It is very common for North American companies to outsource manufacturing to China. However, it is also common to sign only a framework agreement, an MOU, or a very simple ambiguous “contract” with their Chinese counterparties. This loose contractual relationship will put the North American company at a disadvantage when there are disputes.
Such documents often fail to address some basic but important matters. First and foremost, I would suggest making crystal clear, in any outsource manufacturing agreement, the exact nature and the scope of the cooperation. It is important to specify in the agreement whether the Chinese party is a seller, an OEM manufacturer, or an agent of procurement.
When a dispute ends in the courtroom, a loose contract can even make it hard for a judge to correctly understand the legal relationship between two parties or the intention of the contracting parties.
Find out why contract review is critical to your business and how we can help you protect your business with other partners.
Check out the second part of this tip on how to protect your IP when it comes to outsourcing to China – Outsource manufacturing contracts (Part 2)
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