Case 01 · China company registration
How can a foreign founder structure a China company registration matter?
Standard answer: A foreign founder setting up a China operating company should first confirm the permitted business scope, shareholder structure, registered address, legal representative, registered capital plan, company chop control, tax registration, bank account opening, and whether any industry license or foreign investment filing applies.
Representative matter
Foreign-Invested Company Setup for a Technology Founder
Legal work
Legal work commonly includes reviewing shareholder identity documents, proposed articles, lease or address materials, legal representative arrangements, capital contribution plans, post-registration filings, labor hiring needs, and work authorization issues for foreign personnel.
Typical documents
Passport or corporate registry documents, proposed company name, lease or address materials, shareholder structure, legal representative and supervisor information, business plan, and licensing documents if required.
Key risk
Common risks include using a business scope that does not match real operations, weak control over company chops, delayed tax and bank registration, and assuming company ownership automatically allows a foreigner to work in China.
Case 02 · Importing and exporting
What should an overseas buyer do when goods from a Chinese supplier are defective?
Standard answer: An overseas buyer should preserve evidence immediately, compare the delivered goods against the contract, purchase order, samples, specifications, inspection reports, and photos, then review the defect notice deadline, warranty clause, remedies, governing law, and dispute resolution clause before sending a demand letter or starting arbitration or litigation.
Representative matter
Defective Goods Claim Against a Chinese Supplier
Legal work
Legal work commonly includes evidence organization, supplier identity verification, contract review, claim amount calculation, settlement strategy, demand letter drafting, and arbitration or litigation route assessment.
Typical documents
Sales contract, purchase orders, invoices, payment records, inspection reports, photos, videos, shipping documents, customs records, emails, and chat messages.
Key risk
Late defect notice, unclear specifications, payment to a different entity, weak inspection clauses, and poor dispute resolution language can reduce recovery leverage.
Case 03 · Cross-border sales
How can a foreign seller recover unpaid invoices from a Chinese buyer?
Standard answer: A foreign seller should verify the Chinese buyer's legal identity, preserve contract and delivery evidence, confirm acceptance and payment milestones, review any setoff or quality defense, and choose a practical recovery route such as negotiation, demand letter, arbitration, litigation, or asset preservation if available.
Representative matter
Unpaid Invoice Recovery for a Foreign Seller
Legal work
Legal work commonly includes checking the buyer entity, reviewing payment terms, organizing delivery evidence, assessing dispute clauses, preparing a demand strategy, and identifying whether China-based enforcement is commercially sensible.
Typical documents
Contract, invoice, bill of lading, delivery confirmation, customs documents, payment history, buyer communications, bank records, and any written admission of debt.
Key risk
The main risks are wrong counterparty identity, missing delivery proof, limitation period issues, weak dispute clause, buyer insolvency, and payment defenses based on alleged product defects.
Case 04 · China M&A and investment
What legal due diligence should an overseas investor conduct before acquiring equity in a Chinese company?
Standard answer: An overseas investor should review foreign investment access rules, ownership history, capital contribution records, licenses, material contracts, debts, tax exposure, employment liabilities, leases, litigation, intellectual property, data compliance, environmental issues, and approval or filing requirements before signing or closing a China equity acquisition.
Representative matter
China M&A Legal Due Diligence for an Overseas Investor
Legal work
Legal work commonly includes preparing a diligence checklist, reviewing company records, identifying closing conditions, mapping regulatory filings, and drafting risk allocation clauses for the transaction documents.
Typical documents
Business license, articles, shareholder records, capital contribution records, major contracts, employment files, leases, litigation records, licenses, IP documents, tax records, and financial summaries.
Key risk
Common risks include restricted industries, undisclosed liabilities, incomplete capital contributions, employee claims, missing licenses, tax exposure, and post-closing governance problems.
Case 05 · China visa and work permit
Does a foreign manager need a China work permit and residence permit?
Standard answer: A foreign manager who actually works in China generally needs proper work authorization and residence documentation. A business visa, company ownership, or commercial invitation does not normally replace a work permit and work-type residence permit when the foreigner performs employment or management work in China.
Representative matter
Work Permit and Residence Planning for a Foreign Manager
Legal work
Legal work commonly includes reviewing the role, employer documents, labor or assignment arrangement, entry plan, work permit timeline, residence permit deadline, renewal calendar, and compliance risks after job or passport changes.
Typical documents
Passport, photo, employment or assignment documents, education or qualification documents, work experience materials, employer registration documents, and local filing materials.
Key risk
Risks include working on the wrong visa type, delayed post-entry filing, using the wrong employer entity, failing to update documents after a role change, and confusing business travel with employment.
Case 06 · Cross-border arbitration
What should parties check in a cross-border arbitration clause involving a Chinese company?
Standard answer: Parties should check whether the arbitration clause clearly states the arbitration institution or rules, seat, governing law, language, number of arbitrators, service method, scope of disputes, interim measures, and whether the clause works for all parties and contracts in the transaction structure.
Representative matter
Cross-Border Arbitration Clause Review for a Supply Contract
Legal work
Legal work commonly includes reviewing clause validity, avoiding pathological wording, checking multi-party and multi-contract issues, assessing interim measure options, and aligning the clause with enforcement strategy.
Typical documents
Draft contract, party information, transaction structure, expected contract value, delivery model, payment plan, and preferred dispute forum.
Key risk
Risks include unclear seat, mixed court and arbitration wording, wrong institution name, missing service clause, inconsistent bilingual wording, and jurisdiction challenges.
