When I was public defender on the Island of Yap in the Federated States of Micronesia, I heard about one of Victoria Secret’s more difficult customers. Every month, an elderly gentleman from Yap would receive a Victoria Secret catalog. Every month he would make a selection and every month he sent a letter complaining that he had not received what he had ordered. It took the customer service people at Victoria Secret quite a while before they figured out that that old gentleman thought he was ordering the models the catalog depicted and not the clothes they were wearing.
I’m reminded of that failure to communicate as I read about the difficulties of doing business in the Peoples Republic of China. In America over 95% of possible business lawsuits get settled prior to trial because both American Commercial Law and American corporate lawyers have evolved into not quite an exact science, but pretty close. Lawyers can calculate for a client with near precision what the outcome of a lawsuit will be.
By contrast, in the PRC, formal commercial law has developed almost entirely within the last three decades, there are few solid judicial precedents, and Chinese courts are reluctant to award attorney’s fees and/or interest on a judgment, so there is little incentive not to “roll the dice” and take the case to court.
That is why it is absolutely essential, when doing business in the PRC, that both parties work out a solid contract with a clear provision for liquidated damages.
– KENT MITCHELL