Contract Drafting And Negotiation - Services - Baker Botts

Published Oct 06, 21
6 min read

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Because the start of the pandemic, our China attorneys have had to inform a number of foreign companies that came to us after getting in deep problem that their contracts were either entirely useless or worse than having no agreement at all. When we describe why their contracts are so damaging, their action is normally that they could not pay for to use "a real law firm" and they "just figured these would be better than absolutely nothing at all." The issue is that most of the times they are even worse than absolutely nothing at all.

The case was not terribly made complex and I advised this individual secure regional Chinese counsel, especially since this person spoke Mandarin. The new e-mail was an update and the news was not good. Appears this person is persuaded his regional Chinese lawyer passed on secrets to the Chinese business he planned to sue.

Frankly, I have never heard a story like this including a trusted Chinese law office either. The other two instances included American business that had retained (two various) Chinese service providers for their hallmark applications, just to have those law firms take forever to declare their hallmarks and after that report back that a Chinese rival company had in the meantime beaten the American business to the hallmarks.

To put it candidly, Chinese legal representatives are NOT needed to maintain your confidences. Brad is dead on with this guidance and foreign companies utilizing Chinese lawyers should be cognizant of this and this is something our China lawyers continuously have to discuss to our rather disbelieving American customers

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And though Chinese criminal defense attorneys can select to maintain confidentiality (Art. 46, Crim.

American attorneys are truly horrified of disciplinary action. Bar associations take complaints seriously and, for the majority of lawyers, disbarment would be a critical blow, both financially and reputationally.

Political concerns and the defense of law practice' interests were generally the driving force. It is difficult to see how the average Chinese legal representative would be fearful of the effects of exposing secret information, especially if the impacted customer is a foreigner, a lot more so nowadays if it is an American business.

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Possibly your Chinese law company stands to benefit by tipping off your rival before it submits your hallmark application we have actually often times become aware of this happening. Or perhaps it will be as basic as revealing that you informed them that you would have paid $10 per widget, not simply the $8 written in your agreement.

Conscious of all this, smart customers typically take their China work to lawyers bound by the strict confidentiality guidelines of foreign countries. Of course, on occasion some information may require to be revealed to Chinese co-counsel, however it needs to always be carried out in a careful, determined, need-to-know basis. Needless to say, you do not desire to discover that your interaction is not privileged after you have disclosed secret information.

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These legal representative trust concerns have actually been out there for a long time, but with the increasing tensions between China and the United States, they are and will continue coming to the fore and this has actually stimulated us to discuss this again. How To Improve Contract Drafting. So the danger of your Chinese legal representative using your info for its own revenue has constantly been there, but it was uncommon for this risk to come to fulfillment till COVID.

Approximately 40% of the China agreements we have seen done at shockingly low prices were so terribly written regarding be even worse than no agreement at all. Around 25% of these agreements appeared to involve a lawyer/fake legal representative who was paid by the Chinese side to "toss" the agreement to the Chinese side.

Simply put, you paying a really low cost for a Chinese agreement gives you about 10-15% opportunity of doing much better than doing absolutely nothing at all and about a 75% chance of doing even worse. How do you like those chances? In addition to contracts written in manner in which merely does not work, we also frequently see concerns with the kind of agreement selected.

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And we have seen the reverse of this. In other words, people are not just paying for agreements so severely prepared as to be even worse than no contract at all, they oftentimes are paying for the incorrect agreement for their particular scenario!

When we get a matter where the contract really works, we compose an extremely short letter stating that we have an interest in representing them and we will charge x dollars per hour or a flat cost to do so. Two times already this month though we were challenged with situations where for numerous factors we felt it essential to examine the contracts and describe to our client/potential client our views of those agreements.

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Both of these emails involved situations where an Australian (!) company had actually paid practically absolutely nothing for an agreement that was unsatisfactory for us to pursue its claims, but also okay enough for us to be able to say for certain that its lawyer (or phony legal representative) had actually intentionally sought to make things as simple as possible for the potential customer's Chinese counter-party.

Considering you got it [the contract at issue] off Fiverr, I marvel it does in fact specify the securities you want but I question its damages provision because it describes a "penalty" (which is the absolute last thing you desire to call it!) and this may imply a Chinese court will not enforce it. This arrangement is likewise swarming with disparities. It utilizes "private details" and "proprietary information" interchangeably, which will be confusing to the judge and if you do ever find yourself in court will give your Chinese counter-party some good arguments.

In general it is very tough to check out and so it will annoy the judge, which is likewise something you do not want. Mentioning judges, the other thing it does which it needs to not is to attend to arbitration before three arbitrators and for that arbitration to be in Chinese and in English.

It likewise makes it pricey for your Chinese producer to sue you, this hardly matters due to the fact that the chances of your Chinese manufacturer breaching this agreement by providing you with bad or no product or stealing your IP are a lot higher than you failing to pay them. I also hate how your disagreements are to be dealt with by arbitration in Chinese and English.