Now that I even have your attention
Neither our regulation firm nor any top regulation firm I am conscious of ever sells China agreement templates. There are many motives for this. However, the principle is typical that templates simply in no way paintings for China and that they frequently can be a greater danger than having no contract in any respect.
And yet, our China attorneys are continuously getting requested for “templates” for even fantastically complicated China offers. We have been asked for joint project template agreements, and our reaction to this is how we can even offer you any such template until you realize what the terms of that settlement may be? I suggest we have finished joint assignment agreements wherein our consumer has contributed twenty million dollars to the joint venture. All they, in reality, wanted out of it is guaranteed product pricing for the following 15 years. We’ve accomplished joint challenge deals where our patron has provided no money — just technology and system. In return, we get 60 percent ownership of the joint challenge and manipulate over just about everything it does. Do you sincerely assume we have a template that covers each contingency?
Your legal professional’s fee is regularly extra in identifying what an agreement must say than in simply drafting it, and the previous typically takes as plenty or greater time than the latter. Our China Manufacturing Agreements and our China Licensing Agreements are an incredible example of this, and we get the “template query” loads on both of those. We also are regularly asked via potential and actual clients whether it might save them cash to have their in-house attorney or their much less-high-priced nearby home attorney draft such a settlement first, after which have my company’s China legal professionals use that draft agreement as our template. My solution to that query is commonly something like the following:
We do to first accumulate up the statistics from our customers and determine which of our many contracts — if any — we have to use as a version in creating what will basically be a new settlement for you. We often turn out to be pulling sections from more than one contract for a new, tremendously custom-designed agreement. Our agreements were mainly drafted to be used in China and meaning they’re dual-language agreements with Chinese as the respectable language. We usually (however NOT constantly) draft them beneath Chinese law. We make certain to draft each provision to advantage you as a foreign employer that is licensing its services or products in China or having its products manufactured in China.
Our present contracts are as close to ready as you can locate. Consequently, it does not make feel which will pay some other attorney who knows nothing about Chinese law to create a modern-day English language agreement on the way to no longer make the experience for China. Not simplest would the cash you pay that attorney visit waste; however, my regulation company’s costs would increase because rather than beginning with our very own Chinese and English contracts as models, we’d be starting with an English language settlement. Hence, to now not be near what makes you feel for what you’re trying to do in China.
We would need to revise nearly every provision in the agreement you give us to make it China-suitable, and it would likely take us twice as a whole lot of time to try this than for us to use our very own previously drafted contracts as the foundation for yours. It is not beneficial to us to have a not unusual regulation agreement [China is a civil law system] based totally on a pretty idealized and impractical American/European practice that has no applicability or use in China.
China employment files offer every other right example of wherein templates fall brief. We are often requested to draft China employment contracts for China WFOEs and China Joint Ventures.
If the purchaser no longer has any Rules and Regulations, our reaction is to say that we cannot draft the employment contracts standing alone; we need to draft both the employment contracts and a hard and fast of Rules and Regulations (and every so often extra). Our reasoning on this is 3-fold. Almost all locales in China now require employers to have Rules and Regulations, especially those locales with greater than a handful of foreign companies.
Two, having an employment agreement with no Rules and Regulations is like having an automobile without an engine; it just doesn’t paintings. Without such Rules and Regulations, you can not field or terminate your personnel. You are in incredible danger of your employment regulations and decisions being fodder for employee-employer disputes. The 1/3 purpose is more non-public and selfish: we do not need our regulation firm’s call associated with an imminent catastrophe. This third motive is also why properly law companies do now not sell templates.
After we explain the want for Employer Rules and Regulations, the client will every so often request that we use our “model Rules and Regulations to preserve charges down.” Again, we ought to explain why we have no such version and why this type of model can work in any way work. Our standard reaction is something like the following:
Your Employer Rules and Regulations need to shape what you are doing in China and where you’re doing it. In this manner, we should gather up all facts earlier than we can even start to provide you with Rules and Regulations to work. If you are a factory in Qingdao, we can’t even use the Rules and Regulations we did for an accounting company in Qingdao two months in the past? Nor can we use the Rules and Regulations we did for a manufacturing facility in Suzhou 3 months before. We cannot even use the Rules and Regulations we did for a factory in Yantai six days ago. Even though Yantai and Qingdao are within an equal province, their employment legal guidelines and practices do not align. And that manufacturing facility in Yantai becomes truly hard on its personnel, and I remember that it is important to you to be viewed as a remarkable employer.
A China agency’s Rules and Regulations range depending on the type of employer, the sort of personnel, the goals of the organization, and, most significantly, its area. Just employing the manner of an example, the time beyond regulation regulations will differ substantially for a CEO than manufacturing facility workers. Those policies are also going to differ substantially as among Chengdu and Suzhou. We have many Rules and Regulations that function suitable beginning points (usually in combination). Still, earlier than we have any concept that of our many current Rules and Regulations we will use to keep time drafting yours, we first want to understand more about you.
We must always make sure the whole lot in the Rules and Regulations we offer to you is up to date. Since the applicable legal guidelines and regulations constantly change in China, this itself is by no means computerized. After we have done all this, we will start drafting your customized Rules and Regulations in English and Chinese.
