Is a contract worth anything in China?
Import or Trade contracts are of the utmost importance to importers. It is not suffice to let your manufacturer prepare one, nor is it good enough to have a few terms jotted down on a the bottom of a purchase invoice.Whilst this seems common sense to me, I am continually inundated with client referrals where contracts are not in place and where business owners do not believe they are necessary. The common excuse is that “contracts mean nothing in China” and “even if I had a contract its unlikely that I would litigate in China – it would be too expensive”.
This is an unfortunate situation, and whilst I am not a lawyer, I would like to point out why I think contracts are important;
1. They set out terms of trade and force my client to think about the ‘what if?” (obviously for business owners these are not nice thoughts, but very important)
2. They put the factory on alert that if there is a fault, delay or contravention that there will be penalties;
3. They are the best negotiation tool we have when there is a manufacturing dispute. Without one, its hard to even get the supplier to pick up the phone…
If you don’t have a contract but you do have a problem, pray that your supplier has a social conscience.