China: Demand letters (for dispute resolution) matter in China

While a common practice, many international businesses are skeptical about the use of sending a demand letter (or in China, "lawyer's letter) to an opposing party after a dispute has occurred. It is often argued that Chinese managers will just ignore such a letter; or worse, the letter could forewarn them on any actions that are being prepared. In practice, however, well-written demand letters can be of tremendous help in settling a dispute. In fact some international legal practitioners have observed that demand letters have a much greater chance of success than in most other jurisdictions, including in the United States (see Cultural Norms As Law Enforcement Mechanism. Why Demand Letters Still Work In China).

I. Introducing demand letters

The demand letter refers to correspondence from a lawyer on behalf of a client, in which the payment or fulfillment of another obligation (e.g. continuing performance of a contract, ceasing to infringe IP rights etc.) is demanded. Further action is threatened if the demand is not met within a limited period of time. The demand letter usually states the facts relating to the issue at hand, and offers a legal analysis of the dispute issues from the lawyer's point of view, including a clarification of the legal basis (in laws, contracts) of the demands.

The best demand letters are brief and to the point, clear and convincing. As the object of the demand letter is for the opposing party (the recipient) to take it seriously, it should be issued by a law firm that can take further action, such as filing a lawsuit or applying for preliminary injunctions. Where the counterpart is Chinese, it is strongly recommended to have the letter sent by licensed Chinese lawyers and in the name of a Chinese law firm (excl. Hong Kong law firm), and in the Chinese language; and it should be sent to the legal representative or senior management of the target company.

II. Benefits of the Demand Letter

The most common international trade disputes arise from just a limited number of causes, for example:

  1. the purchaser receiving goods that failed to meet the agreed quality requirements or specifications, or not receiving the goods in the right quantity (or at all); or
  2. the vendor shipped the goods as agreed, but the purchaser failed to make due payment in full.

Other disputes could relate to intellectual property, agency & distribution problems, and shipment costs. When issues arise, the disadvantaged party will often try to negotiate a solution first, but if these discussions drag on for a long time without a resolution, a more drastic step should be considered. While it is possible to immediately file a claim in court or arbitration, instructing a lawyer to first send a demand letter may be more cost-effective and could bring the following benefits:

  1. Bringing the Dispute to the Next Level
  2. Negotiations over a dispute often take place between the sales / purchase staff of the parties, however these persons often do not have decision-making power, and could have an interest in delaying the matter to avoid responsibility within their own organization. Sending a demand letter thus ensures that senior management is aware of the threat. This is important because senior management will be more sensitive to the threat of legal action, and may prefer to resolve the dispute amicably to protect future business opportunities.

    Note that a demand letter in China still leaves ample room for the parties to negotiate a face-saving solution to the outstanding problems - which would be more difficult to reach once one of the parties files his claim in court or arbitration.

    On the other hand, the demand letter remains a sign that the injured party takes the matter seriously and is willing to spend money to have the dispute resolved. This threat is much more credible coming from a lawyer than from a company's employee.

  1. Helping Parties to Reach an Agreement
  2. Another accepted function of the demand letter in China, and perhaps the most important one for many international businesses, it is that it clarifies the dispute and - often - opens a new channel for negotiations. The Chinese litigation environment is often difficult and costly to navigate, with as particular challenge the high burden of evidence on the claiming party to prove its case. In practice, most disputes are resolved through a settlement: whether before a claim is formally filed, or even during litigation / arbitration. The demand letter can be the opening bid for such a settlement.

  1. Extending the Time Limit for Proceedings
  2. Where a dispute involves parties in different jurisdictions, it is common to see that the injured party takes a long time to consider whether or not to file a lawsuit or claim in arbitration, also because negotiations can be particularly cumbersome. Under the provisions of the PRC General Principles of Civil Law, a time bar will be interrupted by the receipt of a demand letter. In other words, sending a demand letter ensures that a new period of either 2 years (general) or 4 years (for international trade contracts) commences before the injured party must decide whether or not to file a formal claim in litigation or arbitration.

  1. Fulfilling Notification Requirements
  2. Under some contracts, an injured party has the obligation to send a notification to its counterpart. Some examples:

    • to confirm an act of agency where such agency was not authorized;
    • to claim the invalidity of a contract, or exercise a right to terminate the contract.

    On the latter point in particular, Articles 93, 94 and 96 of the PRC Contract Law provide that certain contracts can be terminated by notice to that effect; in case the recipient disagrees, it should petition the court or arbitration tribunal within a certain time limit to confirm the validity of the contract.

III. Conclusion

The mentioned reasons, and the fact that instructing a law firm to review the case file and send a demand letter is relatively inexpensive, are generally sufficient for companies in a dispute to consider this option seriously. Some may argue that a business letter (i.e. issued by injured party directly) could have the same effect, however the lawyer's demand letter is a legal evaluation and risk assessment made by lawyers based on their experience and professional knowledge; therefore it can be more effective in putting pressure on the recipient to compromise as long as the letter is well-written and contains convincing wording, logic and arguments.

At the same time, there are situations where a demand letter is not worth the limited cost. Companies should always assess the chance that a demand letter will be effective, whether to resolve the dispute or at least to be taken more seriously in negotiations. When making this consideration, one should always keep in mind the complexity of forcing a resolution through courts or arbitration, the demand letter is not easily ignored, and the fact that demand letters do often help to resolve disputes in China.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions