Contracts in China: Q&A with an English-Speaking Chinese Lawyer
In this blog post, our Chinese lawyer answers some of the more common questions about contracts and their enforcement in China.
Answers are provided for general reference and are given in a straightforward format, without the “Chinglish” or “Legalese” that you may come across when dealing with other lawyers in China.
China Contract: Overcoming Language Barriers and Finding English-Speaking Chinese Lawyers
- Western lawyers aren’t allowed to practice in China.
- Chinese lawyers fluent in English are hard to find and expensive.
- AsiaBridge Law carefully screens, trains, and coordinates a network of local lawyers across Asia. Lawyers are selected for the right mix of professionalism, honesty, and affordability.
- AsiaBridge Law paralegals coordinate local lawyers on behalf of the AsiaBridge Law clients while providing account management in English, Spanish, Portuguese, and other major languages.
In this blog, an English-Speaking Chinese Lawyer will answer the following common questions asked about contacts with Chinese companies.
- Do contracts mean anything in China?
- Are English language contracts legally binding in China?
- I have an existing contract template that I use back home. Can I hire a lawyer in China to adjust it for use in China?
- I want to use my bilingual contract over and over again with multiple suppliers, but I don’t speak Chinese. How do I update the Chinese parts of my bilingual contracts when I have new orders to place?
- I don’t speak Chinese; how do I know that the Chinese company’s real name (in Chinese) is on the contract?
- How is a NNN different from an NDA?
Do contracts mean anything in China?
English-Speaking Lawyer in China Answers:
If something goes wrong, some clients doubt a good contract will protect them. I often hear comments like: ‘The Chinese legal system is slated against foreigners.”
I agree that China’s legal system is far from perfect and actually a Chinese person could feel just as confused as any foreigner when dealing with all these changing laws and regulations, although foreigners do face the cultural difference and language barrier.
First off, a well-prepared contract gives out the signal: I care. Other people will think before acting against you.
Second, a good contract provides remedy if anything should go wrong.
In my opinion, doing business without a good contract is akin to parking your car in public with a broken window and your wallet on the seat.
Are English language contracts legally binding in China?
English-Speaking Lawyer in China Answers:
An English-only document signed by both parties is legally binding. But it is bad idea! Here is why, as explained by AsiaBridge Law’s advisory board member- Mike, from the US.
First, to have any legal validity in China, you have to list the Chinese name. I’m talking about the Chinese name you see on their Chinese business license. Local authorities and courts only recognize registered Chinese names. So, the English name, or whatever they call themselves for marketing, is not an official name. You can’t sue some company named “Best Good Star Mfg.” But you can sue “最好星有限公司”!
Keep in mind that to litigate outside of China is for the most part meaningless. The vast majority of Chinese companies do not have any assets outside of China and a court in China does not enforce foreign judgments, so it means that you actually get nothing (except a bill for wasted legal fees) even if you prevail in a court back home. So, if litigation is the only option to solve the dispute, a lawsuit should be filed in a Chinese court.
If your key documents are in English, it complicates things a lot. For example, before the courts can make a decision, the English documents/ supporting evidence will need to be translated into Chinese by a court approved translator for the court’s review. This can be expensive and very time consuming. Plus, the defense can employ a stall tactic of fighting over the wording of the translation itself. It’s much better to have your attorney structure the wording in advance in Chinese rather than hope the court’s translation will be accurate. Be safe. Use bilingual contracts.
I have an existing contract template that I use back home. Can I hire a lawyer in China to adjust it for use in China?
English-Speaking Lawyer in China Answers:
You can certainly hire AsiaBridge Law to customize your existing templates. Once a block of General Counsel time is booked, the hours are yours to assign as you wish. However, it may actually be better and more affordable for you to purchase the AsiaBridge Law templates for the following reasons:
- It’s quite dangerous to simply translate an English only doc from back home and hope it protects you in China.
