Global M & A: Know the differences btw PRC & foreign law contracts

• Citation: jd0114
• Author: Jackie(Jiahe) Yu,Yong Kaichang
• Date: 08 August 2018
• Published date: 08 August 2018
• Subject Matter: Comerical Law

2020/11/10 Global M&A: Know the differences btw PRC & foreign law contracts | China Law Insight

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CHINA LAW INSIGHT

Global M&A: Know the differences btw PRC &

foreign law contracts

By King & Wood Mallesons on August 8, 2018

by： Yong Kaichang Jackie(Jiahe) Yu King & Wood Mallesons International Partner

of Securities Group

In cross border transactions, there is sometimes a misconception amongst both

PRC and foreign parties that all contracts are by and large the same, whether

governed by PRC law or foreign law, and that the key to a good contract is just

proper drafting. Whilst it is true that the key to a good contract is good drafting

backed by proper experience and expertise, different legal systems have inherent

conceptual differences and as such, there are fundamental differences between

PRC law-governed contracts and foreign law-governed contracts. These differences

affect the interpretation, construction and adjudication of a contract – and will

impact parties’ rights, obligations, remedies and liabilities under it. In this article,

we briefly compare some key general differences between PRC law-governed

contracts and common law-governed contracts.

Consideration

Common law requires that consideration must be given in return for a promise to

form a binding contract (with a notable exception of a deed). In contrast, under

PRC law, a contract is formed at the time when a promisor’s promise becomes

effective . This means that, a promise for which no consideration has been given,