Chinese laws and regulations: Is hiring a freelancer legal in China?

Chinese laws and regulations Is hiring a freelancer legal in China

Questions & Answers

Q: More and more websites (like oDesk.com, Elance.com Freelancer.com) in English and Chinese are connecting international business people with Chinese freelancers to project work on a part time and sometimes full time basis. What do the Chinese laws and regulations say about this?

A: Technically, this transaction is not governed by Chinese Labor law and there can’t be a legally binding labor contract in place because the “employer” is not a legally registered Chinese entity. However, Chinese tax law does apply.

It’s not forbidden for a Chinese person in China to work for overseas entity as a freelancer, as long as he/she complies with Chinese laws and regulations, especially the tax law. Income tax needs to be paid and is it the responsibility of the individual freelancer to pay it.
The PRC individual income tax laws clarify how much income tax would need to be paid:

For tax on remuneration for labor services (usually for freelance job) a flat tax rate of 20% is applicable.

There is a different structure for the tax on salary (usually for full-time, long term jobs paid by a formal employer). In those cases a progressive tax rate is in place. 3 to 45 percent is applied depending on the income bracket. Income tax is not applied to the salaries below 3,500 RMB/month.

At the moment, it’s not easy for the China tax man to know how much a freelancer is actually making and where the money came from. However, it’s required by the law that any individual whose income is more than 120,000 per year should report their income to government, regardless of the source.

3 legal services foreign companies in China should not overlook!

To date, there are few instances of freelancers getting in trouble for failure to pay full income tax. In the not too distant future, PRC government will start to crack down. But for now, the laws remain unenforced. BUT there are cases where freelancers and their “employers” are getting into trouble if they perform a service that should only be performed by a licensed entity in China.

Here is one common example:

Dangers of hiring a freelance QC inspector

Chinese laws and regulations Dangers of hiring a freelance QC inspector

Some foreigners hire freelance Chinese to do product inspection. The freelancer goes to the foreigner’s supplier in China and conducts an audit of the factory or does a product inspection. After the visit a report is provided to the foreign customer. Actually, this field is highly regulated and only AQSIQ licensed firms with AQSIQ registered auditors/inspectors should be doing inspection/auditing work.

The danger for the foreign customer is as follows:

  1. If the Chinese supplier wants to remove the inspector because that inspector is finding a lot of defects. The suppliers can secretly turn the inspector into AQSIQ. So suddenly, the overseas buyers find themselves without eyes and ears at the factory.
  2. If the freelance inspector does a poor job and doesn’t find defects or reviews the wrong shipment… the overseas company has little recourse.
  3. Most overseas company’s try to get the lowest price freelancer out there. Yet they ask this freelancer to inspect product which may have a significant value. This situation is ripe for bribery.

Say you pay the freelancer 100 bucks to visit a factory and give the yes/no on a 100,000 USD order. Factory knows they have defects, but they get paid from you when the goods ship, so they give the freelancer 400 USD to turn a blind eye and send you are report that says the order “100% OK”. Since there are no ramifications for the freelancer (keep in mind you can’t sue him because you don’t have a legally binding contract with him under PRC law), they are highly likely to go to the dark side and accept the bribe and you get a load of junk.

Additional resources:

www.SupplierBlacklist.com is a great site if you want to see the problems international buyers have when dealing with freelancers, agents and factories in China. Here is a case study of a Canadian company, published on the CSIC blog.

Setting up an exclusivity agreement with a China supplier

Production-monitoring-qc-china-189x3001-157x250

Summary of the 8 key items to consider when setting up an exclusivity agreement

A client recently asked “we have started working with a Chinese supplier and we want to get them to sign an exclusive agreement with us. How we could make this happen?”

6 items for the general relationship between buyer and seller

One:

Frame the discussion in a way that gets the supplier excited about cooperation. But don’t make promises you can’t keep. Be honest about potential growth and leverage your orders to get the supplier’s attention. For example, if you have big volume, explain that you are a major player in the industry and if they play nice, they will get a lot of business. You are willing to share your market and product intelligence in order to have a mutually beneficial partnership, but your require their confidentiality and exclusivity in exchange.

