Key points in sending a collection letter to domestic party in default

Due to the revision of macro policies, overcapacity in certain industries, financing and operational difficulties of industrial enterprises, etc., manufacturing-type foreign-invested enterprises recently are commonly facing the problem of domestic buyers defaulting on their payments.

Considering the co-operative relationship, the seller will first send a collection letter. As such a letter can signal the limitation of actions, it is of major significance in transactions that span a relatively long period of time. In court, if the defaulting party bases its defence on the limitation of actions, a dispute will inevitably arise ranging from whether the letter was served to the content of the served letter.

Service of collection letters

How does a collecting party show that it has sent the defaulting party the letter, and what does it do if the defaulting party claims that the contents of the letter are not those of a collection letter? With respect to reminders, the Supreme People’s Court takes a stance of presumed service, namely, the reminding party needs to evidence the content and mailing of the reminder, not due delivery.

Blake Yang is an associate at Martin Hu & Partners