Contracts & Payments: How to Protect Yourself

Payment Methods by Risk Level

See the full comparison table in our China Sourcing 101 guide.

The Ideal Payment Timeline

For the visual diagram, see the full China Sourcing 101 guide.

Must-Have Contract Clauses

A purchase agreement is only as good as what it spells out. Vague terms are where disputes start. Here is what yours should cover.

1. Product specifications — Detailed parameters referencing the approved sample number
2. Quantity and unit price — Including tolerance (typically ±5%)
3. Payment terms — Amounts, timing, and method
4. Delivery date — With delay penalties (commonly 0.5–1% per week, capped at 5–10%)
5. Quality standards — AQL levels, inspection rights, golden sample reference
6. Inspection clause — Your right to inspect pre-shipment using your chosen inspector
7. Packaging specifications — Materials, labeling, carton requirements
8. IP protection — NDA, non-compete, ownership of molds and designs
9. Dispute resolution — Arbitration in an internationally recognized venue (Hong Kong or Singapore is a common choice)
10. Warranty and returns — What happens when defective goods are discovered post-delivery

Critical note: An English-only contract can create real translation, interpretation and enforcement risk if a dispute reaches a Chinese court — a bilingual version (Chinese and English) that states the Chinese text prevails substantially reduces that risk. This is general information, not legal advice; have qualified counsel review any cross-border contract before signing.

This is Part 8 of 8 in the Rich Bee China Sourcing 101 series. Previous: Shipping from China: A Survival Guide · All chapters: Sourcing 101 full guide