Two:

Make the terms of the exclusivity known to the group (key managers of the supplier) rather than just 1 negotiator. Contracts ideally are negotiated and signed in front of a group (even if via group emails). Loss of face for breaking one’s word is often more effective than fear of legal repercussions. For example, if the GM says to you he would never do business with your competition, then goes out and does that …all his co-workers will know he is a liar and he loses a lot of face. (unless they are all a pack of thieves)

Three:

On that note, to determine if they have a good reputation (not a pack of wolves), in advance of signing a contract:

a) Were you able to visit with some of their references? If they can’t give a reference or two, that is a big red flag.

b) This blog post explains how to do due diligence on a budget. Some of the tools mentioned can be done without them even knowing.

Four:

After the contract is agreed, don’t just let them sign it and forget it. Have the key terms regarding exclusivity attached to each and every PO. This shows you are serious about it and as the supplier’s staff come and go on the project, new people will see this is a key part of the relationship that must be respected. PO’s placed should also have an official chop by the supplier to confirm they accept the PO/ Terms. Since the supplier needs to sign (and “chop”) the bilingual PO/ agreement each time an order is made, he can’t look me in the eye and say he didn’t remember the terms of the contract about exclusivity.

Five:

Consider keeping an eye on the supplier to make sure they are respecting the terms. Periodically check the trade shows, their showroom, their warehouse, their catalogs, taobao, Alibaba and such. Even contact them under a different name now and then to see if they will sell you the items you have protected!

Six:

If you have IP or even brand names to protect. You can register them with Chinese customs and make it clear that only authorized parties are allowed to export. So if the relationship falls apart with the vendor, you can prevent them from exporting under your brand.

2 essential items to build into the terms and conditions of your exclusivity agreement

Seven:

It is essential that the contract is in Chinese or bilingual. There are many reasons for such an arrangement. First, to have any legal validity in China, you have to list the Chinese name of the suppliers. I’m talking about the Chinese name you see in their Chinese business license. Local authorities and courts only recognize registered Chinese names. So the English name, or whatever they call themselves for marketing, is not an official name. You can’t sue some company named “Best Good Star Mfg.” in China. But you can sue “最好星有限公司”.

Keep in mind that to litigate outside of China is for the most part meaningless. The vast majority of Chinese companies do not have any assets outside of China and a court in China does not enforce foreign judgments, so it means that you actually get nothing (except a bill for wasted legal fees) even if you prevail in a court back home. So if litigation is the only option to solve the dispute, a lawsuit should be filed in a Chinese court.

If your key documents are in English, it complicates things a lot. For example, before the courts can make a decision, the English documents/ supporting evidence will need to be translated into Chinese by a court approved translator for the court’s review. This can be expensive and very time consuming. Plus the defense can employ a stall tactic of fighting over the wording of the translation itself. It’s much better to have your attorney structure the wording in advance in Chinese rather than hope the court’s translation will be accurate. Be safe. Use bi-lingual contracts.

Eight:

Contracts should have a reasonable penalty about what happens if the terms regarding exclusivity are broken. This penalty needs to be stated in the contract, in advance, not only so the seller knows you are serious, but to make any potential future litigation go easy for you.

Details about Penalty Clauses in Chinese Contracts

Make sure the penalty is large enough to make the supplier take them seriously but not so large as to scare them away. As long as the penalty is reasonable, damages are enforceable in Chinese court and it will save you lot of trouble as without pre-agreed terms for compensation it is very hard to prove how much loss you have suffered. Plus, a pre-agreed penalty saves the judge a lot of time and makes his job easy. If you don’t state the penalty, he will probably ask both sides for the amount they feel is fair, then the judge will just split the difference. That method rarely benefits the damaged party. So it is obviously much better to have a penalty in place upfront.

