12 Critical Questions to Ask Before Signing a Supplier Contract (And How to Handle Red Flags)

12 Critical Questions to Ask Before Signing a Supplier Contract (And How to Handle Red Flags)

Introduction

Securing a strong supplier contract is one of the most critical steps in manufacturing in Asia. Many buyers make the mistake of trusting handshake deals, weak contracts, or supplier promises—only to find themselves facing price hikes, delays, poor quality, or even stolen intellectual property (IP).

The truth? Most contract issues arise because buyers don’t ask the right questions before signing.

In this guide, we break down 12 critical questions you should ask before finalizing a supplier agreement—and how to handle red flags that could cost you money, time, and business security.

1. What Contract Terms Should I Negotiate to Protect My Business?

Your supplier contract should cover more than just pricing—it should legally protect your payments, quality expectations, lead times, and intellectual property. Key terms to negotiate include:

• Fixed pricing agreements – Prevents suppliers from raising prices after production starts. ✅ Payment terms – Lower deposits, milestone-based payments, and extended terms for trusted suppliers. ✅ Quality control clauses – Ensures third-party inspections before shipment and supplier liability for defects. ✅ Production deadlines with penalties – Prevents delays by enforcing fines for missed lead times. ✅ Subcontracting restrictions – Stops suppliers from outsourcing your order to unknown factories. ✅ Intellectual property protection – Prevents factories from stealing your designs or selling your product to competitors.

• Red Flag: If a supplier refuses to include these protections, they likely plan to change terms later or avoid accountability.

Case Study: Preventing Mid-Order Price Increases

A client secured a supplier with an attractive initial quote, but after production began, the factory claimed material costs had risen and demanded a 15% price increase. Because we had a fixed pricing clause in place, we enforced the contract, and the supplier had no choice but to honor the original price.

2. What If My Supplier Refuses to Sign the Contract?

If a supplier hesitates or refuses to sign, this is a major red flag. It often means they:

• Plan to increase prices later ❌ Don’t want to be liable for quality issues ❌ Intend to outsource production without telling you ❌ Want control over your molds, tooling, or IP

How to Handle It:

• Negotiate in person – Our team visits the supplier face-to-face to resolve objections.
• Apply pressure – We remind them that we can easily move production elsewhere.
• Secure alternative suppliers – If they refuse to sign, we replace them with a reliable factory.

Case Study: Avoiding a Shady Supplier

One of our clients was about to place a $500,000 order with a Chinese factory, but the supplier refused to sign a clear quality control clause. When we visited the factory, we discovered they had been outsourcing orders to multiple unknown workshops. The client avoided a potential disaster and we secured a more reliable factory instead.

3. How Do I Navigate Local Regulations and Contract Specifics?

Most Western contracts are not enforceable in China, Vietnam, India, or Indonesia. If legal issues arise, you need a contract that is binding in the supplier’s country.

✅ We draft contracts under local jurisdiction, making them legally enforceable where it matters. ✅ We work with local legal experts to ensure compliance with labor laws, IP regulations, and trade standards. ✅ We register agreements in-country, so suppliers cannot ignore penalties or legal action.

🔹 Red Flag: If a supplier insists on a contract that only protects them, not you, they are likely planning to exploit loopholes.

Case Study: Enforcing a Contract in China

A client’s supplier tried to sell excess stock of their product on the local market. Because we had registered an enforceable NNN agreement under Chinese law, we were able to legally stop unauthorized production and prevent counterfeit goods from reaching customers.

4. Does Asia Agent Visit Factories Before Finalizing Contracts?

Yes. Unlike many sourcing agents, we physically visit factories before signing agreements to:

• Meet factory owners & management – Ensuring they fully understand and accept contract terms. ✔ Inspect production capacity – Verifying equipment, materials, and workforce readiness. ✔ Confirm compliance – Making sure the factory meets quality and ethical sourcing standards.

🔹 Red Flag: Many suppliers agree to contract terms over email but don’t actually plan to follow them. Face-to-face negotiation ensures real commitment.

Case Study: Catching a Fake Factory

During a contract finalization visit in Vietnam, we discovered that a supplier did not actually own a factory—they were a middleman posing as a manufacturer. The client avoided working with a fraudulent supplier and found a real factory instead.

Final Thoughts

Signing a bulletproof supplier contract isn’t just about paperwork—it’s about leveraging negotiation power, ensuring legal enforceability, and monitoring suppliers in person.

At Asia Agent, we handle contract negotiation, supplier enforcement, and real-time factory oversight, ensuring your business stays protected from supplier risks.