This article, presented by Chinese international trade lawyers, lists 10 Common Traps in International Trade Contracts and provides specific preventive suggestions. These are designed to help international trade participants reduce risks in international trade transactions and ensure transaction security.

Trap 1: Unclear Subject Qualification

In international trade, one party to a contract may lack the corresponding subject qualification. For example, a company may conduct transactions even after being dissolved or having its business license revoked, or the signing representative may not have legal authorization. Such flaws in subject qualification can lead to problems with the validity of the contract, posing significant risks to the other party. In a case where a machinery company in Zhejiang sued a Middle - Eastern company over a dispute regarding the Middle - Eastern company's agency authority, an employee signed the contract in their personal name without providing a company authorization letter. Subsequently, the Middle - Eastern company refused to perform the contract on the grounds of "unauthorized agency." Eventually, the court ruled the contract invalid, and the Chinese side had to bear the warehousing and transportation losses.

Preventive Suggestions: When reviewing the subject qualification of foreign enterprises in international trade contracts, a "dual - track system of formal review + substantive review" should be followed. Core steps include verifying registration information, qualification licenses, authorization documents, performance capabilities, and legal application clauses, and comprehensively verifying through tools such as international commercial databases, official registration platforms, and third - party credit reports.

Trap 2: Incomplete Contract Terms Leading to Performance Disputes

According to Article 470 of the "Civil Code of the People's Republic of China," contract terms should include eight elements such as the subject matter, quantity, quality, and performance method. In practice, enterprises often face quality disputes due to not clearly defining the "inspection period." Such performance disputes caused by incomplete contracts are quite common and also include the following situations:

1. Vague trade terms.

2. Unclear quality terms.

3. Unclear price terms.

4. Unclear delivery terms.

5. Unclear payment terms.

Preventive Suggestions: Use international trade terms (such as INCOTERMS 2024) to refine delivery conditions, and separately stipulate an inspection clause in the contract (e.g., "Inspection shall be carried out within 30 days after the goods arrive at the port, and notice shall be given within 60 days after the discovery of latent defects"); for goods trade where prices may fluctuate, a reasonable price adjustment mechanism should be set in the contract, clearly defining the trigger conditions and calculation methods for price adjustments; for different payment methods, different risk - prevention methods and solutions after risks occur should be agreed upon; at the same time, carefully select the currency of pricing, consider using a stable currency or agreeing on an exchange rate adjustment clause to reduce the risk of exchange rate fluctuations; clearly specify the specific delivery time in the contract, accurate to the date; detail the delivery place, including specific ports, warehouses, etc.; choose an appropriate delivery method and clearly define transportation responsibilities and handling fees during the delivery process.

Trap 3: Lack of a Law - Application Clause Leading to a Passive Adjudication

Article 41 of the "Law of the People's Republic of China on the Application of Laws to Foreign - related Civil Relations" allows parties to agree on the applicable law. If not agreed, the law of the other party's place of domicile may be applied. For example, when a Chinese enterprise signed an equipment procurement contract with a German company without agreeing on the applicable law, when a dispute occurred, the German court applied the "United Nations Convention on Contracts for the International Sale of Goods" (CISG). Since the Chinese enterprise did not retain a special agreement to "exclude the application of CISG," it ultimately suffered an adverse consequence (refer to the 21st batch of guiding cases of the Supreme People's Court).

Preventive Suggestions: Give priority to choosing Chinese law or the law of a third country that you are familiar with, and state clearly "exclude the application of CISG" (e.g., agree that "This contract is governed by Chinese law and does not apply the United Nations Convention on Contracts for the International Sale of Goods").

Trap 4: Force Majeure Clause Not Covering New Risks

Article 590 of the "Civil Code of the People's Republic of China" requires the obligation to notify of force majeure, but traditional clauses mostly only cover natural disasters. The importance of this aspect is often overlooked by contract reviewers such as legal affairs personnel, and general clauses are commonly used. In 2024, a Chinese enterprise was required to continue performing the contract and pay liquidated damages because it did not stipulate in the contract that "international sanctions" belong to force majeure after the trading partner was listed on the SDN list.

Preventive Suggestions: Expand the scope of force majeure to include situations such as "government regulations, strikes, international sanctions, and public health emergencies," and clearly state that "the affected party must submit official documentary evidence from the place of occurrence within 10 working days."

