Plaintiff entered into the shipbuilding contract with Defendant, by which Defendant would design and build a powerboat to be approved by CCS. The contract also provided that for any late delivery, Defendant should pay 0.2% of the contract price as default interest (actually liquidated damages). Post execution of the contract, Plaintiff paid the first instalment of the contract price, and Defendant handed in the surety cash. However, Defendant failed to deliver the powerboat before the original deadline and even before the extended deadline and the powerboat when finally finished failed to pass the inspection of CCS. Defendant was unable to hand over to Plaintiff the quality and seaworthy certificates and other related ship documents. Plaintiff sued Defendant for termination of the contract and return of paid instalment plus default interest. The court held that (i) Defendant failed to discharge the duty of delivery, as it did not deliver the ship documents and the ship’s quality was not approved by CCS. Plaintiff’s representative’s attendance to the sea trial and putting his signature on the sea trial documents did not mean that the powerboat was seaworthy or meet the specifications of the contract; (ii) Plaintiff could terminate the contract, as the powerboat could not satisfy the intended use of Plaintiff and it could not realize the contract purpose; and (iii) Defendant should return the paid instalment, but the default interest claimed by Plaintiff was excessively higher than the actual loss it could prove to have suffered, so the court adjusted the interest rate to 130% of the loading rate published by the People’s Bank of China.