Most of the US and European business owners want in their contract that there should be provisions that effectively render their contracts unenforceable in China. According to the China lawyers, calling for U.S. court jurisdiction is a huge mistake as the Chinese courts will not enforce the judgment of the U.S. court. Contracts with Chinese companies are more formal than contracts in the United States.
The good faith principle is recognized and embodied in the PRC Contract Law. It is expressly provided in the PRC Contract Law that the parties shall follow the principles of fairness and good faith in entering into and performing the contracts. Here are the decisive factors that your China lawyer must infuse in the draft of the licensing agreement:
- The contract made by your China lawyer must offer you a good business sense. Your lawyer should try to get the exact feel of your business and will be well aware of the facts what you want to achieve and avoid by licensing your technology to China.
- Your lawyer should come out with a contract that can work in China. It must be drafted in a way that your Chinese counterpart should take it seriously and think twice before breaching it.
- The contract should be drafted in a way that your would be Chinese licensee will definitely sign it. You need to keep it mind that, a completely one-sided contract that only favors you will not be signed by your Chinese licensee. So your lawyer has to draft a contract that is acceptable to both of you.
Changes concerning the subject matter, quality, quantity, time, price and place for the performance, liabilities for breach of contract and dispute resolution are considered material changes to the terms of the offer.