Header graphic for print
China Law Blog China Law for Business

Silly Rabbit, The Chinese Language Contract Is What Matters

Posted in Basics of China Business Law, Legal News

One of my favorite “trix” employed against American companies doing business in China is the dual language contract, where the English language version is silent on which language controls.  We often see this from companies that come to us for the first time with a contractual problem.

Dual language contracts can be incredibly dangerous.  If you have a contract in both English and in Chinese, which language controls?  Well, if both of the languages say that one language controls, that one language will control.  So for example, if both the English language and the Chinese language versions say that the Chinese language version controls, then the Chinese language version will in fact control. Similarly, if both versions say that the English language version controls, then the English language version will control.  These are the easy and safe examples.

It is everything else that so often gets American and British and Canadian and Australian companies in huge trouble.

If you have an English language contract and a Chinese language contract that are both silent as to which version controls, the Chinese language version will control in a Chinese court and in a Chinese arbitration.  So what this means is that if your English language contract says that a product must be strong enough to withstand 500 pounds of pressure and your Chinese language contract says that the product need only be strong enough to withstand 300 pounds of pressure and neither contract version says which controls, the Chinese version will control and the product need only be strong enough to withstand 300 pounds of pressure.

And here’s the thing: Chinese companies just love using a contract with an English version that is more favorable to the foreign company than the Chinese version and then relying on the English speaking company to assume that the English language version will control.  I mean, English is the world’s language for business, right?

But what if the English language version explicitly states that it will control? You should be okay with that, right?  Not necessarily.  If the Chinese language version also explicitly states that it will control, the Chinese language version will control.  If the Chinese language version is silent, then the English language contract controls.

As we noted in China OEM Agreements. Why Ours Are In Chinese. Flat Out, our China lawyers usually draft our clients’ contracts in Chinese, with an English language translation. That way at least our clients know what they are really signing.

Bottom Line: No matter what your English language contract says, it behooves you to know exactly what your Chinese language contract says as well.

  • ScottLoar

    It seems obvious enough but remains commonplace that otherwise sensible people doing business in Chinese cannot accept that without literacy in Chinese they are in actuality illiterates. This occasions the rise of a coterie of English speakers within the foreign company whom the illiterate wholly depends and yet, few if any of these English speakers are qualified to translate. Simple interpretation, perhaps, but translation? Rarely. That an illiterate would accept an important, translated document without verifying the accuracy through a competent, independent and indifferent party is… well, stupid.

  • Sviatoslav Richter

    Dan in fact Chinese law states that the Chinese version shall prevail. There is no ambiguity about it at all. For your info.

  • BostonSense

    Dan, as with so many things in China, it seems that it depends. And so, I pretty much take the side of Mr. Richter. Although there are times where, if you have Chinese and English contracts that both say that the English version controls there are some tribunals that will recognize that, I have been told enough times, by enough different (highly respected) lawyers in China, that one should never count on that–it depends on the jurisdiction, the nature of the subject matter, and even the nature of the English expressions/terms that you are “depending on.” As you yourself said–that’s why the contracts should be in Chinese (and should be carefully translated, and retranslated as changes are made, etc.), and even if you expressly state that English version will be paramount in both English and Chinese contracts, clients should be prepared for tribunals to use the Chinese contracts. That is precisely why their contents should be substantially the same!