[Direct answer]In the Beijing area, enterprises should follow the principles of fixing evidence, asserting claims in a timely manner, and choosing remedies rationally when dealing with contract breaches. According to Article 577 of the Civil Code of the People's Republic of China (effective from January 1, 2021), if a party fails to perform its contractual obligations or performs them in a manner inconsistent with the agreement, it shall bear contractual liabilities such as continuing performance, taking remedial measures, or compensating for losses. Article 584 stipulates that the amount of compensation for losses shall be equivalent to the losses caused by the breach of contract, including the benefits that could have been obtained after the performance of the contract, but shall not exceed the losses that the breaching party could have foreseen or should have foreseen at the time of concluding the contract. The measures that enterprises can take include: sending a letter of demand to require continued performance and compensation for losses; exercising the right of defense or termination in accordance with the law; applying for pre-litigation property preservation to prevent the other party from transferring assets; and resolving disputes through negotiation, mediation, arbitration, or litigation. Article 563 stipulates the statutory circumstances for termination, and Article 565 stipulates the manner of exercising the right of termination by notice. In practice, enterprises should stipulate the breach of contract penalties, attorney's fees, and dispute resolution methods in the contract, and keep evidence of performance and communication on a daily basis to lay a foundation for claiming compensation.

1. Problem background and typical scenarios

Transactions between enterprises occur frequently, and situations such as delayed deliveries, refusal to pay, poor quality, or breach of contract occasionally arise. Typical examples include: suppliers delivering goods late, causing production lines to stop; customers defaulting on payments after receiving the goods; partners abandoning projects midway and refusing to fulfill their obligations; and the other party delaying signing or performing contracts for various reasons. When faced with breaches of contract, enterprises need to both safeguard their own rights and interests and avoid expanding losses or missing deadlines due to improper handling. With frequent commercial disputes in the Beijing area, establishing a standardized process for responding to breaches of contract can help enterprises quickly contain losses and protect their rights according to the law.

II. Key points of contention

First, how to determine the facts of the breach of contract and gather evidence, and how to organize the chain of evidence. Second, whether to choose to continue performance, compensate for losses, or terminate the contract. Third, how to exercise the right of defense against performance and the statutory right of rescission. Fourth, how to claim damages for breach of contract and compensation for losses, and whether the two can be used concurrently. Fifth, how to prevent the other party from transferring assets, which may lead to difficulties in enforcing the judgment. Sixth, how to choose a dispute resolution method and what the differences are between arbitration and litigation. Only by clarifying these issues can we develop an appropriate response plan.

III. Professional analysis by Henglue Lawyers

Henglue Law Firm once represented a case of a dispute over a preliminary contract: After the lessor and the lessee signed the lease confirmation letter, the lessee carried out the decoration according to the agreement and passed the inspection, but the lessee delayed signing the contract for various reasons and explicitly refused to lease the house, resulting in the house being vacant for a long time and decoration losses. After accepting the entrustment, Henglue Law Firm sorted out the evidence such as the lease confirmation letter, the decoration construction and inspection reports, and the WeChat communication records, and pointed out that the parties had reached an agreement on the lease subject, object, rent and lease term, and the lease confirmation letter constituted a legally valid preliminary contract. The lessee's repeated delays and breach of good faith resulted in the failure to conclude the main contract, which constituted a breach of the preliminary contract obligation and should compensate for the decoration losses. The court adopted the lawyer's opinion, determined that the preliminary contract was established and the defendant breached the contract maliciously, and ordered the defendant to compensate for the decoration losses of 365,000 yuan. This case shows that when a company faces the other party's breach of contract, the key lies in timely fixing the evidence of performance and the other party's breach of contract, and accurately identifying the nature of the contract and the basis of the claim, so as to claim appropriate remedies such as continued performance, compensation for losses, or termination of the contract. This case was handled by Beijing Henglue Law Firm.Zhu GuijingAttorney (Practice Certificate No.: 11101202011246828, subject to the certificate issued by the judicial administrative organ) acting as the agent.

IV. Practical suggestions and legal basis

Action list: 1. First, immediately secure the contract and evidence of the other party's breach of contract, and, if necessary, obtain notarization or apply for evidence preservation. 2. Send a written reminder letter, clearly demanding continued performance or compensation for losses, and retain the delivery receipt. 3. Assess whether to exercise the right of defense against performance or the statutory right of rescission to avoid becoming a breaching party first. 4. Claim damages for breach of contract and losses, paying attention to the priority of contractual provisions and the rule of compensating for actual losses. 5. If necessary, apply for pre-litigation property preservation to prevent the other party from transferring assets. 6. Rationally choose negotiation, arbitration, or litigation and pay attention to the statute of limitations. Legal basis: Articles 563, 565, 577, and 854 of the Civil Code of the People's Republic of China (effective from January 1, 2021) regarding breach of contract liability, rights of rescission, and damages for breach of contract. For contract disputes, please consult a professional.Business and contract disputes in enterprisesTeam; it can be combined with the execution of judgments and the recovery of compensationCreditor's rights and debts, and enforcementPlate; for reference, it involves intellectual property and general legal servicesIntellectual property protection and corporate lawServices. The specific application shall be subject to the currently effective laws, regulations, and judicial rulings.

