this

should be the No. 2 Intermediate People’s Court of Shanghai Municipality.