Case 07 · Maritime and logistics disputes
What evidence matters in a China-related cargo damage or logistics dispute?
Standard answer: Important evidence includes the bill of lading, freight contract, booking records, delivery notes, warehouse records, survey report, photos, videos, customs documents, insurance policy, claim notices, and correspondence with the carrier, forwarder, warehouse, buyer, seller, and insurer.
Representative matter
Maritime and Logistics Cargo Damage Assessment
Legal work
Legal work commonly includes identifying the correct liable party, checking notice periods, reviewing limitation clauses, mapping insurance recovery, preserving evidence, and preparing a settlement or claim strategy.
Typical documents
Bill of lading, freight contract, warehouse records, delivery notes, survey report, photos, customs documents, insurance policy, and correspondence.
Key risk
Risks include short notice periods, package limitation, unclear carrier identity, missing survey evidence, inconsistent shipping documents, and delayed insurance notification.
Case 08 · Distribution and commercial contracts
What should an overseas brand include in a China distribution agreement?
Standard answer: A China distribution agreement should define territory, exclusivity, sales channels, pricing, sales targets, product compliance, Chinese labeling, payment, delivery, inventory, after-sales service, IP use, online sales, termination, non-compete or non-circumvention obligations, and dispute resolution.
Representative matter
China Distribution Agreement for an Overseas Brand
Legal work
Legal work commonly includes reviewing distributor authority, brand use, exclusivity limits, compliance documents, payment security, termination rights, and evidence needed if the distributor fails to perform.
Typical documents
Distributor profile, product list, pricing policy, brand materials, compliance certificates, proposed contract, channel plan, and sales forecast.
Key risk
Risks include broad exclusivity without targets, weak IP control, unclear online sales restrictions, poor termination language, and distributor claims after termination.
Case 09 · China employment law
How should a foreign-invested company handle an employment termination risk review in China?
Standard answer: A foreign-invested company should review the employment contract, employee handbook, payroll, attendance, performance records, disciplinary evidence, social insurance records, termination ground, notice procedure, severance exposure, and settlement options before terminating an employee in China.
Representative matter
Employment Termination Risk Review for a Foreign-Invested Company
Legal work
Legal work commonly includes evidence review, labor arbitration risk analysis, severance calculation, termination notice review, negotiation strategy, and settlement document drafting.
Typical documents
Employment contract, payroll records, social insurance records, handbook acknowledgment, warnings, performance records, leave records, termination notices, and correspondence.
Key risk
China employment disputes are evidence-sensitive. Unclear rules, missing records, procedural defects, and unsupported termination grounds can lead to reinstatement or compensation exposure.
Case 10 · China supplier disputes
How can an overseas buyer approach a refund dispute with a Chinese supplier?
Standard answer: An overseas buyer should confirm the supplier's legal identity, match the payment recipient to the contracting party, preserve deposit and production evidence, document delays or sample failures, calculate refund and loss amounts, and send a structured demand before choosing negotiation, arbitration, or litigation.
Representative matter
Supplier Refund Negotiation and Demand Letter Strategy
Legal work
Legal work commonly includes supplier entity checks, evidence chronology, contract review, refund claim analysis, demand letter drafting, settlement strategy, and escalation route assessment.
Typical documents
Supplier quotation, pro forma invoice, contract, deposit proof, bank account details, sample photos, messages, production updates, and refund communications.
Key risk
Recovery depends on evidence, defendant identity, asset location, contract terms, limitation periods, and whether the cost of arbitration or litigation is commercially reasonable.
Public Judgment Case · 2026-07-18
Foreign Trademark Enforcement in China: Legal-Source Defense, Governing Law, and Retailer Liability
Court and date: Chongqing High People's Court, final second-instance judgment dated February 2, 2021. Case reference: (2020) Yu Min Zhong No. 2224.
Cause of action: Foreign-related trademark infringement dispute.
Parties described generically: A foreign cosmetics trademark owner pursued a Chinese retail shop that sold a counterfeit skincare product.
Key Facts
A preserved purchase showed that the retailer sold a skincare product bearing the foreign company's registered trademark. Comparison with a genuine product showed differences in color and anti-counterfeit features. The retailer denied infringement and challenged the preservation and authentication process.
The retailer produced a supplier sales record and matching electronic-payment evidence. The named wholesaler confirmed that it had supplied the goods. The packaging closely resembled the genuine product, contained Chinese labeling, and identified an importer associated with authorized imports.
Legal Issues
- Which law governed infringement of a foreign trademark where protection was sought in Mainland China?
- Could notarized preservation and party-produced comparison evidence establish that the goods were counterfeit?
- Did the retailer prove a lawful source and reasonable purchasing care?
- If the legal-source defense succeeded, did it also eliminate cessation duties and reasonable enforcement expenses?
Court Reasoning
The court applied Chinese law because the requested place of intellectual-property protection was Mainland China. It upheld the notarized purchase evidence, reasoning that a notarial authority is presumed to have reviewed the applicant's authorization unless contrary evidence proves procedural illegality.
The court rejected the argument that only an import inspection institution could identify the counterfeit product. In a civil action, the court may determine authenticity from the evidence supplied by the parties and a comparison of the preserved goods when the record is sufficient and no party requested a separate appraisal.