The main value of putting a penalty in your contract is that it will motive the supplier to comply with the terms so that actually you never have to enforce it.

Hope these comments help get you pointed in the right direction.

Let me know how your exclusivity arrangements with Chinese suppliers have worked out.

Related Content:

(video) Negotiation, Contracts and Payments – The Ultimate Guide

7 items you probably forgot to put in your contract with the factory.

Protecting your Intellectual Property

Insider’s look at legal services in China: Contracts & Purchase Orders (Part 14)

Purchase Orders or Purchase Contracts?

Are Bilingual Contracts Necessary?

Common Mistake #8: ‘Leaky contracts’

A small buyer placing orders with Chinese Suppliers: contracts, travel, and other issues

I’m Just Getting Started. Tips for China?

What to expect from the courts when things go bad

Insider’s look at legal services in China: supplier in China: Introduction & Process (Negotiations, Demand Letters & Litigation) (Part 15)

Work with your China-based lawyer to sue your supplier!

Work with your China-based lawyer to sue your supplier

Sometimes miring through a lawsuit, whether against a supplier or an ex-business partner, can be more painful than the events that gave rise to the dispute. Although favorable results can never be guaranteed, foreign clients can take comfort in the fact that retaining a Chinese-based lawyer is less taxing than one might imagine. A client’s physical presence in resolving a dispute is limited, practically in absentia in most cases. The bottom line is that you don’t actually always have to fly to China to sue somebody. But your communication with your attorney is key. Here are some tips to keep in mind:

Always answer your emails within twenty-four hours.

Let’s face it: both you and your attorney have limited time. If you get an email, particularly one asking for additional information, don’t put it off for later—time can be of the essence in some cases. That may seem like a no-brainer, but it is awfully easy to let messages slip through the cracks and remain unanswered. (And don’t be shy in reminding your attorney and his or her staff that the standard goes both ways.)

Disclose as much information as possible.
More is always better. That means every email, invoice, receipt, and note you have. Even if you think it is irrelevant, experienced attorneys are quite skilled when it comes to drawing inferences, which can be more powerful than textual evidence. The best part is, everything can be sent electronically—very rarely will you need to send any hard copies.

Don’t be afraid to ask questions.
Law school is demanding. There is no possible way to learn every aspect of the law in a classroom. If you, the client, are not sure about a particular aspect of your case, do not be shy when it comes to asking questions. In all honesty, lawyers learn an awful lot from their clients’ curiosities. Each case is a learning experience. Lawyers charge clients not just for their achieved wealth of knowledge, but for their ability to obtain new knowledge—researching skills. Of course this may sound like defensive hand wringing, but don’t be dismayed your obscure, off-the-cuff question cannot be immediately answered. The best attorneys will check their facts before giving you a confident answer.

Be honest
Honesty is the best policy. The surefire way of losing your case is to disclose false information. This includes omissions. It is dishonest to leave out small little details because you think their revelation will harm you. Help your attorney help you. Remember, you are hiring an expert to help you with your problem. The lawyer is bound by a confidentiality covenant; there is nothing to fear. Just like when you were a kid, and your parents found that broken cookie jar in the kitchen, with the crumb trail leading to your hideout—someone will find out.

Starting a business in China: How and where to start

Starting a business inChina How and where to start

Right now, small and medium sized entrepreneurs can operate in the P.R.C. more confidently than ever. The Chinese government has committed itself to the protection of foreign partners’ investments, profits and legal rights. These guarantees protect against nationalization and uncompensated takings. If you want to start a business (aside from merely setting up a representative office) there are three basic vehicles: (1) wholly foreign-owned enterprise; (2) joint equity venture; and (3) cooperative venture. Whether you want to start an import-export store, boutique shop, hotel, restaurant, or establish a representative office, you must become familiar with relevant operating requirements.

