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Five benefits of signing a contract with a Chinese company

by · 11/10/2020, 8:07:11 AM

In some business relationships, some factors are important, including background checks and contracts. The contract with the Chinese company can guarantee the clarity of both parties. Many problems in the commercial transactions of the Chinese company are not caused by the malice or incompetence of both parties, but by poor communication. A special feature of the transaction seems so obvious to one party that they neglected to include it in the clause, but the other party ignored this issue and considered it appropriate.

1. A clear contract agreed by both parties can prevent such problems. Everyone either agrees to the contract or disagrees with the contract. Any misunderstanding must be highlighted in the process. One mistake that may prevent foreign companies from benefiting from Chinese contracts is English, not Chinese contracts. For obvious reasons, English contracts have far less impact on clarity than Chinese contracts. Third-party translators professionally translate the contract into Chinese, which can ensure that both parties are clear, and can also disclose the possibility of legal action when needed. This seems obvious, but for Chinese manufacturers, there are generally separate trading companies to handle foreign trade. Make sure that the manufacturer’s good practices are also specified in the contract.

2. The contract indicates that your party’s commitment seems unwilling to negotiate a clear contract with the Chinese company. This may suggest to them that you take the transaction seriously, or that you do not take the quality and result of the transaction seriously. In any case, this is not a good basis for establishing a business relationship with any company. On the contrary, it seems to value contracts and terms, and does not accept unqualified work in the relationship. This impression can be enhanced by making it clear in advance that you will perform background detection and quality inspection. Another advantage of adopting this attitude is to make it clear that you will not easily become a victim, thereby helping to defend against potential scammers.

3. Compensation clauses can prevent delays from hitting a wall with Corner. It is wise to include clear compensation clauses in the contract to cover potential delays and quality problems. For Chinese manufacturers, delaying orders and reducing quality are always temptations, especially if they are not sure whether the buyer is fully committed to the transaction and relationship. The specific penalties for these measures give the contract greater powers, not only as a tool to deal with problems after they occur, but also to prevent them before they occur. In addition, if necessary in the future, the specific wording of the breach of contract can greatly increase the chances of legal proceedings.

4. Contracts can provide support for disputes. Even before legal action is taken, if the other party violates the terms, a clear contract can also have more room for disputes. The value of verbal or non-contractual written agreements is small, especially for Chinese companies that are accustomed to making uncertain transactions with foreign companies. While they are good at reaching agreements, they anticipate that future difficult conversations with you will inevitably deviate from the agreement between the two parties. If the other party knows that you have committed such a deviation, it is almost impossible to cause disputes, but formally agreeing to these terms in advance may give you room for rotation.

5. The contract signed with the Chinese company can be litigated. If the contract dispute with the Chinese company does not yield results, legal proceedings may eventually be taken. If there is no contract, the chance of successful legal action is likely to be zero. In addition, no contract can be performed.

Contracts for business in China also need to follow certain requirements. However, what many people who do business with Chinese companies overlook is that Chinese contracts do have power and are worthy of serious execution. In fact, China ranks 19th in the world in terms of contract enforcement, surpassing Switzerland, Japan and the United Kingdom. This means that signing a legal contract with a Chinese company, violating the terms of the contract, has a very good prospect of initiating legal proceedings. This goes against the obvious impression many people have of the Chinese business world that the law hardly takes this into account.

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