The Breach of Trust: Chinese Companies and Contractual Obligations

In the intricate web of international business relations, maintaining trust is paramount. When a contract is breached, it impacts immediate business transactions and can undermine future dealings and tarnish reputations. Such concerning scenarios have emerged for some of our customers, reaching out to us when Chinese companies, previously bound by, for example, Non-Circumvention, Non-Disclosure Agreements (NCNDA), and commission contracts, sidestep their obligations, selling directly to overseas firms to avoid commission payments.

 

Highlighting the Breach by the Chinese Company

It’s crucial to note that the onus of the breach here rests squarely on the shoulders of the Chinese company. They entered into a legally binding agreement that ensures that a broker, who acts as an intermediary linking them with overseas buyers, is due a commission. The direct sale to an overseas firm, bypassing the broker, is not just a strategic sidestep but a glaring violation of the agreed contract.

 

Essential Steps You Should Take to Address the Violation

  1. Determine the Potential Loss: Begin by estimating the Chinese Company’s earnings from overseas sales over the past year. This gives a clear picture of the financial setback the broker might have faced due to the Chinese company’s actions.
  2. Ascertain the Commission Rate: Understanding the agreed-upon commission rate is critical. This rate will be pivotal in gauging the financial implications of the breach.
  3. Review Jurisdiction and Arbitration Clauses: A closer look at the commission agreement is essential. Look for clauses about arbitration, jurisdiction, and governing law. These elements offer insight into the legal frameworks and potential avenues for redress.

 

Emphasizing the Need for Chinese Legal Counsel

In addressing breaches by Chinese companies, there’s a definitive edge in enlisting legal professionals who are not only adept in international business disputes but are deeply familiar with the nuances of Chinese contract law:

  1. Engage a Chinese Contract Law Expert: The intricacies of Chinese contract law can be complex. Collaborating with a lawyer who specializes in such disputes is of utmost importance.
  2. Drafting a Legal Notice: Under the guidance of the Chinese lawyer, the broker should issue a formal notice to the Chinese company. This document will assertively spotlight the breach while pushing for a resolution.
  3. Prioritize Negotiation and Settlement: Following the issuance of the legal notice, facilitated negotiations can provide a platform for resolution. It’s beneficial for both parties to address the issue constructively, understanding that protracted legal battles can be financially
  4. and relationally draining.

 

Concluding Thoughts

Integrity is the cornerstone of any successful business partnership. Chinese companies, like all global entities, must honor their contractual commitments. When such obligations are overlooked, it is wise and strategic to pursue redress through knowledgeable legal professionals who are experts in Chinese contract law. Such an approach elevates the chances of a fair resolution and reinforces the sanctity of contractual agreements in international trade.

 

Contact us if you need legal help in China, like drafting contracts that follow Chinese law, background investigation of Chinese companies, protecting patents and trademarks in China and internationally, verifying contracts to the law in China, legal translation to and from Chinese, legal and trade disputes with Chinese companies, etc.

If you require our assistance or have further questions about our services, please do not hesitate to contact our Customer Relationship Manager, Jan Erik Christensen, at janerik@ncbhub.com. We look forward to hearing from you and helping your business succeed in China.

 

 

 

Contact us if you need help with drafting of contracts that follows Chinese laws and are enforceable in China, background investigation of Chinese companiesprotecting patents, trademarks, verification of contracts to the law in China, or help with other legal challenges that you have in China.

If you require our assistance or have further questions about our services, please do not hesitate to contact our Customer Relationship Managers Jan Erik Christensen, at janerik@ncbhub.com  or Milla Chen, at huimin.chen@ncbhub.com. We look forward to hearing from you and helping your business succeed in China.