English Language Contracts in China

Are you considering whether you should write an English language contract for a Chinese client or hire a Chinese attorney to do it?

There are a few basic things you should know before making that decision.  Does a contract in China require a dual format or is English is enough.  Does the “legalese” translate easily?  What are the hot-button provisions?

I am no expert in this area, but I came across a fabulous “bLAWg” that addresses these issues.  Take a look at Using English-Language Contracts in China: My Q&A with China Law Blog by Adams on Contract Drafting for more information.  Ken Adams does a great job of addressing these initial questions.

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Legal English – Definitions – General Vocabulary

One day, a long time ago, I decided to start a dictionary of legal terms.  I don’t know why I did it, but I did.  Below is the result!  It is really just a starter list of definitions – there are of course tons of terms not included!

You should feel free to make a copy of the below chart.  Keep it as an electronic file and add to it!  Learn a new word every day!  Any questions?  Comment below or send us an email at AnkaraLegalEnglish@gmail.com.

Absolute liability (strict liability) Liability for an act that causes harm without regard to fault or negligence
Abstract Abbreviated form containing the meaningful parts of an instrument
Acceleration clause A clause in a mortgage or note that causes the entire balance of a loan to become due when a default occurs
Acceptance The unconditional agreement to an offer. This creates the contract. Before acceptance, any offer can be withdrawn, but once accepted the contract is binding on both sides. Any conditions have the effect of a counter offer that must be accepted by the other party.
Acceptor A drawee of a draft who signs it on the face, agreeing to pay it.  (eg. The person who signs a check.)
Accord and satisfaction An agreement to perform in a different manner than originally called for, and the completion of that agreed-upon performance.
Action A law suit or court proceeding
Actionable Furnishing legal ground for a lawsuit
Actual notice Notice actually received
Ademption The discharge of a legal obligation by paying a party what is due.
Adhesion contract A contract that is drawn by one party to that party’s benefit and must be accepted, as is, on a take-it-or leave it basis
Advance directive A written statement specifying whether a person wants life-sustaining medical treatment if he or she becomes desperately ill
Adverse possession Title to real property obtained by taking actual possession of it openly, notoriously, exclusively, under a claim of right and continuously for a periods of time set by statute
Affiant A person who signs an affidavit
Affidavit A written statement sworn to under oath before a notary public as being true to the affiant’s own knowledge, information, and belief.
Agency A relationship that exists when one person is authorized to act under the control of another person
Agent A person authorized to act on behalf of another and subject to the other’s control.
Allegation A statement or claim that the party making it expects to prove
Alleged Claimed, asserted, or charged (but not necessarily true)
Alternative dispute resolutions Procedures for settling disputes by means other than litigation.
Answer The main pleading filed by the defendant in a lawsuit in response to the plaintiff’s complaint
Anticipatory breach The announcement, before the time for performance, by a party to a contract that he or she is not going to perform.
Apparent authority Authority that comes about when a principal, through some act, makes it appear that an agent has authority when none actually exists.
Appellant A party bringing an appeal.
Appellee A party against whom an appeal is brought.
Appurtenant Belonging to; touching and concerning.
Arbitration A method of settling disputes in which a neutral third party makes a decision after hearing the arguments on both sides.
Articles of organization A document that gives authority to an organization to do business as a corporation.  (Certificate of Incorporation; charter)
Asportation The carrying away of goods
Assets Property
Assignee One to whom a right is transferred by assignment
Assignment The transfer of a right from one person to another
Assignor One who transfers a right by assignment
Attachment The act of taking or seizing property by the use of a writ, summons, or other judicial order and bringing it to the custody of the court so that it may be applied toward the defendant’s debt if the plaintiff wins the case.
Attest To bear witness to
Attesting witness Person who witness the signing of a document
Automatic stay A self-operating postponement of collection proceedings against a debtor.  Also called automatic suspension.
Balloon mortgage A mortgage with low fixed payments during the life of the loan, ending in one large final payment
Bankrupt A state of a person who is unable to pay debts as they become due.
Bargain and sale deed A deed that conveys land itself, rather than people’s interests therein, and requires consideration
Bearer A person who is in possession of a negotiable instrument that is payable to a bearer, or to cash, or that has been indorsed in blank
Bilateral contract A contract containing two promises, one made by each party
Bilateral mistake When both parties are mistaken about an important aspect of an agreement.  (mutual mistake)
Bill of lading A document issued by a transportation company evidencing the receipt of goods for shipment
Bill of sale A signed writing evidencing the transfer of personal property from one person to another
Boilerplate Standard language used commonly in documents of the same type
Breach of contract The failure of a party to contract to carry out the terms of an agreement
