Quick Question Friday, China Law Answers, Part XXV

(Before It's News)

Because of this blog, our China lawyers get a fairly steady stream of China law questions from readers, mostly via emails but occasionally via blog comments as well. If we were to conduct research on all the questions we get asked and then comprehensively answer them, we would become overwhelmed. So what we usually do is provide a super fast general answer and, when it is easy to do so, a link or two to a blog post that may provide some additional guidance. We figure we might as well post some of these on here as well. On Fridays, like today.

The below is a compilation of a fairly common email we are getting with increasing frequency as China expands its consumer sector.

My company entered into an exclusive distribution agreement with a Chinese company for it to sell our product in China and then the Chinese company did not do a single thing to try to sell our product in China. Why did it waste its own time on the contract?

Our answer is usually something like this:

The Chinese company did not waste its time on the contract as it no doubt got exactly what it wanted from the contract, which was to prevent anyone else from selling your product in China. I am guessing that this company already makes or sells a product that competes with yours and by contracting with you for the exclusive right to sell your product in China (and then doing nothing), it has effectively shut you out of the China market for however many years it has that exclusivity — assuming you do not have appropriate provisions in the contract that allow you to terminate due to the Chinese company’s inaction.

Unfortunately, we see this a lot.

We will be discussing the practical aspects of Chinese law and how it impacts business there. We will be telling you what works and what does not and what you as a businessperson can do to use the law to your advantage. Our aim is to assist businesses already in China or planning to go into China, not to break new ground in legal theory or policy.

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