Devoted to Corporate Attorneys, Corporate Lawyers, and Corporate Counsel

The following is not meant to be legal advice.

China’s Contract Law took effect on October 1, 1999. The Contract Law allows for the choosing of a foreign country to handle disputes. However, mandatory provisions of Chinese law apply such as the requirement that certain contracts be approved by a government agency to take effect.

Issues of capacity need to be reviewed to ensure that the Chinese party is able to carry out the obligations under its business scope. A Chinese enterprise is required to operate within an approved scope of business. For instance, if a contract contemplates the import or export of goods or cross border transfer of rights in technology (including licensing), then China’s Foreign Trade Law requires the Chinese party to have foreign trade rights in order to enter into the contract. The contract may be declared invalid if a party does not have the ability to carry out obligations under its business scope.

China is a member of the United Nations Convention on the International Sale of Goods (“Convention”). Under Article 142 of the General Provisions of the Civil Law of China, an international treaty to which China has acceded takes precedence over the civil law. The Convention applies to a sale of goods between foreign parties from countries that have acceded to the Convention and Chinese parties unless the parties expressly disclaim it.