Break clause A clause that allows a tenant to end a lease at specific times during the period of the lease.
Bribery The giving or receiving of a reward to influence any official act
Cause of action The ground on which a suit is maintained
Certificate of deposit An instrument that is given by a bank to acknowledge the receipt of money be a depositor
Certified check A check that has been accepted, and thus guaranteed, by the bank on which it was drawn and that has been marked to indicate such acceptance.
Chattels Anything that is the subject of ownership other than real property.  Also called personal property or personalty
Check A draft that is drawn on a bank and payable on demand
Civil action A non-criminal lawsuit
Claim A right to payment
Clear title Title that is free from any outstanding mortgages, liens, or other encumbrances of record
Collective agreement Term used for agreements made between employees and employers, usually involving trade unions. They often cover more than one organization. Although these can be seen as contracts, they are governed by employment law, not contract law.
Comfort Letter Documents issued to back up an agreement but which do not have any contractual standing. They are often issued by a parent or associate company stating that the group will back up the position of a small company to improve its trading position. They always state that they are not intended to be legally binding. Also known as letters of comfort.
Company seal  An embossing press used to indicate the official signature of a company when accompanied by the signatures of two officers of the company. Since 1989 it has been possible for a company to indicate its agreement without use of the seal, by two signatures (directors or company secretary) plus a formal declaration. However, some companies still prefer to use a seal and the articles of a company can override the law and require a seal to be used.
Compensatory damages Damages that compensate the plaintiff
Complaint A formal document containing a short and plain statement of the claim, indicating that the plaintiff is entitled to relief and containing a demand for the relief sought.
Compulsory arbitration Arbitration that is required by agreement or by law
Conciliation An informal process in which a neutral third person listens to both sides and makes suggestions for reaching a solution.  (mediation)
Conditions  Major terms in a contract. Conditions are the basis of any contract and if one of them fails or is broken, the contract is breached. These are in contrast to warranties, the other type of contract term, which are less important and will not usually lead to the breach of the contract – but rather an adjustment in price or a payment of damages.
Confidentiality agreement An agreement to refrain from disclosing trade secrets to others.  (nondisclosure agreement)
Consequential damages Losses that flow not directly from a breach of contract but from the consequences of it.
Consideration An exchange of benefits and detriments by the parties to an agreement.
Constructive notice Notice imputed by law
Consumer aAperson who buys goods or services but not as part of their business. A company can be a consumer for contracts not related to its business – especially for goods or services it buys for its employees. Charities are also treated as consumers.
Contract An agreement that is enforceable in a court of law
Conveyance A deed that conveys property rights.
Covenant A promise within a contract for the performance or non-performance of a specified act.
Damages Money paid as the normal remedy in the law as compensation for an individual or company’s loss. If another type of remedy is wanted (such as an injunction – see general contract terms below) but cannot be or is not given by the court, then damages will be awarded instead.
Debenture A formal debt agreement. It refers to both the agreement and the document that verifies it. It is usually issued by companies and is generally supported by security over some property of the debtor. If the debtor defaults, the creditor can take and sell the property. Debentures are often transferable, so the creditor can sell it and there are markets on formal stock exchanges that deal in types of debenture. It is sometimes referred to as debenture stock. A mortgage is a type of debenture but one that is always secured, usually against land.
Deed A written document by which a person transfers ownership of real property to another. A deed must be properly executed and delivered in order to be effective.
Disclaimer A written document denying legal responsibility, or a limitation of rights that might otherwise be claimed.
Due Diligence The formal process of investigating the background of a business, either prior to buying it, or as another party in a major contract. It is used to ensure that there are no hidden details that could affect the deal.
Easement An interest in land owned by another that entitles its holder to a specific limited use or enjoyment eg the right to cross the land, or to continue to have an unobstructed view over it.
Employment contract A contract between an employer and an employee. This differs from other contracts in that it is governed by employment legislation – which takes precedence over normal contract law.
Encroachment When a building or some portion of it, or a wall or fence, extends beyond the land of the owner and illegally intrudes upon that of an adjoining owner.
Equity The monetary value of a property after any claims, such as a mortgage, are taken away.
Eviction The dispossession of a tenant of leased property by force or through the legal process.
Exchange The exchange of agreed, signed contracts. The transaction between the seller and the buyer is then legally binding, and completion (including the final transfer of money) usually takes place two to four weeks later.
