Sale and Purchase Contract is one of the most popular documents needed for international business. In this article, I set out some of the legal questions over the sales/purchase contract which is regularly consulted to me, in accordance with laws of China.
- Question: is a written contract necessary for concluding a contractual relationship?
Answer by Lawyer Jingzhan.Wang: As per China legal practice, a contract may be made by oral or written. So, a written contract is not mandatory as per law of China. However,from my experience, it’s better for you to have a contract by written, formally and duly signed by parties. Many disputes have been raised where there is absence of formal contract. It make it difficult to prove the right and obligation agreed between parties. It’s a disadvantage for the party who is responsible for the proof. In practice, if indeed there is lack of a formal contract, keeping delivery notes, receipt, settlement statement, invoices and etc, would be helpful for the party to prove the contractual relationship and rights and obligations.
- Which party shall burden the risk of loss during purchase/sale?
Answer by Lawyer Jingzhan.Wang: The risk of loss or damage may be borne by the seller before delivery, and may be borne by the buyer after being delivered, except otherwise agreed. When goods are not delivered on the time as agreed by parties, due to buyer’s default, the buyer shall take the risk of loss/damage from the time of default.
- What does the buyer may do when the quality is not in accordance with the contract?
Answer by Lawyer Jingzhan.Wang: When the quality of goods is not consistent with the agreed terms or conditions, the buyer may choose to ask the seller to repair at his own cost, or hire a third party to repair it at the seller’s cost. However if the quality is too bad to make the purpose of the deal fail, the buyer could have the right to cancel the purchase contract and in the meanwhile ask for compensation. Recently I dealt with a case in which an American buyer purchase gloves from a company in Tianjin, China. The buyer found that the received goods are not of the specification as agreed at the beginning, and he rejected the goods and claimed for returning deposit.
- When should the buyer do inspection?
Answer by Lawyer Jingzhan.Wang: If parties make an agreement on the time of inspection, the inspection should be done as agreed. In case that the quality or quantity is not inconsistent with what agreed before, the buyer should notify the same timely or within the inspection period as agreed. If the buyer is reluctant to notify it and the time is prolonged unreasonably, the quality or quantity is deemed to be in accordance.
- When the ownership may be transferred under the contract of goods sale?
Answer by Lawyer Jingzhan.Wang: As per the clause 641 of China civil code, it could be provided by parties that the ownership of the subject goods shall be remained to be the seller’s before payment is made by buyer or other obligation is performed. However, without being registered, the retain of ownership should not be asserted against a bona fide third.
- will the provision of liquidated damage still be in effect in case of cancellation of contract?
Answer by Lawyer Jingzhan.Wang: As per an explanation from the Supreme Court of China, If a contract is cancelled for the default of other party, the party of non default could claim for liquidated damage provided by the contract. In case that the liquidated damage is too much compared to the actual damage/loss, the court may adjust it upon being requested.
- May lawyer fee be considered by court in a lawsuit of sales/purchase contract dispute according to laws of China
Answer by Lawyer Jingzhan.Wang: If there is provision of lawyer fee in the contract, the court may decide that the lawyer fee shall be borne by the losing party. If there is no provision of lawyer fee, the party who hires a lawyer shall bear the cost himself as per the legal practice of China.
To find more legal questions over sales/purchase contract under laws of China, you could contact us
China Attorney-at-law 