One of our China lawyers recently cc’ed me an email from a potential (using that word as a stretch here) with whom she had been communicating regarding an employment contract. After our lawyer explained the basics of what should go into a China employment contract, the potential client mumbled (to the extent you can mumble in an email) how, “in the end, what’s the point of any of this when everyone knows contracts in China are not worth the paper they are printed on.”
In the old days, I used to fight back hard against this sort of comment, explaining how, yes, there are issues with enforcing contracts in China but the issues in not having a contract…. See this 2009 post we did entitled, Enforcing Contracts In China. Way, Way Better Than You Think. Now though, I just send them this World Bank link showing China ranked at number 5 for “Enforcing contracts” among pretty much all the countries in the world and ask on what they are basing their evaluation of China’s legal system.
I do not believe China is the fifth best country in the world at enforcing contracts — my sense is that it fits about in the middle. But I do believe China deserves to rank way higher than let’s say Russia or Pakistan, but not higher than Norway (ranked 8th) or the United States (ranked 16th) or many others. One reason China ranks so high is because breach of contract cases move so quickly there. But, the point of all this is not how high China ranks in the enforceability of contracts there. No, my point is way more simple than that. My point is only that it makes sense to have a contract for China just as it makes sense to have a contract for the United States and those who persist in believing otherwise are living in a fantasy world. And, hey, if you are going to move your manufacturing from China to Pakistan (which our international lawyers are seeing a fair amount with clothing manufacturers), you should have a contract for there as well. For why a contract makes sense even for Pakistan (ranked 156), check out this 2011 post, China Contracts. Why Even Bother?This article was written by Dan Harris and published on China Law Blog. Original Post: https://www.chinalawblog.com/2018/07/quick-question-friday-china-law-answers-part-62.html