Writing “deposit” instead of “advance payment” in contracts, specifying penalty amounts, and treating credit terms as loans
Only when the word “deposit” is used does the double‑return rule apply: if you break the contract, you lose that money; if the other party breaks it, they must pay you twice the amount. Anything above 20% of the contract value does not qualify as a deposit. If you write “advance payment” instead, the law offers no such protection. Offering credit terms is essentially lending your own money to the buyer interest‑free; if they go bankrupt, it becomes a bad debt.
No cost at all. Simply include the term “deposit” in the c…
A deposit only becomes valid once the money is actually received by the seller (the effective date is when del…
No cost at all. Simply include the term “deposit” in the contract; the amount must not exceed 20% of the total contract value. Collect the payment before delivering goods. Before agreeing to any credit terms that let the buyer receive goods first and pay later, run a background check on them first.
A deposit only becomes valid once the money is actually received by the seller (the effective date is when delivery occurs). If the buyer breaks the contract, they forfeit the deposit. If the seller breaks it, they must return the full amount plus an equal sum as compensation (i.e., double the original amount). Portions exceeding 20% of the total contract value are not treated as deposits. Should the agreed penalty amount be far higher or lower than the actual loss, a court may adjust it at the request of either party. When both a deposit and a penalty clause are included in the same contract, the injured party may claim only one of them, not both (nationwide, effective since 2021).
全国人大 (2020). 民法典（第五百八十五、五百八十六、五百八十七、五百八十八条）. https://www.spp.gov.cn/spp/fl/202006/t20200602_463888.shtml
Open source linkUnder the Civil Code, “advance payment” does not enjoy the same protections as a deposit; it is generally regarded as a simple prepayment. This is the prevailing practice in legal practice, though no specific court rulings were verified for this section. Providing credit terms is equivalent to lending your own funds to the buyer without interest; any default results in a bad debt. Before granting such terms, check the buyer’s records on the National Enterprise Credit Information Publicity System to see if there are any pending lawsuits against them.