Yesterday’s post, How to Avoid Inadvertently Gifting your IP to your Foreign Manufacturer, drew such favorable reactions I figured I’d reprise the theme today and explain how to avoid setting yourself up to get bad product from your foreign manufacturer without being able to get compensated. But rather than write a new post on it, I will just cite a recent email I sent to explain why the international dispute resolution lawyers at my law firm do not think it makes sense to pursue their bad product claims against their foreign manufacturer. This email essentially recites all the things that the recipient did to ensure the product it would get from its foreign manufacturer would be substandard and why once it got that product, there was little or nothing our dispute resolution lawyers could do to secure compensation for the quality problems.
I ran your case by our international dispute resolution lawyers and they are not interested in taking it on a contingency fee basis and they also say they cannot in good conscience ask you to pay us to pursue it.
Our lack of interest in your case stems from the following:
1. Your contract (even assuming this qualifies as a contract under Chinese law) is in English. Many courts in China will not hear a case with an English language contract. This is even more likely to be the case in a place like Hubei Province.
2. It looks like you did not pay the Chinese company with whom you have the contract. You instead paid some other company based in Hong Kong. This is a classic China ploy. If you sue the company with whom you have the contract, it will say you never paid them because you didn’t. Not sure if it will win on this, but it is yet another hoop you will have to jump through.
3. The “contract” says you will inspect the product before it ships. The manufacturer will contend you either did inspect the product and were fine with it or you chose not to inspect. Either way, it should make for a pretty good defense because for whichever reason you allowed the product to be shipped to you without voicing any complaint. If you are not going to inspect product before it gets sent to you, you should not have this sort of provision.
4. China does not generally recognize samples as the standard that must be met. If you want your product to be of a particular quality, you need to lay out every single specification that will get it to that quality and that must be made a part of your contract. Putting in a term like “good quality” in a contract with a China manufacturer is a waste of time because in China they have incredibly low quality levels that are just fine for Chinese commerce and for Chinese courts. It is not at all clear to me that your manufacturer failed to give you exactly what you ordered. You say that it is of “bad quality” but that is under US standards, not under any standards that I see in the contract and that is what is going to matter to a Chinese court. For more on why this matters and for how you should handle this the next time you have product manufactured in China, check ou Getting Good Product from Your China Manufacturer: Specificity is Key.
You might want to try to interest a Chinese lawyer in taking this case, but I have my doubts whether even that would be worth your time and money as you will almost certainly have to pay a fair amount of money just on the out of pocket costs for pursuing this litigation. Suing in the United States would almost certainly be a waste of time and money unless this Chinese manufacturer has assets in the United States, and very few do. China courts do not enforce U.S. judgments so even if you win over here, it will be of little to no value in collecting money from your Chinese manufacturer in China. For more on this, check out Enforcing US Judgments in China: Not Yet.
If you are going to continue buying product from China, you really should start using a contract that will work. What you need is a contract your Chinese manufacturer believes will allow you to win in a Chinese Court. With that sort of contract, your chances of getting bad product go way way down and should you get bad product, your chances of winning at trial and getting your money go way up.
Nearly all of what I said in this email applies to most other countries as well.