China Manufacturing Contracts: What to Include

TL;DR: A good China manufacturing contract should be bilingual (Chinese + English), include specific quality standards, payment milestones, IP protection clauses, and penalty terms. The Chinese version is what matters in Chinese courts. Always use a China-law attorney for significant orders ($20K+).

Essential Contract Clauses

1. Product specifications: Detailed description referencing approved sample, technical drawings, and material specs.
2. Quality standards: AQL levels, testing requirements, reference to golden sample.
3. Quantity and pricing: Unit price, total quantity, price validity period, and any volume discount tiers.
4. Payment terms: Deposit percentage, balance trigger (e.g., after passing QC), payment method.
5. Delivery schedule: Production timeline, shipping date, and penalties for late delivery.
6. IP protection (NNN): Non-disclosure, non-use, non-circumvention with specific penalties.
7. Warranty and returns: Defect handling, replacement/refund terms, warranty period.
8. Dispute resolution: Chinese arbitration (CIETAC) or Chinese court jurisdiction.

Payment Terms Best Practices

Common Contract Pitfalls

• English-only contracts: Chinese courts rely on the Chinese version. An English-only contract is difficult to enforce in China.
• No specific penalties: "Seller will compensate for damages" is too vague. Use specific dollar amounts per defective unit or per day of delay.
• Foreign jurisdiction: Specifying US/UK courts sounds good but is nearly unenforceable in China. Use Chinese arbitration (CIETAC).
• No reference to approved sample: Without tying the contract to a specific physical sample, "quality" becomes subjective.
• Missing IP clauses: An NDA alone doesn't prevent the factory from using your design. Include full NNN terms.

When You Need a Lawyer

For orders under $10K, a well-structured purchase order with clear terms is usually sufficient. For orders over $20K, or any order involving custom tooling, proprietary designs, or new product development, invest in a China-law attorney to draft or review your contract. Firms like Harris Bricken (China Law Blog) and Dezan Shira specialize in China manufacturing agreements. Budget $1,500–$5,000 for a solid contract.