When you take money, write "earnest deposit", not "booking payment". Write the penalty as a number, and review a payment term as if you were lending

Only the words “earnest deposit” bring the double rule: if you break the deal, you do not get this money back; if they break it, they return double. The part above 20% of the contract amount does not count. Written as a booking payment, the law has no such rule. Giving a payment term is lending them your money for nothing. If they go under, it is a bad debt.

Cost

No money. Write “earnest deposit” in the contract. The amount does not exceed 20% of the contract total. Take the money before you deliver. Before you agree to let the other side take the goods and pay later (a payment term), check them first.

Benefit

Earnest money counts only once the money has actually been handed over (it is established on actual delivery). If the side that paid the earnest money breaks the deal, that money is not returned. If the side that received it breaks the deal, it returns the original sum and pays another equal sum on top (double return). The part above 20% of the contract total (the subject amount of the main contract) is not counted as earnest money. If the agreed penalty is absurdly higher or absurdly lower than the actual loss, the court may, at one side's request, adjust it down or up. If both a penalty and earnest money are written into the contract, a real breach lets you claim only one of them. You cannot take both (nationwide, from 2021).

Notes

"booking payment" has none of the earnest-money rules in the Civil Code. It is generally treated only as a prepayment. That is the common way of speaking in practice. This section has not checked the cases. Paying a reservation earnest money on a new home, and then not signing the formal contract, has a separate set of rules. See item 11 of section 15 (reservation earnest money). A payment term is an interest-free loan of your own money to the other side. If they go under, it is a bad debt. Before you give a payment term, check their record on the National Enterprise Credit Information Publicity System, and see whether they have been sued.

Sources · 1

1. 全国人大 (2020). 民法典（第五百八十五、五百八十六、五百八十七、五百八十八条）. spp.gov.cn/spp/fl/202006/t20200602_463888.shtml