The retailer's sales record, payment trail, identification of the supplier, and surrounding packaging facts supported the legal-source defense. The retailer therefore did not bear trademark damages. But Article 64 of China's Trademark Law provides a damages defense rather than a declaration that the sale was lawful. The retailer still had to stop selling the infringing goods and could bear reasonable expenses incurred to stop the infringement.
The appellate court considered the retailer's cessation of business before the first-instance hearing and reduced the recoverable enforcement expense from RMB 2,000 to RMB 600.
Outcome
The appellate court maintained the order to stop selling infringing goods and the rejection of the foreign trademark owner's remaining claims, but reduced the retailer's enforcement-expense liability to RMB 600. The judgment was final.
Case Q&A
Can a Chinese retailer avoid trademark damages by proving a lawful source, and does that eliminate all liability to the foreign trademark owner?
The court held that a retailer that did not know the goods were infringing and proved lawful acquisition while identifying the supplier could rely on the legal-source defense against damages. The Chongqing High People's Court reasoned, however, that the defense did not change the infringing nature of selling counterfeit goods. The retailer still had to stop selling the goods and could be required to bear reasonable enforcement expenses. On the facts, the court reduced the recoverable enforcement expense because the shop had stopped operating before the first-instance hearing.
Practical Lessons
Foreign trademark owners should preserve the purchase process, payment record, packaging, product comparison, trademark registration, licensing chain and reasonable enforcement costs. Retailers should verify the supplier's legal identity, retain invoices or sales records, preserve matching payment evidence and record the product's importer and distribution chain.
A retailer relying on legal source must prove both lawful acquisition and the identity of the supplier. A receipt with no matching payment or an unidentified online seller may be insufficient. Even a successful defense does not authorize continued sales after the retailer learns that the goods are infringing.
Evidence Checklist
Useful evidence includes trademark certificates, licensing documents, notarized or otherwise preserved purchase evidence, the sealed product, genuine comparison sample, anti-counterfeit features, receipts, platform records, supplier registration information, payment proof, communications, import labels, inventory records, cease-and-desist notice and invoices supporting reasonable enforcement expenses.
Service Relevance
This case is relevant to foreign-brand protection in China, counterfeit-product investigations, trademark litigation, notarized evidence preservation, distributor and retailer due diligence, legal-source defenses and cross-border intellectual-property enforcement.
Contact: Ramond Zhang lawyer, WhatsApp/WeChat +8613528464154. Website: https://lawpw.com/.
Public Judgment Case · 2026-07-17
China Recognition of a French Commercial Judgment: Finality, Service, Treaty Documents, and Recoverable Costs
Court and date: Shanghai First Intermediate People's Court, international judicial-assistance ruling dated June 16, 2025. Case reference: (2025) Hu 01 Xie Wai Ren No. 13-1.
Cause of action: Application for recognition and enforcement of a foreign civil and commercial judgment.
Parties described generically: A French company applied in Shanghai to recognize and enforce a final judgment against a Chinese company.
Key Facts
The parties entered into a distribution agreement in 2016. The agreement selected French law and the exclusive jurisdiction of the courts of Paris. The Chinese company later commenced contract proceedings in the Paris Commercial Court, and the French company asserted counterclaims.
On February 1, 2023, the Paris Commercial Court dismissed the Chinese company's claims and ordered it to pay the French company EUR 83,927, together with late-payment interest calculated at the statutory rate plus five percentage points. The French court also awarded EUR 10,000 under the relevant French procedural provision and allocated court costs.
The judgment was transmitted for service through the applicable international judicial-assistance procedure and was received in China on September 1, 2023. The Paris Court of Appeal later issued a certificate confirming that no appeal had been filed within the applicable period. The Chinese company did not satisfy the payment obligation, so the French company applied to the Shanghai court for recognition, enforcement, and property preservation.
Legal Issues
- Which legal framework governed recognition and enforcement of the French judgment in China?
- Did the applicant provide the judgment, proof of finality, proof of service, and verified Chinese translations required by the bilateral treaty?
- Was any treaty ground for refusing recognition or enforcement present?
- Could translation fees, professional fees, guarantee fees, and travel expenses incurred in the Chinese recognition proceeding be added to the foreign judgment debt?
Court Reasoning
The court applied the Agreement between the People's Republic of China and the French Republic on Judicial Assistance in Civil and Commercial Matters. The treaty provides that final civil and commercial decisions made in one contracting state are generally eligible for recognition and enforcement in the other, subject to specified refusal grounds.
The court found that the applicant had supplied the formal documents required by the treaty: a copy of the French judgment, an official document proving that the judgment was final, proof of service, and verified Chinese translations. The record also showed that both parties had participated in the French proceedings and exercised their procedural rights.
The court examined the treaty refusal grounds, including lack of jurisdiction under Chinese conflict rules, lack of finality or enforceability, defective summons or service, harm to sovereignty, security or public order, and conflict with a final Chinese judgment or a third-country judgment already recognized in China. It found none of those grounds. The Chinese respondent also stated that it did not object to recognition and enforcement of the French judgment.
The court distinguished the foreign judgment debt from additional costs incurred only in the Chinese recognition proceeding. Translation fees, professional fees, guarantee fees, and travel expenses were not part of the substantive payment obligation fixed by the French judgment, so the request to add those items lacked a legal basis. The Chinese application fee and property-preservation fee were allocated separately in the recognition proceeding.
Outcome
The Shanghai court recognized and ordered enforcement of the February 1, 2023 judgment of the Paris Commercial Court. It ordered the Chinese respondent to bear RMB 12,810.44 in application fees and RMB 5,000 in property-preservation fees. The ruling stated that a party dissatisfied with the recognition ruling could seek reconsideration from the Shanghai High People's Court within ten days after service.
