30/70 Payment: What the Deposit Is Called Decides What You Get Back

A common payment split: 30% before production starts, 70% before shipment or against shipping documents.

What you call the 30% decides what you can get back. Only a payment the contract calls 定金 (earnest money) can be doubled if the supplier’s breach defeats the purpose of the contract, and only up to 20% of the contract price; anything above that has no effect as earnest money (Civil Code arts. 586 and 587). A payment called 订金, advance or prepayment is simply part of the price.

The 70% is your bargaining power. Tie it to an inspection report you accept, not to a date, and say in the contract that paying the balance is not acceptance of quality.

Both halves, in practice

A common situation: the buyer pays 30% on a PI that calls it a deposit, the factory misses delivery by two months, and the buyer wants double back. Whether that is possible turns on the Chinese word. If the PI or the remittance note says 订金 or 预付款, the claim is for the 30% plus provable loss, not double. If it says 定金 and the delay defeats the purpose of the contract, double return is available, but only the part up to 20% of the price counts as earnest money.

With the 70%, the usual mistake runs the other way. The buyer pays the balance to get the container moving, finds defects on arrival, and the factory says payment meant approval. The Civil Code makes timing matter here too: where the contract sets an inspection period and the buyer does not notify defects within it, quantity and quality are deemed to conform (art. 621).

Payment clause

One way to split it so that each part does a job:

“The Buyer shall pay 20% of the price as earnest money (定金) within [5] days of signing, 10% as advance payment (预付款) on approval of the pre-production sample, and 70% within [5] days of receiving an inspection report acceptable to the Buyer. Payment of any instalment is not acceptance of the goods.”

Set the inspection period long enough to open the cartons at destination, and write it as a number of days after arrival.

Related terms

• 定金 and 订金 (earnest money and advance payment)
• T/T (telegraphic transfer)
• Golden sample (sealed sample, 封样)
• All twelve terms

Read next

• Paid a 30% Deposit to a Chinese Supplier? Only 20% Can Be Doubled, and Only If the Contract Says 定金
• Chinese Supplier Breached the Contract: What Can a Foreign Buyer Do?

Sources

• Civil Code of the PRC (effective 1 January 2021), articles 586, 587 and 621, full text on the Ministry of Justice site ↗
• Translations are mine and unofficial.