What a China Sourcing Company Is Liable For

A container of goods arrives with a coating defect across roughly 40% of the units. The buyer turns to thesourcing companythat found the factory, ran the samples and booked the inspection, and asks it to make good. The reply distinguishes carefully between the factory's obligations and its own, and the buyer reads it as evasion. It is not. The company contracted as an agent, the goods were sold by the factory, and what he can claim from each party is a different question with a different answer.

One structural question decides most of this: whether the sourcing company is acting on your behalf or selling to you. Everything about recourse follows from that, and it is settled long before anything goes wrong.

Key Takeaways

• Whether a sourcing company acts as agent or as seller determines who you can claim against for defective goods.

• A disclosed agent generally creates a contract between you and the factory rather than between you and itself.

• Where the company buys and resells, it is the seller and carries the seller's conformity obligations directly.

• An agent is answerable for its own performance: care, disclosure, accounting for money and honest reporting.

• Service agreements commonly cap liability at the fee paid, which is far below the value of the goods.

Agent or Seller: The Question Behind Everything

The distinction sounds academic and decides who pays when a batch is wrong.

Acting as Your Agent

Where a sourcing company acts as your disclosed agent, it arranges a contract between you and the factory.TheUNIDROIT Principles of International Commercial Contractsdevote a section of Chapter 2 to the authority of agents, and the general position where agency is disclosed is that the legal relationship formed is between the principal and the third party.

In practice that means your claim over defective goods runs against the factory, not against the agent, unless the agent did something wrong itself. The agent's own liability attaches to its own work, which is a narrower and different thing.

Buying and Reselling as Principal

Where the company purchases from the factory in its own name and sells to you, it is the seller.All the seller's obligations apply to it directly, including conformity of the goods to what was agreed, which under theCISGmeans quantity, quality and description required by the contract, with a set of remedies for non-performance.

This is why the resale model, whatever its drawbacks on price visibility, gives buyers the simplest recourse. One counterparty, one contract, one party answerable for what arrives. Buyers who value that simplicity should recognise they are paying for it in transparency.

Hybrid arrangements exist and need reading carefully. A company may act as agent on most products while reselling a few, or invoice you for goods on some orders and for a service fee on others. Neither is improper. It does mean your recourse changes order by order, so record which capacity applied to each shipment rather than assuming one answer covers the whole relationship.

Expert Tip:Read the invoice, not the marketing. Whoever invoices you for the goods is the seller, and if that is your sourcing company then it is the party answerable for conformity regardless of what the service agreement calls the relationship. I check this on the first order every time, because companies describe themselves as agents while operating as resellers and occasionally the reverse. The document trail is what a tribunal would look at, and it is what you should look at too.

What an Agent Actually Answers For

Narrower recourse over the goods does not mean no recourse at all. An agent carries real obligations, and they are the ones buyers most often fail to invoke.

Care, Disclosure and Accounting

An agent owes competent performance of the work it agreed to do. If it was engaged to verify a supplier and failed to check a business licence, if it inspected and passed a batch that any competent inspector would have failed, or if it misreported production status, those are failures of its own performance rather than the factory's.

It also owes disclosure and honest accounting. Undisclosed payments from suppliers, an undeclared prior relationship with a factory it recommended, or a margin taken while presenting itself as fee-based all go to the heart of an agency relationship.The International Chamber of Commerce publishes amodel commercial agency contractthat sets out these duties explicitly, which is a reasonable starting point where you have no drafting of your own.

Money handling deserves separate mention because it is where the clearest breaches occur. Where payments route through a provider, it holds funds that are not its own, and it owes an account of what was paid, to whom and when. Ask for the factory proforma invoice on each order, and treat reluctance to provide it as a signal rather than an administrative inconvenience.

What Stays Outside Its Responsibility

An agent is not an insurer of your commercial outcome. It does not guarantee the factory's solvency, does not underwrite market demand, and is not liable because a product sold badly or a competitor undercut you.

Nor does it absorb your compliance obligations. Market safety rules, labelling and classification sit with you as importer, and an agent that helps with them is providing assistance rather than assuming the duty. Confusing help with transfer of responsibility is a common and expensive misunderstanding.

Common Mistake to Avoid:Assuming your sourcing company is liable for defective goods simply because it found the supplier is the error underneath most disputes in these relationships. Where it acted as a disclosed agent, the goods were sold by the factory and the claim lies there. What you can pursue against the agent is its own failure: a check it agreed to perform and did not, a report that was wrong, a conflict it did not disclose. Frame the claim against the right party from the outset, because a badly aimed claim wastes the notice period that mattered.

Where Liability Gets Capped

Even a clear breach by an agent runs into the limits written into its own agreement, and those limits are usually severe.

Limitation Clauses and the Standard of Care

Most service agreements cap liability at the fees paid, sometimes at fees paid in the preceding twelve months. On a 5% commission that means a cap of roughly 5% of the goods value, which will not come close to covering a container of unsaleable stock.

Read the standard of care too. Reasonable skill and care is the usual formulation and it is a meaningful obligation. Best endeavours to assist is not, and clauses phrased that way convert an obligation into an aspiration. Where an agreement disclaims responsibility for supplier performance entirely, that is normal for a genuine agency and worth reading alongside what the company is affirmatively promising to do.

