[Direct answer]In the Beijing area, it depends on whether the service is paid or unpaid, and the degree of fault. According to Article 929 of the Civil Code of the People's Republic of China, in the case of a paid entrustment contract, if the entrusted party causes losses to the principal due to the entrusted party's fault, the principal may request compensation for the losses; in the case of an unpaid entrustment contract, if the entrusted party causes losses to the principal due to the entrusted party's intentional or gross negligence, the principal may request compensation for the losses; if the entrusted party exceeds the scope of authority and causes losses to the principal, the entrusted party shall compensate for the losses. Therefore, if the entrusted party handles the entrusted matters with fault, exceeds the scope of authority, or fails to fulfill the duty of diligence, causing losses to the principal, the entrusted party shall bear the liability for compensation, and the scope of compensation shall be limited to the actual losses. It is necessary to provide evidence of the fault, losses, and causality.

1. Problem background and typical scenarios

When entrusting others to handle matters on their behalf, manage property, hold equity on their behalf, or handle legal affairs, if the trustee handles the matters improperly, delays passively, changes the arrangements without authorization, or even exceeds their authority, it often causes actual losses to the principal. When the principal claims compensation, they often encounter defenses such as "I was just helping" and "The loss wasn't caused by me". Due to the fact that trust contracts are divided into paid and unpaid ones, the legal obligations of care and liability standards for trustees are different: paid trusts are based on fault, while unpaid trusts require intentional or gross negligence, and any actions beyond authority should be compensated. Only by distinguishing these levels can we determine whether compensation can be obtained.

II. Key points of contention

The controversy focuses on four aspects: first, the standard of liability, the differences in the determination of the trustee's fault between paid and unpaid trusts; second, the judgment of fault, whether the trustee has fulfilled his duties of diligence, prudence and loyalty; third, the scope of losses and causality, which losses can be attributed to the trustee; fourth, the burden of proof, the trustor needs to prove the trustee's fault, losses and the relationship between the two. In practice, the court usually makes a comprehensive judgment based on the nature of the entrusted affairs, the existence or absence of remuneration, and the specific actions of the trustee.

III. Professional analysis by Henglue Lawyers

The first layer concerns the differences in liability between paid and unpaid entrustment. Paid entrustment imposes higher requirements on the trustee. As long as the trustee commits a fault and causes losses, the client can request compensation; unpaid entrustment requires the trustee to have intentional or gross negligence, and general negligence does not entail liability for compensation. The difference between the two stems from the presence or absence of compensation and the level of duty of care. The second layer involves the determination of fault. It examines whether the trustee handled the matter in accordance with the agreement and the purpose of the entrustment, whether they fulfilled their obligations of due diligence, diligence, and loyalty, and whether they engaged in passive inaction, unauthorized modification of arrangements, failed to report losses promptly, or failed to take reasonable measures to prevent losses from escalating. The third layer concerns liability for exceeding authority. If the trustee handles matters beyond the scope of the entrustment and causes losses to the client, they should compensate regardless of whether the entrustment is paid or unpaid. This represents a strict constraint on the boundaries of authority. The fourth layer focuses on the scope of losses and causality. Compensation is limited to the actual losses suffered by the client, and the losses must be causally related to the trustee's faulty actions. Losses caused by the client's own reasons or objective circumstances cannot be attributed to the trustee. The fifth layer involves evidentiary support and practical recommendations. The client should retain the entrustment contract, communication records, the trustee's handling process and results, and evidence of the loss's composition. The trustee should prove that they have exercised reasonable care or that the losses are not attributable to them. In a entrustment contract dispute handled by our firm, the trustee unilaterally modified the nominee arrangement and failed to complete the entrusted tasks after being entrusted, resulting in long-term damage to the client's rights and interests. The client lost the first-instance case due to insufficient evidence; however, the lawyer identified inconsistencies in the trustee's statements and built a complete chain of evidence in the second-instance trial, ultimately obtaining a judgment in favor of returning the investment funds and interest. This case demonstrates that if the trustee fails to fulfill their obligations or deviate from the scope of the entrustment, they should bear liability for their faults. The key lies in using evidence to reconstruct the trustee's performance of obligations and the consequences of the losses. This case was handled by Beijing Henglu Law Firm.Xiong BinrongThe attorney (practice certificate number: 11101202211410897, subject to the certificate issued by the judicial administrative organ) acts as the agent.

