A friend visited me yesterday to talk about a deal gone wrong. He was the middleman between a Chinese factory and overseas buyer. Obviously, there is a shortage in masks all over the world, and everybody is scrambling to get masks. The buyer wanted 5 million pieces of masks, and gave 5 million to my friend to acquire the masks. My friend found a factory in Dongguan to produce these masks, bought them for 4.5 million, and shipped these masks to Italy a week later. Easy money, wasn’t it? Half a million Yuan just for being the middleman. However, that was just the start of his problems. The masks could not clear customs as there were issues with quality. The CE certificate was fake. As the buyer didn’t receive his 5 million masks, he was really angry and wanted his 5 million back. Obviously, my friend did not have the money anymore as he had already paid the factory.The factory was also unwilling to return the money as they claimed that they had already produced the masks, and whether or not the masks could clear customs was not their problem. My friend is now in deep water as he is being sued by the buyer for not being able to deliver certified masks. To get the 4.5 million Yuan from the factory, he would also have to sue the factory.
This is a real case, and he could have avoided this from the start. As the middleman, it is obviously not worth getting into all this trouble just over half a million. In the worse scenario, he would have to pay the buyer 5 million out of his own pocket.Even if he succeeds in suing the factory, it may take quite a few months, and the factory might be bankrupt by then. Even if the factory pays up, unnecessary time and money is wasted. Think about how much you need to spend hiring a lawyer to sue the factory, and defending yourself as well. Therefore, my advice is to write up a commission contract between you and the factory to ensure that you get your share of the pie. Find a reputable third party, like a law firm to escrow the money instead of taking it into your own hands. The buyer trusts the law firm, and the factory also trusts that the law firm will release the funds when the deal is complete. This way, you are removing yourself from all risks and will not end up in the same scenario as my friend did.Scan This QR Code To Subcribe!
Edgar Choi is the author of five books, viz: Commercial Law in a Minute; Economic Law in a Minute; Financial Law In A Minute; Intellectual Property Law in a Minute and The Miracles Of Finance. These books shall be in print by early 2020. Edgar is a law graduate of the Fudan University with a mission to promote law to serve better mankind, and he believes that legal literacy is a key factor to success. Since his childhood, Edgar has been taking joy in writing fiction and short stories. He hopes that through reading his legal stories, the traditional, passive way of learning law in class can be disrupted and readers can experience a brand new world by taking an active role and spending a few minutes every day in this series to have fun and actually remember what was read.
Edgar is the legal advisor of: Esports International Group, International Financial Techonology Academy, and World Blockchain and Fintech Foundation.
Edgar can be contacted by scanning the QR code below, searching WeChat ‘edgarwlchoi’, and by email ‘edgarchoilaw@gmail.com’.
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