Doing Business in China For Dummies®

Following Tips for Supply Agreements

The number of large multinationals that don’t do a great job with their supply agreements is surprising. You do have to make your agreements as concise and clear as possible (if you hand potential suppliers documents as thick as the Bible, no one will sign them); however, you shouldn’t skimp on some areas. The tips that follow don’t make for a complete contract in and of themselves. Rather, these are areas where companies often mess up their contracts.

Avoid using the supplier’s contract, which is likely one-sided and full of potential pitfalls. Make sure you negotiate the final contract.

Product description

Closely and carefully describe the product you want, referring to any samples you’ve already approved (hopefully by mutually signing and dating them).

If you don’t yet have approved samples, state that the product must be exactly like (or similar to, depending on the product) the samples that you’re going to approve. In that case, write the sample approval process into the contract. Also, make sure you describe the quality of the product. If you have detailed prints and designs, reference them in the contract. The more specific, the better protected you’ll be.

Delivery date

You want to specify the date on which the products should be delivered. Putting in a penalty for late delivery — for example, $100 per day late — is often a good idea. ...