How to negotiate a purchase contract with Chinese supplier

An Expert's View about Contracts in China

Posted on: 16 Apr 2010

I was approached frequently by buyers ripped off by Chinese suppliers. Oftentimes when I ask them to send me the purchase contract they signed with the suppliers, some of them will send me proforma invoice(PI), and some will say, no I don't have a contract or PI, I keep the receipt that I sending them money or do you want to see the emails and/or instant messenger conversation record?

Practically, PI is deemed as a contract, but PI is too simple to protect your rights, you need to write down the following terms and conditions on a paperwork – Contract. As per ;mcescript type=">/pub/FDI_EN/Laws/law_en_info.jsp?docid=50943">Contract law of People's Republic of China, a contract shall contain the following clauses:(1) title or name and domicile of the parties;(2) contract object;(3) quantity;(4) quality;(5) price or remuneration;(6) time limit, place and method of performance;(7) liability for breach of contract; and(8) methods to settle disputes.

The following are bonus tips to sign a sales contract with Chinese supplier(tips will be given in the order of contract clauses):(1) title or name and domicile of the parties;Make sure the company name, domicile, contact information mentioned on contract are correct. It will be safe if you use the company name, domicile disclosed on their business license and registration form of foreign trade dealers. Only Chinese name and address are listed on the business license, but both English and Chinese name and address will be listed on the registration form of foreign trade dealers.

(2) contract object, quantity and quality clausesThis clause is the definition of what you bought from the suppliers. A certain quantity of product with the quality specification as blah blah. My advices are: a) use full product description so the supplier won't be confused and could not make any excuses in case of wrong delivery; b) It is important to add a Quality Clause, use the detailed specification to define the product clearly. I was surprised many fellow companies only put a brief products description and no quality clause or standard on the contract, especially those who use PI as a contract.


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Posted: 16 April 2010

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