Many factories 'foreign trade contracts are changed from English templates downloaded online. Templates are easy, but risk clauses are often mismatched: templates are drafted based on the purchase and sale of goods, but your order has OEM-customized intellectual property issues; templates default to US dollar settlement and New York arbitration, and your customers are in the Middle East. There is no difference in contracts usually, but every item is money when there is a dispute. This article does not talk about a comprehensive contract collection, but only talks about how to write the four most common parts of the contract.
1. Quality and inspection terms: sealing samples are more useful than adjectives
The most common pitfalls in quality terms are to write adjectives: "excellent quality" and "consistent with confirmation samples." When a dispute arises, adjectives cannot be ruled out. The executable writing method is three-piece: technical standards-quote specific standard numbers and testing methods (such as corresponding clauses in ISO, EN, and ASTM), and write the numerical interval for key indicators; seal samples-each party signs and seals one copy, stating that "the quality of large goods is subject to the sealed samples and technical specifications." In case of conflict between the two, the value of the technical specifications shall prevail; objection period-a written quality objection is filed within XX days after the goods arrive at the port of destination and a third-party inspection report is attached. If the time limit is exceeded, it is deemed to have passed the acceptance. A quality clause without an objection period is equivalent to writing the buyer a blank check to claim compensation at any time; the objection period is too short (such as 7 days) and will be directly rejected by large buyers. 30 days is a common balance point.
2. Delivery date and force majeure: Don't just write the sentence "Except for force majeure"
There are three numbers to be written in the delivery terms: the standard cycle from order to delivery, the rule for postponing peak season (stating what is the peak season and how many days to postpone), and the upper limit of compensation for delayed delivery (the common way is the weekly value of the delayed part of the goods. 0.5% to 1%, and the cumulative amount does not exceed 5%). The focus of the force majeure clause is not to list earthquakes and typhoons, but to three things: obligation of notification-the party in which force majeure occurs must provide a certificate issued by the local chamber of commerce or notary office within X days; hierarchical consequences-short-term force majeure is postponed and the delivery period lasts for more than the agreed number of days (such as 60 days), either party has the right to cancel the undelivered part; Scope convergence-Make it clear whether "government actions" and "policy changes" are force majeure. In recent years, tariffs have suddenly changed and export controls have been frequent. If this article is not clearly written, one party will claim policy risks, and the other party will claim commercial risks. Say your own words.
3. Payment terms and rights reserved
How to choose the payment method has been discussed in the previous special article, but here we only talk about the two points to be written on the contract text. The first is the retention of title clause: it states that "the ownership of the goods will not be transferred until the purchase price is fully paid." This is a lower-level guarantee that is much more effective than a reminder for credit sales orders-when the buyer is bankrupt and liquidated, sellers with retention of rights clauses have a much higher order of claiming rights to goods in transit and in stock than ordinary creditors. Of course, we must pay attention to the registration requirements for retention of rights in the country where the transaction is held. Some jurisdictions do not register and do not oppose third parties. The second is currency and exchange rate: specify the settlement currency, which party bears the exchange rate risk, and the price adjustment mechanism when exchange rate fluctuations exceed the agreed range. These words are worth a lot of money in years when the two-way fluctuation of the RMB increases.
4. Dispute resolution: The place of arbitration is more important than the arbitration clause itself
A common misunderstanding in factories for dispute resolution clauses in foreign-related contracts is to write "If negotiation fails, sue the court"-foreign judgments in China and China judgments in the other country, recognition and enforcement are troublesome. A more practical structure is institutional arbitration: agree on an arbitration institution and arbitration venue acceptable to both parties (common choices include arbitration institutions in Hong Kong, Singapore, or China International Economic and Trade Arbitration Commission), specifying the applicable law and arbitration language. The advantage of Hong Kong and Singapore as arbitration venues is that awards can be applied for enforcement in more than 170 parties in accordance with the New York Convention. Another detail: If the contract stipulates two versions in Chinese and English, it must be stated that "If the two versions are inconsistent, the text X shall prevail." Otherwise, the minor language versions will be manipulated, and the validity of the version will only be known when there is a dispute.
5. Common questions
1. What should I do if the customer insists on using the contract template they provide?
See the terms and then decide. The core demands of most buyers 'templates are quality, delivery time, and compensation. If the terms are fair and acceptable, five points are checked one by one: payment trigger point, quality objection period, compensation limit, force majeure scope, and dispute resolution place. If there are really unacceptable terms, use the form of "Attachment of our Standard Terms and Conditions" to hang up the supplementary agreement, indicating that in case of conflict, the attachment will prevail, and the business will proceed as usual and the risks will be locked.
2. Do I have to sign such a thick contract for a small order?
Don't have to be thick, but have to be. A two-page simple contract for small orders: product specification and seal sample number, amount and payment method, delivery date, quality objection period, and dispute resolution. All five items will be sufficient. Disputes rarely occur because of the thickness of the contract, and most of them are not written at all. Courts and arbitration institutions also recognize quotations and confirmation of orders that have been confirmed through email exchanges, but dozens of emails are scattered, and the cost of proof is much higher.
3. The contract stipulates that China law shall apply. Is it binding on foreign buyers?
Yes, provided that the contract stipulates the dispute resolution mechanism and the agreement is valid. The applicable law solves the issue of "which country's rules should be used for the adjudication," and the arbitration clause solves the issue of "where to arbitrate." The two can be combined: it is agreed to apply the laws of China and the place of arbitration in Hong Kong, or the laws of Hong Kong and the place of arbitration in Shenzhen. These are common combinations. If you are not sure, spend a small amount of money to hire a foreign-related lawyer to review the dispute resolution clause. The fee for this clause is the highest rate of return among all clauses.
