Sales Contracts
Why You MUST Have a Sales Contract & How to Ensures It’s Done Properly
When you place an order with a factory you simply must have a contract. If there’s a problem with your order, getting the factory to take responsibility is impossible without a contract. While contracts are rarely the FINAL word in China, they offer you an important bargaining positioning to reference again and again.
Here are five important considerations:
- Phone calls and verbal commitments from your factory rep are absolutely NOT enough. You need to get a written, stamped document from a factory manager/owner that says exactly what you both agree to.
- Getting a sales person to sign off on a contract is NOT ENOUGH. You need to get this contract stamped by someone in an authority position – an owner or manager. Not the English speaking sales staff. It’s very common for Chinese factories to use the excuse “that sales person left the company, so your contract is invalid”.
- All payments to the factory must be tied into passing the quality control (QC) standards you have set. These QC standards must be detailed in the contract and have been signed, stamped and agreed upon by a decision maker. It doesn’t count, unless the right person signs off on the contract.
- Never change your contract once it has been made. This says to the supplier – I’m willing to accept lower quality. It’s a slippery slope to follow.
- A well written contract is an absolute necessity. It offers you a strong bargaining position and holds the factory accountable to the standards you have set.
Do I really need a Contract?
Many think “the legal system is still quite under developed in China, what’s the point in making a contract? If someone defaults for any reason, would you really take them to court?”
The answer is yes you would. China’s legal system does give you some rights. And while you would take them to court if you had to – importantly – the act of having a proper contract makes this event extremely unlikely.
A contract offers you a strong bargaining position should something go wrong.
If problems occur and you need to visit the factory and apply pressure, you can reference your contract, giving them no way to deflect blame.
Four Sales Contract Specifics – Never Forget to Include These
When making a contract with a Chinese factory, there are specific points to remember:
- You should make sure that all your specification and details are clearly laid out in the contact. However, bear in mind you need to keep the contract as short as possible. Don’t write long winded paragraphs. Use bullet points and keep it simple. Importantly, don’t forget to put everything in - no matter how obvious.
- You’ll want to establish the factories policy on replacement of defective merchandise. You’ll want to write how the supplier will replace any defective items, indicating that they will be responsible for replacing the product, but also arranging for the collection and return shipment as well.
- In China, people do not use letter headed paper. They don’t recognise this. Instead, each company in China has a stamp. If the factory hasn’t put their stamp to the contract, even if it has been signed, it makes the contract worthless.
- Include the address where your goods will be produced. It’s not uncommon for suppliers to show you one set of production facilities while outsourcing production to a smaller factory nearby. A less reliable factory with lower standards, lower quality and using cheaper materials. If your quality control/factory audit uncovers such games, you need to ensure you have the production address in your contract.
Why Easy Imex?
EASY IMEX creates all the sales contracts on your behalf – ensuring those with real authority are signing off on them.
As a Chinese registered business, Chinese manufactures tend to abide to our contracts more than they would if it were with an overseas company, as our contracts are valid under Chinese law.
If a factory knows you have zero presence in China, you’ll be ignored should something go wrong.
Being on the ground in China – Chinese factories treat Easy Imex differently from the beginning. Why? Because they know we will turn up to the factory in person and apply pressure. We will reference the contract, giving them no way to deflect blame. They know we will hold them accountable. Something many importers fail to do.
A well written contract is an absolute necessity. It offers you strong bargaining position, and holds the factory accountable to the standards you have set. If you do not have a solid contract and problems occur – you can guarantee the factory are going to deflect blame.
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When we first started on our “china experiment” as we call it we knew right away it would be naive to think we could do it all ourselves. We found Easy Imex online and quickly related to the no nonsense, factual approach they offer.
Adam and Tom (in Australia) were quick to respond to our needs and guided us through the minefield sourcing and negotiating from the other side of the world can be. When we visited Shanghai we were met at the airport - chauffeured and taken care of wonderfully for our entire trip. We learnt and continue to learn so much from Adam and his team.
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Easy Imex is now a vital part of my business. I no longer look at Easy Imex as my exporting agent but as my business partner and office in Shanghai. Adam and the team at Easy Imex not only source items but they arrange for samples, arrange any modifications I require and quality control all of my orders. They have the facilities to combine several orders into one container and ship directly to my warehouse. I no longer have to worry about working with shipping companies, customs and log painful paperwork. Easy Imex offers a factory to door service. Please feel free to contact me as a reference for Easy Imex and I wish you good trading in the future
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Easy Imex are a trustworthy, efficient company. They are easy to deal with, very friendly and with good knowledge of the Chinese marketplace. They helped me in many ways:-
- Saving money. My previous agent was very greedy and secretive.
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The most important benefit of using Easy Imex as opposed to the Brisbane sourcing company I first approached when seeking information and costs on importing from China, was that they were very open and honest with me. All charges were realistic and every question was answered in great detail. The Brisbane sourcing company I sough initially were extremely vague, the costings given to me were very hard to understand and the commission they were going to charge was going to make my new business venture almost unviable.”
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On one of our container shipments, we had some product damaged due to loading errors. When we received the product we unloaded it and took pictures and contacted Adam with the managed results. He credited us for the damage and also made changes in the loading procedure so this would not happen again. Everyone makes mistakes, it’s how you handle the mistakes with your customers that installs confidence.
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