China contract boot camp: How foreign businesses can avoid entering into contracts involving "fake content with a genuine chop"

Under normal circumstances the fact that the parties to a contract have imprinted seals (or 'chops' as official company seals are called in China) would typically indicate that the parties have reached an agreement on the contents of the contract and are ready to perform it. However, in practice, there are still cases where the official seal of one party is genuine, but senior management of the company in question has no knowledge of the contract until the time comes when it is called upon to perform its obligations or receives a court summons. We have worked on several such disputes involving foreign-invested enterprises (FIE) in recent years. In this note, we will look at how this phenomenon came about, discuss how to prevent it happening, and how to deal with disputes arising in this area.