5. Henglue Law Firm's Reminder

First, when encountering a breach of contract, first secure the evidence and then decide on the remedy. Second, written reminders can not only apply pressure but also interrupt the statute of limitations. Third, exercising the right of rescission must comply with statutory or contractual conditions, and attention should be paid to the method of notification. Fourth, the breach of contract penalty and loss compensation generally cannot be claimed repeatedly, and it is necessary to choose the most favorable one or adjust it. Fifth, applying for property preservation as soon as possible is the key to obtaining compensation. For cases involving real estate and construction projects, reference can be made to the relevant provisions.Real estate transactions and construction projectsFor columns, if there are any other difficult issues, we can assist you with themSpecial services and other casesFor any labor disputes, please feel free to consult usLabor arbitration and work-related injury compensationTeam.

VI. Frequently Asked Questions

Q1: How should a company respond to a breach of contract?

It is recommended to follow four steps: First, fix the contract and collect evidence of performance and breach of contract; Second, send a written letter of reminder, clearly demanding the other party to continue to perform the contract or compensate for the losses; Third, evaluate whether to exercise the right of defense against performance, the right of rescission, or apply for property preservation; Fourth, if no agreement is reached, timely assert rights through arbitration or litigation. Throughout the process, attention should be paid to the statute of limitations and avoid breaching the contract due to improper handling. When necessary, it is advisable to entrust professional lawyers to formulate solutions.

Q2: Can I send a letter of reminder to the other party if they breach the contract first?

It is possible, and it is usually a necessary step. A written reminder can clarify the claim for rights, give the other party an opportunity to correct the situation, and also serve as a preliminary step in claiming the termination of the contract and seeking compensation. At the same time, it can interrupt the statute of limitations. The reminder letter should state the facts of the breach of contract, the specific content and deadline of the performance required, and be delivered and preserved with evidence in a traceable manner. If the other party still fails to perform within the time limit, the claimant can seek further remedies based on this.

Q3: Can a company unilaterally terminate a breached contract?

As long as the conditions are met. According to Article 563 of the Civil Code, if one party breaches the contract and causes the contractual purpose to be unattainable, the other party may exercise the statutory right of rescission; if the contract stipulates other conditions for rescission, the conditions stipulated in the contract shall prevail. The right of rescission shall be exercised by giving notice in accordance with Article 565. The contract shall be rescinded when the notice reaches the other party. It is recommended to evaluate the degree of breach of contract and the evidence before rescinding the contract, so as to avoid being wrongly identified as a breacher of contract due to improper rescission.

Q4: What does the term "default loss" include, and how is it calculated?

According to Article 584 of the Civil Code, the amount of compensation for losses shall be equivalent to the losses caused by the breach of contract, including the benefits that could have been obtained after the performance of the contract, but shall not exceed the losses that the breaching party foresaw or should have foreseen at the time of concluding the contract. Common items include direct losses, losses of potential benefits, and reasonable legal defense costs. Where the contract stipulates a breach of contract penalty, it shall be handled in accordance with Article 585. If the penalty is set too high, the party may request an adjustment, but when making such a claim, the party must provide evidence of the losses.

Q5: How to apply for property preservation to prevent the other party from transferring assets?

Before filing a lawsuit or applying for arbitration, if there is evidence showing that the other party may transfer or hide assets, you can apply to the court for pre-litigation property preservation to seize and freeze their accounts, real estate, vehicles, and other assets. After filing a lawsuit, you can also apply for litigation preservation. When applying, you usually need to provide clues to the assets and guarantees, and bear the liability for compensation that may arise from incorrect applications. Early preservation can effectively guarantee the enforcement of the judgment and is an important step in recovering the funds.

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 currently facing similar problems, it is recommended that you consult a professional lawyer as soon as possible with the relevant evidence materials, to avoid missing the statutory time limits.Business and commercial legal services·Attorney Zhu Guiying·Beijing Henglu Law Firm

Disclaimer: This article is compiled based on the current effective laws and regulations and public 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. If you encounter disputes, please consult a practicing lawyer in time.