In November 2021, Company B entered into a Trust Agreement with Company C, under which Company C assumed full responsibility for the management and operation of Company B, including custody of the official seal, financial administration, and external contract signing, with the trust period extending until April 2024. In August 2023, Company A and Company B signed a… Transportation Contract 》， The parties agreed that Company A would undertake the cargo transportation services for Company B. The contract stipulated provisions regarding the unit freight rate, settlement procedures, and liability for breach of contract in the event of late payment. Following the execution of the contract, Company A duly performed its transportation obligations; however, Company B repeatedly failed to pay the freight on time. Consequently, Company A brought the matter before the court, requesting that the court issue a judgment ordering… It is contended that Company B and Company C should jointly bear the obligation to repay the debt to the party in question.

The court holds that the Transportation Contract entered into by Company A and Company B reflects the true intentions of both parties, does not contravene any mandatory provisions of laws, regulations, or administrative rules, nor does it violate public order and good morals; therefore, it is lawful and valid, and both parties are obligated to perform their respective obligations in good faith. In the present case, Company A has asserted that it has rendered transportation and related services to Company B, thereby giving rise to transportation charges totaling over RMB 80,000, and has submitted relevant evidence; accordingly, Company B is required to pay the transportation fees as stipulated in the contract. Furthermore, Company A’s claim for liquidated damages for late payment is legally grounded and should be upheld.

With respect to whether Company C should bear payment liability to Company A, pursuant to the Trust Agreement it entered into with Company B, during the trust period, Company C exercised comprehensive management over Company B’s production, supply, sales, finance, quality control, human resources, and administration. Moreover, Company C was entrusted with custody and use of Company B’s official seal, thereby acquiring operational, managerial, and controlling authority over Company B and conducting business in its name. All proceeds of Company B were allocated to Company C, which was also responsible for ensuring that Company B settled all outstanding receivables and payables arising during the trust period and for bearing the corresponding legal consequences. In accordance with the principle of equal rights and obligations, Company C is therefore liable for the debts incurred during the trust period. Furthermore, as the parties did not carry out a formal settlement of Company B’s receivables and payables during the trust period, Company A’s explicit assertion that both Company B and Company C jointly assume repayment obligations is lawful and well-founded, and the court has upheld this position. With regard to the creditor–debtor relationship between Company B and Company C, once they have fully discharged their respective repayment obligations to Company A, they may bring separate litigation to assert their rights.

In summary, the court ruled that Defendant Company B shall pay Plaintiff Company A freight charges totaling over RMB 80,000, together with damages for late payment; Third Party Company C shall bear joint liability for repayment of Company B’s obligation to pay.

From the perspective of the principle of equal rights and obligations in agency relationships and the relevant provisions of commission contracts, although third party Company C is not a party to the transportation contract at issue, under the custody agreement it entered into with Company B, Company C exercised comprehensive management over Company B’s production, operations, finances, personnel, and other matters during the custody period; it also safeguarded and used Company B’s official seal, thereby effectively exercising operational control over Company B and appropriating all of its operating profits. In accordance with Article 6 of the Civil Code of the People’s Republic of China (hereinafter referred to as the “Civil Code”), which stipulates that “civil subjects engaging in civil activities shall abide by the principle of fairness and reasonably determine the rights and obligations of all parties,” the principle of fairness—requiring an equivalence between rights and obligations and a matching of benefits and risks—is a fundamental tenet of civil and commercial transactions. Accordingly, while enjoying all the proceeds generated during the custody period, Company C should likewise bear the corresponding business risks and liabilities. Furthermore, in light of Articles 927 and 929 of the Civil Code, which provide that “the trustee shall handle the entrusted affairs in accordance with the principal’s instructions” and that “in a compensated commission contract, if the trustee’s fault causes losses to the principal, the principal may claim compensation for such losses,” Company C, as the trustee assuming comprehensive custody of Company B, has, through its de facto control over Company B, established a close nexus of liability with the latter and thus bears joint responsibility for any debts incurred by Company B in the course of its business activities during the custody period.

In this case, the court held that Company C and Company B shall jointly bear liability for repayment. This does not constitute a departure from the principle of contractual privity; rather, it stems from a comprehensive assessment of Company C’s de facto control over Company B, its exclusive entitlement to profits, and the principles of fairness enshrined in the Civil Code, as well as the relevant provisions governing agency contracts. Such an outcome is consistent with the spirit of the law and the ideals of equity and justice. In this regard, all market entities are reminded that, when adopting business arrangements such as trusteeship or contracting, they must clearly delineate the boundaries of each party’s rights and obligations, bearing in mind the legal principle that “rights and obligations are commensurate, and benefits and risks coexist.” While enjoying control and operational profits, they must also assume the corresponding debt‑related risks. Engaging in practices that, under the guise of trusteeship, effectively amount to de facto control over another company while evading one’s own liabilities, not only contravenes statutory provisions but also fails to absolve the party of its civil liability.