In international supply arrangements, particularly those involving Asian suppliers, which are frequently handled by our China Desk, failure to comply with agreed delivery deadlines can have significant consequences for buyers’ production schedules and commercial obligations. Accepting goods after the agreed delivery date may be commercially necessary, but care must be taken to ensure that such a decision does not prejudice the buyer’s right to claim contractual penalties or damages arising from the delay.

The Issue: Does Accepting Late Delivery Mean Accepting the Delay?

When a Chinese supplier announces that it will be unable to meet the contractual delivery deadline, the buyer often faces a difficult choice: reject the delayed delivery, potentially disrupting its business operations, or allow the goods to be shipped later to ensure continuity of supply.

The latter option is often the more reasonable one from a commercial perspective. However, the buyer’s consent to a late shipment must be carefully worded to prevent it from being interpreted, or relied upon in legal proceedings, as an amendment to the original contractual delivery deadline or as an express or implied waiver of the remedies available in respect of the delay.

A distinction must therefore be drawn between merely accepting late performance, granting an additional period for performance and mutually agreeing to amend the contractual obligations. These situations may give rise to different legal consequences.

Legal Framework: CISG and Chinese Law

International sales contracts between Italian and Chinese companies may be governed by the United Nations Convention on Contracts for the International Sale of Goods (CISG), unless the parties have validly excluded its application or other circumstances prevent it from applying.

Article 45 CISG provides buyers with a range of remedies where the seller fails to perform its contractual obligations, including the right to claim damages.

Of particular relevance is Article 47(2) CISG, under which, during any additional period granted to the seller for performance, the buyer retains the right to claim damages for delayed performance, although certain restrictions apply to the exercise of other remedies.

Another relevant provision is Article 29 CISG, which governs contractual modifications by mutual agreement. In this context, communications between the parties and their conduct may also be relevant in determining the terms of any agreement reached.

Where Chinese law applies, the provisions of the Civil Code of the People’s Republic of China concerning contractual liability, amendments to agreements and contractual penalties for non-performance must also be considered, with particular reference to Article 585.

There is therefore no general rule whereby the mere acceptance of goods delivered late automatically results in the loss of the right to claim damages. The risk depends on the applicable law, the terms of the contract and, above all, how the buyer has handled the delay.

The Risk of Extensions and Implied Waivers

One of the most sensitive situations arises when the supplier asks the buyer to confirm a revised shipment date.

An apparently straightforward response, such as accepting a new deadline without reservation, could subsequently be relied upon by the supplier to argue that the parties have amended the original contract, potentially affecting the buyer’s entitlement to contractual penalties and damages.

The risk increases where the revised date is incorporated into an amended purchase order, an order confirmation or an agreement that does not clarify the status of liabilities already accrued.

Similarly, buyers should exercise caution when signing documents containing acknowledgements of full performance or release provisions, particularly where the losses resulting from the delay have not yet been quantified.

The key is to prevent an authorisation granted for commercial reasons from inadvertently amounting to a legal waiver of the buyer’s rights.

How to Authorise Late Shipment While Preserving Contractual Rights

From a practical perspective, buyers should take certain precautions.

• First, the failure to meet the original contractual deadline should be formally notified in writing, identifying the relevant contract, purchase order and missed deadline.
• Second, any authorisation to proceed with shipment should clarify whether it is granted solely to allow the supplier to perform its obligations, without retroactively amending the contractual terms.
• Third, it is advisable to include an express reservation of rights, making clear that acceptance of late delivery does not constitute a waiver of any applicable contractual penalties, recoverable damages or other available remedies.

These precautions must be tailored to the relevant contract and applicable law. Indeed, a unilateral reservation of rights cannot automatically neutralise the effects of a contractual amendment that has already been validly agreed between the parties.

Preventing Risks at the Contract Drafting Stage

Effective management of delivery delays should begin before any breach occurs.

Contracts with Chinese suppliers should clearly define delivery deadlines, distinguishing between the date of completion of production, the shipment date and the delivery date, also taking into account any applicable Incoterms.

The contract should also regulate the consequences of delay, any applicable contractual penalties, the conditions for granting extensions and the procedures through which the buyer may authorise late shipment without waiving its contractual remedies.

Particular attention should be paid to including a provision stating that, to the extent permitted by applicable law, the mere tolerance of delays or acceptance of goods does not constitute a waiver of the buyer’s rights.

Conclusions

Accepting late delivery and preserving the right to claim damages are not necessarily mutually exclusive. However, it is essential for buyers to distinguish between the commercial decision to receive the goods and the legal intention to amend the contract or waive existing claims. Prompt written notification of the delay, accompanied by an authorisation limited to shipment and an express reservation of rights, can help reduce the risk of subsequent disputes.

In a context where continuity of supply is often essential, proper management and documentation of delivery delays is therefore an important tool for protecting the buyer’s interests.

Avv. Luigi Zunarelli, Desk Cina. luigi.zunarelli@studiozunarelli.com