Chinese Supplier Delivering Late: When Can I Cancel and Get a Refund?

The delivery date has passed. The supplier keeps giving new dates. You have paid a deposit, or maybe the whole price. Now you want to stop waiting, buy elsewhere and get your money back.

The law allows that. But a late delivery does not end the contract on its own. You need the right grounds, a written notice and proof that it arrived. If the refund still doesn't come, see how I recover money from Chinese suppliers that won't ship.

Which rules apply

The CISG is the UN convention on the international sale of goods. China has joined it. So have the US, Germany, Japan and many other countries. The UK and India have not. If your country and China have both joined, the CISG applies automatically. Your contract can exclude it (CISG arts. 1(1)(a) and 6). Choosing "Chinese law" alone does not exclude it.

China's Civil Code applies where the CISG does not, for example if the contract excludes the CISG and chooses Chinese law.

Under the CISG

The CISG calls cancelling the contract "avoidance". For late delivery, a buyer can avoid the contract in two ways.

• Fundamental breach. The delay must substantially deprive you of what you were entitled to expect under the contract (CISG arts. 25 and 49(1)(a)). It doesn't count if the supplier did not foresee that harm and a reasonable supplier would not have either. In my view, this is easier to show when the date clearly mattered, for example for seasonal goods.
• A final date the supplier misses. If nothing has been delivered, you can give the supplier an extra period of reasonable length (art. 47). If it doesn't deliver within that period, or says it won't, you can avoid the contract (art. 49(1)(b)). You don't need to prove a fundamental breach. You do have to wait until the period ends, unless the supplier says it won't deliver. You keep your claim for damages for the delay (art. 47(2)).

Either way, the contract ends only when you give the supplier notice (art. 26). Then you can claim back what you paid (art. 81(2)). The supplier must also pay interest from the date you paid (art. 84(1)). Chinese courts sometimes start interest later, for example after your written demand.

If the late goods do arrive, act quickly. You must avoid the contract within a reasonable time after you learn of the delivery. Otherwise you lose the right (art. 49(2)(a)).

Under the Civil Code

The Civil Code calls it "termination". A buyer can terminate for late delivery in two cases (Civil Code art. 563):

• The supplier is late with its main obligation, here delivery. You demand delivery, and it still doesn't deliver within a reasonable time.
• The delay defeats the purpose of the contract.

You terminate by notice. The contract ends when the notice reaches the supplier (art. 565). One letter can also make the demand and end the contract. It says that the contract ends if the goods don't arrive by a stated date. If that date passes with no delivery, the contract ends then.

After termination, you can ask for your prepayment back and claim damages for your loss. Where the supplier's breach caused it, the supplier is also liable for that breach, unless the contract says otherwise (art. 566).

Don't wait too long. Unless the law or your contract sets a time limit, the right to terminate lapses after one year. The year runs from when you knew, or should have known, of the grounds. It lapses sooner if the supplier asks you to decide and you don't act within a reasonable time (art. 564).

In one case I handled, the supplier stopped delivering and still did not perform after being chased. So the buyer could end the open orders and ask for its money back (art. 563). That result turned on the case's own facts. It doesn't predict the outcome of yours.

What to do, step by step

1. Send a written demand with a clear final date. Name the order, the missing goods and the date by which they must arrive. Allow enough time to make and ship them, so the period is reasonable. Say what you will do if the date is missed.
2. If the date passes, send the notice ending the contract. Send both letters to the contract address and to your usual email contact. Keep the sent emails, courier receipts and any reply. You may need to prove that each letter arrived.
3. Be careful with part deliveries. If you accept a late part shipment, say in writing that you keep your rights for the rest. Under the CISG, the rules above then apply to the missing part. You can avoid the whole contract only if the shortfall is itself a fundamental breach (art. 51).
4. Buy elsewhere with care. You must take reasonable steps to limit your loss. If you don't, you can't recover the part you could have avoided (CISG art. 77; Civil Code art. 591). I would end the contract first, so you are no longer bound to take the late goods. Then buy at a fair market price and keep the quotes. Under the CISG, you can claim the price difference if you buy within a reasonable time after avoidance (art. 75).
5. Test any force majeure excuse. Force majeure means an event that could not be foreseen, avoided or overcome (Civil Code art. 180). If the supplier blames one, ask for proof at once. A supplier that was already late when the event happened is not excused (art. 590). One common excuse is power rationing.

Is your supplier late and still holding your money? Send a short summary and the company names. Documents follow after the conflict check. I'll tell you where you stand and what your options are. Describe your situation →

Part of my guide to supplier disputes in China.

This article is general information on PRC law. It isn't advice on any particular matter.