As you can imagine, the new era has brought about a substantial amount of new regulations. The World Bank’s Doing Business Report provides a great starting point for newcomers to the P.R.C. The report provides a generalized framework, providing fees and time frames; but nevertheless, professional help should be consulted.

Should you choose to “go it alone,” your main ally will be the State Administration of Industry and Commerce’s (SAIC) website. There you can find English translations of highly useful laws on advertising, consumer protection, and business associations (incorporation law). It is a good idea to become familiar with these primary sources before you seek counsel. The more you know, the better you can communicate your precise needs to Chinese professionals.

SAIC is where you will obtain your business license. You will need preapproval of your business name, which usually takes around two weeks for a decision. You will need to open a Chinese-based bank account, subject to a minimum capital deposit. (The requisite funds and percentages required by each foreign partner or shareholder depend on what business vehicle you have chosen). Although it is possible to complete these initial steps without professional assistance, P.R.C. law mandates a verification report prepared by a Chinese auditing firm.

Further requirements include registering with the local statistics bureau, police station, and taxing authority. Recent developments in social insurance have also obligated foreigner business owners to enroll with local career service centers and welfare centers, before hiring any Chinese nationals. These procedures can be tricky at first, but you should not feel discouraged. They are testament to the bright economic future of foreign direct investment in the P.R.C. AsiaBridge Law can help you ease through each step, comfortably and confidently.

Why should I retain a China-based lawyer?

Why should I retain a China-based lawyer

There are many benefits to hiring a China-based lawyer. Often times having boots on the ground is indispensable. Whether you are operating within Asia or abroad, it is always reassuring having someone on-site and ready to respond at first notice. Additionally, there are many procedures and functions that a foreign attorney, even with an international firm, simply cannot do.

You need competence in the drafting of documents and transactions—specificity is key. Although it may seem beneficial and expeditious to simply pull a template from the internet, even the most expansive generally-termed contract cannot herald what you have in mind. Every situation is different.

But beneath the obvious needs for a Chinese attorney (e.g., drafting bilingual contracts, advising on Chinese law, locally registering intellectual property) the benefits are legion. The rule of law is a burgeoning concept in China. There has never been a more commanding need for competent legal counsel.

Keep in mind, your presence may be required in China for business. During these times, whether you are looking for, or managing vendors, legal consultation is likely to be needed. For example, product safety is incredibly important. At home in the U.S., or in Europe, there is a distributor who is the importer of record and if anything goes wrong, the distributor absorbs liability (or at most shares liability).

Why should I retain a China-based lawyer Doing business in China

However, in China you are likely to be the importer of record. Even if you are completely unaware or detached of any wrong doing on the behalf of a supplier (e.g., labor disputes, product hazards) the local government may come after you. Do not rest easy when a factory manager tells you that they are “globally insured.” Consider for a moment, would a U.S. lawyer go after a Chinese-based supplier when there is a stateside defendant to go after? Generally, if you are a U.S. citizen (or even a non-citizen, but with “minimum contacts” in the U.S.) you are always amenable to U.S. jurisdiction. As the importer of record, YOU are directly liable. As such, liability comes with the duty to stay informed of the relevant laws of both the U.S. and mainland China.

Consider another case illustration: when dealing with electronics, whether in U.S. or Europe, you will be responsible for safety certifications. Even if the factory deems a product as CE or UL certified, you are responsible for staying abreast of the developments and changes with regulations (rubber stamps do not equal compliance). You may have had a great relationship with a genuine supplier for years, but regulations always change. In other words, no matter what, even if you have found a good apple supplier, they may, because of slight error, be out of compliance.

International shipping is replete with slight hurdles that can lead to costly delays. For example, your new product’s customs clearance might require additional paperwork and duties. A quick phone call to your Chinese-based counsel at the border can avoid lengthy and unnecessary delays.

