Prices Moved: Who Bears the Increase When Your Supplier Demands More to Ship?

Of all the messages buyers forward to me, this is the most common shape: everything was fine until the money was sunk. Then materials rose, the exchange rate swung, or a tariff landed — and the supplier, holding your deposit and your half-finished goods, reopens the price. This guide covers who bears that increase in law, what the supplier's escape doors really do, and how to negotiate from the stronger position you actually occupy.

1. The Hold-Up Pattern

The pattern works because of timing, not malice. At quote stage, the supplier's price is theoretical; once your deposit is in and production started, your money is at risk in their factory. The supplier knows that switching factories mid-order costs you time, re-tooling and inspection risk — so the demand arrives at the moment of maximum leverage: “you pay 8% more or we don't ship.”

The packaging varies. The hard version is a formal-looking force majeure notice, stamped, citing “market conditions” or a policy change. The soft version is a voice message about friendship and how nobody wants to lose money — same demand, better manners. Both are the same transaction: the supplier is asking you to insure their business risk, after the contract fixed who bears it. The question is not whether the cost moved. It is whether the contract allocated that movement to you.

2. The Baseline Rule: A Contract Is a Price

Start from the rule that decides almost every one of these disputes: a contract is a price. A fixed-price supply contract allocates the ordinary risks of production — material costs, labor, exchange rates — to the seller. That is what the margin is for. The supplier's difficulty performing is the supplier's problem, not a legal basis to reopen the deal.

Which means the threat — “pay more or we don't ship” — is not leverage floating in a vacuum. Under Article 578 of the PRC Civil Code, where a party makes clear it will not perform, or demonstrates by its conduct that it will not, the other party may pursue breach liability before the performance deadline arrives. That is the anticipatory-breach rule, and it matters here: you do not have to wait for the delivery date to pass and hope. The moment the demand is made — ship or pay extra — the supplier has put non-performance on the table, and your remedies clock is running on your schedule, not theirs. If the deadline does lapse without shipment, the ordinary breach machinery applies: what to do when the supplier didn't deliver.

3. The Two Escape Doors, and Where They Actually Lead

Suppliers rarely say “I want more money” nakedly; they route the demand through one of two legal-sounding doors. Both are worth knowing precisely, because both fail for a price increase more often than suppliers expect.

Door one: force majeure. Under Chinese law, force majeure means an objective situation that is unforeseeable, unavoidable and insurmountable — the trinity is conjunctive, and all three must hold (Articles 180 and 590 of the PRC Civil Code). The party invoking it must notify the other party within a timely manner and provide proof within a reasonable time, and liability is exempted only to the extent the event actually caused the non-performance. Now apply that to the demand in your inbox: a raw-material price rise is foreseeable in the ordinary course of manufacturing and it does not make performance impossible — it makes it less profitable. It is not force majeure. Customs tariffs generally are not either, for a party whose job is to price that risk: an exporter selling into a tariffed market is in the business of tariff movements. What force majeure does cover — port closures, export bans, genuine disasters — excuses delay, and requires that notice-plus-proof package, not a paragraph about market conditions.

Door two: hardship. Article 533 covers the narrower, realer case: performance remains possible but becomes radically unfair for one side because of circumstances neither party foresaw. The legal consequence is a sequence, not a weapon: the affected party must first seek renegotiation; if renegotiation fails within a reasonable time, the party may ask a court or arbitral tribunal to adjust the contract or terminate it. Hardship is an application to a judge for a re-cut deal — it is not a unilateral walk-away right, and it is certainly not a unilateral right to demand 8% more before the container moves. A supplier waving a hardship argument at you is, legally, asking to renegotiate. That is a position you can work with.

Scenario	Force majeure?	Hardship?	Who bears it
Raw materials up 30%	No — foreseeable, performance still possible	Possibly, only in extreme cases, via court adjustment	Supplier, unless you agree to renegotiate
FX swing against the supplier	No	No — ordinary commercial risk	Supplier
New import tariff in your market	Generally no for the exporter	Generally no	Per the contract and Incoterms — check which party's obligations the duty attaches to
Port shut / export suspension	Possibly yes — notice + proof certificates required	—	Nobody bears delay during the event; document it and adjust the schedule
Supplier's power rationing or internal cost shocks	No	No	Supplier

4. The Buyer's Options Ladder

Your real options, priced honestly, from lowest to highest escalation:

