Sino Agro Food Inc (fka SIAF)

[RealDutch]

Wow, read this about MoU's in China.

https://www.chinalawblog.com/2015/11/china-loi-and-mou-dont-let-them-happen-to-you.html

At least once a month a US company comes to one of our China lawyers after having spent considerable time in China negotiating a complex transaction. They then show us a Letter of Intent (LOI) or a Memorandum of Understanding (MOU) that sets out in great detail the terms of their proposed China deal. We then explain to them that it is a very bad idea in China to enter into this type of detailed LOI or MOU. The US company then usually says: “the document clearly states it is non-binding. What liability could possibly arise?”

These US companies are making a major mistake and are exposing themselves to substantial liability. Most U.S. (and many European companies) just assume that they are covered by the rule that prevails in England: no party is exposed to any liability during the negotiation period; liability arises only after the parties have executed a formal, written contract. Under this rule, if the written document clearly states that it is non-binding, no liability arises.

The rule in China is exactly the opposite. The Contract Law of the PRC has formally adopted the German law principle of liability for negligence in contracting (??????). Contrary to the classic common law view of the United States and England, under this principle, parties to a contract owe one another a duty of good faith. In a case where negotiations have commenced but no contract is concluded, the party that caused the failure to contract can be liable to the other party for damages. The damages in this situation are not contract damages, but rather damages for compensation for loss resulting from the reasonable reliance of the damaged party on the conduct of the other.