Cancellation of the Trade Contract Must Take Place Before the Goods Are Shipped

Because it is fair to both sides.

Our clients who purchase goods often describe the following scenario to us:

The Chinese supplier delays delivery while the buyer has already made an advance payment. However, the Chinese supplier failed to deliver the goods before the delivery deadline. The buyer does not want to continue the transaction or to accept the goods, and may only want to cancel the contract. At the same time, the goods may be on the vessel en route from China to the port of destination.

The buyer believes that he has sufficient grounds to cancel the contract. He no longer needs the goods because the goods delivery is delayed.

However, the Chinese suppliers find the request unreasonable.

Because they have to wait for the goods to reach the destination port, and then arrange for a new shipping company to transport the goods back to China.

This involves hefty port storage fees, and freight fees, not to mention the fact that customs authorities in many countries are extremely strict about goods returns. That’s why many Chinese suppliers say the cost of returning goods is much higher than the price of the goods.

Under this situation, if a foreign purchaser initiates an action before a court to have the contract canceled and the advance payment returned, it will be difficult to convince the Chinese judge.

As we said in a previous post:

On the one hand, China traditionally prioritizes harmony and, on the other hand, promoting transactions is an important judicial value among Chinese courts.

“You must be aware that Chinese judges are unwilling to uphold any rescission claim.

Therefore, in order to promote transactions, most judges are inclined to encourage the parties to continue the contract, rather than to terminate the transaction.”

If the cancelation of the contract will cause so much trouble for the other party, the Chinese judge is unlikely to uphold your claim.

However, if you cancel the contract before the Chinese supplier delivers the goods, the Chinese supplier can control the risks and costs on its own. At that point, you are much more likely to win the support of the Chinese judge.