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Jun 9, 2013

Contracts in China: Do you Even Have One?

The following is from a blog post I put up a few years ago and although it is brief and not as verbose as my other posts, it is certainly in my top ten favorites.

It is not surprising how many companies and entrepreneurs are in such a hurry to get started in manufacturing, partnering or marketing that they totally disregard the need for a contract, a simple memorandum of understanding or something written on a cocktail napkin.  It’s also not surprising anymore (after 10 years in the Jungle) that people come to me looking to recover losses incurred with Chinese suppliers, factories, or partners and they don’t even have a basic agreement.  Usually I have to tell them that without an agreement, you really have no chance to recover and that there are very few lawyers or legitimate collection agencies in China that are willing to work on a contingency fee basis, including yours truly.

So, as we enter the second quarter of 2013 and try to reach our manufacturing goals and sales targets for the year, it might be time to conduct a thorough review of your contracts.  Do you have them?  Are they written in English and Chinese? Are they written by your U.S.-based lawyer who knows nothing about China?  Are they written by your Chinese lawyer who has little or no obligation to advocate on your behalf and has never even traveled outside of China?

I thought I would share this blog posting from The International Technology Law Blog as a reminder that you shouldn’t start without a contract, and if you have started you must conduct a thorough contract review or you risk not having any recourse for recovery when you get shafted by your Chinese factory, supplier or partner.  There are many factors that must be considered when presenting and negotiating a contract with the Chinese and you better have someone skilled and experienced in China looking out for your best interests.

by Frank Caruso

IPG is engaged in projects for companies and entrepreneurs doing business in Bangladesh, Cambodia, China, Korea, Laos, Myanmar, the Philippines, Vietnam and the U.S.