1. Renegotiate — but with a side letter that preserves the claim. If a split of the increase is commercially sensible, take it in writing: the supplement states the additional payment is made under protest and without prejudice to your rights under the contract, with amounts potentially recoverable and all other terms unchanged. You get the goods; the legal question of who owed what stays alive for settlement leverage later. Never accept the increase by silence — a clean email trail of protest costs nothing.
2. Insist on performance — and cover elsewhere if needed. Demand shipment on the original terms (in writing), and if the supplier stays defiant, source the shortfall in the market. The price gap between your contract price and the replacement purchase — cover damages — is claimable under Article 584 of the PRC Civil Code, which measures damages by the loss actually caused by breach, including expected profit, limited to what the breaching party foresaw or should have foreseen. Replacement-purchase price gaps are the classic, well-understood example. This is the core of a no-delivery claim: the full playbook.
3. Cancel — and price the deposit first. Termination is the nuclear option because the deposit penalty cuts both ways. Under Articles 586 and 587 of the PRC Civil Code: if the party receiving the deposit breaches, they must return double; but if the party paying it walks away without cause, the supplier is entitled to keep it. Cancelling “without cause” because the price hurts is exactly that scenario — compute the forfeited deposit against your cover damages and any delay penalty before you pull the trigger: the deposit rules in detail; delay penalties and how courts adjust them.

Two wrinkles change the ladder. Partial performance: half-built goods mean termination raises questions of progress payments, work-in-process ownership and salvage value — document the production status before escalating, whatever you choose. Installment dynamics: a breach on one staged delivery does not automatically kill the rest; keep any termination notice precise about which installments it covers and why.

5. The Evidence Package to Build Now

Whichever rung you choose, the file is built while the argument is hot — evidence assembled now is worth triple the same evidence reconstructed later:

• Production status — photos or a third-party inspection of the half-finished goods, dated. This fixes what existed when the demand was made, and what a cancellation would actually cost.
• The demand messages — preserve the chat and email in full, with context. “Pay 8% more or we don't ship” is your anticipatory-breach evidence; do not let it live only in a phone that can be lost.
• Replacement quotations — written, dated quotes from alternative suppliers for equivalent goods. This is the number that becomes your cover-damages claim.
• Shipping-rate records — if freight moved too, the rate evidence supports (or rebuts) parts of the supplier's story and sizes your own delay costs.

With the file assembled, escalation is cheap and orderly: a properly framed demand letter often ends the matter, because a supplier holding half-built goods understands what a documented anticipatory-breach claim plus a deposit double-return claim looks like. When a lawyer's letter works. And mind the clock: claims like these have limitation periods that quietly run from when you knew or should have known of the harm — the timelines here.

6. Drafting Fixes for the Next Contract

Every hold-up is a drafting failure wearing a market's costume. Four clauses make the next order hold-up-proof:

1. Raw-material price-adjustment bands. Pick an index or benchmark, define a band (say, movements within a stated percentage are absorbed by the seller), and require documentary proof (mill invoices) for anything beyond it — with a fixed adjustment formula, not “parties shall discuss.” The band converts a crisis call into a paperwork exercise.
2. Tariff/allocation clauses. State who bears duties or trade-measures imposed between order and shipment, for each side of the journey. Silence is how “you pay 8% more” acquires its opening.
3. Delivery deadline discipline. A hard delivery date, a liquidated damages figure per week of delay, and an express right to cancel after a stated overrun. Vague “approximately 45 days” deadlines are how hold-ups buy months. Drafting the LD clause.
4. Deposit sizing. The deposit is your lever, not just your exposure: a properly sized deposit under the statutory regime means the supplier's breach costs double — and your walk-away costs yours. Size it deliberately. How to size it.

None of these clauses require renegotiating the commercial deal — they require deciding, in advance and in writing, who bears which kind of movement. That decision is the whole game.

7. When the Supplier Is Genuinely Distressed

Finally, calibrate for the case where the price demand is a symptom, not a strategy. A supplier demanding money mid-order and showing other distress signals — slowed replies, requests to pay a personal account or a third company, other buyers chasing, equipment being moved out — may be insolvent, and the 8% may be a bridge to the end of the quarter. Then the ladder changes: speed matters more than principle, preservation of assets beats letters, and your claim becomes one among many in a bankruptcy process where timing decides recovery. What to do when the supplier is going under — and read the red flags before you pay the increase, because the worst outcome is funding a doomed order.

The through-line: the law puts you in the stronger position — a contract is a price, and the demand to reopen it is itself the breach. The work is using that position cleanly: evidence first, escalation in writing, every concession bought with a reservation of rights.

This article is general information, not legal advice, and does not create an attorney–client relationship. Statutory article references reflect the PRC Civil Code as currently in force and may change; outcomes vary by contract, evidence and court. Nothing here is a guarantee of results.