Translate Your Contract For China? Not Gonna Do It

China lawyers

Don’t be a sucker. Translating your contract won’t work. Every few months someone will write one of my law firm’s China lawyers asking them to translate an already written contract for China. We always refuse, not just because we are lawyers not translators, but because doing so would be a complete waste of time because contracts that work for the United States, Europe, Australia, Canada, etc., do not work for China and putting those contracts into Chinese won’t change that. Indeed, it is ridiculous to think that an American business owner could draft a contract in English and that contract would work for China.

The other day though, someone who wrote me asking to have one of our China attorneys translate an NNN Agreement into Chinese pushed back when I said my law firm has a longstanding policy never to translate contracts (or anything else for that matter). After a couple more emails where I adamantly refused to have my firm do the work, he asked me if I would “just tell him how we arrive at our liquidated damages amount” and “refer him to a really good English-Chinese translator.”

My response to that was as follows:

You can translate your NNN perfectly (and good luck with that) but there is still a 99.99% chance it will be completely ineffective. I say this because I have never seen an NNN that works that has not been written by a very experienced China lawyer. I suggest you read our most recent two posts on our blog, as those deal with how IP squirts out unless your NNN or other agreement includes provisions preventing them from leaking to these other third parties. This is only one of many ways the NNN you want translated pretty much has to be ineffective.

As for liquidated damages [more properly called contract damages], that is an art not a science and — get this — you have to write this in a specific way because if it is deemed to be a penalty and not a valid and reasonable effort at quantifying damages, no Chinese court will enforce it. In the end the right amount should be based on, among other things, the court’s predilection in the Chinese city in which the disputes will be resolved (as China’s courts are all over the map on this — and you had better choose the right court for your disputes or your contract will be unenforceable), the value of the product at issue, the value of the IP at issue, the size of the companies involved, the type of IP at issue, and the most important thing is the amount must be low enough that the other side will sign it and the court will enforce it. Oh, and one more thing, you need to write this so you are not limited to just this amount, but remain free to pursue other damages in addition to this.

The point of the contract damages provision is not to get the penalty; it is to prevent the other side from leaking out your IP. The force of this provision is that it allows you to go to a Chinese court (but only if written a certain way) and freeze the assets of the Chinese company. This is the key to getting the Chinese company to stop abusing your IP. This provision must be written so the Chinese company believes it is better off not stealing your IP than bearing the wrath of that provision if it does. For more on this, read this. I have never seen anyone other than an experienced China lawyer get this right and countless times I have seen this done completely wrong.

If despite the above, you want to spend money on translating I don’t think it matters who you use and you do not need someone who knows legal terminology because you probably have not used the right legal terminology in the English language version of your NNN Agreement in the first place. There are plenty of Chinese translators on UpWork but I cannot recommend anyone because we do not use translators; we use our own Chinese lawyers to draft agreements.

Bottom Line: Translating contracts into Chinese does not make them valid China law contracts. It just doesn’t.

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