Chinese Contracts 101: What You Need to Know Before Signing Contracts in China

For the uninitiated, navigating the bureaucratic systems in China carries a certain degree of challenge. Differences in language and legal system alone will make contracts unfamiliar and intimidating for most foreign residents, increasing the risk that the average expat will sign without a full understanding of the terms of the agreement, or is left without much recourse should terms be violated. To avoid the headache of common contract problems, here’s a basic primer.

The Basics

• Language: Contract language can be chosen by both parties, meaning that you have the option of Mandarin or English. If the contract has an English and Chinese version, only the Chinese version is legally binding. This feature can leave foreigners who do not speak Chinese in a vulnerable position, as terms may differ in the Chinese language version, so if possible, ask to have the contract written in English only. 
• Structure: Chinese contracts tend to use simple language and are generally shorter than in most Western legal systems.
• Key provisions: When crafting a business contract with a Chinese counterpart, make sure to include an amendment for damages with the correct business name. Preventing any confusion and clearly establishing legal penalties will save time in the event of a conflict.

Rental Agreements

• Contract length: Rental agreements are quite variable in length and highly subject to a case-by-case negotiation. While you might pay month to month, paying in installments of three to six months is more common.
• Deposit: Landlords may mandate two months’ rent in an upfront deposit. When paying your deposit, avoid paying in cash when possible. Creating a paper trail will help protect you in the event of a dispute.
• Disputes: Renters, whether foreign nationals or PRC citizens, have limited recourse in the event of a rental dispute. In recognition of the challenges faced by renters, the Ministry of Housing and Urban-Rural Development rolled nationwide laws to clarify the obligations of landlords and protect the rights of tenants in spring 2017. These stipulations prohibited landlords from arbitrarily evicting their tenants, and instituted fines for raising rents prior to the end of lease agreements. Should you need to dispute your rental contract with your landlord, you can take the case to Chinese court. However, expect the process to be lengthy and unlikely to gain a favorable resolution. To save yourself the headache later on, ask for feedback from previous tenants when possible.

Work Contracts

• Length: Most contracts for foreigners in China are for one year only and are designed to align with yearly work visa renewal requirements.
• Probation and termination: Inclusion of a probationary period is common, within this timeframe either you or your employer are able to terminate the contract without penalty. When negotiating your contract, pay attention to termination terms. When possible, make sure your employer is mandated to give you at least 30 days’ notice.
• Annual leave: Under Chinese law, workers are guaranteed mandatory annual leave. For more than one year and less than 10 years of work experience in China, you are guaranteed five days of vacation in addition to national holidays. If you have worked for less than a year in China, you are not legally guaranteed any additional leave.

Phone Contracts

• Key players: the largest mobile companies in China are China Mobile, China Telecom, and China Unicom. While you will receive a similar service with all providers, there are a few differences worthy of note. China Mobile has the largest market share of the three, so will provide the most options for service no matter where you travel domestically. China Unicom is the only provider that offers 3G services for phones purchased outside of China. China Telecom, in contrast, will not work with any phones bought internationally.
• Getting service: The most common option for foreigners purchasing phones in China is to buy a pre-paid SIM card with a set amount of data and minutes and then top up as needed. If you will be in China for a longer period, monthly service contracts (referred to as “set meals,” or 包月套餐 bāoyuè tàocān in Mandarin) will automatically deduct funds for a set number of minutes and data per month.
• Location: Whenever you purchase your SIM card determines your location restrictions. Although your phone will work in other parts of China, you may need to purchase additional data when traveling domestically.

READ: Ziroom Allows Foreigners Outside China to Terminate Their Lease and Keep Their Deposit

Image: talkingconstruction.com