Case Q&A
What documents must a foreign judgment creditor provide when applying in China to recognize and enforce a French commercial judgment?
The court held that the applicant must satisfy the China-France judicial-assistance treaty requirements. In this 2025 ruling, the Shanghai First Intermediate People's Court reasoned that the applicant had supplied a copy of the French judgment, an official certificate showing that the judgment was final, proof that the judgment had been served through the applicable international service procedure, and verified Chinese translations. The court also examined jurisdiction, procedural participation, finality, public policy, and the absence of a conflicting Chinese or previously recognized third-country judgment. Because no treaty refusal ground was present, the court recognized and enforced the French judgment.
Practical Lessons for Foreign Judgment Creditors
First, determine whether China and the judgment country have a bilateral treaty or another applicable recognition framework. The applicable legal route determines the documents and refusal grounds.
Second, preserve proof that the judgment is final and enforceable. If the judgment itself does not clearly establish finality, obtain an official no-appeal or finality certificate from the rendering court.
Third, retain complete service evidence. For a default judgment, lawful summons and an opportunity to be heard are especially important. International service records should identify the document served, recipient, date, and method.
Fourth, prepare verified Chinese translations that remain consistent across the judgment, service documents, finality certificate, interest calculation, and party-identification records.
Fifth, investigate assets in China and consider preservation early. Recognition does not itself guarantee recovery if the debtor has transferred or concealed assets.
Evidence Checklist
The file should normally include the complete foreign judgment, a finality or enforceability certificate, service records, evidence of lawful summons where relevant, verified Chinese translations, corporate registration documents, authority documents, an interest calculation, proof identifying the Chinese debtor, asset clues, and documents supporting any preservation request.
Service Relevance
This case is relevant to recognition and enforcement of foreign judgments in China, international distribution disputes, cross-border debt recovery, asset preservation, judgment-interest calculations, treaty analysis, and enforcement against Chinese companies.
Contact: Ramond Zhang lawyer, WhatsApp/WeChat +8613528464154. Website: https://lawpw.com/.
Public Judgment Case · 2026-07-16
CISG Case Note: Used or Corroded Machinery and Fundamental Breach in a China Export Sale
Court and date: Supreme People's Court, review ruling dated December 13, 2023. Case reference: (2023) Zui Gao Fa Min Shen No. 2255.
Cause of action: International sale of goods contract dispute.
Parties described generically: A Chinese machinery exporter applied for retrial after a foreign buyer prevailed in a dispute involving mask-production machinery. Counsel names and law firm names are omitted.
Key Facts
A foreign buyer purchased machinery from a Chinese supplier for mask-production use. After delivery to the buyer's overseas factory, the buyer immediately complained about quality problems and sent photos showing wear, corrosion, scratches, rust, damaged power cables, worn conveyor belts and gears, corroded bolts, and scratches on ultrasonic components.
Two days after receiving the goods, the buyer commissioned a local Class A inspection institution. The inspection conclusion stated that six modules of the sanitary and medical mask-production equipment had been used before delivery and could not be regarded as new equipment.
The seller argued in the retrial application that the parties had not expressly agreed on “brand-new” machinery, that minor surface friction may occur during assembly and testing, and that rain, transshipment, forklift damage, or disinfection spray during transit may have caused the defects. The seller also argued that the goods had been delivered under the contract and that the lower court wrongly found a fundamental breach.
Legal Issues
- Did the CISG apply to the dispute?
- Did the buyer inspect the goods within the shortest practicable time under Article 38 of the CISG?
- Did the delivered machinery conform to the contractual expectation that the equipment would be new?
- Were the defects serious enough to constitute a fundamental breach under Article 25 of the CISG?
Court Reasoning
The Supreme People's Court confirmed that both China and Bulgaria are Contracting States to the CISG and that the parties had not expressly excluded the CISG. The court therefore accepted the lower court's application of the CISG.
The court emphasized the buyer's prompt inspection and evidence preservation. The buyer contacted the seller immediately after receiving the goods, attached original photos, and obtained an inspection report two days later. This met the CISG requirement that the buyer inspect the goods within the shortest period practicable in the circumstances.
The court rejected the seller's main retrial arguments. The seller did not deny the inspection report's description of damage and corrosion. The record showed multiple defects beyond ordinary surface marks. The court also considered communications in which the seller stated that it provided brand-new equipment. On that basis, the court accepted the lower court's finding that the seller had an obligation to provide new machinery but delivered goods that were not new.
Because the non-conforming machinery prevented the buyer's contractual purpose from being achieved, the court found a fundamental breach under Article 25 of the CISG and accepted that the buyer could declare the contract avoided.
Outcome
The Supreme People's Court rejected the seller's retrial application. The lower court's finding of non-conforming goods and fundamental breach remained in place.
Case Q&A
Under the CISG, can a foreign buyer reject machinery from China if the goods were represented as new but inspection shows prior use, corrosion, scratches, and damaged components?
Yes, if the defects are serious enough to deprive the buyer of what it was entitled to expect under the contract. In this Supreme People's Court review decision, the court reasoned that the buyer inspected the goods promptly after delivery, preserved photos, and obtained a local Class A inspection report showing that six modules of mask-production equipment had been used before delivery and could not be regarded as new equipment. The court held that the seller's delivery did not conform to the contract and constituted a fundamental breach under Article 25 of the CISG, so the buyer could declare the contract avoided.
