Chris Sloan’s Blog

China Law Blog had a good post the other day on China OEM agreements, including some interesting points on using Chinese as the official language and governing law/venue.

China Law Blog nicely summarized the crucial imporantance of a strong contract when dealing with China here. A few takeaways:

1. Chinese companies are not that different from U.S. companies in how they view contracts in many respects. For example, a strapped Chinese company might pay its Chinese vendors before its U.S. vendors, not because of culture, but because the Chinese ones can cause trouble more quickly. Same is true in the U.S.

2. If you don’t have a good contract, you’re dead if you end up in a dispute.

3. You are usually better off with a Chinese language contract that allows for litigation in China.

The Chinese court system now has a website where they will list the names of all delinquent judgment debtors. Previously, a written request was required to find out this information.

China Law Blog has a great post about the likely very significant impact of this list on the prospects of collecting on a debt in China. As he notes in the post, the operative question is NOT whether you can sue and win, but whether you can collect. Of course, that’s also true in the U.S., because you can’t always be certain whether your debtor can or will pay you, but at least you know that the government will help you enforce the judgement. Not so in China, so this public listing of bad judgment debtors should be important in a society where respect (often called “face”) is so important.

If you have had much experience dealing with Chinese suppliers, you know that one of the biggest risks is how to recover money that they owe you (e.g. for delivery of bad product). It’s a complicated issue, and there are a lot of ways to address it (including drafting a good supplier agreement that can be enforced in China). China Law Blog has a blog post on an interesting “new” way to address the issue. It may only be useful in a limited number of situations, but it never hurts to have one more arrow in the quiver.