5 THINGS YOUR PARTNER DOESN’T TELL YOU 

In the practice of international manufacturing contracts, there are at least five “blind spots” that counterparties rarely disclose, yet they are decisive in shaping the Manufacturer’s legal risk exposure.

First, the choice of governing law as foreign law, coupled with dispute resolution before foreign courts, places the Manufacturer in a disadvantaged position, increasing costs and limiting the ability to effectively protect its rights.

Second, although the counterparty is not directly involved in production, it often retains control over the supply chain; therefore, any delay in payment can disrupt the entire operational flow, exposing the Manufacturer to significant financial risk.

Third, termination clauses allowing the counterparty to end the contract at any time without cause result in the Manufacturer bearing all sunk investment costs, lacking any recovery mechanism, and losing the ability to forecast cash flow.

Fourth, indemnity obligations are typically drafted broadly, covering product defects, legal violations, and intellectual property issues, sometimes extending to third-party conduct, without any limitation of liability—creating exposure to uncontrolled financial obligations.

Finally, the mechanism for appointing subcontractors and allocating intellectual property rights creates a substantial imbalance: the counterparty controls supplier selection, while the Manufacturer remains fully liable, and intellectual property is directly assigned to the counterparty—undermining the Manufacturer’s legal position and control over its core assets.