Oh, and one extra component. Each English and the Chinese must be nicely written and clean because both languages may be critical down the street. The Chinese are important because that is the authentic language and the language on which the courts and administrative bodies will rely. However, English is likewise crucial because your HR people will probably use the English language component in making their employee selections.
I these days explained to an exceedingly insistent emailer why we might no longer promote him any of our existing China contracts for him to use as a template:
We have never bought a China agreement as a template and in no way will. First off, it might be a huge disservice to you due to the fact we’ve actually masses of contracts for the entirety we do, and except you have been to first preserve us as your lawyers, we might no longer have any basis for determining which of those contracts makes feel for you whilst a place to begin. Our making that dedication is itself presenting you with prison recommendation. To do that, we’d first want to run a battle check and then onboard you as a customer, after which paintings with you in figuring out the precise model contract. And here’s every other issue: around half the time while an agency thinks it wishes a particular settlement for what it’s far doing in China, it without a doubt needs a wholly exceptional one, and we handiest find out that when gathering up all the relevant facts. So take your case. You say which you want a distribution settlement; however, you could really want a reseller settlement. And for us to even know that, we need a lot greater records.
Second, whichever of our contracts we turn out to be giving you’ll now not be right for what you’re doing, and something modifications you make to it will best make it even much less right. There is a lot extra to cope with a Chinese agency that is really sending it a settlement and getting it to sign it. You first need to do at least basic due diligence to make certain the employer you’ve got been negotiating with is the identical employer signing your agreement and to make sure you have the corporation’s name and deal with efficiently. This is often ways extra complex than people think.
At least 30 percent of the time, the contracting birthday party is virtually a Hong Kong or a Taiwan entity, and in one’s instances, a PRC contract does now not even make sense. I am now not going to promote you a settlement with a 30% threat of being incorrect u. S .! At least any other 30 percent of the time, we find irregularities inside the enterprise records, and we want to analyze and make clear. And then there are the times we decide there is virtually no agency in any respect, and the Chinese “company” turned into absolutely a whole fraud. So no, we gained’t sell you one in every one of our contracts as some template. The closing factor we need is our regulation firm’s name related to something we know can not make paintings.
Another lawyer in my company once wrote the following email to a consumer to give an explanation for why we could not simply pull a template off the shelf for them to present to their in-residence recommend to use in drafting the agreement needed:
We don’t use “templates” for our agreements. After quite a few evaluations, IF we find what the overseas client is attempting to do suits into a sample from a preceding transaction we have completed, we can use a settlement from a previous transaction as a model for the contemporary transaction. But even within the maximum simple transactions, what we do is to customize it for the contemporary transaction.
In drafting pretty a whole lot of any contract for China, there are literally dozens of variables that may be blended in a nearly countless quantity of configurations. So the final settlement of one transaction can also haven’t no software for another transaction. This is why providing an agreement from a beyond transaction will have no advantage to the Western aspect and could probable handiest harm it.
And then, there may be the issue of dealing with the Chinese counter-party’s reaction. Did the Chinese facet change the Chinese and no longer the English, as they so often do? Did the Chinese side redline in a way that the changes to the Chinese portion are even obvious? More importantly, are the Chinese facet’s changes everyday technical adjustments that are a part of ordinary enterprise exercise (45 days to supply a product rather than 30 days) or are their modifications unfavorable to the whole approach, together with: “no, you do not very own the technology, we do.” Or, “no, we received offer any warranty at all.” Or, “no, we very own the molds, not you.” It takes deep information of Chinese regulation and Chinese enterprise to address these kinds of matters.
In drafting our contracts, we normally pull some language from other contracts, including personal facts language. However, the core agreement is almost always particular to the unique consumer before us. While we use the previous language, we almost always revise it to customize it for the particular customer and the precise transaction.
From having written hundreds of China agreements, we understand certain troubles need to be resolved pretty an awful lot whenever. So we work with our clients to pick out the one’s troubles, after which we paintings with them on how they want to address those troubles, and then we positioned the agreement collectively to attain the goals our patron has instructed us it has. Of path, for some of these additives, we use as a base some of the languages that have worked in the beyond in China. This is the gain of working with us: we realize what works and know what fails. But the ensuing contract in every case is specific, So in that sense, there may be no template.
There are simply decades of enjoying drafting agreements for commercial enterprise in China or commercial enterprise with China. This is why every time a person asks me to send them a “template” settlement, I tell them I can’t because I don’t have any way to recognize which of the almost limitless number of options they should comply with. How will they select and pick out from a dozen options for a rather easy provision? What is particular approximately their situation? Will the most common solution we have used within the beyond even make feel for them? Does it make sense for his or her enterprise? Their business? Their product? Their area? What if the regulation has modified? What if the law changes days when we start drafting?
I generally advocate each customer 3 options for every crucial difficulty, and I typically provide you with those three from about a dozen feasible. Let’s think there are ten critical problems in their contract — this is probably a reasonably standard quantity. Each choice of an option impacts all of the different options, regularly in ways we’ve previously encountered. Before the client solutions the questions, we don’t even know what shape to apply. After they answer the questions, the settlement that meets all their needs does not exist.
Our approach to China contracts is based on three supports :
1) Decades of China enjoy, 2) A deep knowledge of Chinese civil law system and the Chinese court system, 3) A deep know-how of how contracts clearly paintings in China. If your in-residence lawyer combines all 3 of these, you no longer want us on your agreement.