- AsiaBridge Law contract templates have a proven track record.
- The lawyers in our network are familiar with the AsiaBridge Law templates so it is easier for them to make adjustments. If they are working from an outside template, they may need to spend time getting up to speed on your template, and that could waste time and costs. This point is especially true if your existing contract is not already bilingual.
However, if your existing document is bilingual, then perhaps there is no need to buy the AsiaBridge Law contract templates and you can simply engage AsiaBridge Law’s General Counsel services to customize your existing template and confirm it is suitable for China.
I want to use my bilingual contract over and over again with multiple suppliers, but I don’t speak Chinese. How do I update the Chinese parts of my bilingual contracts when I have new orders to place?
English-Speaking Lawyer in China Answers:
As part of our service, a lawyer will be assigned to your project for an agreed block of time to customize your contracts. As long as you have time remaining in the block, the lawyer is available to update and revise your documents.
Here are some options if you have used up the agreed block of time:
As the translation is done sentence by sentence rather than page by page, the bilingual contract is provided to you in a format that you can edit on your own if needed. Assuming your core business doesn’t change and you are using the same terms & conditions for multiple suppliers, you can cut out the Chinese name of the previous supplier and insert the Chinese name of the new supplier.
But if your products change or you have negotiated new terms, you should consider re-engaging our lawyers under a new block of time. But as you have already paid for the template when you initially hired AsiaBridge Law, you would not need to re-purchase the template again just to have updates made.
I don’t speak Chinese; how do I know that the Chinese company’s real name (in Chinese) is on the contract?
Make it easy for the Chinese judge to rule in your favor.
Once you know the official name of the Chinese party, our lawyers can easily insert it into the contracts for you. As part of our service, when we send you the final draft of the contract, we also provide a list of tips to help you make sure you are signing the contract with the right party. For example, it is very important to have an official name/ corporate chop on the contract and that this name matches public records and corporate bank accounts.
Important: A great contract with a fake company doesn’t protect you! If you don’t know the official Chinese name of the company or you are unsure about the company’s reputation and fairness, the following services are recommended:
Corporate Assessment (CA): Ownership, Stability, Reputation & Assets of a Chinese company
Red Flag Assessment (RFA): Risk, Scams & Fraud in a given transaction
How is a NNN different from an NDA?
NNN stands for “Non-disclosure, Non-compete, Non-circumvention” and is a more robust version of the traditional NDA (Non-disclosure agreement)”. Simply put, the NDA is a promise that “they won’t tell anybody outside their organization about the idea”. The NNN adds more layers of protection because it makes them promise to not only keep it a secret but also not develop the idea in house. So technically, under an NDA, a company could copy your idea, make the product in-house and sell it to your competition as long as they did it inside their organization rather than telling somebody outside about it. For those reasons an NNN is better than the NDA as the NNN specifically addresses not only secrecy but also non-compete and non-circumvention.
Most professional lawyers dealing with China have moved from the NDA to the NNN in the past decade. The NNN contracts provided by AsiaBridgeLaw are well-written and suppliers who have used an NDA in the past will have no problem accepting the terms of the NNN as well. And if a supplier fights the terms of the NNN, that’s a big red flag that they may have a hidden agenda.
Read more about it!
Related content can be found at AsiaBridge Law’s China Business, Law & Sourcing Library.
ABL Blog: Sr. Editor and Primary Content Creator: Michael J. Bellamy
Originally from Upstate New York, Mike moved to Asia in 1993 and is a China business advisor to both Fortune 500 companies and small businesses. Recognized as an expert on doing business in China, he has been interviewed by WSJ, CNBC, FT & Bloomberg.
A featured presenter on China issues at seminars, trade shows and corporate events across the globe.
Learn more about Mike and AsiaBridge Law at
https://www.asiabridgelaw.com/business-advisory-services/
Mike is the author of “The Essential Reference Guide to China Sourcing”
(available on Amazon).