Southern Perspective Shenzhen

A man working for a pharmaceutical company signed a three year contract and non-compete clause. After two years, he decides to leave and the company believes he has breached his non-compete clause. The company then goes on to sue the employee for 300,000 yuan, claiming he breached his non-compete clause.

Problem:

The non-compete clause they drafted up only included the employee’s responsibilities and no responsibilities of the employer. When they go to the court, the court judges in the employee’s favor, because the contract only stipulated the responsibilities of the employee, but did not stipulate what the employer was responsible for. The court also stated, both parties should have equal rights and responsibilities. The employee was liable/responsible for a certain set of rules stated within the non-compete clause, but there were no equal responsibilities for the company to abide by in the contract. Whether this was the company’s intent or not, the contract was clearly biased. Therefore, the contents should not be binding on the employee.

This is an interesting situation above. Now the employee can take other job, of the same title, at other competing company and approach old customers to do business. Everything the non-compete clause was supposed to prevent, had utterly failed. Again, there is this sense of “fairness” gong on. Chinese courts will not follow a completely one sided and winner-takes-all contract. The concept of “Good Faith” is a big reason for this. Negotiating in good faith, creating contracts in good faith, and performing a contract in good faith is an idea used today and written into law.

While the court did not mention good faith in the case, we could take a stab at a possible theory that the company could have been charged with “failure to negotiate in good faith” because of the one sided contract. Next week, I will get into what good faith means to you.