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Dual Language China Contracts Double Your Chance Of Disaster.

Posted in Legal News

Got an interesting email the other day regarding the language to use on a contract. It went as follows:

I was talking to someone who was bragging about how great their employment contract was yesterday, and he said “My contract is in both Chinese and English, and it says that in the case of a difference in the translation, the English language version takes precedence.”
Am I the only person who sees the potential abuses of this, when given to someone who cannot read Chinese? If the Chinese language version says the opposite, he’s screwed, right?
If you choose to answer this question, please answer it on your blog. I’m sure everyone considering employment in China would like to know the answer.

The answer is yes, if the Chinese language version says the opposite of the English “he’s screwed.” And here is why. And this holds true for all agreements, not just employment contracts.
In China, Chinese language contracts take precedence over any other language, unless the Chinese language contract states that some other language controls. So if a contract is in both Chinese and English and the Chinese version says the Chinese language controls and the English language version says English controls, the Chinese language version will control. Even if the Chinese language version is silent as to which version controls, I am pretty certain the Chinese language version will actually control.
Years ago, my firm was representing Russian company that had an agreement with a dishonest American company (guess what people, it is not always the “foreigners” who pull this stuff). The English language version said that the English language version would control and the Russian language version said that the English and Russian versions had “equal weight.” On one critical issue, the English language version said one thing and the Russian language version said either the same thing or something else, all depending on how one interpreted the Russian version. We argued that the Russian version said “something else” and the American company argued that, no, the Russian version, “of course” said exactly the same thing as the American version. We settled before a ruling, but I was not optimistic that our interpretation would carry the day even though we had an email from the American company that helped our argument.
I have written on this before but it bears repeating. If you are going to have your contract in multiple languages, make sure you know for certain which language is going to control. This means making sure you know exactly what all of your contracts say, whatever the language. Having two languages with equal weight is pretty much always the worst “solution” of all because all that does is increase the room for interpretation and delay it until there is a dispute. It is far cheaper and more sensible to get the meaning clear before signing a contract than to pay your lawyers to fight about it later.
For more on the language of your China contract, check out “China OEM Agreements. Why Ours Are In Chinese. Flat Out.

  • http://www.east-west-connect.com Tait

    Why can’t they have a third party translate it? A reputable translator wouldn’t translate it so that terms are contradictory. Actually, almost all the contracts that I translate say that the original Chinese version takes precedence.
    Writing “English takes precedence” on the English version and “Chinese takes precedence” on the Chinese version isn’t right. Will companies actually try to pull that trick? If they intentionally provided an English version of the contract that differs from the Chinese version, wouldn’t they get in trouble for that?

  • LongTian

    Don’t assume that your dual-language contract in China actually is a translation. Have it verified by a 3rd party at the very least. I’m off-contract at the moment because I’m tired of working on contracts. I know that one of the companies I work for has contracts that constantly change on the Chinese side, and change on the English side if someone complains about it. I know that none of them are enforceable in English, and I don’t agree with the Chinese contract. Therefore, I work on an hourly basis in cash. It’s not ideal, but I’ve time-after-time encountered Chinese who downplay the importance of the contract, but then pull it out if they have a problem with you. Each time it’s happened it’s been a Chinese manager who studied abroad. Most of the time they act Chinese, but sometimes they revert back to their foreign experiences if it suits them. Be careful, and don’t assume how somebody will act due to their nationality or culture despite what you may have learned about cultural differences. People are multi-cultural now.

  • Eric

    “Even if the Chinese language version is silent as to which version controls, I am pretty certain the Chinese language version will actually control.”
    I think this is not right. In China, any evidence in English must be translated into Chinese before it can be accepted by court. If the Chinese version is silent while the English one says it shall prevail, and you produce to court an acceptable translation of the English one, then the English one controls.

  • http://www.chinalawblog.com Dan

    Eric,
    You are absolutely correct. However, it is my understanding that if there are two agreements, with one in Chinese and the other in English, the Chinese agreement is presumed to control, unless it states otherwise. So what we have here then is essentially two rules of law fighting against each other and though your view of which will prevail is probably the more logical one, I certainly would not be willing to put my money down on it. There is definitely enough uncertainty here that the better way to go is to understand both contracts or to have just one contract (and a translation), which one contract should be understood.

  • Eric

    Dan, I could not agree with you more.Apparently for future contracts your recommendation is the best choice for client.
    In a lawsuit I am handling in Beijing the key evidence is the Articles of Association written in dual languages. The Chinese one indicates the existence of the English version and the English one says it shall prevail in case of contradiction.Though I have not got the judgment yet, the court has expressed explicitly its respect to the English one which is certainly the true intention of the parties.

  • BrandonS

    Excellent posting , You absolutely hit the
    nail on the head. If you are going to be doing business in or with China, it usually makes sense to have the contract in Chinese. I have been doing business in China for 12 years and though it took me a while to see the benefit of having our contracts in Chinese, once we started doing that, I quickly realized what those benefits are. We have fewer problems with our Chinese counterparties and when we do have problems, they get resolved faster.