Today`s contribution focuses on some of the additional issues we keep to our customers who keep us in designing their distribution agreement with a Chinese company or company. Below is part of an email sent by one of our lawyers to a client for whom we were in the process of designing a sales contract in China. Therefore, if a distributor wishes to enter into an exclusive distribution contract, it may be necessary to ensure that it is able to sell a minimum amount of the seller`s goods or services in order to deny the need to hire multiple distributors in order to avoid the risk of being limited to an unproductive distributor. In the previous article, we focused on a number of issues that need to be considered before signing distribution agreements with Chinese parties. You will also find that some of the issues in our top 10 may apply generally to commercial contracts involving Chinese parties, including the need to take into account the protection of property rights and discussions on compensation and the effectiveness of liquidated damage rules. The issue of sales branding is usually a big topic in this type of agreement, so defining milestones in a way that is clear and easy to understand is important. Under THE law of the PRC, there is a general obligation to correctly answer questions and provide certain important information prior to the conclusion of a contract without a special invitation (culpa in contrahendo, see section 42 of the PRC Contracts Act). However, as far as we have seen, there are no relevant cases of judicial clarification that refer to the culpa, contrary to disclosure obligations when entering into agency agreements. With regard to the agreements executed in the counterparties, a standard clause in a trade agreement makes the contract legally binding under English law, even if each contractor does not sign the same copy of the contract. However, “counter-parties,” as included in the law of some other jurisdictions, are not recognized in China. In order to guarantee the validity of a written contract, the two contracting parties must instead sign all copies of the contract governing the parties. I have some fundamental questions and comments on your agreement.
4. In the event of an exclusive agreement, the duration/duration of the agreement becomes essential. The normal procedure is to last long enough to give the Chinese distributor time to earn his efforts in promoting your products.