Labor policy in China entitles workers to rely strongly on perceived promises made by employers, meaning that attempting to rescind anything in a job offer can result in an adverse court judgment. A common situation involves removing a promised bonus from the contract, after which the employee may successfully claim the bonus in litigation. Compensation policies that conflict with pre-employment promises may also be held unenforceable because of procedural defects. Rescinding a job offer in a way that causes lost opportunities for an applicant may also lead to liability for damages. In this article, we will explain when a job offer may control despite a later employment contract and outline best practices for avoiding legal exposure for damages.

Contents

• Why Courts Hold Offer Letters Binding
• Offer Letter Enforceability and Liability
• Precontractual Fault for Unilaterally Revoking an Offer Letter
• Enforceability of the Offer Letter and the Employment Contract
• Offer Letter Disputes and Risk Management
• Compliance Strategies

Why Courts Hold Offer Letters Binding

A Shandong company sent Li an offer letter on March 8, 2018, stating his monthly salary would be 15,000 yuan, with probationary pay of 12,000 yuan. The annual performance bonus would be calculated based on the annual performance review. Li started work on March 28 and signed a 3-year employment contract. Under § 3 Compensation and Benefits of the contract, his base pay after the probationary period would be at least 1,810 yuan per month.

Li resigned citing personal reasons on August 1, 2020, and the company issued him a termination certificate on August 19. In January 2021, Li filed a claim with the arbitration tribunal seeking 95,600 yuan in performance bonuses for 2018–2020 and payment for paid annual leave. The arbitration tribunal ruled in Li’s favor, and the trial and appeals courts affirmed the award of performance bonuses.

In this case, Li’s claim for the performance bonus was based on the offer letter provision that “annual performance bonus is at least 20 percent of the annual salary.” The company disagreed and argued the offer letter expired on March 26, 2018, and that Li’s incentive pay was contingent on the company’s financial performance. The company was unprofitable during the performance period, and therefore did not meet the conditions for paying performance bonuses. The company submitted the employment contract, compensation plan, and a screenshot to prove the compensation plan was publicly posted.

The court held that the company failed to provide evidence that the compensation plan was adopted through employee consultation or was otherwise communicated to Li. Therefore, the court held that the plan was ineffective against Li and did not give weight to the evidence.

At trial, both parties agreed Li’s pay during his employment matched the offer letter’s base salary rate, contradicting the company’s claim that the employment contract replaced the offer letter. The company provided no further evidence, so the court found the offer letter controlled the compensation provisions.

The company also failed to prove that it had negotiated with Li to tie the performance bonus to the company’s financial performance or that they reached a written agreement on this. Because the company failed to meet its burden of proof, the court ordered it to pay Li the claimed performance bonus.

Offer Letter Enforceability and Liability

Enforceability of an offer letter in China depends on its legal characterization during formation of the employment relationship. Offer letters are a step in the establishment of employment relationships, but the Employment Act, Employment Contracts Act, and other Chinese laws do not address offer letters. Therefore, the general contract rules in the Civil Code apply. Under the Civil Code, an offer must manifest a clear intent to be bound and should be binding on the offeror after the offeree accepts it.[1] An offer letter is therefore generally irrevocable if it specifies an acceptance deadline, or if the applicant reasonably relied on it by quitting their current job, turning down other offers, or otherwise making preparations.

The offer letter is thus an offer to establish an employment relationship and enter into an employment contract with a job applicant. It becomes binding on the employer once the applicant accepts it, and the offer letter’s wage and employment benefits terms become part of the contract. An offer letter is a legally binding offer in terms of legal character, as long as the terms are clear. It cannot be withdrawn if it sets a response deadline or a start date, or if the job applicant took actions in reliance on it, for example, by resigning from their current job or turning down other job offers.

Contract formation requires the parties to act in good faith and with genuine assent. China Civil Code § 500 provides that a party is liable for damages under the doctrine of precontractual liability if it negotiated in bad faith, made fraudulent misrepresentations, hid material facts, or otherwise acted in bad faith during contract formation.[1]

If hiring needs could change after an applicant relies on the offer, seek legal advice about compliant strategies. If you need help with employment issues in China, take a look at CBL’s legal services page.

Precontractual Fault for Unilaterally Revoking an Offer Letter

An offer letter creates reliance between the parties, and the employer may incur precontractual liability if it arbitrarily revokes the offer letter after the applicant accepts the offer and before an employment contract is executed.[2] Chinese law does not define the scope of damages recoverable under precontractual liability, but courts generally award reliance damages, including:

• Actual expenditures incurred to prepare to execute the employment contract, such as travel expenses, lodging costs, and phone bills.
• Wage income and lost opportunity. Lost wages during unemployment caused by the employer’s revocation can be calculated either using the total wages specified in the offer letter or the applicant’s wage income from their former employer. Opportunity loss is the loss of opportunity to enter into employment contracts with other employers resulting from accepting the offer letter.

Employers may want to revoke an offer letter if the applicant provided a forged diploma or falsified resume, and disputes may arise over whether the employer should be liable for precontractual fault causing detrimental reliance. Courts typically would find that if the employer revoked the offer letter within a reasonable time after learning of the falsity, and the offer letter clearly stated that employment is conditional on passing a background check or providing truthful information, then the employer is not liable. Courts generally do not allow an employee’s fault as an affirmative defense if the offer letter lacks explicit conditions. Thus, offer letters should include such a condition precedent.

