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China Law Blog China Law for Business

In Which We Turn You Into A China Lawyer. NOT!

Posted in Legal News

Got the following message on linkedin a few weeks ago:

Been following [China Law Blog] for about 8 or 9 months — it’s been helpful as I’ve been setting up a foreign branch here (sourcing appliances for overseas), preparing employment contracts, renegotiating OEM deals, etc. The site is by far the most useful, practical, concise advice I’ve had on dealing with legal issues here in China. I had all the management dealing in China subscribe as well. Thanks for the resource you guys provide — cheers.

I got it more than a week ago, but  I have yet to respond.  We have been writing this blog for going on eight years and this is the first time it ever occurred to me that someone would think that the snippets of information we provide here are enough for writing international cross-border contracts. Does this person (a non-lawyer) really believe that he is now qualified to act as a China lawyer and write cross-border US-China contracts.  His email has left me nonplussed and I do not know how to politely respond.

But I first want to talk about another, earlier email I received , along with an article in today’s local (Seattle) newspaper.

The other email was from someone who had just attended a continuing legal education course in which one of the speakers talked about the importance of having a disclaimer on your blog so that readers realize that a blog is not the equivalent of legal advice.  This person emailed me with this information to make sure that we had such a disclaimer.  I emailed back saying that we have the following disclaimer:

This Blog is made available for educational purposes only, as well as to give general information and a general understanding of the law. It is NOT to provide specific legal advice. By using this blog you understand there is no attorney-client relationship between you and the Blog publisher. You should NOT use this blog as a substitute for competent legal advice from a licensed professional attorney

I then talked about how stupid I find such disclaimers and of how unnecessary they are, but that out of an overabundance of caution, we have had one since our inception.  This email correspondence with the lawyer predated the email from the person who apparently uses our blog exactly as we tell people not to do.

The article to which I refer above is a Seattle Times interview with Gary Locke, the US Ambassador to China. In that interview, Ambassador Locke is asked what advice he would give to American businesses that want to do business with China, and he responds as follows:

There are great opportunities but be very careful. Study the market. Perform due diligence. Get outside advice from experts in the law and so forth. It’s tempting to enter into a two-or three-page contract with a Chinese partner. But that won’t be adequate to protect you from disputes or other hiccups that can happen.

Correct.

Here’s the deal people.  Every single contract is what we in the law call sui generisor one of a kind.  This is why my law firm always refuses to provide “template” or “generic” contracts.  Whenever someone asks us for a template contract or a copy of one that we did for someone else, we always refuse no matter how much they offer to pay.  We will not stake our reputation (and our malpractice policy) on a contract that almost certainly will not be right for the company seeking to purchase it. And if the contracts we draft for our own clients are not good enough when used off the shelf, certainly our blogged advice on how to draft such contracts has even less value.

Now for some examples.

We often write of how we generally (generally is the key word here) write our contracts in Chinese with a China court as the jurisdiction.  Generally, but not always.  If the contract is with a Hong Kong entity, we usually do not want a China court.  What if the contract is with a Hong Kong parent company and its mainland manufacturing subsidiary?  There is no one answer.  What if the Chinese company has substantial assets in the United States?  Well then US jurisdiction might very well make sense. And it is not as though this is an unimportant issue; if you get it wrong you may end up having no remedy at all.

We also often write about how well liquidated damages provisions work in Chinese contracts. But even if we assume that someone other than an experienced China lawyer can write a liquidated damages provision that makes sense, for what amount will that provision be written?  There is no one right amount; choosing the amount is at least as much art and experience as science.  We base the amount usually on the nature of the contract, the value of the transaction, and the court in which the dispute will be resolved. It is not at all uncommon for two to three lawyers to discuss this amount before it is finalized.

I could go on and on.

Lest anyone still thinks drafting a China contract is easy, I urge you to check out the following:

Not going to tell you that using our blog as a guide for drafting your China contracts is the equivalent of using a blog as a guide for performing open heart surgery, but I will say that anyone who does either is making a huge mistake.

Does anyone really think otherwise?

 

  • Paul Kossof

    I’ve noticed similar trends for small businesses in the US. Considering the number of followers that your blog has, I was surprised that you haven’t receive more responses like this one years ago.

  • Chris Neumeyer

    No kidding. Even top management at the multi-billion dollar Taiwanese
    tech company where I used to work — native Chinese-speaking businessmen
    born and raised just across the Strait from China — routinely got
    hoodwinked, bamboozled and fleeced in China and struggled to obtain
    satisfactory legal relief, usually failing in that respect. It’s a
    jungle over there and anyone who wishes to risk large sums of time and
    money in China would be foolish not to seek counsel and assistance from
    the most experienced, long-time China hand they can find. Sometimes
    chabuduo just isn’t enough.