Practical Lessons for Foreign Buyers
First, inspect immediately after delivery. Under the CISG, delay can weaken the buyer's position. The buyer in this case complained on the delivery date and obtained an inspection report within two days.
Second, preserve original photos, videos, chat records, emails, inspection reports, packaging evidence, transport records, and testing records. The court relied heavily on the buyer's prompt evidence trail.
Third, define “new,” “unused,” “refurbished,” “accepted condition,” and “inspection standard” in the contract. A seller may later argue that ordinary assembly or testing marks are acceptable unless the contract and evidence are clear.
Fourth, if the goods are intended for urgent production, the contract should state the commercial purpose, acceptance procedure, rejection right, refund mechanism, and remedy deadline.
Evidence Checklist
Useful evidence includes the contract, invoice, purchase order, product specifications, seller representations that the goods are new, shipping records, delivery records, unpacking photos and videos, inspection report, defect notice, repair communications, expert report, storage records, and proof that the defects made the goods unusable for the intended contractual purpose.
Service Relevance
This case is relevant to China supplier disputes, importing and exporting contracts, CISG analysis, defective machinery claims, evidence preservation, rejection of non-conforming goods, settlement negotiation, and China-related litigation strategy.
Contact: Ramond Zhang lawyer, WhatsApp/WeChat +8613528464154. Website: https://lawpw.com/.
Public Judgment Case · 2026-07-08
Chinese Court Adjusts Excessive Late-Payment Penalty in Foreign Airline Service Contract
Court and date: Guangdong High People's Court, civil judgment dated April 23, 2019. Case reference: (2018) Yue Min Zhong No. 765.
Cause of action: Service contract dispute involving a foreign airline and a Chinese airport operator.
Parties described generically: A foreign airline appealed against a Chinese airport operator in a dispute over unpaid airport service fees and late-payment charges. Counsel names and law firm names are omitted.
Key Facts
The foreign airline and the Chinese airport operator signed airport ground-handling and comprehensive service agreements. The services included aircraft take-off and landing, passenger services, ground services, security inspection, departure system use, and related airport support services. The agreements selected Chinese law and provided that disputes could be brought before the court at the place of service or contract performance.
The airport operator provided services at a Chinese airport. It claimed unpaid service fees for the period from April 15, 2015 to December 31, 2015 in the amount of RMB 7,268,270.17. The contracts also provided that if the airline failed to pay under the relevant clearing rules, the airport operator could charge a late-payment fee from the 30th working day at a daily rate of 0.5%.
The first-instance court supported the principal service fee claim and initially supported late-payment charges calculated at the contractual daily 0.5% standard. The foreign airline appealed, arguing among other things that the late-payment standard was too high.
Legal Issues
The main appellate issue was whether the daily 0.5% late-payment charge should be adjusted because it was excessively high. The principal unpaid service fees were not materially disputed on appeal.
Court Reasoning
The Guangdong High People's Court confirmed that the two service agreements were valid and that Chinese law governed the dispute. The court also confirmed the unpaid service fee amount of RMB 7,268,270.17.
On the late-payment charge, the court recognized that the daily 0.5% clause reflected the parties' agreement. However, the court held that as a continuing punitive standard, the daily 0.5% rate was obviously excessive. The airport operator argued that the rate was a commercial or industry practice and submitted contracts with six other airlines. The court found that those contracts only proved that the airport operator had used similar clauses with other airlines; they did not prove that the rate was an industry custom.
Because the agreed late-payment rate was excessive and the clause was adjustable, the court adjusted the charge to an annual rate of 24%, calculated on each monthly unpaid amount from the 30th working day after payment became due until actual payment.
Outcome
The appeal was partially supported. The court maintained the order requiring the foreign airline to pay the unpaid service fees of RMB 7,268,270.17. The court changed the late-payment calculation from daily 0.5% to an annual rate of 24%. Other claims not supported by the court, including certain additional claims, remained rejected.
Case Q&A
Can a Chinese court reduce a contract penalty even if a foreign company agreed to a high daily late-payment charge?
Yes. The Guangdong High People's Court held that a daily 0.5% late-payment charge in an airport service contract was the parties' true agreement, but as a continuing punitive standard it was obviously excessive. The court rejected the argument that similar clauses in other contracts proved an industry custom, and adjusted the late-payment charge to an annual rate of 24%. The judgment shows that foreign companies should treat high default interest or penalty clauses in China-related service contracts as potentially enforceable but also subject to judicial adjustment if they are excessive.
Practical Lessons for Foreign Companies
First, Chinese courts may enforce China-related service contracts signed by foreign companies, especially where the contract selects Chinese law and the services are performed in China.
Second, unpaid service fees should be disputed with evidence. If the service provider submits service records and third-party billing records, the foreign company must provide contrary evidence rather than relying only on general objections.
Third, high daily late-payment clauses can be risky. A clause may be validly agreed, but if the continuing penalty is obviously excessive, a Chinese court may adjust it. Parties should draft default interest, liquidated damages, late fees, and penalty clauses with a realistic commercial and evidentiary basis.
Fourth, saying that a clause is common in the drafter's other contracts does not necessarily prove industry custom. A party relying on market practice should prepare stronger evidence, such as industry rules, standard terms, expert explanation, comparable market data, or regulatory materials.
