Negotiating a Contract in China!

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“A written contract in China is just the starting point for new negotiations”, or so I often think when pondering the way that seemingly “rock-solid” agreements are ignored for the sake of expediency (and usually to make a quick profit). This would seem to infer that there is no legal recourse for breaches of contract, but that is becoming untrue. An increasing number of foreign teachers and businessmen are successfully taking legal action to protect their rights. Let’s look at how you can protect yourself by ensuring your contract has little chance of being disputed by the other party.

First, ensure you retain your own legal counsel. Don’t fall for accepting the counsel of your new Chinese business partner “to save money and time”. Make sure you have clearly identifiable performance indicators, quality control measures and payment schedules. Don’t accept any provisions in the contract that you have no control over. For example, having a penalty clause for late payment during a holiday period when banks are shut. Don’t assume any parties in the contract have the ability or authority to perform specified tasks. You need to undertake exhaustive due diligence. Make sure you are able to obtain any legally required licenses or permits to fulfil your obligations. Don’t accept any statements that certain covenants or clauses are required under Chinese law without checking with your legal counsel. Also ensure that you correctly sign the contract and initial each page. The most important thing you should do is uphold your part of the contract. You could find it an expensive exercise otherwise!

Good luck with your contract negotiations. Remember that often you will be tested on your ability to foresee problems before they occur. Many business operators in China are seeking a fast profit rather than a steady income stream!

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