Please can I get a bit more clarity on drafting a manufacturing agreement with a Chinese company?

Question

I am launching my own sleepwear brand middle of this year- I will be designing and manufacturing the sleepwear in China, importing them to UK and then selling them online and distributing it from here, to US, EU and across UK.

I have been working on drafting a manufacturing agreement for the Chinese sleepwear manufacturer, as I want to just cover myself if anything doesn’t go according to plan- I have put it together but there are a few outstanding issues that I am not too sure of, and was hoping I could get some clarity from an expert on this forum:

– What is the governing law for these contracts, would it be the Law of the People’s Republic of China on Economic Contracts Involving Foreign Interests or UK law?

– Is it normal practice for me to set a penalty per garment of however many USD if their delivery date deadline for manufacturing has been reached and missed?

– Is it usual for me to pay 30% upfront, and the remaining 70% only within 30 days of when the goods have left the port of origin, or does it need to be paid in full before the goods leave the port?

– Do I have any legal leg to stand on if I find issues with the order once it has arrived in London, as this would be after a QC has already checked and done the AQL checks on my behalf at the factory before product has left the port? Could I ask for some kind of warranty period of e.g. 6 months after goods have been received, where the manufacturer still has to cover any rejects if found?

– If there are any disputes in the contract, who/ which authority does this actually get submitted to?

Any help or guidance here would be so hugely appreciated.

Answer

International Supply Agreements

I note that you are attempting to draw up an International Supply Agreement yourself. I cannot help but point out that this is quite an undertaking if you are not legally qualified and experienced in international business law and the drafting of such agreements. There is considerable risk to taking a DIY approach to this very important aspect of your business bearing in mind the international aspect of the venture and size of what you will ultimately be investing in your business operations, if you are to yield worthwhile returns.

However, on the issue of choice of law provisions within your agreement, please click on the link below as you may find our Article on this issue helpful.

www.hallmarksolicitors.co.uk/cross-border-agreements-jurisdiction-clauses/.

Regards

Uche Akali
Hallmark Solicitors
www.hallmarksolicitors

Answer

Good afternoon Nina

As Uche pointed out, I admit it’s a very risky move to try to do it yourself. Dealing with Chinese manufacturers has become much safer along the past years, but it definitely is something you can’t improvise, both in the research of the said-supplier and in the definition of an agreement.

ALTIOS International has been doing business in China for 20 years. We have strong knowledge of the market and on the doing business with Chinese partners.
Please feel free to drop me an email, I can get you in contact with helpful people.

Best regards
Pierre Boesinger
p.boesinger@altios-international.com

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