Exclusion clauses Clauses in a contract that are intended to exclude one party from liability if a stated circumstance happens. They are types of exemption clauses. The courts tend to interpret them strictly and, where possible, in favour of the party that did not write them. In customer dealings, exclusion clauses are governed by regulations that render most of them ineffective but note that these regulations do not cover you in business dealings.
Exemption clauses Clauses in a contract that try to restrict the liability of the party that writes them. These are split into exclusion clauses that try to exclude liability completely for specified outcomes, and limitation clauses that try to set a maximum on the amount of damages the party may have to pay if there is a failure of some part of the contract. Exemption clauses are regulated very strictly in consumer dealings but these don’t apply for those who deal in the course of their business.
Express terms The terms actually stated in the contract. These can be the written terms, or verbal ones agreed before or at the time the contract is made (see implied terms).
Fixture A permanently fixed piece of furniture or equipment incorporated into a property. Removing it would cause damage to buildings or land, and is therefore regarded as legally part of it.
Floating charge A form of security for a debt. Instead of naming a specific property, which can be taken by the creditor if the debtor defaults (as in a fixed charge like a mortgage), a class of goods or assets is named, such as the debtor’s stock. This allows the debtor to trade in the assets freely, but if the debtor fails to make repayments then the floating charge becomes a fixed charge (known as crystallisation) over all the stock at that time. The creditor can then take and sell it to recover the debt.
Franchising Commercial agreements that allow one business to deal in a product or service controlled by another. For example, most car manufacturers give franchises to sell their cars to local garages, who then operate using the manufacturer’s brand.
Freehold Outright ownership of a property. This type of tenure contrasts with leasehold where the leaseholder has the rights to occupy a property for a specified period of time.
Going concern Going concern – accounting idea that a business should be valued on the basis that it will be continuing to trade and able to use its assets for their intended purpose. The alternative is a break-up basis, which sets values according to what the assets could be sold for immediately – often much less than their value if they were kept in use.
Guarantee A secondary agreement by which one person promises to honour the debt of another if that debtor fails to pay. Banks and other creditors often call on directors of small companies to give their personal guarantees for company debts. A guarantee must be in writing. The guarantor can only be sued if the actual debtor can’t pay, in contrast to indemnity.
Habitable Suitable and fit for a person to live in and free of any faults that might endanger the health and safety of occupants.
Holdover Tenancy A tenancy that arises when someone remains in possession of a property after the expiration of the previous tenancy and is recognised by the landlord by accepting rent.
Implied terms Implied terms – are terms and clauses that are implied in a contract by law or custom and practice without actually being mentioned by any party. Terms implied by custom and practice can always be overridden by express terms, but some terms implied by law cannot be overridden, particularly those relating to consumers (see exemption clauses).
Incorporate Incorporate – inclusion in, or adoption of, some term or condition as part of the contract. It differs from its company law definition where it refers to the legal act of creating a company.
Indemnity A promise by a third party to pay a debt owed, or repay a loss caused, by another party. Unlike a guarantee, the person owed can get the money direct from the indemnifier without having to chase the debtor first. Insurance contracts are contracts of indemnity: the insurance company pays first, and then tries to recover the loss from whoever caused it.
Indenture A deed or other document to which two or more parties are bound.
Insolvency The situation where a person or business cannot pay its debts as they fall due (see bankruptcy, liquidation and receivership).
Invitee A person, such as a customer, who is present in a place either by the express or the implied invitation of the occupier. This normally means that the occupier has to exercise reasonable care to protect the safety of the invited person.
Joint and several liability Where parties act together in a contract as partners they have joint and several liability. In addition to all the partners being responsible together, each partner is also liable individually for the entire contract – so a creditor could recover a whole debt from any one of them individually, leaving that person to recover their shares from the rest of the partners.
Joint venture An agreement between two or more independent businesses in a business enterprise, in which they will share the costs, management, profits or benefits arising from the venture. The exact shares and responsibilities will be set out in a Joint Venture Agreement.
Jurisdiction A jurisdiction clause sets out the country or state whose laws will govern the contract and where any legal action must take place. Don’t forget that England and Scotland have different legal codes, and this may need to be specified.
Landlord The owner of property that is leased or rented to others.
Lease A contract by which an owner of property conveys exclusive possession and use of it for a specified rent and for a specified period – after which the property reverts to the owner.