Courts have also treated offer letters as agreements to agree and held applicants liable for breach. In Shanghai Civil Case 02-cv-3126 (2020), an applicant signed and returned an offer letter, which the applicant later rescinded. The employer filed an arbitration claim for breach of contract, and then filed in court after the arbitration tribunal’s dismissal. The court ordered the applicant to pay stipulated damages equal to one month’s wages under the offer letter.[3]

Two courts relied on different legal grounds in reaching the same final judgment. The trial court ruled that the applicant breached the duty of good faith and fair dealing and injured the company’s reliance interest by refusing to accept the job offer. Therefore, the applicant was liable for damages under the doctrine of precontractual fault causing detrimental reliance. The appeals court instead found that the offer letter was an agreement to agree between the parties to enter into an employment contract within a certain period of time, so either party can hold the breaching party liable for breach of agreement. The court therefore held that the applicant was liable to pay the stipulated damages set forth in the offer letter.

The China Civil Code § 495 added a rule under which a reservation, purchase order, booking, or similar agreement to enter into a contract in the future is an agreement to agree.[1] A party might be held liable to the other party for breach if it fails to perform its obligation to enter into the contract. An employer’s job offer letter sent to a job applicant and accepted by the applicant creates a preliminary agreement to enter into an employment contract; if either party fails to perform, the other may hold the breaching party liable for breach.

Enforceability of the Offer Letter and the Employment Contract

An offer letter is not automatically invalidated when an employment contract is signed. The enforceability of the offer letter depends on whether its terms match those of the employment contract. There are three ways in which this generally happens:

1. The employment contract incorporates all of the offer letter’s terms, so there is no conflict or inconsistency.
2. The employment contract conflicts with the offer letter; because the contract is executed later, it is treated as a separate agreement that modifies the offer letter’s terms; thus the employment contract controls.
3. Offer letter terms not addressed in the employment contract remain valid and binding on both parties.

Here, the employment contract provided base pay of at least 1,810 yuan monthly but omitted the exact amount and made no mention of an annual bonus. The monthly salary actually paid matched the offer letter, a fact the parties did not dispute, so the court used the offer letter to determine the compensation terms and granted the employee’s annual performance bonus claim. The court rejected the company’s argument that the offer letter was superseded by the employment contract, holding that an offer letter would remain in effect unless expressly modified in the employment contract. Most courts hold that an employment relationship begins on the date the employee actually starts performing work, treating performance of work as the sole determining factor. (See Employment Contracts Act § 7)

Offer Letter Disputes and Risk Management

Under Chinese law, disputes over offer letters are governed by the Civil Code and are not treated as employment disputes because no employment relationship or contract exists at that stage. The recipient of an offer letter is considered an applicant, not an employee, and the company is not yet an employer.[1]

The non-breaching party may file a civil suit directly in court since the court has subject matter jurisdiction. But what usually happens is that the parties will complete the pre-suit procedures by filing with the employment arbitration tribunal first, then file suit in court after it dismisses the case, which helps avoid procedural disputes.

Exercise caution when using offer letters. Offer letters are not covered by the statute and employers are free to issue or not to issue them. Where one is necessary or where customary practice dictates using one, employers should complete background checks, including education and work experience, and physicals before sending an offer letter to the applicant.

Draft and issue offer letters correctly. Clearly state all agreed-upon terms and whether the offer letter remains valid after the employment contract is signed to avoid disputes. Consider including conditions precedent. Include breach of contract liability provisions for both employer and applicant. When hiring executives, include detailed contractual terms and stipulated damages to reduce losses if the applicant declines.

Compliance Strategies

The China Civil Code rules on offers and the principle of good faith make it difficult for companies to use internal budgeting changes, approval process oversights, or document errors as a defense against applicant claims.[1] Therefore, management should not treat an offer letter as an HR department document, but rather as a business commitment that requires authority and accountability. Before issuing an offer letter, the hiring manager should confirm the position and needed start date, the finance controller should confirm the base salary, target bonus, and internal budgeting, and a responsible person should confirm hiring authority. Nonstandard compensation, special bonuses, or any deviations from the company’s standard form should be subject to attorney review. Do not send the offer letter until all these reviews are complete.

Use the hiring approval form as the canonical reference for the compensation package, and keep the offer letter, employment contract, and payroll system synchronized. Maintain an audit trail that records who proposed each change, who approved it, and the effective date.

After an applicant accepts, if business conditions warrant a change, the management team should compare the commercial consequences of continued performance, a negotiated change, and a vacancy before deciding whether to propose a written amendment. Do not require an applicant to resign or report for work and then deny promised benefits on grounds of internal policies, operating loss, or approval process errors. This approach moves disputes from after-the-fact evidence back to business decisions made before the offer was made.

Since an appropriate strategy depends on the specific business context, consulting an expert for advice is necessary to reduce potential legal exposure. If you need help with employment issues in China, ask CBL to connect you with a lawyer.

Further Reading

Get more insights about Chinese employment law:

• China Employees Who Refuse to Sign an Employment Contract
• Expiration Is Not Necessarily the End for China Employment Contracts

For a general overview of this topic, see also CBL’s China Employment Law FAQ.

Footnotes

[1] China Civil Code, (中华人民共和国民法典), (National People’s Congress, May 28, 2020), (in Mandarin)

[2] Supreme Court Leading Cases, (最高人民法院发布第四批人民法院大力弘扬社会主义核心价值观典型民事案例), (Supreme Court, Dec. 16, 2025), (in Mandarin)

[3] Shanghai Civil Case 02-cv-3126 (2020), ((2020)沪02民终3126号), (Shanghai Second Lower Appeals Court, Jul. 17, 2020), (in Mandarin)