What Should the Bank Account Clause Say in a China Supplier Contract?

I check each contract against Chinese law, Chinese court rulings and my own cases. Each clause note does that for one clause. This one covers where your money goes.

A payment to the wrong account can cost you twice. If the money never reaches the supplier, a Chinese court may not count it as paid. In the purchase contracts I draft for overseas buyers, payment goes only to the seller's own company account.

What the law says

No article of Chinese law tells a buyer which account to pay. The contract decides that. Courts then read it closely, as the cases below show.

One rule matters if another company is to receive the money. That company can promise to answer for the supplier. This is a guarantee. Chinese law has two kinds. Under a joint and several guarantee, you can claim from the guarantor as soon as the supplier fails to pay or perform. Under an ordinary guarantee, you generally have to pursue the supplier first. If the guarantee doesn't say which kind it is, the law treats it as the ordinary kind (Civil Code art. 686). So the words "joint and several" have to be in it.

What courts have done

Three appeal judgments show the pattern. In each, the appeal court upheld the first judgment.

• The contract named the account. In a 2023 case in Changde, Hunan, the contract named the seller's account. The buyer could pay elsewhere only after the seller's written notice. RMB 700,000 of the price went into the personal account of the seller's legal representative. The buyer said he had asked for that. There was no written notice. The transfers carried no note linking them to the deal, and the buyer never confirmed them with the seller. The court did not count the payment, so the buyer had to pay that part again.
• Another company received the money. In a 2023 case in Foshan, Guangdong, the seller's contact person told the buyer to pay RMB 440,000 to a different company. He had signed the contract and handled the accounts. The seller denied giving him that authority. The court said changing who receives the price is a major change to the contract. A buyer must check that the seller really agreed. This buyer hadn't, so it had to pay again.
• The contract said nothing. In a 2022 case in Jiaxing, Zhejiang, the contract set no method of payment. The seller's agent had handled the deal from signing to collection. He had RMB 144,550 paid to a third person. The court held that the buyer could reasonably rely on him, and counted the payment.

The lesson runs both ways. Where the contract names the account, courts hold both sides to it. Where it doesn't, the result depends on who handled the deal and what you can prove. If a fraudster's email sent you to a fake account, see hacked email, fake bank details.

What happened in my cases

In 58 checks I ran on suppliers as separate engagements before signing, three named a payee that was not the supplier. One account belonged to a related company. One was the personal account of the supplier's legal representative. One belonged to a minority shareholder. I found each one by comparing the name on the contract with the name on the account. Then I searched public records for companies linked to the supplier. Each time, the supplier switched to its own company account, and only then was the contract signed.

Another client came to me too late. It had paid a different company, not the supplier, and had never signed a contract. When the goods turned out to be faulty, they were already with its own customers. The defects could no longer be traced back to the supplier. Nothing was recovered.

How I write it now

I don't give full sample wording in these notes. These are the points I now cover.

1. One named account. The contract gives the bank, the account name and the number. The account name matches the supplier that signs the contract.
2. No personal accounts. That includes accounts of the legal representative, shareholders and staff.
3. Changes need the company seal. A new account counts only after a written notice stamped with the supplier's company seal (chop). An email, a WeChat message or a call doesn't change it.
4. Another company only with a guarantee. If the money is to go to another company, that company signs a separate guarantee. It states that it is jointly and severally liable for the supplier's obligations under the contract.

On your side, put the contract or invoice number on every transfer. In the Changde case, the missing note was one reason the payment didn't count.

About to pay a Chinese supplier, or already paid the wrong account? Send a short summary and the supplier's Chinese company name. Once I've checked that I don't act for the other side, I'll ask for the contract or proforma invoice, the payment instructions you were given and its last message. I'll tell you where you stand and what your options are. Describe your situation →

Part of my guide to checking a supplier before you pay.

The checks and the case in "What happened in my cases" are my own work. Names, products, places, dates and amounts are left out. They describe my matters and aren't a prediction for any other. This article is general information on PRC law. It isn't advice on any particular matter.