In Depth: How a Pandemic Windfall Turned Into a Legal Quagmire

1. Wang Changshen, chairman of Rizhao Sanqi Medical & Health Products Co. Ltd., states his company remains affected by the pandemic [para. 1]. Three years post-Covid-19, which caused demand surges and price drops for medical supplies, the firm faces legal disputes over unfulfilled contracts [para. 2].

2. Designated a key emergency supplier by China's Ministry of Industry and Information Technology, Sanqi was central to the 2020 scramble for protective gear at its Rizhao, Shandong factory [para. 3]. To manage demand, it required advance payments and direct factory pickup [para. 3].

3. As pandemic dynamics shifted and prices crashed, some buyers abandoned orders, leading to lawsuits for refunds; Sanqi countersued for contract fulfillment and penalties [para. 4].

4. In three cases, Rizhao courts favored buyers, applying the "change of circumstances" doctrine from China's Civil Code, allowing contract revision or termination due to unforeseen unfair events [para. 5]. Sanqi argued price drops were normal risks, but Shandong High People's Court rejected retrials [para. 6].

5. N95 masks boomed from industrial use to medical demand in early 2020 [para. 7][para. 8]. Pre-2019 prices were ~1 yuan ($0.15); by June-July 2020, 35-50 yuan [para. 9]. Contracts demanded deposits and prompt balance payment/pickup [para. 10].

6. Post-September 2020, prices plummeted; most buyers swapped for other goods, but some litigated [para. 11].

7. A Qingdao firm sued in Nov 2020 over 1 million N95 masks, after receiving ~100,000; sought deposit refund [para. 12][para. 13]. Sanqi countersued for 21 million yuan plus 5% penalty [para. 13]. Donggang District Court terminated contract, ordered Sanqi refund of 10.43 million yuan + interest, but buyer penalty of 1.05 million yuan for delay [para. 14]; upheld by Intermediate Court in 2021 [para. 15].

8. Similar suits: Yunnan firm (July 2020 contract), Shandong chemical-maker (June 2020); courts dissolved contracts for fairness as society normalized, total Sanqi refunds ~26 million yuan, minor buyer penalties [para. 16].

9. Sanqi's defense, backed by five professors, viewed doctrine as rare shield against buyer's remorse [para. 17][para. 18]. Article 533 (2021 Civil Code) allows renegotiation/revision for unforeseeable non-commercial risks [para. 19].

10. Lawyer Zhu Yiyi noted case-by-case evaluation challenges [para. 20]. Scholar Cao Shouye warned of judicial discretion risks [para. 21], but endorsed use in SARS/Covid for risk-sharing [para. 22].

11. Shandong High Court closed appeals: acknowledged buyer breaches but noted shifted conditions; enforcing would require expired inventory remake, harming Sanqi too [para. 24][para. 25][para. 26]. Contracts dissolved, ending boom [para. 27].