 

Legal duty The responsibility to others to act according to the law.

 

Liability A person or business deemed liable is subject to a legal obligation. A person/business who commits a wrong or breaks a contract or trust is said to be liable or responsible for it.
Limited liability Usually refers to limited companies where the owners’ liability to pay the debts of the company is limited to the value of their shares. It can also apply to contracts where a valid limitation clause has been included in the terms.
Liquidation The formal breaking up of a company or partnership by realising (selling or transferring to pay a debt) the assets of the business. This usually happens when the business is insolvent, but a solvent business can be liquidated if it no longer wishes to continue trading for whatever reason (see receivership in the financial terms below).
Loss of use Circumstances where a property cannot be occupied in the normal way, through the negligence or wrongdoing of another party.
Misrepresentation Where one party to a contract makes a false statement of fact to the other which that other person relies on. Where there has been a misrepresentation then the party who received the false statement can get damages for their loss. The remedy of rescission (putting things back to how they were before the contract began) is sometimes available, but where it is not possible or too difficult the court can award damages instead.
Non-executive director A director who does not work directly for a company but advises the other directors. Non-executive directors have the full powers and authority of any other director and can bind the company to any contract.
Notice to quit A notification or communication to a tenant to leave specified premises usually for a breach of terms of the lease.
Occupancy Holding, possessing, or occupying premises.
Occupant Someone who occupies a particular place.
Offer An offer to contract must be made with the intention to create, if accepted, a legal relationship. It must be capable of being accepted (not containing any impossible conditions), must also be complete (not requiring more information to define the offer) and not merely advertising.
Parent company Where one company owns more than 50 per cent of the voting rights of another company it is the parent of that company which in turn becomes its subsidiary. It can also occur where the parent has less than 50 per cent but can control the board of directors of the subsidiary: that is, it has the power to appoint and remove directors without referring to other shareholders.
Partition The division into parts of property held jointly, or the sale of such property by a court with division of the proceeds.
Partnership When two or more people or organizations join together to carry on a business.
Party wall A wall that divides two separate premises, which is the joint responsibility of both owners.
Premises A building or part of a building usually including the adjacent grounds.
Proxy A person who acts on behalf of another for a specific purpose, or the form used to make such an appointment. In a company a shareholder can appoint a proxy to attend a meeting and vote on their behalf.
Quit For a tenant to move out of rented premises.
Quorum The minimum number of people needed at a meeting for it to proceed and make any decisions.
Ratification Giving authority to an act that has already been done. A company general meeting resolution can ratify an act previously done by the directors; or a principal can choose to ratify the act of an agent that was beyond the specified power of the agent.
Reasonable wear and tear Damage sustained in the course of normal use.
Receivership The appointment of a licensed insolvency practitioner to take over the running of a company. A creditor with a secured debt appoints the receiver. The job of the receiver is to recover the debt either by taking the security and selling it or by running the business as a going concern until the debt is paid off (see liquidation).
Redemption of shares Where a company issues shares on terms stating that they can be bought back by the company. Not all shares can be redeemed, only those stated to be redeemable when they were issued. The payment for the shares must generally come from reserves of profit so that the capital of the company is preserved.
Remedy/Remedies Payments or actions ordered by the court as settlement of a dispute. The most common is damages (a payment of money). Others include specific performance (of an action required in the contract), injunction (see the general contract terms above) and rescission – putting things back to how they were before the contract was signed.