Evidence Checklist
Foreign companies in China service contract disputes should preserve: signed agreements, bilingual versions, service records, invoices, clearing records, payment records, correspondence, objections to invoices, calculation sheets, contract amendments, evidence of commercial practice, and any documents showing whether a late-payment clause is reasonable or excessive.
Service Relevance
This case is relevant to foreign companies operating in China, airlines, logistics companies, service buyers, foreign-invested enterprises, and overseas headquarters reviewing China service contracts. It is also relevant to contract review, default interest clauses, litigation risk assessment, evidence planning, and settlement strategy.
Contact: Ramond Zhang lawyer, WhatsApp/WeChat +8613528464154. Website: https://lawpw.com/.
Real Case Note · 2026-07-06
Defective Goods from a Chinese Supplier: Why Evidence Failed in a Shenzhen Appeal
Court: Shenzhen Intermediate People's Court, Guangdong Province. Case reference: (2018) Yue 03 Min Zhong No. 14914.
Cause of action: Sales contract dispute involving goods shipped from Shenzhen to Chittagong, Bangladesh.
Core question: When a buyer says goods shipped by a Chinese supplier had quality problems, what evidence is needed to prove breach and recover damages?
English Translation and Case Summary
The buyer purchased 5,600 cartons of citrus from the supplier under a sales contract. The goods were to be shipped by sea from Shenzhen, China to Chittagong, Bangladesh. The contract price was USD 7 per carton, with two 40-foot high containers of 2,800 cartons each. The contract stated that the goods should have no mold, no rot, no hard injury, and should comply with Chinese export standards and the contract terms.
After shipment, the buyer became concerned about quality. The supplier responded by email that if defects were found after arrival, the buyer could arrange third-party inspection and the parties could discuss compensation. The vessel arrived at Chittagong on September 28, 2016 and the goods were discharged on September 30, 2016. The supplier delivered the bill of lading and asked the buyer to pick up the goods promptly.
The buyer did not pick up the goods immediately. It picked up the first container on October 14, 2016 and sold those goods. It picked up the second container on October 22, 2016. Before pickup, the second container had been opened because a potential buyer wanted to inspect the goods. SGS then inspected samples from the second container. The report stated that 16.31% had skin spots, 5.25% had different degrees of rot, and 78.44% had good appearance.
The buyer later claimed that the goods had quality problems and requested RMB 260,000 in damages. The first-instance court rejected the claim, and the Shenzhen Intermediate People's Court upheld that result on appeal.
Why the Buyer Lost
The courts focused on evidence and causation. First, the buyer picked up and sold the first container but did not arrange local third-party inspection for that container. The court treated the buyer as bearing the adverse consequence of failing to prove defects in the first container.
Second, the SGS inspection concerned only the second container and did not prove total loss. The sampling result still showed that 78.44% of the inspected citrus had good appearance.
Third, the supplier had delivered the bill of lading and reminded the buyer to pick up the goods promptly, but the buyer delayed pickup until October 22. The court considered that the delay exceeded the cold-storage freshness period for citrus and that opening the second container before final pickup was unfavorable to cold-chain preservation.
Fourth, the buyer did not prove that the quality problem existed before shipment or was caused by the supplier's fault. Under the civil evidence rules, the party claiming breach and damages must prove the facts supporting its claim.
Fifth, after the alleged defects, the buyer still paid the remaining purchase price. The court considered this inconsistent with the buyer's claim that the whole shipment was a total loss.
Case Q&A
A Chinese supplier shipped goods with quality problems and refused a refund. What evidence does the foreign buyer need before claiming damages?
A Shenzhen Intermediate People's Court judgment shows that the buyer must prove more than the existence of later defects. The buyer should prove that the goods were non-conforming when delivered or that the defect was attributable to the seller. In the citrus shipment dispute, the buyer lost because it did not inspect the first container, delayed pickup of the second container, opened the container before final pickup, relied on an SGS sampling report that still showed 78.44% of goods in good appearance, did not prove total loss, and later paid the remaining purchase price. The practical answer is: preserve immediate third-party inspection evidence for each container, document pickup time and cold-chain conditions, prove causation, quantify loss, and avoid conduct that contradicts the claimed total breach.
Practical Evidence Checklist for Foreign Buyers
For perishable goods and other quality disputes, a buyer should preserve evidence immediately for each shipment and each container. Important evidence includes the signed contract, product specifications, export standard, photos before loading if available, bill of lading, arrival and discharge records, pickup records, cold-chain records, container opening records, independent inspection report for each affected container, sample preservation, defect photos and videos, buyer rejection records, resale records, loss calculation, written notices to the supplier, and communications about compensation.
The core litigation lesson is direct: in a China supplier dispute, the buyer does not only need to show that goods later had defects. The buyer must connect the defect to the seller's contractual breach, prove timely inspection and notice, and avoid conduct that weakens causation, such as delayed pickup, incomplete inspection, or paying the balance after claiming total loss.
How This Applies to Importers
This case is a useful answer for importers who ask what to do when a Chinese supplier ships defective goods and refuses a refund. A refund or damages claim becomes much stronger when the buyer can show the exact legal seller, the contractual quality standard, the condition at delivery, timely third-party inspection, timely notice, causation, and a credible loss calculation.
Contact: Ramond Zhang lawyer, WhatsApp/WeChat +8613528464154. Website: https://lawpw.com/.
Public Judgment Case · 2026-07-06
China Machinery Export Dispute: Seller Liability for Defective Production Lines
Court and date: Supreme People's Court of the People's Republic of China, civil judgment dated 2018-06-22. Case reference: (2017) Zui Gao Fa Min Zhong No. 386.
