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China contracts. Email not usually included.

by Dan Harris in 'China Law Blog'

My law firm is frequently contacted by American companies seeking our help in pursuing Chinese companies for providing "bad product." We turn down at least 95% of these cases because we do not want to pursue them.

We typically do not want to pursue these claims because the American company's contract with the Chinese company does not clearly specify the quality of product the Chinese company must provide. There are usually other problems with the contract (including, oftentimes, the lack of any contract at all), but this is usually the most glaring. I often explain the following to the American company:

I know you expected the ______ you ordered from ______ [Chinese factory] to work for more than a week, but you have to understand that China has levels of quality many tiers below anything that would be acceptable in the United States. Have you been there? Good, because then you have seen T-shirt people selling T-shirts in the street for 25 cents. Those shirts are of such poor quality that they are ruined after one wash. But nobody complains because they paid 25 cents for them and so they got what they paid for. I hate to say this here, but that is the exact argument your Chinese factory will make against you. That had you wanted your product to work for more than a week, they would have been happy to have provided you with such a product, but then you would have had to pay 50 cents more for it.

Their response to that is oftentimes to insist that they have an email they sent at some point in the process "making clear" they wanted the product only if it is of "good quality." I typically then point out to them that the term "good quality" in China is pretty much devoid of legal meaning and that even if it were deemed to have meaning, what constitutes "good quality" there is very different from what constitutes good quality here.

I then sometimes lecture them as well on another difference between US/Canada/Britain contract law and China contract law, which is that Chinese courts rarely, if ever, look outside the four corners of a contract to determine how to rule on a contract dispute. Co-blogger Steve Dickinson recently explained this to a client:

If you think this may be an issue, we can include "complete agreement" language that makes clear that the Agreement documents control and that nothing outside the agreement has any legal effect. Normally, however, this is not done in China. This is because the Chinese look entirely at the written and sealed contract. They routinely ignore everything else (like emails) and they certainly do not include terms that come from a pre-contract writing from either of the parties.

This is another of the many differences between Chinese (civil) law and U.S./Canadian common law.

Dan Harris is founder of the Harris & Moure law firm, a boutique international law firm focusing on small and medium sized businesses that operate internationally. China is the fastest growing area for the firm. Dan writes as a source of China legal and business information.

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