Foreign businesses need to keep in mind that, at the time of negotiating contract with a Chinese manufacturer, maintaining deadline can be advantageous as well as risky. Most of the Chinese business lawyers are of the view that the risk in framing a deadline deal is, by working with the overseas clients for many years, Chinese firms have acquired the art of manipulating deadline to their advantage.
Here we are offering you the pros and cons of framing deadline with a Chinese company
Pros- In the cases where the Chinese party needs to make a payment for buying an offshore asset, they intentionally make delay in making the final decision. Tighten them up with a deadline could prove valuable to restrain them from intentionally delaying it.
Cons- The down side is when the money is flowing in the other direction, the Chinese side will often impose an artificial deadline unrelated to the actual deal.
Pros- If the Chinese side has agreed upon a deal to complete a project within the stipulated deadline, financially it is a great sign for you as a foreign company. Apart from this you could also walk out from the deal by citing the excuse that the Chinese company failed to maintain deadline.
Cons- The risk is as it is said earlier that Chinese companies can manipulate the deadline that may go against you.
There three standard programs Chinese companies use for manipulating deadline, take a look at them-
- First- It is usually the overseas company that submits the initial draft of the contract not the Chinese because it would require the Chinese company to “tip their hand”. The overseas company’s assumption is one month is enough to work out all the deals but still they don’t receive any type of acknowledgment of receipt. When they contact with their Chinese counterpart, they assure the foreign firms that it did a quick review and everything looks okay.
- Second- It is the one week prior the deadline, the Chinese firm will send its comments on the draft agreement with two to three alteration proposals. According to the Chinese business lawyers these proposed changes are tricks designed to make the contract completely unenforceable against the Chinese side.
- Third- The last stage is, the Chinese party will return the contract four days before with extensive revisions throughout the entire document, usually with no deadline of the revisions. The overseas companies fall prey to the trap set up by the Chinese company and they are forced to do two things
- The foreign company will have to make concessions just to get the document signed
- The foreign side will make drafting mistakes due to the short timeline and the need to work in two or more languages. The Chinese side will then ruthlessly take advantage of those mistakes at a later date.
Any foreign firm eager to do business with the Chinese party needs to aware of all the loopholes and traps laid by the Chinese company.