The Supreme People’s Court Issued the Reply on the Validity of Clauses Requiring Third-Party Payment

On August 27, 2024, the Supreme People’s Court officially issued the Reply on the Validity of Clauses Agreed between Large Enterprises and Small and Medium-sized Enterprises to Use Third-Party Payments as a Precondition for Payment (the “Reply”).

The Reply gives a negative evaluation on the validity of agreements between large enterprises and small and medium-sized enterprises to use third-party payment as a payment condition, and stipulates how to determine the payment period and breach of contract liability after the relevant clauses become invalid. It reflects a clear attitude of guaranteeing the fair participation of small and medium-sized enterprises in market competition and safeguarding the legitimate rights and interests of small and medium-sized enterprises in accordance with the law, and is of great significance for preventing and resolving financial risks and promoting the substantive resolution of contradictions and disputes.