[Direct answer]In the Beijing area, the core criterion for determining whether a breach of contract constitutes a fundamental breach is whether it renders the contractual purpose unattainable. According to Article 563 of the Civil Code of the People's Republic of China (effective January 1, 2021), if a party delays in performing its obligations or engages in other breaches of contract that render the contractual purpose unattainable, the other party may terminate the contract. In addition, the article also stipulates circumstances such as the inability to achieve the contractual purpose due to force majeure, and where a party explicitly states or demonstrates through its actions that it will not perform its main obligations before the expiration of the performance period. Moreover, according to Article 578, if a party explicitly states or demonstrates through its actions that it will not perform its contractual obligations, the other party may request it to bear breach of contract liability before the expiration of the performance period, which is commonly referred to as anticipated breach of contract. Therefore, whether a breach of contract constitutes a fundamental breach requires a comprehensive assessment of the impact of the breach on the contractual purpose, the proportion of the breached obligations to the total contractual obligations, and whether the breach can be remedied. Minor breaches of contract generally do not suffice to terminate the contract.

1. Problem background and typical scenarios

When there are defects in the performance of the contract, the parties often struggle with whether to terminate the contract and claim compensation. Typical scenarios include: the seller failing to deliver the goods on time, resulting in missing the peak sales season; the buyer defaulting on most of the payment and explicitly stating that he will no longer make payments; the contractor's serious delay causing the project to fail to open on schedule; one party selling the subject matter to a third party; one party transferring assets or explicitly refusing to perform before the expiration of the performance period. When adjudicating such cases in Beijing, the court will review whether the breach of contract has rendered the contractual purpose futile, and then decide whether to support the request for termination and compensation.

II. Key points of contention

First, the criteria for determining whether the purpose of the contract cannot be achieved. Second, the distinction between partial breach of contract and full breach of contract. Third, the constitution of anticipated breach of contract and the time of claiming. Fourth, the mode and time limit of exercising the right of rescission. Fifth, whether the breach of contract penalty and loss compensation can be used concurrently after rescission. Sixth, the remedies for minor breach of contract.

III. Professional analysis by Henglue Lawyers

Henglue Law Firm once represented a case of equity transfer dispute: The plaintiff, Liu Jia, transferred 11.3819% of the shares of a certain company to the defendant, Wang Yi, for 1,108,736.08 yuan, with an agreement that the transfer payment would be paid off in five years from 2021 to 2025. However, Wang Yi only paid part of the money and transferred the acquired shares to his wife, Zhang Ping. The lawyer represented the plaintiff in the lawsuit, claiming that the defendant committed anticipatory breach of contract and the remaining transfer payment should be due in advance, and arguing that the debt belonged to the couple's joint debt. The court ruled that the agreement was legal and valid. According to Article 578 of the Civil Code of the People's Republic of China, Wang Yi's actions indicated his failure to perform the debt, and the anticipatory breach of contract was established, so all the debts could be deemed due. The court ordered him to pay the remaining transfer payment of 708,736.08 yuan, and according to Article 1064 of the Civil Code, the debt was identified as a couple's joint debt, with Zhang Ping assuming joint repayment responsibility. This case shows that fundamental breach of contract not only includes the actual breach that results in the failure of the contract's purpose, but also includes the anticipatory breach of contract where one party indicates through their actions that they will not perform the main debt. Once this is established, the non-breaching party can claim that all the debts are due and demand corresponding responsibilities before the performance period expires. In practice, organizing evidence around the nature, extent, and consequences of the breach of contract is key to claiming termination or early追责.

