Case Study: Contracting Fault Liability Dispute Where Employer Rescinded Job Offer
Case Summary
This case involves a dispute over contracting fault liability. An electronics company issued a formal job offer to Mr. Zhang with an annual salary of 800,000 RMB. Based on this offer, Zhang resigned from his previous job. However, shortly before the start date, the company rescinded the offer, alleging that Zhang had proposed new conditions, a claim they failed to prove. The court ruled that the company violated the principle of good faith, causing Zhang the loss of a contracting opportunity and reliance interests. The court ordered the company to compensate Zhang for three months of lost wages and travel expenses,.
Full Decision
(I) Contracting Fault Liability Dispute
If an employer notifies a worker of employment and then reneges, violating the principle of good faith, it shall bear contracting fault liability. — Zhang v. An Electronics Company Contracting Fault Liability Case
[Basic Case Information]
Judgment Reference: Fujian Province Xiamen Intermediate People's Court (2023) Min 02 Min Zhong No. 1845 Civil Judgment. 1. Cause of Action: Contracting Fault Liability Dispute. 1. Parties:- Plaintiff (Appellee): Zhang. - Defendant (Appellant): An Electronics Company.
[Basic Facts] On July 17, 2022, an Electronics Company sent a "Letter of Employment" to Zhang via email, stating: "To: Zhang: We are honored to inform you that due to your outstanding business ability and excellent comprehensive quality, you have been officially hired by our company.
" It listed specific employment conditions: Start date: August 22, 2022; Location: Shanghai; Remuneration: 800,000 RMB/year. "Please sign your name and return it to company HR before July 18, 2022. " On the same day, Zhang replied by email accepting the position.
On the same day, the Electronics Company replied via email: "Receipt confirmed, thank you! After you formally resign from your original unit, please send me a message. " On August 19, 2022, Zhang drove from Suzhou to Shanghai and checked into a hotel in Shanghai arranged by the Electronics Company.
On August 21, 2022, at 15:46, he met with Li, the legal representative of the Electronics Company. At 17:56, Zhang left and returned to Jiangyin, Jiangsu on the same day,. During the trial, the Electronics Company stated: "On August 21, 2022, Zhang proposed new entry conditions, requesting to work in Jiangyin and hoping the Electronics Company would rent a house in Shanghai as a staff dormitory.
This touched the Electronics Company's bottom line. Furthermore, Zhang held multiple job offers and did not give any reply. The Electronics Company had reason to believe Zhang no longer wanted to join, so the Electronics Company sent a text message to Zhang declining employment.
" On August 22, 2022, at 20:56, the HR of the Electronics Company sent a text message to Zhang: "Hello Zhang, we regret to inform you that after comprehensive evaluation, we feel you do not currently meet our job requirements. We hope you understand. We also hope you find opportunities more suited to your development.
Thank you for your understanding and support. " It was further found that on June 7, 2021, Zhang (Party B) signed a "Labor Contract" with a Semiconductor Company, stipulating: "From June 7, 2021, to June 6, 2024, Party B's monthly salary is 29,167 RMB. " On July 19, 2022, Zhang submitted his resignation to the Semiconductor Company.
On August 19, 2022, the Semiconductor Company issued a "Certificate of Separation," stating: "This certifies that Zhang has been employed by our company since June 7, 2021. Due to personal reasons, he proposed to leave and formally terminated the labor relationship with our company on August 19, 2022.
" The "Payroll" submitted by Zhang showed that Zhang's wages at the Semiconductor Company from June to August 2022 were 29,167 RMB, 29,167 RMB, and 31,205 RMB, respectively. Additionally, Zhang had no social security payment records from September to December 2022,.
Zhang filed the following litigation requests: (1) The Electronics Company shall bear the losses caused by the breach of contract, including transportation, accommodation, lost wages, and induction physical examination fees totaling 10,918. 64 RMB. (2) The Electronics Company shall pay Zhang a signing fee of 160,000 RMB.
(3) The Electronics Company shall pay Zhang lost wages of 400,000 RMB. (4) The acceptance fee and preservation fee of this case, 3,374. 59 RMB, shall be borne by the Electronics Company. [Case Focus] Whether the Electronics Company should bear contracting fault liability.
[Court Adjudication Synopsis] The Xiamen Huli District People's Court of Fujian Province held after hearing the case: On July 17, 2022, the content of the "Letter of Employment" sent by the Electronics Company to Zhang was clear in its expression of intent and already contained the main content of a labor contract.
Zhang had reason to believe he had been hired by the Electronics Company and would start work on August 22, 2022; Zhang terminated his labor relationship with his original unit based on reasonable reliance on the Electronics Company, resulting in actual damages.
