Chops For China, Sorry But No

One of our China lawyers attended a Continuing Legal Education Seminar (CLE) last week to pick up needed credits before the bar fines start setting in. The seminar was on Law Firm Management for the 21st Century (or something like that) and one of the things discussed there was how it is our job as lawyers to discern what it is our clients actually need and then instruct them on that. In other words, clients oftentimes think they need A when in reality they need B.

This is all so true. And in deleting old emails this past weekend, I came across countless examples where this was the case, but my favorite ones are always those where someone writes us (and I apologize in advance for making this post so heavy with bad analogies but I’m in the Midwest United States right now and that just always seems to get me in an analogy mood) very calmly and knowingly asking us for a band-aid without realizing that they have already lost both arms and legs.

The below is a composite of a couple of those, with the email from the potential client and my dream response:

We’re an Australian company and we’ve just been asked by a vendor in China to provide our chop to be added to our contract. Is this something you can help us acquire?

Thanks

My responses (modified slightly for blog purposes) were essentially as follows:

Sorry but no and the reason for saying no is somewhat complicated, but I feel compelled to explain.

Asking us as a law firm for help in getting a chop is the equivalent of giving us a twenty-page contract and asking us to sign it without looking at it. If we sign it (or give you the chop) our law firm is tied in with the contract and no law firm would permit that. No exaggeration, but nearly all of the contracts we see between American companies and Chinese companies do not protect the American company at all. This is because these contracts were either drafted by the Chinese side, which knows exactly how to draft a contracts that leave their US counter-parties out in the cold, or by an American lawyer unfamiliar with Chinese law. For just one example of where domestic lawyers so often go badly wrong on these contracts, check out number two in this post on China mistakes to avoid.

If you want a non-legal analogy, think shutting the barn door after all of the animals have left.

I gave a quick look at your website and I see that you provide services. This is a particularly risky arena for us because service companies are constantly not getting paid by the Chinese companies for which they perform the service, either because the Chinese company chooses not to pay or because (and this is happening constantly these days) the Bank of China itself chooses not to pay. For more on both of these things, I urge you to read the following:

• Service Companies in China. How to Get Paid.

• Want to Get Paid by a China Company? Do These Three Things.

• Getting Money out of China. What the Heck is Happening (This article is from two weeks ago!)

Without knowing what you have done so far, I cannot give you any specific advice beyond that you take real stock of where you are right now as compared to where you should be.

Bottom Line: Don’t wait until the last minute to reach out to a lawyer for help.

The post Chops For China, Sorry But No appeared first on China Law Blog.

We will be discussing the practical aspects of Chinese law and how it impacts business there. We will be telling you what works and what does not and what you as a businessperson can do to use the law to your advantage. Our aim is to assist businesses already in China or planning to go into China, not to break new ground in legal theory or policy.