IV. Practical suggestions and legal basis

First, review whether the entrustment contract is paid or unpaid, and determine the applicable standard of liability. Second, fix the process, results, and evidence of losses handled by the trustee to prove the fault and causality. Third, negotiate with the trustee for compensation for the losses first; if no agreement is reached, sue within the three-year statute of limitations. Fourth, if it involves acting beyond authority, you can claim compensation and request an explanation of the handling of the affairs at the same time. Main legal basis: Article 909 of the Civil Code of the People's Republic of China (Liability for the Trustee's Fault and Exceeding Authority), Article 930 (Request for Compensation by the Trustee for Damages Suffered Due to Non-Attributable Causes), and Article 933 (Right of Arbitrary Termination); the above provisions shall come into effect on January 1, 2021, and the specific application shall be subject to the currently effective provisions.

5. Henglue Law Firm's Reminder

Three sentences on trustee's liability for compensation: for paid trusts, the trustee shall compensate if there is any fault; for unpaid trusts, the trustee shall compensate only if there is intentional or gross negligence, and shall compensate for any act exceeding the scope of authority; the compensation shall be limited to the actual losses, and the causality shall be proven; keep good evidence of the entrustment, instructions, handling process, and losses, so as to have the confidence to claim compensation. For matters involving contracts and corporate affairs, you can seek legal help through professional lawyers or law firms.Business and contract disputes in enterprisesWe provide a comprehensive solution for services, which can be integrated with corporate and equity mattersIntellectual property protection and corporate lawFor reference, please refer to the section on recovering and enforcing paymentsDebt recovery and enforcementFor any questions regarding difficult commercial disputes, please feel free to consult us.Special servicesTeam.

VI. Frequently Asked Questions

Q1: How should the trustee compensate if they are at fault?

If losses are caused by the trustee's fault in a paid commission, the client may request compensation; in the case of an unpaid commission, the trustee must have acted with intent or committed a major negligence; if the trustee exceeds his authority, he shall be liable for compensation, and the compensation shall be limited to the actual losses.

Q2: What evidence do I need to prepare to claim compensation?

The power of attorney contract or proof of the entrustment relationship, records of instructions and communication, the process and results of the trustee's handling of affairs, vouchers for the composition and amount of losses, and materials showing the causal relationship between the fault and the losses.

Q3: Are the costs of such claims high?

For cases with clear facts and losses, the costs are controllable, and the fees are charged according to the subject matter of the litigation. It is possible to negotiate with lawyers for phased payments or risk-based fees, subject to the provisions of the entrustment contract.

Q4: How long does it take to make a claim?

It usually takes several months to resolve disputes through negotiation. For those cases that proceed to litigation, the first-instance trial is generally concluded within a few months. However, cases involving disputes over loss determination and causality may take longer, depending on the court's scheduling arrangements.

Q5: If the trustee says he hasn't charged any fees and doesn't need to compensate, what should I do?

A gratuitous entrustment does not mean absolute exemption from liability: the trustee shall still compensate if there is intentional or gross negligence, and shall compensate even more if he acts beyond his authority. The principal shall fix the evidence and assert his rights in accordance with the law.

The above Q&A is mainly based on the judicial practice in Beijing. There may be differences in the adjudication standards in different regions. It is recommended to consult a professional lawyer based on the specific circumstances of the case.

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 current laws and regulations and publicly available adjudication rules, and is provided for general reference only. It does not constitute formal legal advice for specific cases. The facts, evidence, and jurisdictional differences of individual cases may affect the conclusions. If a dispute arises, please consult a practicing lawyer in a timely manner.