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Chinese Supplier Breached the Contract: What Can a Foreign Buyer Do?

Late delivery, defective goods or a deposit that bought nothing: what PRC law lets you recover, the deadlines that quietly kill claims, and why your dispute clause decides where you can actually get paid.

28 September 2026|About 9 minutes|By HAN FENG
A row of plastic parts on an inspection table, one of them cracked

A foreign buyer facing a Chinese supplier's breach usually has three levers: insist on performance or repair, terminate and recover what was paid, and claim damages. Whether those rights turn into money depends less on the rule itself than on four practical facts: your paper trail, whether you gave notice in time, what your dispute clause says, and whether the supplier has assets in mainland China that a Chinese court can reach.

This guide is written for overseas importers, brand owners and procurement teams buying from manufacturers in mainland China. It assumes the contract is governed by PRC law or that PRC law will matter because enforcement will happen in China. If the contract is silent on governing law, see the note on the CISG below.

Law as of 28 September 2026: PRC Civil Code (Book Three, Contracts); the Supreme People's Court Interpretation on the General Provisions of the Contracts Book, effective 5 December 2023; the Civil Procedure Law as amended with effect from 1 January 2024; and the Arbitration Law as amended with effect from 1 March 2026.

1. Start by naming the breach correctly

The remedy you can use, and how quickly you must act, depends on which kind of breach you are dealing with. Mixing them up in the first notice is one of the most common and most expensive mistakes.

01 / LATE DELIVERY

The goods are coming, just late

You can demand performance and claim losses caused by the delay. Termination is generally available only after you demand performance within a reasonable period and the supplier still fails, or where the delay defeats the purpose of the contract, for example seasonal goods that miss the season (Civil Code Art. 563).

02 / DEFECTS

The goods arrived but do not conform

You may require repair, replacement, rework or return, or a price reduction, and claim further losses (Arts. 582–583). This right depends on a timely quality notice, discussed in section 4.

03 / NON-DELIVERY

You paid a deposit and nothing shipped

You can terminate, recover the advance payment and claim damages. If the Chinese contract text calls the payment dingjin (定金, earnest money), a supplier who fails to perform must return double (Art. 587), but earnest money cannot exceed 20% of the contract price (Art. 586), and you must choose between earnest money and liquidated damages (Art. 588). A payment called a "deposit" in English is often just a prepayment (预付款) and does not carry the double-return rule.

04 / SILENCE

The supplier stops answering

Before anything else, confirm which legal entity signed and whether it still exists in the same form. Trading names, group names and the company that actually received your money are often different.

2. What you can realistically recover

Does the CISG apply? If your place of business is in a CISG contracting state, such as the United States, most EU member states, Japan, Korea, Singapore or Viet Nam, and the contract does not exclude it, the UN Convention on Contracts for the International Sale of Goods may govern the sale instead of the Civil Code's sales rules (UNCITRAL status table). Remedies are broadly similar, but notice and avoidance rules differ, so check this before sending a termination notice. Taiwan and the United Kingdom are not contracting parties; for buyers there, the contract's choice of law does the work.

3. Your dispute clause decides where you can get paid

A strong claim that cannot reach the supplier's assets is a weak claim. Most Chinese suppliers hold their assets, receivables and bank accounts in mainland China, so the question is which route turns a decision into a frozen account or a sale of assets there.

ROUTE A / CHINESE COURT

Most direct path to Chinese assets

A mainland judgment is enforced by the same court system, and property preservation (freezing bank accounts or other assets) is available before or during the lawsuit, usually against security. Since 1 January 2024, foreign parties may agree in writing on a Chinese court even if the dispute has no other connection to China (Civil Procedure Law Art. 277), and Chinese courts may also hear foreign-related cases with an "appropriate connection" to China (Art. 276) (summary of the 2023 amendments).

ROUTE B / ARBITRATION IN MAINLAND CHINA OR HONG KONG

Neutral, enforceable, with asset freezing

For arbitration seated in mainland China, the amended Arbitration Law in force from 1 March 2026 recognises the parties' choice of seat and lets a party apply to court for asset preservation, including before the arbitration begins in urgent cases (Arts. 39, 58 and 81) (summary of the amendments). Hong Kong-seated arbitrations administered by qualifying institutions such as HKIAC can seek mainland interim measures under the 2019 Mainland–Hong Kong Arrangement.

ROUTE C / ARBITRATION ELSEWHERE

Enforceable later, but no early freeze

An award from Singapore, London or another New York Convention seat can be recognised and enforced in China. The practical gap is timing: mainland courts generally do not grant interim asset preservation in support of arbitrations seated outside mainland China and Hong Kong, so a supplier may have months to move assets before you can act.

ROUTE D / YOUR HOME COURT

Often the slowest route to Chinese assets

A foreign court judgment must first be recognised in China. Chinese courts have become more open to this since 2022, but recognition remains case by case, and it can be refused on grounds such as lack of jurisdiction, defective service or conflict with a Chinese judgment (Civil Procedure Law Art. 300). If your contract points here, factor that extra step into your strategy and your settlement expectations.

If there is no dispute clause at all, for example because the deal ran on purchase orders and proforma invoices, a Chinese court will usually have jurisdiction as the court of the defendant's domicile or the place of performance. Read the supplier's order confirmation and terms: a clause buried there may still bind you.

4. Deadlines that quietly kill claims

5. A 30-day action plan

DAYS 1–7

Freeze the record

Collect the contract, POs, specifications, approved samples, inspection and test reports, payment records, logistics documents and all email and WeChat messages. Export chats with dates and sender identities rather than relying on screenshots, and commission an independent inspection if quality is in dispute.

DAYS 1–14

Send a proper written notice

Identify the breach, list the defects, set a cure deadline, state the remedies you reserve and whether you are suspending payment. Send it to the contract's notice address and the registered address, with a Chinese version. Avoid informal concessions in chat.

DAYS 7–30

Check the supplier and choose a route

Look up the company on the National Enterprise Credit Information Publicity System and search existing enforcement cases on the courts' enforcement information platform. Then decide: negotiate with leverage, terminate by written notice (effective on arrival, Civil Code Art. 565), buy replacement goods, or file with a preservation application.

6. When is legal action worth it?

Not every breach justifies litigation or arbitration. For a modest order, a firm notice, withheld balance payments, a platform claim such as trade assurance, or a trade credit insurance claim is often faster and cheaper than formal proceedings. A China lawyer adds the most value when the amount is significant, when the supplier has gone silent or appears to be moving assets, before you send a termination notice that cannot be withdrawn, and before you sign a settlement that releases claims.

The deciding question is rarely "am I right?" It is "which step gives me the most leverage today, without closing off the route that can actually reach the supplier's assets?"

Related service: Claims Against Suppliers: Demand Letters, Arbitration & Litigation ↗

A supplier dispute is often won or lost on the first notice.

If a Chinese supplier has missed a delivery, shipped defective goods or kept your deposit, we can review the contract, the dispute clause and the supplier's profile, and set out realistic options before you commit to a route.

Related Reading

This article is general information about PRC law as of 28 September 2026 and does not constitute legal advice on any particular contract or dispute. Remedies, deadlines and enforcement options depend on the contract terms, governing law, dispute clause, evidence and the supplier's circumstances.

Han Feng

PRC Lawyer | Tiantai Law Firm Shanghai Office | Licence No. 13101201310936574

Last updated: 28 September 2026 · About Han Feng · LinkedIn ↗