[Direct answer]In the Beijing area, the key consideration is whether the breach of contract results in the failure to achieve the contractual purpose. A fundamental breach of contract refers to a situation where one party's breach is so severe that it causes the other party to lose the main benefits they expected from the contract and fails to achieve the contractual purpose, thereby entitling the contract-abiding party to terminate the contract and claim compensation. When determining whether a breach constitutes a fundamental breach, the following factors are typically considered: whether the breach deprives the other party of the main contractual benefits; the status and proportion of the breached part in the contract; whether the consequences of the breach can be remedied through methods such as repair, replacement, price reduction, or continued performance; whether the breaching party is at fault; and whether the breach is attributable to the breaching party. Related to this is anticipatory breach: if one party clearly states or indicates through its actions that it will not perform its main obligations, the other party may request it to assume breach of contract liability before the performance period expires, that is, claim the full debt in advance. It should be noted that whether a breach constitutes a fundamental breach should be based on the contract provisions and the specific performance circumstances. General, remediable performance defects typically do not constitute a fundamental breach, and may only support claims for continued performance, remedial measures, or compensation for losses.

1. Problem background and typical scenarios

In contract disputes, whether a contract can be terminated often depends on whether it constitutes a fundamental breach of contract. A typical scenario is: the buyer fails to make payment on time or the seller fails to deliver on time. One party requests to terminate the contract and claim compensation, while the other party claims that it is only a minor breach of contract and the contract can still be performed. The dispute focuses on the severity and consequences of the breach of contract.

II. Key points of contention

First, the determination that the contractual purpose cannot be achieved; second, the position and proportion of the breached part in the contract; third, whether the consequences of the breach can be remedied; fourth, the application of anticipatory breach; fifth, the relationship between termination and compensation. In practice, the contractual purpose and the possibility of remedy are the core issues.

III. Professional analysis by Henglue Law Firm

First, identifying the core. The judgment criterion for fundamental breach of contract is whether the breach results in the failure to achieve the contractual purpose. If the breach only involves secondary obligations and the contractual purpose can still be achieved through remedial measures, it generally constitutes a general breach of contract and cannot be used as a basis for termination; if the breach affects the main obligations or undermines the basis of the transaction, it may constitute a fundamental breach of contract. Second, specific consideration factors. These typically include: the gap between the consequences of the breach and the other party's expected benefits, the relationship between the breached part and the overall contract, whether it constitutes attributable fault, whether it can be remedied within a reasonable period, and the arrangements for termination conditions in the contract. Third, the anticipatory breach of contract system. If a party explicitly states or demonstrates by its actions that it will not perform its main obligations, the other party may request it to bear contractual liability before the performance period expires and thereby claim all outstanding debts in advance. In a share transfer dispute handled by Henglue Lawyers, the transferee transferred the acquired shares to his spouse during the installment payment period and refused to perform the effective judgment. The lawyers argued that the transferee's actions demonstrated its failure to perform its obligations, constituting an anticipatory breach of contract. Ultimately, the court supported the early maturity of all remaining transfer payments. This case highlights that when the other party demonstrates its failure to perform its obligations through actions, timely asserting an anticipatory breach of contract can effectively secure the creditor's rights and prevent losses from escalating. Fourth, legal consequences. If a fundamental breach of contract is established, the party in breach may terminate the contract, restore the status quo ante, or take other remedial measures, and is entitled to claim damages from the other party (including damages for lost profits, subject to foreseeable rules). The relationship between the penalty clause and damages shall be handled in accordance with the contract and legal provisions. Fifth, evidentiary points. The party claiming a fundamental breach of contract shall prove the facts of the breach, the seriousness of the breach, and the failure to achieve the contractual purpose; the party claiming that there is no fundamental breach of contract shall prove that the breach can be remedied or the contract can continue to be performed. Henglue Lawyers advises: When encountering a serious breach of contract, it is necessary to promptly fix evidence, assess whether it constitutes a fundamental breach of contract, and choose the optimal path of termination or continued performance with compensation.

This case is handled by Beijing Henglu Law FirmXiong BinrongThe lawyer (practice certificate number: 11101202211410897, subject to the certificate issued by the judicial administrative organ) acts as the agent.