For a moment, think back to Philosophy 101, in which you may remember Jeremy Bentham’s school of thought “Utilitarianism.” Among the many principles he espoused, the most relevant here is deterrence. Put yourself in the shoes of a supplier. If a supplier knows that you have retained local counsel, it is more likely than not that he or she will exercise more diligence and care throughout production as your response to any wrongdoing will be much more swift and efficient. Part of avoiding the most common mistakes in China is making yourself a hard target. This also includes educating yourself about both the remarkable benefits and the unfortunate realities of doing business in China. As mentioned before, even a great supplier might be mistaken. Thus you and your counsel’s fastidiousness may be mutually beneficial.

At times it may seem more convenient to hire a domestic, U.S.-based law firm. But consider this: even for the most basic tasks a U.S. firm might consider it more efficient to outsource its in-house responsibilities to a Chinese firm! With this in mind, it is logical to cut out the middle man and connect directly with the firm handling the matter. Another reason clients may hesitant to hire Chinese attorneys is that—well let’s face it—because it can be a daunting task connecting with a good Chinese supplier, it reasons that it may be just as difficult to find an effective Chinese legal firm. But keep in mind, the key is finding a firm that can communicate with not only you, but also with your associates.

With all the practical considerations, it is always nice to know that you have local support in such a great land for opportunity as China.

Legal system in Hong Kong and the P.R.C.

Legal system in Hong Kong and the P.R.C.

“One China, two systems”

In the United States, we tend to take for granted the Constitution’s Full Faith and Credit Clause. The concept is simple: any valid judgment issued by one state is fully enforceable in another state. Unfortunately, international civil litigation is not that simple and as a result the designated jurisdiction in your contract may affect the success of your claim.

Under certain circumstances the P.R.C. permits parties to apply foreign contract law when enforcing the terms of business agreements. But generally, difficulties arise when attempting to enforce foreign court judgments in the P.R.C. However, Hong Kong judgments are an outlying exception.

In 2006, China and Hong Kong implemented a special reciprocity arrangement for enforcing monetary judgments in commercial disputes. The legal system in Hong Kong is based on English common law  and has relatively sophisticated courts. What this means is that Hong Kong more closely resembles both the British and American systems of jurisprudence. If jurisdiction can be obtained, litigation in Hong Kong may be viable and advantageous option for dispute resolution. To ensure protection under the Hong Kong S.A.R. (Special Administrative Region) you must first establish qualified jurisdiction and understand the steps of enforcement.

Only some categories of agreements may apply Hong Kong law. Actions brought on disputes arising from the performance of contracts for Chinese-foreign equity joint ventures, Chinese-foreign contractual joint ventures or Chinese-foreign cooperative exploration and development of P.R.C. natural resources exclusively fall under the jurisdiction of the People’s Courts of the P.R.C.

In addition to the substantive terms of your agreements (e.g., defining the product, payment schedule, quality assurance) the handling of claims and disputes is just as important. Arguably, the most important contractual term in your agreement is the exclusive choice of court provision. You MUST expressly (in writing) agree to designate either the Mainland or a Hong Kong Court to have exclusive jurisdiction for dispute resolution.

To quote the H.K.S.A.R.’s press release on the Arrangement on Reciprocal Enforcement of Judgments in Civil and Commercial Matters, “the Arrangement is only applicable to money judgments on disputes arising from commercial contracts where the parties concerned, on the basis of freedom of contract, have made an agreement in writing in which a court of the Mainland or court of the H.K.S.A.R. is expressly designated as the court to have sole jurisdiction for resolving the dispute concerned.”

“Should I designate Hong Kong or the P.R.C. as my choice of jurisdiction?”

Legal system in Hong Kong Should I designate Hong Kong or the P.R.C. as my choice of jurisdiction

At first glance, applying Hong Kong law may seem like the more attractive option. The reason being that most Western businesses are more familiar with basic legal terms of the common law system (for example, common law contracts require offer, acceptance and consideration; whereas P.R.C. may only require mutual assent). But difficulties may arise when your supplier or associate operates only within the Mainland.

