Installment Payment refers to the buyer paying the seller in several installments at the time points agreed in the contract. It is commonly used for large equipment, customized products, long-cycle orders, or long-term cooperative customers. A typical installment structure includes: down payment (deposit, e.g., 30%), payment before shipment (e.g., 40%), payment after arrival/acceptance (e.g., 20%), and final payment/retention (e.g., 10%). Use cases: long production cycles, large amounts, heavy cash flow pressure on the buyer, or when trust between both parties is gradually being established. Notes: it is necessary to specify each installment ratio, payment time, trigger conditions (such as copy of bill of lading, passing acceptance inspection), currency, exchange rate risk, overdue interest, and liability for breach; installment payment differs from open account in that the former has clear installment milestones, while the latter only stipulates a credit term; combining it with an L/C can reduce risk. Similar to installment payment but easily confused is 'Partial Shipment': the former is a payment method, while the latter is a delivery method. It is recommended to stipulate it in detail in the contract and insure against export credit risk.
📝 Examples
1. The total amount of this contract is USD 100,000. The buyer shall pay a 30% down payment within 7 days after signing the contract, 40% before shipment, 20% after receiving a copy of the bill of lading, and the remaining 10% as retention within 30 days after passing acceptance inspection. (Note: a typical installment payment ratio and trigger conditions, covering four milestones: down payment, pre-shipment, post-arrival, and retention.)
2. Because the customization cycle of this production line is as long as 6 months, we agree to adopt installment payment: 20% upon signing, 50% upon completion of production, 20% after arrival and commissioning, and the remaining 10% after the one-year warranty period ends. (Note: for long-cycle customized equipment, installment payment is linked to the warranty period, reducing the buyer's cash flow pressure and safeguarding the seller's collection.)
💡 Foreign Trade Tips
Foreign trade terms are the foundation of international business communication
Trade practices may vary slightly by country; pay attention when using them
When using terms in contracts, specify the applicable version (e.g., Incoterms 2020)
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