On Tuesday May 24th, our Managing Director Philippe Snel was invited as a panel speaker on the topic ‘Safe Contracting from a Distance’. This is a topic that we are extremely familiar with, especially since access to China has been restricted due to Covid.
This webinar was organized by the Danish-Chinese Business Forum, a platform focusing on the promotion exchange of information and contacts among companies, organisations, top executives and managers who have Danish-Chinese commercial interests.
Under the current Covid-19 containment measures, travelling to China continues to be subject to very restrictive conditions which are likely to remain applicable for much longer than one might expect.
The presentation provided some practical sugggestions and basic legal recommendations on how to negotiate, conclude and manage contracts with companies in China from afar:
1. Negotiation: Setting a Solid Base
- Properly Identify the company you are talking to (see business license);
- Identify the person you are speaking with and verify his/her authority in the Company;
- Avoid or at least limit language problems as much as possible;
- Set clear terms or rules of communication;
- Keep verifiable records, prefer Chinese communication tools;
- Confirm the essential points in clear and explicit writings;
- Feel free to use the “record” function for important voice or video communications.
2. Concluding Contract: Ensuring the Essentials
- A PO is not a valid contract, nor is an email;
- A scan copy of a signed contract is not a valid proof of a contract;
- Make sure you have a duly authorized signatory, eventually ask for a Power Of Attorney;
3. Performance: Hope for the Best, Prepare for the Worst
- Preserve evidence at every stage of the performance (in particular important for QC);
- Detail each default and confirm in a contradictory manner;
- Keep communications under control (avoid long email chains, keep communication channels clear, apply “4-eyes Principle”);
We’d like to give a checklist on safe contracting to conclude our article:
1. Do you know who you are talking to? Are you sure?
2. Is this person duly authorized to engage with you for the purposes of your trade?
3. Are you clear about what it is you are ordering and are you certain the other side understands the same thing?
4. Do you have verifiable and accessible evidence for all of the above?
5. Is your contract enforceable under PRC Law?
6. Does your contract provide essential clauses needed in case something goes wrong?
7. Do you know who to call in China to help out if things do not work out as planned?