China, Contracts, International Law

Getting A China Contract Properly 'Chopped'

You need to be particularly vigilant about securing a proper chop. Why?

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My firm’s clients often ask how their contracts with Chinese companies should be signed and/or chopped (affixed with the company seal). We typically respond with something like the following:

Each Chinese company has only one “legal representative” (a term of art under Chinese law), who is identified as such on the company’s business license. Any agreement signed by a Chinese company’s legal representative is binding on the company, whether or not a chop is affixed. However, to enforce a contract that is not chopped, you must prove that the signature on the contract really belongs to the Chinese company’s legal representative. Therefore, if you can get the contract chopped, you should.

Larger Chinese companies often do not have their legal representative sign their contracts. In this situation, you need to be particularly vigilant about securing a proper chop.

Any agreement affixed with the Chinese company’s chop is binding, regardless of who signed on behalf of the company and regardless of who used the chop. However, to enforce the contract you must prove that the chop used on the contract is actually the correct chop from the correct company. Control of the company chop is, needless to say, quite important. Most Chinese companies keep their company chop with their legal representative or another high-ranking company representative.

An agreement signed by the legal representative and affixed with the company chop is a belt-and-suspenders approach. It is also what we advise.

It is possible to enforce an agreement that is neither chopped nor signed by the legal representative, if the company executes a number of agreements in this fashion. You should, however, not rely on being able to enforce such a contract.

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If you purchase products solely with purchase orders and invoices, you do not have a signed or chopped agreement. Our law firm has been asked to take on hundreds of breach of contract actions based solely on POs and invoices, and we have turned down every single one. To have any hope of enforcement in China, it is critically important to have a written and properly signed and chopped contract.

To increase your confidence that a contract has been properly executed, review other contracts executed by the Chinese company to confirm that the contracts bear the same chop and signature, or that the company follows a consistent pattern. For instance, perhaps the chop is always used, but depending on the type of contract or type of customer, maybe the sales manager signs or maybe the Vice President signs, or maybe the legal representative signs.

On large transactions, we recommend to our clients that they have one of our China lawyers confirm with the appropriate government agency that the chop on their contract is in fact the Chinese company’s official chop.

For more on the formalities involved with China contracts, see here and here.

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Dan Harris is a founding member of Harris Moure, an international law firm with lawyers in Seattle, Chicago, Beijing, and Qingdao. He is also a co-editor of the China Law Blog. You can reach him by email at firm@harrismoure.com.

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