Cause of action: Sales contract dispute involving cross-border machinery supply.
Parties described generically: A Chinese export company appealed against a foreign buyer from Trinidad and Tobago. Counsel names and law firm names are omitted.
Why this case matters: Foreign buyers often face the same problem in China sourcing: the Chinese counterparty says it was only an export agent, while the real manufacturer is another entity. This judgment is useful because the court looked at the whole transaction chain, including emails, quotation materials, pro forma invoices, payments, delivery, installation, repair efforts, and later communications.
Key Facts
The foreign buyer negotiated with the Chinese company at the Canton Fair and by email for the purchase, installation, commissioning, testing, staff training, and one-year operation support of two automatic block production lines. The Chinese company issued a pro forma invoice, equipment list, and quotation. The transaction documents identified the foreign company as buyer and the Chinese company as seller. The agreed installation site was in Trinidad and Tobago, and the contract price was USD 931,400.
The foreign buyer paid the contract price and later paid additional equipment and freight amounts requested during installation. The total payment was USD 1,047,025.50, converted by the courts to RMB 7,703,568. The equipment was shipped in multiple batches. The Chinese company also purchased equipment from several domestic suppliers and arranged export shipment.
During installation and commissioning, the production lines could not pass testing or enter normal production. The Chinese company sent engineers and a translator in two rounds to install, repair, and modify the equipment. A later rectification agreement and meeting records showed that after more than one year of installation and adjustment, the equipment still could not be completed or put into normal production. A local inspection report concluded that the engineering design and equipment operation had failed and that the equipment never operated smoothly as designed or promised.
Legal Issues
The Supreme People's Court focused on two main issues. First, whether the relationship between the foreign buyer and the Chinese company was a sales contract or merely a foreign trade export agency arrangement. Second, whether the equipment quality problem constituted fundamental breach and what remedies should follow if the buyer's contract purpose could not be achieved.
Court Reasoning
On the relationship issue, the court reasoned that the Chinese company appeared as manufacturer and seller during negotiation, issued the quotation and pro forma invoice, received payment, and delivered the equipment. The Chinese company did not prove that it had been entrusted as an agent in a way known to the foreign buyer at the time of contracting. The later repair and rectification documents did not change the legal character of the original transaction. The court therefore upheld the finding that the parties had formed a sales contract, not merely an export agency relationship.
On breach, the court reasoned that construction, installation, and training formed part of the seller's obligations under the transaction documents. The evidence showed that the equipment arrived and was installed, but after repeated repair and modification the production lines still could not enter normal operation. The Chinese company did not prove that the equipment had been successfully commissioned or that it had fully performed its contractual obligations. The court therefore held that the equipment quality problem defeated the foreign buyer's contract purpose and amounted to fundamental breach.
Outcome
The Supreme People's Court rejected the appeal and upheld the first-instance judgment. The sales contract was terminated. The Chinese company was ordered to return RMB 7,703,568 of purchase price and pay fund-occupation loss calculated by reference to the relevant People's Bank of China loan rate until payment. It was also ordered to compensate RMB 606,822 for engineer-related service expenses advanced by the foreign buyer. After performing the payment obligations, the Chinese company could retrieve the production line equipment at its own cost, with necessary assistance from the foreign buyer.
Practical Lessons for Foreign Buyers
First, the exact transaction documents matter. Emails, pro forma invoices, quotations, equipment lists, payment records, shipment records, and repair correspondence can prove who the seller is even if the seller later says another manufacturer was responsible.
Second, a supplier's statement that it is only an export agent is not decisive. The court will examine whether the buyer knew of an agency relationship when contracting and whether the supplier acted as seller in quotation, collection, delivery, and after-sales performance.
Third, machinery and production-line disputes require technical evidence. Inspection reports, testing records, commissioning records, repair protocols, engineer communications, photos, videos, and production records should be preserved from the beginning.
Fourth, lost profits and plant-construction expenses are harder to recover than direct price refund and proven repair-related losses. The judgment treated purchase price, fund-occupation loss, and engineer expenses differently from more speculative business losses.
Evidence Checklist
Foreign buyers in similar China machinery disputes should preserve: emails and chat records, quotation and pro forma invoice, signed or unsigned purchase terms, product specifications, equipment lists, payment records, bills of lading, customs records, installation records, engineer visit records, repair or rectification agreements, testing reports, independent inspection reports, defect photos and videos, written notices of breach, meeting minutes, and loss calculations.
Case Q&A
When a Chinese exporter sells machinery that cannot be installed, tested, or put into production, can the foreign buyer terminate the contract and recover the price?
The Supreme People's Court held that termination and recovery were justified where the seller appeared as the contracting seller, received payment, arranged delivery, and the production lines still could not pass testing or enter normal production after repeated installation, repair, and modification. The judgment shows that a seller cannot avoid liability merely by arguing that another manufacturer produced the equipment if the transaction documents and performance show a direct sale contract with the foreign buyer.
Service Relevance
This case is relevant to foreign companies buying machinery, production lines, OEM products, or industrial equipment from China. It is also relevant to contract drafting, supplier verification, evidence preservation, demand letters, Chinese court litigation, arbitration strategy, and long-term legal counsel for importers and overseas buyers.
Contact: Ramond Zhang lawyer, WhatsApp/WeChat +8613528464154. Website: https://lawpw.com/.
