Five useful things to include in your China sales contract

There are the obvious things you want to include in your sales contract with your China supplier including negotiated cost of item, delivery date, procedures to return defective items, right of cancellation, terms of cancellation, non-compete clauses etc. etc. However there are five things you can include in your OEM Agreement or contract which may prove helpful in getting an order out of China that you are pleased with.

1.)
Product specs as appendices. Don’t just include a brief description of your item but attaché your production spec sheets as an appendix . You should also attaché your QC checklist as an appendix. In short, all the information and design that you have given your vendor during product development should be attached in some way, shape or form to the sales contract.

2.)
Right to inspect goods at any time. I have seen many vendors who want you to come for an inspection when it is convenient for them and not for you. You should make it clear to your vendor that you have the right to inspect your order at any time and you plan to do so even if you don’t intend to conduct the inspection yourself. What this clause may do is to serve to keep the vendor on their toes as far as production dates go. The last thing you want to do with a vendor is give them an order and leave them with the feeling that all they have to do is make the order and ship. So address a potential inspection in your SC.

3.)
Right to request a stoppage of production if an inspection reveals widespread defects. You should have the right to tell the vendor to stop production if you feel your product is not being made according to spec. Once again the purpose is to send a message to the vendor that you take the order seriously and are not just going to give them a PO and sit back and wait for the ship date.

4.)
Return of buyers IP in the event of breach of contract. In the event that you cancel the order, you should ask that your vendor return your IP. I had a situation a couple of years ago where a customer of mine had given some designs to a factory they thought they were going to go ahead with. They subsequently canceled the order because of widespread non-compliance and then they had to argue with the vendor getting their designs back because they did not have anything in their OEM contract about this. The ended up just marching into the vendor’s office and removing the designs as their vendor stood there browbeating them . The moral of the story is don’t give your vendor new designs unless you are 100% sure you are going ahead with the vendor on a second or third order.

5.)
Agreed on raw materials clause – If your products have certain requirements e.g. toy or food items you should specifty these in the product specs but also specify them in a raw materials clause. For example, if you want your vendor to use only environmentally friendly fabric, you would want them to spell it out here. And add that all samples pulled from early production will be subject to required testing.

http://www.theeastasiaco.com

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