China Contract Specificity and North Carolina Blue

Today’s Wall Street Journal has an article entitled, Fifty Shades of Blue: Tar Heels Seek the Truest Hue
UNC has a new color for basketball’s Final Four: Pantone 542. The article essentially talks about the importance the “North Carolina” blue color is for North Carolina fans.

It reminds me of a matter I had many years ago, involving a North Carolina company that called me wanting our China attorneys to sue a Chinese company that had provided the NC company with “bad” shirts. The NC company had sent a sample shirt to a Chinese manufacturer for color matching and the Chinese manufacturer in turn sent the NC company a sample shirt back to the NC company. Based on the Chinese manufacturer’s sample, the NC company ordered a million dollars of North Carolina blue shirts.

One problem. The shirts that arrived, though Blue, were not North Carolina blue. And as every reader of today’s Wall Street Journal and every college basketball fan knows, the University of North Carolina has its own specific shade of blue. And for reasons normal human beings cannot fathom, there are a horde of people who want only that color in their jerseys and there is no way those people are going to buy an ordinary blue jersey. All of this meant that instead of this NC company being able to sell its jerseys for maybe $30, it would maybe be able to get $3 a shirt. The NC company had obviously suffered major damages.

We turned down the case because we did not want it on a contingency fee basis, nor did we want to charge our hourly rates on a case we did not think could be won. We did not like this case because generally if you are in front of a Chinese court and something is not specifically in your OEM contract, in Chinese, and sealed/chopped by your Chinese manufacturer that describes in excruciating detail the specifications of the product you are having manufactured in China, you are going to have problems. This NC company had only some English-language emails saying it wanted the shirts to be like “the sample.” What sample?

Yes, this North Carolina company could have sued its Chinese manufacturer in a U.S. court and won. However, because China does not enforce U.S. judgments, and because the Chinese manufacturer did not have any U.S. assets, the U.S. judgment would have been worth less than one of the wrong color shirts the NC company received. Yes, the NC company was stuck, out nearly a million dollars over a few shades of blue.

And I’m not fooling you…..

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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.