Signing an OEM contract is one of the ways to protect yourself when you source in China.
But how to do it properly is a big question, after all, the language, legal system and culture, etc.is totally different.
The suggestion I want to offer is:
1. Find an English-speaking Chinese lawyer to help you.
Benefit: they know what happens in practice and they are aware of the newest change in court if finally a lawsuit is inevitable. They will give more practical suggestions that any overseas lawyer can’t offer.
In one word, their job ensure the contract’s enforceability.
2. Selecting China as the jurisdiction to make sure the award being executed.
Why？Because China court barely enforce award formed in other jurisdiction.
Choose to file lawsuit in China court and file for a rule to freeze defendant’s assets will make sure the award in favor of you could be executed. For more information, you may check: Foreign Judgment-Enforceable in China?
3. Choose Chinese as the main language.
Only Chinese is the official language allowed to be used in China court, any paper in other language need to be translated into Chinese firstly.
So it’s better to prepare a bilingual contract and say: if there is any contradiction between this two version, the Chinese version will prevail.
In this way, you could make sure it’s the version your lawyer prepared to be used in the court, not a translation copy provided by any translator assigned by the court.
4. Choose China law as the applicable law.
Though the parties are allowed to choose the applicable law, but there are actually no detailed rules about how to use other’s country’s law in China court. In another word, it’s hard to do.
5. Specify liabilities for breach of contracts clearly and reasonably.
It’s very important to make sure the China factory understand the consequence if they breach the contract is very important.
Consult with your lawyer to set a suitable liability. If it’s too light, it’s not enough to warn the factory; if it’s too heavy, the other party will claim it to be invalid and the judge would support that.
But the court will stick to it, if the liabilities is reasonable.
Anything else?
Useful link:
MINISTRY OF COMMERCE OF THE PEOPLE’S REPUBLIC OF CHINA