Notice periods sit alongside the cap and are easy to miss. Service agreements frequently require claims to be raised within a defined window, sometimes as short as thirty days from delivery, and a claim raised late may be barred regardless of merit. Diary the window when goods arrive rather than trusting that a reasonable complaint will be treated reasonably.

Insurance and Practical Recourse

Ask whether the company carries professional indemnity cover and for how much. Firms doing inspection work in particular should, and the answer tells you both about their scale and about how seriously they treat the risk of their own error.

Practical recourse also depends on where the company sits. A claim against an entity in your own jurisdiction is a different proposition from a claim against a company in China, whatever the contract says. This is not an argument against Chinese providers, and it is a reason to understand what enforcement would actually involve before you need to know.

Expert Tip:Negotiate the liability cap upward for the specific work where an error would be expensive, rather than trying to remove it altogether. A cap at fees paid is standard and defensible for general coordination. For inspection specifically, ask for a separate, higher cap, since that is the one service where a failure can cost you an entire shipment. Providers respond far better to a targeted request than to a demand for unlimited liability, and the conversation itself tells you how confident they are in that part of their work.

Structuring the Relationship Clearly

Most of the difficulty here is preventable with a short document written before the first order.

The Clauses That Do the Work

State the capacity explicitly: agent acting on your behalf, or seller. Name the deliverables the company is responsible for producing. State the standard of care. Set the liability cap, with a separate figure for inspection if that is in scope. Include an anti-kickback provision requiring disclosure of any payment or prior relationship with suppliers.

Add a clause on who owns the supplier relationship and the documentation if the arrangement ends. Providers differ substantially on whether factory identities are yours or their commercial asset, and discovering the answer during a separation is worse than agreeing it at the start.

Practical Steps Before You Sign

Ask three questions and record the answers. Who invoices me for the goods. What exactly are you liable for if a batch fails. What is your cap and do you carry insurance. Providers with clean structures answer all three immediately because they have thought about them.

Then keep your own evidence chain: the specification, the approved sample, the inspection brief, and dated records of what was reported to you and when. Claims against agents turn on what was agreed and what was reported, and buyers who kept the correspondence in order are in a substantially better position than those reconstructing it later.

Expert Tip:Put the standard the inspection will be judged against into the agreement rather than into an email. Sampling level, acceptance limits, defect classes. If an inspection later passes a batch you believe should have failed, the question becomes whether the inspector applied the agreed standard, and that is answerable only where a standard was actually agreed. Without one, the discussion collapses into opinions about quality, which nobody wins.

How NewBuyingAgent Stands in the Chain

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Whatever the contractual structure, the practical protection against a bad batch is the checking that happens before goods leave, not the claim that follows afterwards.

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Prevention of that kind depends on somebody being present at the factory rather than corresponding with it, which is the part that otherwise falls to the buyer.

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Frequently Asked Questions

Is my sourcing agent responsible if the goods are defective?

It depends on the capacity it acted in. As a disclosed agent, the sale is between you and the factory and your claim over the goods lies there. Where the company bought and resold to you, it is the seller and carries conformity obligations directly. Check who invoiced you for the goods.

What can I claim against a sourcing company?

Its own failures: verification it agreed to perform and did not, an inspection carried out incompetently, misreporting, undisclosed payments from suppliers, or mishandling of funds. These are breaches of its own obligations rather than the factory's, and they are usually subject to a liability cap in the service agreement.

Are liability caps in sourcing agreements normal?

Yes, and a cap at fees paid is the common formulation. It is worth negotiating a separate, higher cap for inspection work specifically, since that is where an error can cost the value of a shipment. Ask also whether the company carries professional indemnity insurance and for what amount.

How do I know whether my provider is an agent or a seller?

Look at who invoices you for the goods and whose name appears as seller on the commercial documents. Marketing language is unreliable, since companies describe themselves as agents while operating as resellers. Settle the capacity explicitly in the agreement so that both sides are working from the same understanding.

Does it matter which law governs the agreement?

It matters for enforcement more than for drafting. A choice of law clause settles which rules apply, and separately you need to know where a judgment or award could actually be enforced against assets. Arbitration is common in these agreements for that reason. Where the sums involved are material, take advice before signing rather than after a dispute.

Conclusion

Settle capacity first, because everything else follows from it. Ask who invoices you for the goods, name the deliverables the company is answerable for, read the cap and negotiate a higher one for inspection, and keep your own record of what was agreed and reported. Recourse is decided by documents written before anything goes wrong, not by arguments made afterwards. For buyers who would rather prevent bad batches than pursue them, NewBuyingAgent handles factory selection, quality control and delivery from China.

Sources

1. International Institute for the Unification of Private Law (UNIDROIT) — UNIDROIT Principles of International Commercial Contracts 2016, including Chapter 2 Section 2 on the authority of agents —https://www.unidroit.org/wp-content/uploads/2021/06/Unidroit-Principles-2016-English-bl.pdf— accessed 28 August 2026

2. United Nations Commission on International Trade Law — United Nations Convention on Contracts for the International Sale of Goods (Vienna, 1980), covering seller obligations and remedies for non-performance —https://uncitral.un.org/en/texts/salegoods/conventions/sale_of_goods/cisg— accessed 28 August 2026

3. International Chamber of Commerce — ICC Model Commercial Agency Contract, standard provisions for agency-principal relations —https://iccwbo.org/business-solutions/model-contracts-clauses/icc-model-commercial-agency-contract/— accessed 28 August 2026