Signing Contracts with a Company in China
Signing Contracts with a Company in ChinaUpdated on Tuesday 20th August 2019
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Signing a business contract with a Chinese company is a common practice for many investors in the country. Business agreements in China are formal and they usually mark the beginning of the relationship between parties (and they can still be amended as needed), as opposed to the European model that will often times mark the conclusion of an arrangement.
When doing business with a Chinese company it is advisable to conclude the needed arrangements according to the Chinese law. Our lawyers in China can advise you upon the clauses that you can include in the contract and the best ways to begin your new business relationship in the country.
Formalities for signing contracts in China
When signing contracts with a company in China, you should try to visit the company if possible. This will give you a real image about your business partner and will help you validate information, like the business address. Alternatively, you could obtain a copy of the company’s business license and a previously concluded contract to verify the seal of the company. If the information included in the contract is inconsistent with the information gathered after performing a simple verification, you should postpone the execution of the contract.
A company due diligence can be performed before signing an agreement with a Chinese company. One of our lawyers in China can help you with this process that includes a detailed verification of the company so that you can be sure that you will sign a valid contract.
Recommendations for foreign investors in China
Foreign investors doing business for the first time in China should make sure that the contract signed with a Chinese company includes detailed information about the business requirements and the legal implications for breaching the contract. When the contract is concluded for small amounts of money, the signing requirements are usually less rigorous but in order to make sure that the contract is enforceable, it should be signed by the company’s legal representative. Our law firm in China can provide assistance for you and your company whenever doing business with a Chinese counterpart. Our lawyers will verify the business and its legal representative.
What does a contract contain?
A business contract comprises information about the parties involved, whether companies or natural persons. These are the entities involved in a legal agreement where the business names are mentioned. Below you can find information about the main aspects contained by a contract in China:
- The terms and conditions of the business are mentioned in the contract, alongside the obligations of each party involved.
- Information about how contract breaches can be solved is stipulated in the agreement.
- All the details about the payments (if any) are normally mentioned of the first or second page.
- Second parties involved in a contract cannot be blamed if at a certain point it is discovered that the products are stolen, yet delivered under a contract.
- The duration of the arrangement is established by the parties before being mentioned in the contract.
- A contract becomes valid if stamped by all parties involved in the agreement.
- All the conditions and regulations in case of litigation are mentioned by a contract.
Our Chinese lawyers advise foreign and local investors to ask for legal support before creating and signing a contract with a company or servicer in China. It is highly recommended to consider the assistance of an expert in this matter and that because he or she knows the applicable legislation in China.
Is an express contract recommended in China?
An express contract is an oral agreement between two or more business contractors where the terms, the conditions, and the offer are established. You might say that this is the starting point of a legal contract, however, an express agreement does not have the same importance as the one established on paper. Feel free to ask any questions about the contracts you wish to sign with a company in china and make sure you have all the legal support by your side.
Employment contracts in China
Signing contracts with a company in China might involve employees meaning that a worker can perform his/her activities in a firm if an agreement is signed in this direction. An employment contract respects the Labor Law in China and contains information about the employer or the company, the working hours, the duration of the agreement, remuneration, workplace, job description, social insurance, work conditions, holidays, internal rules and many more. An employment contract can be signed on a definite or indefinite period of time, depending on the job and the arrangements between the employee and the employer. The same contract comprises details about the cases in which the internal rules and the job description are not respected, but for a complete idea about legal aspects of an employment agreement, you should get in touch with a lawyer in China, especially if you are a foreign worker.
What you need to know before signing a contract with a company in China
Signing a contract as a foreign investor or entrepreneur in China means respecting the applicable rules and regulations besides having a complete idea about the business culture of the country. It is recommended to avoid as much as possible complex or complicated terms and conditions and stick to clear and concise business terms. Having an arrangement with a Chinese party as a foreign investor or entrepreneur means that the contract must be in both Chinese and English language, a matter where our team of advisors can provide support and assistance. It is important to know that electronic contracts are agreed in China, meaning that you are not obliged to travel to this country and meet your partners to sign an agreement. Though, it is important to prove that you are the official sender and you represent the company in terms of business, documents and other legal matters related to contracts and arrangements. Contracts can be signed and sent via the email or fax to Chinese companies mentioning that these can apply the same method, with the help of authorized staff or representatives.
Below you can find some interesting information about companies and investments in China:
- • China is the 2nd largest FDI recipient in the world, after the USA, according to the statistics of the previous year;
- • according to the “Doing Business” report for 2019, China ranks 46th out of 190 countries worldwide;
- • more than 72% of the foreign investments have been directed in Hong Kong in 2017;
- • China is considered the largest internal market in the world, with approximately 1.4 billion potential clients.
All the legal aspects of a contract in China need to be completely understood before it is signed, so the legal advice of an experienced lawyer in China is recommended. For more information about doing business in China, including opening a company, you can contact our Chinese attorneys.