Entering into a contract is a serious legal process for anyone, especially small and medium enterprises entering new markets. For those who work on an international scale, particularly in China, those contracts may contain legal terms along with clauses or terms that the average business owner may not fully understand. And without a legal background, previous knowledge of the subject, or outside legal help, these businesses could be at a disadvantage.
But why exactly is contract review so important? It may seem like a tedious step, but this service is extremely important when entering a new international market. Failing to properly review your contracts or legal documents could have significant legal and financial consequences. Let’s take a look at the basics of contract review and document drafting services for non-lawyers and why they are so valuable.
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What are contract review services?
Contract review services are performed by legal professionals who audit a contract between two parties, ensuring all terms are fair, enforceable, and straightforward. They can break down a contract into easy-to-understand terms, giving business owners a clear understanding of what they are entering into. Contract review services that serve global markets can include translation services as well.
What are legal document drafting services?
Contract review and legal document drafting services go hand in hand. Legal document drafting involves the development of all sections of your legal documents, from terms to clauses and everything in between. Like contract review, document drafting is usually done by an experienced lawyer. In many cases, the drafting specialist will work very closely with the party that wishes to draft the document to ensure that their needs for the contract are met.
Contract review uses for small businesses
There are a number of applications for contract review services, many of which can be beneficial for small businesses. Some uses include:
- Litigation and paralegal support.
- Legal research and writing is taken off of the plate of the business owner.
- Keeping track of important dates involved in contract renewals.
- Translation services for international business contracts.
- Examining contracts for completeness, grammar, and spelling errors.
- Identifying missing contracts or legal documents.
- Reviewing contracts for compliance and clarity.
- Non-disclosure and confidentiality agreements.
- Employment and consultant (or sub-consultant) agreements.
- Contracts for distributors, partnerships, material transfers, and collaborators.
- Website privacy policies and e-commerce agreements for web-based businesses.
Why contract review is important for SMEs in China
First and foremost, contract review is a necessary service to invest in, no matter where you are doing business. However, for those doing business in China, extra care must be taken to ensure that differences in language, legal systems, enforcement, and business culture do not interfere with contracts. Here’s how a contract review service can help:
Legal terminology is difficult enough to discourage the average business owner from managing their own contracts. Add in potential language barriers and a fairly straightforward contract can seem impossible to navigate. Some businesses will simply invest in a freelance translator or advisor, but this often isn’t enough. A bilingual lawyer with experience in writing contracts is a necessity to provide context and clarify complex legal terms.
Identifying unfavorable terms
Disputes can occur at any point in a partnership, even in the contract-drafting stage. A lawyer who can identify unfavorable terms or agreements in a contract can help business owners prevent issues from arising, protect their business interests, and preserve valuable business partnerships.
A governing law clause is a type of clause in which one can declare what rules or laws will govern the agreement if legal issues should arise. In addition to the governing law clause, dispute resolution in China can be complex, so it is wise to include dispute resolution clauses that establish guidelines for how disputes will be resolved.
Negotiate terms in your favor
Between payment, delivery schedules, quality control, and other terms, there are a number of terms that contracts must cover. It’s hard enough to negotiate terms without a legal background, not to mention the potential language barriers. Beyond preserving your best interests, it can be difficult to negotiate in a way that aligns with Chinese business culture. A contract review expert with experience in Chinese business can help you negotiate terms in your favour while laying the foundation for a prosperous working relationship.
A restrictive covenant is any type of contract that requires one party to do or avoid a specific action. Any restrictive covenant will need to include a significant amount of detail, from the reasoning behind the covenant to the details of avoiding or engaging in that covenant to repercussions for violating the restrictive covenant.
Some common restrictive covenants in China include non-competes and non-solicitation agreements. Non-competes are legal documents that bind one or both parties from working for a competitor. A non-solicitation agreement prohibits one or both parties from soliciting the other entity’s clients or customers once the terms of the contract have ended. If there’s a chance your partner could become a competitor in the future, it’s necessary to ensure that any non-solicitation agreements are negotiated properly.
Payment details and terms
Any business partnership should detail the terms and details of payment in their contract. If you wish to work with a Chinese supplier, for example, you’ll need to establish rates, timelines, payment methods, primary currency, and other details. Sound overwhelming? For many business owners, it is. A contract review expert can help ensure that payment terms are fair and that both parties are satisfied.
Non-disclosure and confidentiality agreements are a part of many business partnerships, and both parties involved should not simply rely on trust. A contract review expert can help you include details regarding confidentiality, such as the information that can or cannot be disclosed, along with the repercussions for disclosing sensitive information.
Contracts are an integral part of any business, so it’s essential that they receive proper attention. If your business is entering a foreign market, this becomes even more important. But rather than trying to handle contracts on your own, you should consider getting help from professionals with experience in the space. Sign up for a free account to purchase a legal service, or book a free 15 minutes call to let us help you to start your new partnership off right.