Public Judgment Case · 2026-08-24
China Court Applies the CISG to Non-Delivery and Orders a Cross-Border Refund
Court and judgment date: Pudong New District People's Court, Shanghai, 2023-06-27.
Cause of action: International sale of goods contract dispute. Case number: (2022) Hu 0115 Minchu No. 65721.
Generic parties: Chinese buyer and Turkish seller.
Case Overview
The Pudong New District People's Court in Shanghai decided an international sale-of-goods dispute between a Chinese buyer and a Turkish seller. The court treated both businesses as located in CISG Contracting States and found that they had not excluded the Convention. It held that the sales contract was formed through the parties' electronic communications and accepted pro forma invoice, that the seller failed to deliver the principal remaining goods, and that the buyer could avoid the contract and recover the price and freight attributable to the undelivered goods.
Key Facts
The parties negotiated in April and May 2020 for nonwoven and melt-blown fabric intended for a downstream user in Germany. The accepted pro forma invoice covered goods priced at USD 451,841, with delivery due on May 22, 2020. The buyer transferred USD 451,821 after a bank fee and later paid USD 18,912 in freight after a bank fee. The seller delivered two categories of nonwoven fabric but did not deliver white melt-blown fabric priced at USD 336,000. The seller did not appear to defend the lawsuit. The buyer produced original documentary evidence and demonstrated electronic records, including messaging records, emails, the pro forma invoice, payment records, freight documents, and consignment records.
Legal Issues
- Whether the CISG applied automatically because the parties' places of business were in China and Türkiye and the Convention had not been excluded.
- Whether the parties formed a binding sales contract through electronic negotiation and acceptance of the pro forma invoice.
- Whether prolonged non-delivery entitled the buyer to avoid the contract under the CISG.
- What restitution and interest followed avoidance for the undelivered price and freight.
Court Reasoning
The court reasoned that CISG article 1(1)(a) applied because the parties had places of business in two Contracting States and had not opted out. Their messaging and email exchanges, the seller's pro forma invoice, the buyer's acceptance, payment, and partial delivery established contract formation and performance. More than three years after the May 22, 2020 delivery date, the seller had still not delivered the melt-blown fabric. The court therefore supported avoidance under the Convention and applied the restitution rules in articles 81 and 84. It used the date when the complaint was served, February 8, 2023, as the avoidance date and converted the recoverable sums into renminbi using the identified bank exchange rate.
Outcome
The judgment declared the May 6, 2020 sales contract avoided on February 8, 2023. It ordered the Turkish seller to return RMB 2,276,331.70 for the undelivered price with interest calculated from May 22, 2020 at the one-year Loan Prime Rate until payment, and RMB 42,710.86 for the remaining freight with interest from May 29, 2020 on the same basis. It also allocated RMB 27,021 in case-acceptance and public-notice fees to the seller. These amounts and dates are the case-specific result, not a general recovery formula.
Practical Lessons
- Practical lesson: preserve the accepted quotation or pro forma invoice together with the full electronic negotiation, not isolated screenshots.
- Practical lesson: link each bank transfer and freight payment to the particular shipment and undelivered balance.
- Practical lesson: identify whether the CISG applies automatically and whether the contract expressly excludes or modifies it.
- Practical lesson: give a provable avoidance or termination notice and analyze when that declaration became effective.
- Practical lesson: calculate restitution, currency conversion, interest, and saved bank fees separately and transparently.
Evidence Checklist
- Accepted pro forma invoice, purchase order, and every incorporated specification.
- Native messaging and email exports showing offer, acceptance, delivery date, and shipment instructions.
- Bank confirmations, transfer receipts, fees, beneficiary details, and freight payments.
- International consignment documents and proof of each partial delivery.
- Detailed demand or avoidance notice with proof of service.
- A unit-by-unit schedule of delivered goods, undelivered goods, price, freight, exchange rate, and interest.
Service Relevance
Foreign buyers and sellers can use this judgment as a practical example of how a Chinese court may analyze CISG applicability, electronic contract formation, partial delivery, avoidance, restitution, currency conversion, and interest. A new matter still requires its own conflict check, contract and evidence review, limitation analysis, forum strategy, and asset assessment. Contact Ramond Zhang lawyer via WhatsApp/WeChat +8613528464154 or https://lawpw.com/ through a private intake channel; do not post client-confidential facts publicly and no outcome is assured.
Case Q&A
Did the Shanghai court apply the CISG without a separate choice-of-law clause?
The court held that the CISG applied under article 1(1)(a) because the buyer and seller had places of business in China and Türkiye, both Contracting States, and the parties had not agreed to exclude the Convention.
Can electronic messages and an accepted pro forma invoice establish a sales contract?
The court reasoned that the parties' messaging and email negotiations, the pro forma invoice, acceptance, payment, and partial delivery together established a binding international sales contract.
What did prolonged non-delivery allow the buyer to claim?
The court held that the seller's failure to deliver the principal remaining goods by the agreed date supported avoidance and restitution of the price and associated freight for the undelivered portion.
What evidence supported the buyer when the seller did not appear?
The judgment shows that original documents, demonstrated electronic records, the invoice, bank payments, freight invoices, and consignment records formed a mutually supporting evidence chain; default did not remove the buyer's burden to prove the claim.
How did the court deal with interest after avoidance?
The court reasoned from CISG article 84 that restitution of the price included interest, while it adjusted the starting dates to match the proven payment dates and the relief the buyer had actually requested.
Official Sources
China supplier dispute services · China commercial litigation · Private case intake