As mentioned above, you may be able to secure a money judgment in Hong Kong and enforce it against a P.R.C. entity, but you will NOT be able to obtain an injunction in a Hong Kong court enforceable in the P.R.C. An injunction differs from a final money judgment. If your business partner breaches a non-compete agreement, and decides to become your competitor, the issuance of a preliminary injunction (in the form of a cease and desist order) could save you invaluable time and money. This is a crucial factor that you must consider when weighing your options.

Another practical consideration is the fact that P.R.C. attorneys practice mainly within the P.R.C. Although not a general rule, most P.R.C. attorneys are more comfortable and proficient with Mainland Chinese civil law. Absent any special requirements or client preference, the default rule is to apply P.R.C. to all contracts. The final decision will likely rest with your own business needs.

Trademarks in China: What do I need to file for my application?

Trademarks in ChinaWhat do I need to file for my application

The notion that being there first somehow justifies ownership rights is a venerable and persistent one.” –Lawrence C. Becker, Property Rights: Philosophical Foundations (1977).

Generally there are six requirements that the client must provide to the firm:

  1. Logo
  2. English text of the trademark
  3. Chinese text (characters) of the trademark
  4. Copy of the passport, if applicant is individual or copy of certification of incorporation
  5. Name and address of the applicant
  6. The items the trademark applies to

Logo

The first step is avoiding the mistake of submitting your logo in color. Although you may have a graphic with a very distinct hue, you must send the firm a digital copy in black and white only. If you submit an application in a certain color, your right is limited to that single color. Although others cannot register your image in another color, there is no express bar on the use of a different color. In other words, if you apply for red you can’t stop others from using pink or fuchsia, etc.

Trademarks in China: English text

Essentially there are three ways different methods of “Romanizing” your trademark’s text. Most importantly you will need to register the plain English label. However, if you are marketing a Chinese product that does not have a direct English translation, you should to register its pinyin transliteration. In case you are not familiar, Pinyin is the official Chinese system using the Latin alphabet for denoting the sounds of words. Basically it entails transcribing the pronunciation into phonics into a format so that 广州市becomes “Guangzhou.” The last and least important method concerns the Wade-Giles system. Pinyin has effectively superseded Wade-Giles. It is important to make mention of it because you will see various products today still using the Wade-Giles system (e.g., T’sing Tao).

Trademarks in China: Chinese text (characters)

If you continue selling your product in China (sooner or later) you should register your trademark in Chinese as well. Chinese consumers will remember the products in Chinese characters. Too many times have I purchased the wrong flavor of noodles, mistaking Spicy Beef for Seaweed. As a result, I always go with chicken because it is the only character I can remember—point well illustrated I hope. (For another example, consider the dilemma Hermes faced when the company did not register its transliteration in Chinese)

Although there are myriad dialects of Chinese, the most standard pronunciation is Mandarin. Mandarin uses the pronunciation in Bei Jing as standard. But technically all written Chinese characters are nearly the same. I say nearly because in some dialects there are minor special characters to be aware of, such as in Cantonese. The bottom line is that you should register the Mandarin characters.

Copy of passport or certification of incorporation

A simple copy or certification of incorporation will be acceptable. However, if the applicant is individual, a signed power-of-attorney will be needed.

Name and address of the applicant

No special considerations need mentioning for this step.

The items the trademark applies to

Remember, trademarks are words and symbols representing the source of a product or service. This means that in addition to whatever physical products you may wish to sell, you can also have images and symbols representing the business and services you offer.

For the purpose of trademark applications, Nice Classifications (which take their name from the Diplomatic Conference of 1957 in Nice, France), prepared by the World Intellectual Property Organization (WIPO), provide the acceptable formats for descriptions. For more information, please click here. This is the U.N.’s equivalent to the U.S. Patent and Trademark Office’s listing of Acceptable Identification of Goods and Services, (located here)

Please note that certain Nice Classifications are subdivided into additional categories. Applications in different classifications will be treated as separate transactions for billing purposes. However, for those remaining under one classification, the Trademark Office in Beijing will include up to ten categories. An extra fee will be charged for any more.

