The importance of a China manufacturing contract
I’ve written about terms to negotiate with your contract manufacturer and the positive effects of signing a strong manufacturing contract before. And some commonalities between them include making expectations clear, protecting IP, and making your supplier accountable for their results in your China manufacturing contract.
It’s fair to say that many of today’s buyers still start working with a supplier in China (or other Asian countries) without a valid manufacturing contract. Perhaps they have already dealt with them and ‘everything has been fine so far,’ or maybe they come recommended or have Alibaba gold supplier status. But the rule of thumb should be to plan ahead for the worst-case scenario, and relying on a foreign supplier’s good graces is very far from that.
What happens if:
- The supplier is so late in delivering the goods that you miss deadlines for, say, Christmas?
- You receive a shipment of goods where the quality is so poor that you can’t sell them?
- It becomes clear that your supplier sub-contracted manufacturing to a third party factory who was using toxic or sub-standard materials that don’t reach your quality standard?
You’ll have very little leverage over them to put things right without a China manufacturing contract. Even if you wanted to litigate, for example, how can you claim that your expectations weren’t met when they were never down on paper in black and white and accepted (with signature and chop) by your supplier?
So, what’s in a contract?
A good starting point is to understand what makes up an enforceable manufacturing contract and its benefits, and this is what we discuss in this episode of the podcast.
Listen to the episode right here 👇👇👇
Here’s a summary of what’s in the episode:
- Do buyers work with suppliers without a manufacturing contract?
- What makes buyers feel secure enough not to use a contract when dealing with Asian suppliers?
- Payment terms that can help mitigate your risks
- What are the benefits of having a valid and enforceable manufacturing contract?
- What is included in a manufacturing contract: Confidentiality agreement / Product Development Agreement (PDA) / Manufacturing Agreement (MA)
- Further discussion about when these 3 elements may or may not be appropriate
All of the following blog posts are relevant to the topics we discussed in this episode:
- On the Sofeast blog we explain: How To Create A Valid Manufacturing Contract In China To Protect Your IP
- On China Law Blog they also wrote about the content of a manufacturing contract
How do you use manufacturing contracts to protect your interests? Any tips to share?
Please share your thoughts in the comments.
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