How Foreign Companies Can Safeguard their Business with the Right China Contracts

As the ability to consistently mass produce and meet demand is crucial to a company’s success, Overseas manufacturing is less expensive, allows for goods to be produced in very large volumes. Volume ensures that businesses and companies are able to meet their market needs every time. For most small businesses, the trick to manufacturing overseas is to find a way to contract the job or go into a partnership with an overseas manufacturer without losing control of your product. That is the main reason why various types of contracts in China are of immense importance.

 

Legal Purpose of the China Contract

A business contract in China must be for a legal purpose to be considered valid. If, for example, one party knowingly contracted to deliver stolen merchandise for a second party, the second party would have no legal recourse if the first party failed to deliver the goods to their intended destination. Beyond parties, considerations and deadlines, some terms affect the execution and success of delivering on the agreement. They include particulars about whether the contract can be terminated, by whom and under what circumstances. Additional terms may include whether the agreement can be transferred to or assumed by another party, and how disputes will be negotiated, such as through arbitration or mediation.

 

China contracts prevent conflicts and mitigate risk

Good China contracts often go through a negotiation process that ensures both sides are getting the best deal possible. Good negotiation should lead to a mutually successful outcome that prevents conflict down the line and sets the foundation for a strong partnership moving forward. A contract will never be enough to prevent the breach of an obligation, however, it will be the perfect weapon of defense in case of an undesirable legal proceedings.

 

China distribution contract

Most companies and entrepreneurs are sourcing from China for two main reasons. The first reason is the long-term objective of creating a market presence in China for the purpose of serving the economy. The other reason is a short-term objective of taking advantage of low labor cost in this part of the world. Forming a distribution contract in China is the best possible options for the foreign businesses to distribute their manufacturing goods in the Mainland China. As an overseas company, if you are not willing to appoint agents in China to act on behalf of you, then going for a distribution contract is the ideal way to operate over here. The risk is less and the gains are enormous.

 

To be able to get to have smooth-sailing operations without being stressed with all the technical details in one of the world’s leading business countries, hiring a Chinese law firm would be your best bet. The right Chinese lawyer can make a huge difference to your business. Attorneys of the China trademark & patent law office can add value in the obvious ways, helping to avoid early mistakes in complying with the Chinese regulations. China lawyers will help you to secure the copyright, trademark and trade secrets of your firm, tech products and inventions.

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How China Contract Helps Protecting Your Business Interests

Foreign companies conducting business in China, whether from abroad or through a subsidiary in China, may sign various contracts with Chinese companies to secure their business interests. For companies trading in China, it is essential to use draft contracts to help in negotiations with Chinese companies, and also to provide legal certainty. A China contract is legally enforceable. In case a party fails to do what he or she has promised to do, the other can ask the courts to enforce the agreement or award damages for injury sustained because the contract has been breached—because a promise made under the contract hasn’t been kept or an act hasn’t been performed.

 

Legal Purpose of the China Contract

A business contract in China must be for a legal purpose to be considered valid. If, for example, one party knowingly contracted to deliver stolen merchandise for a second party, the second party would have no legal recourse if the first party failed to deliver the goods to their intended destination. Beyond parties, considerations and deadlines, some terms affect the execution and success of delivering on the agreement. They include particulars about whether the contract can be terminated, by whom and under what circumstances. Additional terms may include whether the agreement can be transferred to or assumed by another party, and how disputes will be negotiated, such as through arbitration or mediation. In order to form a business contract, an offer of some sort must be extended by one party and officially accepted by the other along with the following:

 

  • Promise to perform a service, duty, or deliver a product
  • The time requirements of the delivery or performance
  • The terms and conditions of the agreement

There is no specific format that a contract must follow. Generally, it will include some terms, either expressed or implied, that will form the basis of the agreement. These terms may outline contract conditions or contract warranties. If the contract conditions are not met it is possible to terminate the contract and seek compensation or damages.

 

When to Use & What is The Purpose?

A. If a foreign company is working with an Original Design Manufacturer (ODM).

B. If a foreign company is working with an Original Equipment Manufacturer (OEM).

Having a China contract in place will discourage your Chinese counterpart from sharing your design files, showing your production to other customers when they visit the factory and listing your products on Alibaba or anywhere else. The legal challenges that come with breaking a contract will greatly work in your favor as it will give you an extra layer of protection.

A company due diligence can be performed before signing an agreement with a Chinese company. When signing contracts with a company in China, you should try to visit the company if possible. This will give you a real image of your business partner and will help you validate information, like the business address.

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