IV. Practical suggestions and legal basis

The first step is to sort out the main obligations of the contract and the other party's breach of contract; the second step is to assess whether the breach of contract results in the failure to achieve the purpose of the contract and whether it can be remedied; the third step is, if it constitutes a fundamental breach of contract or an anticipated breach of contract, to promptly issue a notice of termination or a reminder and preserve the evidence of delivery; the fourth step is to claim termination, return of the goods, and compensation for losses, and, if necessary, apply for property preservation; the fifth step is to resolve the dispute through litigation or arbitration if no agreement can be reached. The main legal basis: Articles 563, 577, 578, 584, and 585 of the Civil Code of the People's Republic of China. The specific application shall be subject to the currently effective provisions.

5. Henglu Law Firm's Reminder

There are three basic principles of breach of contract: Firstly, determine whether the breach of contract renders the purpose of the contract impossible to achieve. If the breach can be remedied, it is generally a minor breach of contract. Secondly, if the other party explicitly states or demonstrates by actions that they will not perform their obligations, the party may claim anticipatory breach of contract in advance. Thirdly, the procedures of termination, restitution, compensation, and preservation of evidence must be initiated simultaneously, and all relevant evidence must be preserved. For disputes involving contracts and corporate commercial matters, parties may seek resolution through legal means.Business and contract disputes in enterprisesThe service provides a comprehensive solution that integrates judgment enforcement and debt recoveryCreditor's rights and debts, and enforcementFor reference, you can check the section related to corporate compliance and general legal practicesIntellectual property protection and corporate lawFor any queries regarding difficult contract disputes, please feel free to consult us.Special servicesTeam.

VI. Frequently Asked Questions

Q1: How to determine whether it constitutes a fundamental breach of contract?

The key issue is whether the breach of contract results in the failure to achieve the contractual purpose. This is usually determined by comprehensively considering the impact of the breach on the main interests, the status and proportion of the breached part, whether it can be remedied, and the fault of the breaching party. For minor breaches of secondary obligations that can be remedied and continued to be performed, they are generally considered ordinary breaches and cannot be used as grounds for terminating the contract.

Q2: Under what circumstances can the contract be terminated?

In the event of force majeure rendering the purpose of the contract unattainable, where one party expressly states or demonstrates by actions that it will not perform its main obligations, where one party delays in performing its main obligations and still fails to perform them after being reminded, and in other cases of fundamental breach of contract, the party in compliance with the contract may terminate the contract. Where the agreed conditions for termination are met, the contract may also be terminated in accordance with the agreement. The termination shall be notified to the other party and shall take effect upon its delivery.

Q3: What is an anticipatory breach of contract?

It refers to the situation where one party explicitly states or demonstrates through its actions that it will not perform its main obligations before the expiration of the performance period. At this point, the other party may request the party to bear the liability for breach of contract before the expiration of the performance period, that is, claim all the debts due in advance. When making the claim, there must be sufficient evidence to prove that the other party has "explicitly stated" or demonstrated through its actions that it will not perform its obligations.

Q4: Can I still demand compensation after terminating the contract?

Yes. After the contract is terminated, the party in breach may request the other party to restore the status quo, return the property, take remedial measures, and claim compensation for losses, including the loss of anticipated profits, subject to the limitations of foreseeable rules. If the contract stipulates a penalty, the party in breach may claim the penalty, and if the penalty is too high or too low, the party may request an adjustment. The claims for termination and compensation can usually be made in parallel.

Q5: What evidence do I need to prepare to claim a fundamental breach of contract?

You should prepare the contract and supplementary agreements, records of performance and payment, written evidence of the other party's breach of contract, records of reminders and communication, materials proving that the purpose of the contract cannot be achieved, and evidence of your own losses. The evidence should clearly demonstrate the facts of the breach of contract, its severity, and the scope of the losses. If necessary, you can apply for appraisal or preservation of evidence.

The above answer is based on the judicial practice in Beijing. The adjudication guidelines in other provinces and cities may vary. For specific cases, please refer to the local rules and evidence situation.

If you are facing similar problems, it is recommended that you consult a professional lawyer as soon as possible with the evidence materials, so as to avoid missing the statutory time limit. →Corporate commercial legal services·Beijing Henglue Law Firm

Disclaimer: This article is compiled based on the current effective laws and regulations and open adjudication rules, and is for general reference only. It does not constitute a formal legal opinion on specific cases. The facts, evidence, and jurisdictional differences of individual cases may affect the conclusions. In case of disputes, please consult a practicing lawyer in time.