Drafting China Contracts That Work

1. China Enforces Good Contracts

I hate when someone claims China does not enforce contracts. I hate this because it is just not true. Yes, if you are seeking to protect your cutting-edge semiconductors based on a a contract enforceable in China, your odds are not good. But if, on the other hand, you are seeking to enforce a run of the mill manufacturing contract or service contract or whatever and your contract was drafted with China in mind, you ought to be just fine. The World Bank ranks China better for getting a contract enforced than the United States.

2. The Five Keys to a China Contract That Works

The following are the five keys to a China contract that works:

1. You generally want your contract with Chinese companies to provide for disputes to be resolved in China, either in a Chinese court or before a China-based arbitral body. Your choice of venue will depend on the nature of your contract. China does not enforce most foreign court judgments. See e.g. China Enforces United States Judgment: This Changes Pretty Much Nothing. China’s courts do (technically anyway) enforce most foreign country arbitrations, but not always, and getting a Chinese court to do this is rarely quick or easy.

2. You generally want your contract with Chinese companies to use Chinese as its official language. See Dual Language China Contracts: Don’t Get Fooled! If you are going to have your contract be in Chinese, your lawyer must fully understand the Chinese in your contract and be fully capable of translating that contract into English for you.

3. You generally want your contract with Chinese companies to call for application of Chinese law. If you are going to have your contract in Chinese and your disputes before a Chinese trier of fact, this only makes sense.

4. You usually should have a provision calling for contract damages. This provision can act as a heavy hammer against your Chinese counterparts. See China Contract Damage Provisions.

5. Make certain the name (in Chinese) of your Chinese counterpart is 100% accurate and corresponds with its official company name. And while you are at it, it is good to have your Chinese counterpart stamp/seal the contract as well. See China Company Chops: The Basics.

Go forth and prosper.