[Client Story] How to sign a binding 3-year commercial agreement with Chinese partners?
2023. 4. 28
[Client Story] How to sign a binding 3-year commercial agreement with Chinese partners?
As a law firm, we work directly with companies or their legal departments, but also with other experts and consultancies. One such client is LITAO, who have been helping international companies to sell their F&B products in China market since 2015.
Recently, their client Allive’s international wellness brand ‘Planet Superfood’ signed a three-year partnership with ‘Innolife Healthcare Limited’ - a company specializing in selling globally renowned supplement brands to Chinese consumers through ‘Tmall Global’.
LITAO’s founder, Lina Bartuseviciute, shared some valuable and practical experience on doing business in China and working with A&Z Law Firm:
“When a brand approaches us, we provide them with a tailored contract in English, outlining the rules and commitments of both parties for the next three years. In food business this sometimes feels rather unexpected - but we do it on purpose, so that we know the company is ready for what China business will be demanding from them soon.
Some clients come back with comments from their lawyer. We integrate the comments with our lawyer, aligning expectations and creating a reasonable working foundation. Then we sign a contract. These are the types of clients we are always very happy to work with, because we know they will have the same process when the time comes to sign a contract with a Chinese partner.
Some other clients come back with emotional remarks, claiming that signing a contract is too complicated, and it is but a sign of mistrust on our side. These are the types of clients we believe do not yet have established business processes to expand to China, and rely on a person or two to make all the decisions, which means sooner or later this bottleneck doesn’t allow anything to get done.
So how can we make sure that the Western party’s interests are met, and make sure the Chinese party is willing to sign a contract?
In the contract we signed last week, we listed various scenarios under every ‘breach’ and created rules for how we will calculate the punishment and the payout. The contract is still strictly binding, but here it’s no longer black and white, and there is a margin for negotiations and staying human, which is especially important now, in the face of economic and political adversity.
“A good contract is such that both parties are excited about it, and willing to sign,” says our advisor Anna Lukina. Thank you so much for your professional help, as well as help from your colleagues at A&Z Law Firm. We have learned a lot working with you, and we hope to have many more successful collaborations now that business travel is picking up again!”
We would like to thank LITAO for their trust in our services and we look forward to working together on more exciting projects.
