To prepare an OEM contract properly is one of the good waysto protect yourself when you source in China.

But how to do it properly is a big question, after all, thelanguage, legal system and culture, etc.is totally different

The first suggestion I want to offer is:

1. Find an English-speaking Chinese lawyer to help you. 

Benefit: they know what happens in practice and they areaware of the newest change in court if finally a lawsuit is inevitable.  Theywill give more practical suggestions that any overseas lawyer can’t offer. Inone word, their job ensure the contract’s enforceability.

2. Selecting China as the jurisdiction tomake sure the award being executed.

Why？Because Chinacourt barely enforce award formed in other jurisdiction.  Choose to file lawsuit in China cout and filefor a rule to freeze defendant’s assets will make sure the award in favor ofyou could be executed.

3. Choose Chinese as the main language.

Only Chinese is the official language allowed to be used in Chinacourt, any paper in other language need to be translated into Chinese firstly.

So it’s better to prepare a bilingual contract and say: if there isany contradiction between this two version, the Chinese version will prevail. Inthis way, you could make sure it’s the version your lawyer prepared to be usedin the court, not a translation copy provided by any translator assigned by thecourt.

4. Choose China law as the applicable law.

Though the parties are allowed to choose the applicable law, butthere are actually no detailed rules about how to use other’s country’s law inChina court. In another word, it’s hard to do. 

5. Specify liabilities for breach of contracts clearly and reasonably.

It’s very important to make sure the China factory understand theconsequence if they breach the contract is very important.  Consult with your lawyer to set a suitableliability, if it’s too light, it’s not enough to warn the factory, if it’s tooheavy, the other party will claim it to be invalid and the judge would suppotthat. But the court will stick to it, if the liabilities is reasonable.

Anything else?

Other articles you may feel interested in:

Why Business License so important?

Is English Contract Enforceable in China?

Sourcing in China, are you ready?--Rule 1: Check the license