A company chairman held the lease of a Hongkou District flat and sublet it rent-free to the general manager of Company A. The manager forged a public-housing voucher for a Pudong property that did not exist, and the parties signed a differential exchange contract transferring the Hongkou flat into the manager’s name. The chairman’s wife, discovering that no such Pudong flat existed, sued to have the exchange contract declared invalid.

Issue

Whether a public-housing exchange contract founded on a forged voucher is void, and who bears the loss caused by the forgery.

Outcome

The court held the contract invalid for want of a genuine subject matter and allocated the resulting loss to the party whose fault produced it. The case illustrates the standard applied to public-housing exchanges: the existence and status of the exchanged property must be verified before the contract can stand.