What has happened?
- The supplier breached the contract?
- The bad quality products lead to significant liability issue?
- Thousands of dollars wasted developing the products but couldn’t sell?
There is that moment, we all wished that if we can just take that supplier to the court because they have done so much damage to our business.
Regardless of your reason, there 3 things you must know about suing a Chinese company or any of the overseas companies per se.
Disclaimer: I am Yuping Wang, I used to practice law when I was working in China. Now I teach people like yourself to be brilliant in sourcing. I am sharing this information only from a practical business perspective to help you be prepared in case of a disastrous moment.
# 1: Where to sue?
You probably know in your gut that suing a Chinese company on the Chinese soil probably won’t work to your advantage. Can you just sue them in your home country, in your home city? Yes, you can.
Let’s assume you get a sure win suing the Chinese company in the United States, what happens next? Nothing!
Chinese courts do not enforce US judgments. You don’t have a chance to collect on your winning judgment.
Is your supplier an international company who does has assets in your home country? No? Then don’t waste your time taking them to court there. Even if you win, you win nothing. It is big waste of time and money.
# 2: Sue in what language?
It is not favorable to sue the supplier in China, but we want to get some money back so we will.
Do you have all your contracts drafted in English? Yes? Not good enough.
Some Chinese courts don’t enforce English language contracts at all. Some that do, your English document must be translated into Chinese first by the authorized party. This means you will somewhat lose your base evidence since it will be translated.
By the way, your purchase order, IS A CONTRACT.
#3: Whose Signature Is Considered Legal?
When you deal with a western country company, the authorized representative’s signature on the contract is good enough.
When you deal with a Chinese supplier, is your sales person’s signature good enough? No. How about his boss? Still a no.
To be admitted as a piece of legal document, your contract needs to be “Stamped” by the Chinese company’s official seal.
Want to know why?
The stamp represents the company to make the `document legal.
The seal has so much power, it supersedes any person’s “signature”. Normally there is a one or two people in a Chinese who have the access to the stamp or seal. When a company is shut down by the government, the legal seal is also confiscated.
This is a royal seal.
A Chinese business seal is more like this:
To prepare for the “just in case” moment when you want the supplier pay for the damage:
- Provide documents in both English and Chinese
- Have the Chinese supplier stamp the contract with the legal seal
- Sue them in China
For all the reasons I explained above, in Sourcing Warriors’ course, we have made your Purchase Orders (for your product and your tool), and your non-compete documents both in English and in Chinese.
Click below to check out Sourcing Warrior’s excellent trainings. Priceless materials that you can only find in Sourcing Warriors courses. Hope you source smarter, not harder.