What if a Chinese Supplier Does Not Deliver the Products?
You probably want to terminate the contract and get a refund or even compensation.
You should make an agreement with your supplier on a specific period for delivery, termination conditions, and liquidated damages. If not, you can give the supplier a reasonable period.
Thereafter, you can request the termination of the contract and refund of the advance payment if the supplier doesn’t deliver the goods within the designated period.
As mentioned in a previous post, you had better settle the disputes with Chinese business partners in China. For example, you can file a lawsuit with a Chinese court or apply for arbitration in a Chinese arbitration institution.
For the disputes settled in China, you can take the following approach:
1. You need to specify a delivery period in the contract.
You should include a delivery period in your formal or informal contract (purchase orders, emails, chatting records).
The period can be a definite date or a precise calculation method that can make judges or everyone calculate a clear date. If it is the former, it couldn’t be better.
You also need to specify the time you can terminate the contract when the supplier delays the delivery.
It is a wise thing that you can also specify the liquidated damages the supplier has to pay for overdue delivery.
Because Chinese judges don’t have the business knowledge, flexibility and time to understand the transactions beyond the contract terms. (see the previous post 3 Things You Have to Know About How Chinese Judges Think in Commercial Litigation)
With these terms easily understood by Chinese judges, you can terminate the contract, request a refund, and achieve your goal through the Chinese courts.
2. If you fail to specify the delivery period in the contract, you need to complete a series of notices.
Chinese judges would consider that you have not agreed on the period of the contract because the contract doesn’t state the delivery period.
At this time, you should give a reasonable delivery period for the supplier, and send the first notice. In other words, you should inform the supplier to deliver the goods within this period, otherwise, you will terminate the contract.
You had better explain why you think this period is reasonable when you notify the supplier.
This explanation is to make Chinese judges understand that the period you give is not unreasonable.
If the supplier still fails to deliver the goods within this period, OK, you should send a second notice at this point. That is, inform the supplier that you decide to terminate the contract, and request the refund of the advance payment you have paid within the specified period.
In this notice, you had better explain that even if the supplier delivers the goods after the deadline, it makes no sense for you. For example, your distributor has canceled the order with you, which means that you can no longer sell the goods at a fair price when you receive the goods.
This explanation is to make Chinese judges understand that the overdue of the supplier has made it impossible for you to achieve the purpose of the purchase.
If the supplier ignores you, you can initiate an action before a court now.
For how to terminate a contract with a Company in China, please read our post “How Do I Terminate a Contract with a Company in China?“.
For how to get a refund from a company in China, please read our post “How Do I Get My Money Back From a Chinese Supplier?“.
Do you need support in cross-border trade and debt collection? CJO Global's team can provide you with China-related cross-border trade risk management and debt collection services, including: (1) verification and due diligence; (2) trade contracts drafting; and (3) dispute resolution and debt collection. If you need our services, or if you wish to share your story, you can contact our Client Manager Susan Li (firstname.lastname@example.org). If you want to know more about CJO Global, please click here. If you want to know more about CJO Global services, please click here. If you wish to read more CJO Global posts, please click here.
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