In business, I can't do anything without a contract, or letter of intent. Without one, we hear of folks reneging on their promises to deliver. (How many times have you lost your good faith deposits for gliders that never materialized).
Also without a contract how would a vendor like Zhuo know what is an acceptable level of quality. Guys like him think shoveling crap out the door is the same thing as meeting customer expectation for volume and that there is no quality expectation. And then feel justified in claiming being wrong when they aren't paid for the crap they think was suitable and delivered on time.
Also doing business without a contract is a sure fire way to loose friends.
The Joker
To illustrate the Chinese mentality on this subject, let me tell you what happened to me a few years ago in China. I had designed some sports equipment for a very famous North American fitness company and I was in Shanghai for a show to help my client to sell the stuff to western visitors and explain it, as I can speak both English and Manadrin Chinese. During the show I noticed that there was another outfit also selling similar stuff under the same brand name.
I knew it was not legal, but since it was pretty unusual to see someone so blatantly copying or using another's trade mark, I singled out the company boss whom I had met before under similar circumstances. He recognized me too, so curious, I invited him for a coffee (DONT drink Chinese coffee! Its hucking forrible) and after we'd sat down and reacquainted, I asked him how he could be so obvious in publicly using the name of a competitor, and not only that, he'd claimed that the stuff was designed by them too. Wow!
A well-dressed and handsome young guy of about 35, He sat back and looked steadily at me, then he said:
"Ok what can you do? If you ask me to take down the illegal trademarks then I will do it, but only if the organisers threaten to kick me out of the show, which they wont" he smiled, tapping his wallet pocket.
"If you try to sue me I will have disappeared, my company name and even my factory will be gone, and one week later I'll be in full production under a different name and in a different place."
"If you actually did manage to sue me personally, it would take years, and even if you were successful I'd never pay, I'll be long gone and it will have cost you a fortune to do the litigation."
"Remember who I sell to" He said with a big grin. "I sell to the West, to you guys, and you guys are fully aware that what I am selling has nothing to do with the designers or their trade marks. At best its a copy and at worst its a poor Chinese design - but as long as the price is right, you guys just dont care! Think about it, I don't sell in China, so if you didn't buy my fake products, I couldn't make the stuff anyway, so as long as you keep buying it, I'll keep making it."
Unfortunately its exactly there, that East meets West.
MY own problems.
1. A contract for smaller business is literally toilet paper. Its not enforceable, and only would be if the goods that are being made OEM were previously registered with the China copyright/IPR department before any production started. Added to that, the IPR department for each province is different and has different requirements. Registration takes 6 to 9 months for each product. Of course nobody tells you this, because few people do small scale OEM in China; its all ODM or large scale.
2. You think things are cheap in China? Going after this kind of thing legally will involve a retaining fee upfront of about 20,000 US$ with absolutely no guarantee of success. Each court appearance demands another fee, and also the legal preparation, so lets say if you want to go get your stuff back, you need about 35 to 40,000 US$ in your war chest to start with. And thats if you DID register the products.
3. Chinese law completely protects the smaller OEM, and with the big OEM violators we're talking big money anyway. So I have found other ways to prosecute my claim for my moulds. Zhou can tell any story he likes about me, and there have been some pretty good ones I can tell you, though more fool those that believe them.

But he will not escape the results of these claims as they will come from his own government.
In a nutshell, I cant make him return my moulds, but I can make him wish he had.
So if you are going to do OEM business in China and your name is not VOLKSWAGEN AUDI or similar, then forget any contract.
Doc.