In the case of dispute over port dredging contract between Ningbo Yongyi
Ocean Engineering Co., Ltd.(hereinafter referred to as Yongyi Company) as
the plaintiff and Dalian Hangsheng Port Construction Engineering Co., Ltd.
(hereinafter referred to as Hangsheng Company) as the defendant and Dalian
Huichang Terminal Co., Ltd. (hereinafter referred to as Huichang Company) as
the defendant30, Huichang Company offered the port berth construction project
to Hangsheng Company without port construction qualification, and Hangsheng
Company subcontracted the dredging project of the harbor basin to Yongyi
Company without construction qualification. Both the above-mentioned
contracts were invalid. Although the latter contract was cancelled before the
completion of the project, yet Hangsheng Company recognized the quality of
completed project. Therefore, the Court ruled that Hangsheng Company should
make the corresponding payments to Yongyi Company. Since the contract
between Hangsheng Company and Yongyi Company was invalid, the letter of
guarantee issued by Huichang Company to Yongyi Company for the payment
of the project was invalid, too. Knowing that Hangsheng Company did not
have the relevant construction qualifications, Huichang Company still offered
the port berth construction project to Hangsheng Company and confirmed that
Hangsheng Company subcontracted the dredging project of the harbor basin
to Yongyi Company, which belonged to the situation of providing a guarantee
for the principal contract knowing that it is invalid, and Huichang Company is
thereupon at fault for the invalidity of the guarantee contract. In accordance with
the provisions of Article 8 of the Interpretation of the Supreme People’s Court on
Several Issues Concerning the Application of the Guarantee Law of the People’s
Republic of China, the Court ordered Huichang Company to assume joint and
several liability for one third of the aforementioned project prices.