Facts
My client was a US consumer-products company that had contracted with an Asia-based contract manufacturer to produce a custom product line. The total purchase order was in the mid six figures, with a deposit of roughly one third paid up front and the balance due on delivery. The manufacturing agreement was a short purchase-order-style document in English, with the manufacturer's standard terms in the country of operation appended in the local language as a schedule. Delivery was scheduled for a specific date tied to my client's planned retail launch.
The delivery date passed. The manufacturer cited a series of input-supply issues, asked for additional time, then for a price increase, then went silent. My client retained other counsel to evaluate a US-court suit and was advised that a US judgment would be difficult to enforce against an Asia-based defendant without local proceedings. My client then asked me to evaluate the deposit recovery and the prospects for negotiated resolution.
What I did
I read both the English-language purchase order and the local-language schedule in the original, with attention to the dispute-resolution clause, the governing-law clause, the deposit terms, and the force majeure language. The local-language schedule designated arbitration at a named Asia-based commercial arbitration center and applied the local country's contract law. I confirmed with local counsel in the relevant jurisdiction that the arbitration center was active and that an arbitral award there would be enforceable both locally and, through the New York Convention, in jurisdictions where the manufacturer might have assets.
I drafted a written demand letter on my US letterhead, with parallel text in the local language, that recited the manufacturer's defaults, cited the local-law provisions on deposit return on supplier default, and put the manufacturer on notice that arbitration would be filed within a stated window if the deposit were not returned. I sent the letter through both certified mail and the local-language equivalent service of process the contract specified.
Outcome
After the bilingual demand letter, the manufacturer's general counsel responded in writing and proposed a partial deposit return with the balance treated as credit against a future order. My client did not want a future order and declined the credit. After a further exchange, the manufacturer agreed to return roughly seventy percent of the deposit in cash, paid within forty-five days, in exchange for a written mutual release. The arbitration was not filed. Each matter turns on its facts; the outcome here does not predict the outcome on a similarly framed cross-border default.
Lesson
A US client that signs a manufacturing agreement with a local-language schedule and a foreign dispute-resolution clause has, in practice, a foreign-law contract. A US-court strategy will run into enforcement problems and a US-court complaint often does not move the counterparty at all. A bilingual demand letter that cites the operative foreign-law provisions, sent through both US channels and the local channels the contract specifies, frequently does. Read the local-language schedule before signing; read it again at default.
Have a cross-border US-Asia matter that looks similar?
Send the contracts (in both languages if you have them) and the facts in writing. I read every inquiry myself.
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