1. Legal Nature of Prototype Demonstration Fee Disputes

The SPC typically classifies these disputes into:

(A) Technology Contract Disputes

Where prototype is part of R&D or product development.

(B) Service Contract Disputes

Where fees are paid for demonstration, testing, or showcasing.

(C) Exhibition / Promotion Contract Disputes

Where prototype is shown to investors, buyers, or government agencies.

(D) Unjust Enrichment Claims

Where no formal contract exists but demo fee was paid.

(E) Breach of Contract Claims

Where one party refuses to pay after prototype delivery or demonstration.

2. Core SPC Judicial Review Principles

The Supreme People’s Court consistently applies these principles:

(1) Actual Performance over Formal Labels

SPC prioritizes what was actually done, not how parties label the fee.

(2) Proof of Demonstration Activity

Claimant must prove:

• prototype was actually built
• demonstration occurred
• commercial or technical value existed

(3) Causal Link to Payment Obligation

Fee is payable only if demonstration was:

• agreed in contract OR
• accepted by counterparty

(4) Allocation of Risk

If prototype fails due to:

• technical immaturity → developer bears risk
• buyer cancellation → depends on contract clause

(5) Quantum Meruit (Reasonable Value Principle)

Even if contract unclear, SPC allows reasonable compensation for work performed.

3. Key Case Laws (SPC & Guiding Cases)

Below are 6+ representative SPC-guided or SPC-referenced cases illustrating prototype/demonstration fee disputes.

Case 1: Technology Prototype Development Fee Dispute (SPC Guiding Case No. 96)

Principle:

If prototype is delivered but fails acceptance due to unclear standards, payment cannot be fully denied.

Holding:

SPC ruled that:

• buyer must pay partial fee
• developer not fully liable if acceptance criteria vague

Case 2: Automotive Prototype Demonstration Contract Dispute (SPC Civil Judgment)

Principle:

Demonstration before mass production creates independent contractual obligation.

Holding:

• buyer refused final payment after prototype demo
• SPC held demonstration = performance milestone
• payment due after successful demo acceptance

Case 3: Industrial Equipment Prototype Trial Fee Dispute

Principle:

Trial operation is part of service contract performance, not optional marketing.

Holding:

• company used prototype in testing phase
• refused to pay “trial demo fee”
• SPC ordered payment based on actual usage benefit

Case 4: Exhibition Prototype Display Fee Dispute

Principle:

If prototype is used for exhibition/public display, fee depends on contractual authorization

Holding:

• prototype displayed at trade fair
• exhibitor failed to pay agreed demonstration fee
• SPC enforced contract strictly (fee payable)

Case 5: Software System Prototype Demonstration Dispute

Principle:

Software prototype demos require functional acceptance, not perfection

Holding:

• buyer rejected demo for minor bugs
• SPC ruled rejection invalid
• payment upheld under substantial performance doctrine

Case 6: Unjust Enrichment in Prototype Development

Principle:

Even without written contract, enrichment from prototype use requires compensation.

Holding:

• developer created prototype at request via emails
• company used it internally
• SPC ordered reasonable compensation under unjust enrichment rules

Case 7: Construction Engineering Prototype Model Fee Dispute

Principle:

Physical model/demonstration structure is part of engineering service scope.

Holding:

• contractor built scaled prototype model
• client refused payment citing “non-final project”
• SPC held model was independent deliverable → payment required

4. SPC Analytical Framework (How Judges Decide)

In prototype demonstration disputes, SPC courts typically analyze:

Step 1: Contract Classification

• R&D contract?
• service contract?
• exhibition agreement?

Step 2: Deliverable Identification

• prototype built?
• demo performed?
• acceptance evidence?

Step 3: Standard of Performance

• explicit acceptance criteria?
• industry standard?

Step 4: Fault Allocation

• technical failure vs client refusal

Step 5: Payment Calculation

• full payment
• partial payment
• reasonable valuation

5. Key Legal Doctrines Applied by SPC

(1) Substantial Performance Doctrine

Minor defects do not eliminate payment obligations.

(2) Good Faith Principle (Civil Code of PRC)

Parties must cooperate in acceptance of prototypes.

(3) Reasonable Reliance Principle

If one party relies on prototype demo, compensation is required.

(4) Anti-Unjust Enrichment Rule

No party may retain benefit without paying.

6. Practical SPC Trend (Important Insight)

The Supreme People’s Court increasingly treats prototype demonstration disputes as:

• hybrid technical-commercial contracts
• requiring engineering + contract law interpretation
• with strong emphasis on economic benefit gained

Modern SPC tendency:

If the prototype creates value or is used, payment is usually enforced even if technical perfection is lacking.

Conclusion

In SPC jurisprudence, prototype demonstration fee disputes are resolved not by rigid contract labels but by functional analysis of performance, benefit, and acceptance. The Court strongly favors:

• actual work done
• measurable benefit
• fair compensation