China Business and Contract Law Guide
Since the Civil Code took effect, China’s contract rules are more consolidated—but local practice, company chops, and bilingual drafting still decide outcomes. Foreign parties should treat the Chinese-language contract and the company seal as operational realities, not formalities.
1. Formation and validity
Offer, acceptance, and consideration-like bargains are recognized in Civil Code structure. Written form is mandatory or strongly advisable for major commercial deals. Validity issues include fraud, coercion, malicious collusion harming third parties, and violations of mandatory law or public order.
Authority problems are common: who can bind the Chinese company? Check legal representative status, articles of association, and whether the counterparty’s chop is the official company seal. “Contract seal” vs “finance seal” misuse appears in many disputes.
2. Key commercial templates
- Sales and supply — specifications, inspection, quality metrics, Incoterms alignment, retention of title.
- Distribution / agency — territory, exclusivity, IP use, online sales channels, termination and sell-off.
- OEM/ODM manufacturing — tooling ownership, molds, IP, audit, subcontracting bans.
- Services and SaaS — data localization, SLAs, liability caps, IP ownership of deliverables.
- NDA / term sheets — bilingual consistency and chop formalities even for “preliminary” docs.
3. Payment, guarantees, and performance
Deposits, advance payments, bank guarantees, and personal guarantees from founders each carry different enforcement profiles. Late performance remedies include agreed damages (liquidated damages subject to adjustment), specific performance in some cases, and termination rights carefully drafted around cure periods.
4. E-commerce and platform sales
Online channel control, MAP policies, live-streaming promotions, and consumer protection rules affect brand owners. Platform rules can change practical enforcement more quickly than statutes. Align consumer refund practices with PRC consumer law expectations.
5. M&A and investment contracts
Share purchase agreements, joint venture contracts, and capital increase documents interact with foreign investment negative lists, merger filing thresholds, and sector licenses. Closing conditions should track SAMR/commerce and industry approvals where needed.
6. Breach, suspension, and termination
Define material breach, change-of-control, insolvency, and sanctions events. Suspension rights for non-payment should be express. Post-termination obligations—IP return, inventory repurchase, non-solicit—need practical timelines.
7. Drafting tips for foreign counsel coordinating with China counsel
- Decide which language controls; do not assume English prevails.
- Schedule exhibits (SOWs, price lists) under the same chop process.
- Match dispute clause to where assets and interim relief will be needed.
- Avoid copy-pasting common-law boilerplate that conflicts with Civil Code defaults.
- Record negotiation evidence—WeChat is often exhibit one.