Repossess To take possession again of a property or goods after non-payment of money owed. This might follow a court order.
Repudiation Repudiation – has two meanings in contract law. The first is where a party refuses to comply with a contract and this amounts to a breach of contract. The second is where a contract was made by a minor (person under the age of 18) who then repudiates it at or shortly after the age of 18. Then the repudiation voids the contract rather than causing a breach of contract.
Restrictive covenant Is often included in long-term contracts and contracts of employment to stop the parties working with competitors during the period of the agreement and for some time thereafter. However, unless carefully written the courts will see them as being a restraint of trade and not enforce them.
Search An inspection carried out to establish whether any legal restraints, planning applications or aspects of legal ownership might affect the purchase of a property. Solicitors will look into land registry and local government records when pursuing this.
Service contract Directors and officers of a company are usually given service contracts that are different to a contract of service or employment contract. This is because directors and officers are not always employees and the effect of employment law is different.
Shareholders’ agreement An agreement between all of the shareholders about how the company should be run and the application of the rights of the shareholders. This acts as a contract between the shareholders. The company itself is not bound by it, as it is not a party to the agreement.
Stamp duty A tax on transactions. Only applied to specific types of transactions eg dealings in land and buildings, shares and ships.
Subject to contract Subject to contract – words used on documents exchanged by parties during contract negotiations. They denote that the document is not an offer or acceptance and negotiations are ongoing. Often the expression without prejudice is used when subject to contract is meant.
Sublease A lease that is given by a tenant of part or all of the leased premises, to another person for a period shorter than the original lease, while still retaining some interest.
Tenancy The temporary possession or occupancy of property that belongs to another. It also refers to the period of a tenant’s possession.
Tenure The way in which a property is held eg freehold tenure or leasehold tenure.
Trademark A registered name or logo that is protected by law. Trademarks must be granted through the Patent Office.
Trespass A wilful act or active negligence that causes an injury to a person or the invasion of their property.
Underwriter A person who signs as party to a contract. Now usually only applied to insurance contracts where the underwriters are those who agree to bear all or part of the risk in return for the premium payments. Underwriters at Lloyd’s of London are also known as names.
Unfair terms Some terms are made unfair by legislation and will not be enforced by the courts and may even be interpreted against the person who included them in the contract. The legislation mainly protects consumers, but can also apply where there is a business-to-business contract in which one party is significantly more powerful than the other.
Usufruct The right to use the profits of property that belongs to another.
Vendee The person to whom a property is sold.
Vendor The person who is selling a property.
Void A void contract is one that cannot be performed or completed at all. A void contract is void from the beginning (ab initio – see the Latin terms below) and the normal remedy, if possible, is to put things back to where they were before the contract. Contracts are void where one party lacks the capacity to perform the contracted task, it is based on a mistake, or it is illegal.
Warranties Promises made in a contract, but which are less than a condition. Failure of a warranty results in liability to pay damages (see the financial terms below) but will not be a breach of contract unlike failure of a condition, which does breach the contract.
Without prejudice A term used by solicitors in negotiations over disputes where an offer is made in an attempt to avoid going to court. If the case does go to court no offer or facts stated to be without prejudice can be disclosed as evidence. Often misused by businesses during negotiations when they actually mean subject to contract.
Wound up Winding-up is the formal procedure for disbanding a company.