Can my Contract be in Chinese?
Contracts are a great way to manage relationships and risk. Getting parties to sign a contract before starting business helps to pre-empt disputes by making rights and obligations clear, and also getting parties to manage their disputes by less adversarial means. A careful businessman naturally wants to know what he is signing up for, and naturally a Chinese-speaking party might ask for a contract written in Chinese. But is it worth the time and effort?
By default, someone who signs an agreement is bound by the terms and conditions stated in it. However, some parties may attempt to free themselves of the contract by claiming that they did not understand the contents, or that they did not understand the effect of the contract - the common law defence of non est factum. Although this defence rarely succeeds, some people will just want to try their luck. Having the contract in a language which they are literate in helps to pre-empt such a defence and reduces the scope of a contractual dispute.
Aside from the legal advantage, a practical consideration is in building trust between the parties. For a Chinese party who does not know much about the Singaporean legal system and its substantive rules, presenting a Chinese contract gives them the confidence that they will know what they're getting into, and that the presenting party is not trying to hide anything behind a wall of English text. A relationship with a good start also helps when parties later disagree, since it's much easier to convince both sides to continue working together if there is a relationship to preserve.
On the other hand, there may be procedural difficulties if the agreement is only in Chinese:
The court will want the agreement to be translated in English. That leads to additional translation costs, and sometimes the dispute gets escalated when both sides have a different translation and then the respective translators have to be called as witnesses, which then has the effect of prolonging the trial process. So why incur the initial cost of writing it in Chinese, only to have it translated back into English?
Certified translators or multilingual persons will know that some words do not translate well because there is no exact equivalent. In a similar vein, parties coming from different countries would likely be governed by different laws and therefore would find certain Singaporean or common law legal concepts alien. For example, the English concept of equity has no equivalent in Chinese law, and a direct translation of "equity" into the phrase 平衡法 does nothing to help the Chinese reader understand the consequences of preserving equitable remedies.
In a similar vein, some words can be translated in several different ways. In the absence of a commonly accepted Chinese legal vocabulary for common law or local statutory concepts, there may be different terms used by individual lawyers or translators but which relate back to the same concept.
Some Chinese parties may want to include references to foreign legal concepts to make up for a perceived imbalance or disadvantage when it comes to contracting under an unfamiliar legal system. However that increases the cost of litigation, because then parties would need to introduce expert evidence on foreign law.
One way to mitigate these issues is to draft the contract in both English and Chinese, but with the English version to take precedence. This retains the advantage of both helping the Chinese-speaking party understand the contract, but yet reduce the cost of adversarial dispute resolution. Although this may increase the upfront cost of preparing the contract, it will reduce the time and money cost pressure if a dispute arises in the future.
Having said that, a good contract helps to make sure that parties are of one mind before they start working with each other. Having it in different languages helps to bridge the gap in a different way, as long as the necessary precautions are taken to avoid misunderstanding.
Considering a bilingual contract or contracting with Chinese parties? Email me (firstname.lastname@example.org) or send a LinkedIn message (to Boon Gan Ng) to get started.