The Electronics Company's behavior violated the principle of honesty and credibility and constituted obvious contracting fault; thus, it should bear corresponding compensation liability according to the law.
The Electronics Company argued that Zhang proposed new entry conditions that touched their bottom line, but failed to submit relevant evidence to prove this claim, so the court did not adopt it. Regarding Zhang's losses: Zhang claimed transportation and accommodation fees of 3,135.
84 RMB, but failed to submit complete payment vouchers and failed to prove these were all incurred for joining the Electronics Company. Therefore, the court exercised discretion to determine the Electronics Company should compensate Zhang 1,500 RMB for transportation and accommodation; Zhang claimed 120 RMB for physical examination fees, to which the Electronics Company had no objection, and the court confirmed this,.
Regarding Zhang's claim for lost wages of 7,662. 8 RMB (miscellaneous) and 400,000 RMB (salary loss), the court held: Employers and workers must follow the principle of good faith when concluding labor contracts.
If an employer promises a job and then cancels it, causing the worker to lose their original job due to mistaken reliance, the employer should bear contracting fault liability. Considering the scope of compensation for contracting fault liability includes not only direct losses but also losses due to the loss of contracting opportunities, and considering the monthly salary promised by the employer and the reasonable time for the worker to find a new job, the court determined the Electronics Company should compensate Zhang for three months of wage losses amounting to 200,000 RMB (referencing the promised 800,000 RMB annual salary).
Regarding the signing fee of 160,000 RMB claimed by Zhang, according to the "Letter of Employment," "Three months' wages are referred to as a signing fee, distributed with the first month's salary, subject to one year of service, otherwise fully refundable.
" Therefore, Zhang's claim for the signing fee lacked factual and legal basis, and the court did not support it. The Xiamen Huli District People's Court of Fujian Province, in accordance with Article 500 of the "Civil Code of the People's Republic of China" and Article 67, Paragraph 1 of the "Civil Procedure Law of the People's Republic of China," ruled as follows:
The Electronics Company shall compensate Zhang 203,120 RMB within ten days from the effective date of this judgment;1. Dismiss Zhang's other litigation requests,. The Electronics Company refused to accept the first-instance judgment and filed an appeal.
The Xiamen Intermediate People's Court of Fujian Province held: The "Letter of Employment" sent by the Electronics Company on July 17, 2022, was its true expression of intent. Zhang subsequently resigned and prepared for entry.
Although the letter stated the start date was August 22, Zhang arrived in Shanghai early on August 19 and met with the legal representative on August 21. This should be viewed as fulfilling the entry obligation in advance.
Furthermore, when the company notified Zhang of the non-hiring via SMS on August 22, it did not mention failure to report on time as the reason. The company's claim that Zhang proposed new conditions was unsupported by evidence. Therefore, the SMS notification constituted a unilateral breach, causing reliance interest losses to Zhang.
The Electronics Company must bear contracting fault liability,. The Xiamen Intermediate People's Court of Fujian Province, in accordance with Article 177, Paragraph 1, Item 1 of the "Civil Procedure Law of the People's Republic of China," ruled as follows: Dismiss the appeal and sustain the original judgment.
Key Legal Points
Good Faith Principle in Hiring: Even before a formal labor contract is signed, the issuance of a formal offer letter ("Letter of Employment") creates a pre-contractual relationship. If an employer reneges on a clear offer without just cause, they violate the principle of good faith and must bear contracting fault liability,.
Protection of Reliance Interests: If a prospective employee resigns from their current job based on a reasonable reliance on a new job offer, and the new employer cancels the offer, the employee is entitled to compensation for the "reliance interest" losses. This includes direct losses (expenses) and opportunity losses (lost wages during the unemployment gap).
Burden of Proof: If an employer claims they rescinded an offer because the employee changed the terms or failed to meet requirements, the burden of proof is on the employer. Failure to provide evidence results in the employer bearing the legal consequences of the breach,.
Frequently Asked Questions
Can I sue a company if they withdraw a job offer after I have resigned from my old job?
Yes. Under Chinese law (Civil Code Article 500), if a company violates the principle of good faith during contract negotiations—such as withdrawing a firm offer after you have relied on it to your detriment (e.g., resigning)—they may be liable for contracting fault liability,.
What kind of compensation can I get in a contracting fault liability case?
Damages typically cover direct losses (travel, accommodation, medical checks for the new job) and opportunity losses (wages lost during the reasonable time it takes to find another job). In this case, the court awarded 3 months of the promised salary as compensation for lost wages.
Is a "Letter of Employment" (Offer Letter) legally binding?
Yes, if the content is specific and expresses a clear intent to hire, it constitutes a binding offer. Reneging on it without a valid legal reason triggers liability for the damages caused to the prospective employee.