Have you ever faced problems with a supplier during a transaction? It’s a common issue in international trade, and it’s important to know how to handle it.

As a lawyer with 6 years of experience, I’ve encountered cases where clients continued with orders even after the supplier breached the contract. While cost considerations often play a role, it’s crucial to remember that terminating the contract and seeking a refund is the right course of action.

Let me share two recent cases as examples:

1. Australian Client vs. Hangzhou Supplier:
The initial agreement was that only after receiving a satisfactory sample, Our Client would make a second payment to the counter-party.
However, Our Client never received the sample to his satisfaction but made the second payment to the counter-party only because the counter-party said that they would modify the sample according to Our Client’s requests only if Our Client paid the second payment first.
The second payment of Our Client is very easy to make the judge misunderstand that Our Client was already satisfied with the sample.

2.South African Client vs. Hebei Supplier:
Initially, the trade term agreed upon was FOB, meaning the supplier was responsible for delivering the goods to a specified ship. However, our client was in a hurry and arranged for their forwarder to pick up the goods from the supplier’s warehouse. This action could be misinterpreted as a modification of the trade term (from FOB to EXW).

Another case involved Gracia’s company, which purchased N40 batteries from a Dongguan-based company called Yuyue. The contract specified delivery according to the sample, which stated the batteries had a magnetic force of 2800 gauss.

However, a year later, Gracia’s company discovered the sample batteries only met the standard for N35 batteries. They refused the remaining goods and took legal action against Yuyue.

The judge ruled in favor of Yuyue, emphasizing that both parties had confirmed the sample’s Gauss value, effectively modifying the contract clause.

Here are some important takeaways for your transactions:

1. Prompt Action on Supplier Defaults:
Even minor defaults, like delayed delivery or unsatisfactory samples, should prompt you to terminate the cooperation. Failure to do so may be seen as a voluntary modification of the contract.

2. Breach of Contract Indicates Risk:
A supplier that breaches the contract at the outset may not be trustworthy. They’re more likely to default on quality and timely delivery.

3. Suspend Payments in Case of Breach:
If you discover a breach of contract, don’t continue making payments based on the supplier’s requests. Doing so may only lead to greater losses. It’s harder to seek refunds or compensation once the supplier has received your money.

Remember, our team of attorneys is here to assist you throughout the procurement process from China. Don’t hesitate to reach out with any questions.

Warm regards,

Abby, Esq.