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Naha City wins court battle

Date Posted: 1998-05-16

Naha City was declared not responsible for paying a Tokyo company selling plumbing fixtures in a reversal of earlier lower court decision by the Kyushu High Court decision handed down Thursday.

The court case stems from an incident in 1996, when a Naha based, now defunct construction company asked the Tokyo vendor to wait for a payment until the construction company would collect a 41.6 million payment from Naha City. The construction company's liabilities to the Tokyo supplier were about 85 million at the time. The Tokyo company had agreed on condition that Naha City officials would agree to pay the 41.6 million directly to the Tokyo company.

A representative of the Tokyo company subsequently visited the Naha City Offices together with the president of the construction company to set up the payment scheme which all parties had agreed to. However, right after the representative returned to Tokyo, the construction company president visited the city office by himself and arranged the payment to be made into his bank account. Naha City then paid the money to the contractor.

The contractor then dissolved his company and disappeared with the money. The Tokyo supplier then took Naha City to court for a breach of contract and demanded the payment.. Naha District court agreed and ruled that Naha City was responsible and should pay. After the decision, the city attorneys filed an appeal. The higher court ruled that city officials had acted in good faith and had followed proper procedures. The decision said that since the original contract to purchase the goods was between the Tokyo supplier and the Naha contractor, the contractor alone was responsible for paying for them. Naha City was a third party who had nothing to do with the transaction between the two, even though Naha city was the final recipient of the goods as a part of a construction contract. The court ruling said that it was the responsibility of the supplier to secure payment from the contractor.

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