Trap 5: Falsification of Certificate of Origin Triggering Administrative Penalties

Article 12 of the "Measures for Administrative Penalties Concerning the Inspection of Import and Export Commodities of the People's Republic of China" clarifies the legal liability for forging certificates of origin. In 2024, a Zhejiang export enterprise tampered with the origin label of textiles to obtain tariff preferences. After being investigated by the customs, it was disqualified from applying for certificates, resulting in its inability to deliver subsequent orders and having to compensate customers for losses.

Preventive Suggestions: Establish a "double - review" system for certificates of origin and file electronic certificates through the international trade single window (such as the China (Shanghai) International Trade Single Window).

Trap 6: Vague Intellectual Property Clauses Triggering Infringement Risks

Article 76 of the "Regulations for the Implementation of the Trademark Law of the People's Republic of China" prohibits the use of similar trademarks as product decorations. When a Chinese enterprise contract - manufactured sports shoes, the contract did not clearly state that "wing - like logos similar to Nike shall not be used." Later, it was determined to have committed trademark infringement and was liable for a compensation of 2 million yuan (refer to the judgment idea of [(2024) Hu 72 Min Chu No. 1125]).

Preventive Suggestions: Set up an intellectual property guarantee clause in the contract (e.g., "The seller guarantees that the goods do not infringe on the intellectual property rights of third parties, otherwise it shall bear all compensation liabilities and litigation costs"), and require the provision of a patent search report.

Trap 7: Data Cross - border Clauses Violating Compliance Requirements

Article 38 of the "Personal Information Protection Law of the People's Republic of China" requires that data outbound transfer needs to pass a security assessment or sign a standard contract. A cross - border e - commerce enterprise did not specify the data storage location in the user agreement. Because it transferred the personal information of EU users to a Chinese server, it was fined 4% of its turnover by the Italian regulatory authority (refer to the enforcement cases of the "General Data Protection Regulation" (GDPR)).

Preventive Suggestions: Clearly define the data storage location in the contract (e.g., "Both parties confirm that the personal information involved in this agreement is stored in the Frankfurt data center"), and complete the filing of the standard contract with the Cyberspace Administration of China.

Trap 8: Dispute Resolution Clause Lacking Enforceability

Article 276 of the "Civil Procedure Law of the People's Republic of China" allows for the agreement of jurisdiction by Chinese courts. However, a Chinese enterprise and a Singaporean company agreed that "disputes shall be submitted to the Pudong New Area Court of Shanghai for jurisdiction." Due to the lack of a clear "exclusive jurisdiction" clause, the other party initiated parallel litigation in Singapore.

Preventive Suggestions: Use a clear jurisdiction clause (e.g., "Any disputes shall be submitted to the Shanghai International Economic and Trade Arbitration Commission (SHIAC) for arbitration, and the award is final and binding on both parties"), and exclude other dispute - resolution methods (for tips on agreeing on cross - border dispute - jurisdiction institutions, see the official account article: Share a Secret to Agreeing on Cross - border Dispute - jurisdiction Institutions).

Trap 9: Electronic Signature's Validity Not Recognized Abroad

Article 3 of the "Electronic Signature Law of the People's Republic of China" recognizes the validity of electronic contracts. However, an electronic contract signed via WeChat by an enterprise was determined to be invalid in a lawsuit in Vietnam because Vietnamese law requires an "electronic signature certified by the government."

Preventive Suggestions: For major contracts, adopt a "double - insurance" approach of "electronic signature + notarized cloud evidence preservation," and enhance extraterritorial recognition through Apostille.

Trap 10: Incomplete Confidentiality Clause Failing to Ensure Confidentiality

If a confidentiality clause does not comprehensively stipulate the scope of confidentiality, the term, and liability for breach of contract, it may lead to the leakage of a company's trade secrets, damaging the company's competitiveness. For example, Company M cooperated with foreign Company N on a project. The confidentiality clause in the contract only briefly mentioned that both parties should keep the cooperation information confidential, but did not clearly define the scope and term of confidentiality. After the project ended, Company N leaked Company M's core technology to a competitor. After discovery, Company M found it difficult to safeguard its rights due to the incomplete confidentiality clause in the contract.

Preventive Suggestions: Clearly define the scope of confidential information, including technical materials, business plans, customer information, etc.; clarify the confidentiality term, which should generally be reasonably set according to the nature and value of the trade secrets; stipulate strict liability for breach of contract to increase the cost of breach of contract and effectively protect the company's trade secrets.

This article only lists ten common general traps. For complex foreign - related trade contracts, there are far more considerations than those mentioned above. If you need a lawyer to further draft or review relevant contracts, please feel free to contact us on our website.