Trademarks in China: Ensuring longevity in the PRC

Trademarks in China Ensuring longevity in the PRC

After a year and half, our client’s trademark was finally granted by the Trademark Office in Beijing.

The client asked me: “Do you have any guidance on requirements for usage and requirements for ongoing maintenance?”

Good question. It occurred to me that this is something important for people to know about, after they tried so hard and obtained the trademark certificate.

Generally, owners of the trademark are entitled to use it in his or her products, packaging and/or marketing materials. They are also entitled to use it in an AD, exhibition or other commercial activities.

Trademarks in China: Trademark law of the PRC

  1. The term for a trademark is ten years commencing from the day the trademark is granted. If the owner wants to renew it, they must file his/her application of renewal within twelve month before expiration. He/she will have a six months grace period after the expiration date. However, after the grace period, he/she will lose the trademark forever if no application for renewal is filed.
  2. All trademark owners are supposed to file for registration with the Trademark Office in the event that: they plan to change their trademark, they plan to change their name or address or they plan to assign his or her trademark to anyone else. Besides, if the owner doesn’t use his/her trademark for three years consecutively, his/her trademark will face the risk of being revoked by Trademark Office.

It’s not easy for a trademark to be granted in China, given the huge amount of trademark applications the bureau sees each day. To clients this seems to be a never-ending wait. So I want to advise you all to please pay attention to the ongoing maintenance of this precious certificate!

4 simple ways to protect yourself in the New Year

4 simple ways to protect yourself in the New Year

2014 is fresh and so the scams will be too. Make sure you’re prepared. Here’s four ways you can best protect yourself.

  1. Be sure to register to your IP. China recognizes IP if it’s registered in China and not if it’s on the market or already registered in your home country.
  2. Find the right contract that fits you and your supplier. There are many different contracts to choose from and you should always know what you are signing to. In a Chinese court, Chinese is the only language allowed during a court hearing.
  3. Do your Due Diligence. Before you send money to that perfect supplier you found via internet, do a little research. You can always hire someone to call the supplier beforehand to confirm they are legitimate or make sure the name is in Chinese characters, this will almost always confirm whether they are real or fake.
  4. When all else fails having a simple retainer. Doing business in China can be difficult and scary but having a lawyer on call definitely lessens the burden.

Finally, “proper prior preparation prevents poor performance.”

Happy 2014 from all of us at Asiabridge Law!

Purchase agreements vs purchase orders

Purchase agreements vs purchase orders

More than once, when I review Purchase Agreements (PA) that buyers have already signed with his or her supplier, I’ve found that actually what he signed is a Purchase Order (PO).

Purchase agreements vs purchase orders: What’s the difference?

A Purchase Agreement is an agreement signed by both buyer and supplier focused mainly on duty and rights of both parties. This includes General Terms, such as language, choice of jurisdiction, etc. the main points in a PA may include: responsibility of each party, inspection, price and payment, confidentiality, inco-terms, term and termination, molds, remedy for breach of the contract, place and acceptance of order, warranty, etc.

In conclusion, PA’s clearly define expectations by both parties and more importantly, also specifies a remedy if either party fails to comply with the specifications of the PA.

Usually when buyers decide to buy from a certain supplier, the buyer will sign a PA with the supplier. The terms of the PA will cover all the orders he is going to place—essentially a catch-all unless otherwise stated.

On the other hand, Purchase Orders’ primary focus are the specific requirement for one single order, it gives all detailed information of one order, the product name, specification, quantity, date of delivery, etc., it may change from time to time. In other words, Po’s solely focus on the product in deal, and leaves other terms to be dealt with by a PA.

Though each focus is different, PA’s and PO’s work together to specify terms of an order. Once a dispute comes to fruition, we will use the PA and the PO as a guide to solve the issue.PO