Introduction to Purchase and Sale Contract Terms in China
The Legal Framework for Sales Contracts in China
Purchase and sale contracts in China are governed primarily by the PRC Civil Code (Book III — Contracts, effective January 1, 2021), which consolidated and replaced the earlier PRC Contract Law. For international sales contracts, China is a signatory to the United Nations Convention on Contracts for the International Sale of Goods (CISG), which applies automatically to contracts between parties whose places of business are in different CISG contracting states, unless the parties have expressly opted out.
For Guangzhou-based traders — who handle a significant share of China's import and export volume — understanding the interplay between Chinese domestic law and the CISG is essential for drafting enforceable contracts and managing transaction risk.
Essential Contract Terms
Description of Goods: The description must be sufficiently precise to identify the goods — specifications, quality standards, quantity, and packaging requirements. Under Chinese law, if the goods delivered do not conform to the contractual description, the buyer may reject the goods, demand substitute goods, or claim damages. Reference to international standards (ISO, ASTM) or Chinese national standards (GB standards) should be explicit.
Price and Payment Terms: Clearly state the currency, unit price, total contract value, payment milestones, and payment method. For international transactions, specify whether prices are FOB, CIF, or EXW (Incoterms 2020). Include provisions for price adjustment in long-term supply contracts where raw material costs may fluctuate.
Delivery Terms: Specify the delivery location, delivery date or period, and which party bears the risk of loss during transit. In Guangzhou, where goods may be shipped from Nansha Port, Huangpu Port, or Baiyun Airport, the delivery point determines when risk transfers from seller to buyer — a critical issue in insurance and claims.
Inspection and Acceptance: Chinese law recognizes the buyer's right to inspect goods before acceptance. The contract should specify the inspection period, the inspection standards, and the consequences of failing to inspect within the agreed period. For international sales, specify whether inspection will take place at the port of loading, the port of discharge, or the buyer's premises.
Warranties and Liability: Address warranties of title, quality, and fitness for purpose. Chinese law implies certain warranties into sales contracts, but parties may expand or limit these warranties by agreement. Limitations of liability must be reasonable — Chinese courts may strike down clauses that purport to exclude liability for willful misconduct or gross negligence.
Governing Law and Dispute Resolution: For international sales contracts, specify the governing law (PRC law, the CISG, or a combination) and the dispute resolution mechanism (CIETAC arbitration in Guangzhou is the most common choice for contracts with a Guangzhou nexus).