IV. Practical suggestions and legal basis

Action list: First, sort out the contractual obligations and the performance thereof, and determine whether the breach of contract affects the purpose of the contract; Second, promptly send written reminders and fix the evidence, such as collection letters, communication records, and payment vouchers; Third, for anticipated breaches of contract, claim the full maturity of the debt or terminate the contract as soon as possible; Fourth, the right of termination should be exercised within a reasonable period of time to avoid being regarded as a waiver due to delay; Fifth, when claiming breach of contract penalties and damages, attention should be paid to avoiding double counting; Sixth, if necessary, apply for preservation to prevent the other party from transferring assets. For contract disputes, you can refer to the following materials for reference:Business and contract disputes in enterprises; Those involving debt collection and enforcement can be combined togetherCreditor's rights and debts, and enforcementColumn. Legal basis: Articles 563, 565, 566, 577 and 578 of the Civil Code of the People's Republic of China (effective as of January 1, 2021). The specific application shall be subject to the currently effective laws, regulations and judicial decisions. This case is handled by Beijing Henglu Law Firm.Xiong BinrongThe attorney (practice license number: 11101202211410897, subject to the document issued by the judicial administrative organ) acts as the agent.

5. Henglu Law Firm's Advice

Firstly, the criterion for determining a fundamental breach of contract is whether the purpose of the contract can be achieved, rather than the absolute magnitude of the breach. Secondly, anticipatory breach of contract allows for the assertion of liability in advance, without having to wait until the performance period expires. Thirdly, the right of rescission should be exercised promptly and notified in writing, with the delivery receipt retained. Fourthly, preservation measures are crucial for ensuring the enforceability of judgments. If you are currently facing similar issues, you can seek assistance through the following channels:Business and contract disputes in enterprisesThe service obtains an overall solution, which can be combined with the enforcement of creditor's rights.Creditor's rights and debts, and enforcement板块。

VI. Frequently Asked Questions

Q1: What constitutes a fundamental breach of contract?

The key point is whether it results in the failure to achieve the purpose of the contract. According to Article 563 of the Civil Code of the People's Republic of China, if a party delays in performing its obligations or commits other breaches of contract that result in the failure to achieve the purpose of the contract, the other party may rescind the contract. When making the judgment, we need to comprehensively consider the proportion of the breached part in the contractual obligations, whether it can be remedied, and its impact on the interests of the parties. Minor and remediable breaches of contract generally do not constitute fundamental breaches of contract.

Q2: What is an anticipated breach of contract?

It refers to a situation where one party clearly states or demonstrates by their actions that they will not fulfill their contractual obligations before the performance period expires. According to Article 578, the other party may request the party to bear breach of contract liability before the performance period expires, without having to wait for the actual breach of contract to occur. For example, if the debtor transfers assets, explicitly refuses to pay, or loses the ability to perform the contract, this may constitute an anticipated breach of contract, and the right holder may claim that all debts are due in advance.

Q3: Can a fundamental breach of contract terminate the contract?

Yes. When there is a fundamental breach of contract or other circumstances in accordance with Article 563, the parties may terminate the contract. The right of termination shall be exercised within a reasonable period and notified to the other party; according to Article 565, the contract shall be terminated when the notice reaches the other party. After the termination, the consequences such as restoring the status quo and compensating for losses shall be handled in accordance with Article 566. When making a claim, the parties shall keep the notice and the proof of service.

Q4: Can I still claim the breach of contract penalty after the contract is terminated?

This can be claimed, but duplicate calculations should be avoided. The termination of the contract does not affect the assumption of breach of contract liability. The parties may claim the breach of contract penalty according to the agreement; the part of the breach of contract penalty that duplicates the compensation for losses is generally not supported repeatedly. The court will determine the scope of liability based on the actual losses, the performance of the contract, and the degree of fault. When making a claim, the basis and calculation method of each request should be clearly stated.

Q5: What should I do if there's a minor breach of contract?

Remedial measures can be requested. For minor breaches that do not jeopardize the purpose of the contract, it is generally not appropriate to terminate the contract. The right holder may request continued performance, remedial measures such as repair or replacement, and claim compensation for the losses incurred. It is necessary to raise objections in writing and keep the relevant evidence in a timely manner to avoid being deemed to have accepted the other party's performance method if no objections are raised for a long time.

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

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. →Business and commercial legal services·Attorney Xiong Binrong·Beijing Henglu Law Firm

Disclaimer: This article is compiled based on the current effective laws and regulations and publicly available 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.