[Direct answer]In the Beijing area, the conclusion is that it is allowed, but the employer should compensate the contractor for the losses. According to Article 787 of the Civil Code of the People's Republic of China, the employer may terminate the contract at any time before the contractor completes the work, and if the contractor suffers losses, the employer shall compensate for the losses. That is to say, the employer enjoys the right of arbitrary termination without the condition that the contractor breaches the contract, but the termination must occur before the contractor completes the work, and the employer shall bear the actual losses caused to the contractor by the termination, such as the loss of materials, labor and reasonable profits that have been invested. If the contractor has completed the main work, the employer generally cannot exercise the right of arbitrary termination any more, and at this time, the employer shall perform and settle the contract according to the contract. The notice of claiming termination shall be clear and timely. If the parties have disputes over the scope of losses, they may determine it through consultation, appraisal or litigation.

I. Problem background and typical scenarios

Contracts for work are commonly used in scenarios such as processing, customization, production, and repair. The client often wants to terminate the contract prematurely due to changes in demand, budget adjustments, or market fluctuations. Typical situations include: the client no longer needs the completed design or order and requests to stop production; the contractor has already purchased raw materials and invested labor, and the two parties dispute over who should bear the losses; the contract stipulates the conditions for termination, but the actual termination procedures vary; and how to settle and deliver the completed parts. When courts in Beijing handle such cases, they usually review whether the termination occurred before the work was completed, the scope and evidence of the contractor's actual losses, and determine the amount of compensation accordingly.

II. Key points of contention

First, the exercise conditions and time limits of the right to arbitrary termination. Second, the termination and settlement when the contractor has completed part of the work. Third, the scope and calculation method of loss compensation. Fourth, the ownership and disposal of materials and semi-finished products already invested. Fifth, the effectiveness and application of the contractually agreed termination conditions. Sixth, whether the penalty and loss compensation can be used concurrently. Seventh, the form and effective time of the termination notice. These issues determine the effectiveness of the termination and the amount of compensation.

III. Professional analysis by Henglue Law Firm

Based on Henglu Law Firm's practical experience in handling contracting and contract disputes, there are four key points to address such issues. Firstly, the legal basis: According to Article 787 of the Civil Code of the People's Republic of China, the client enjoys the right of arbitrary termination, but must exercise this right before the contractor completes the work. After completion, the client generally cannot exercise the right of arbitrary termination. Secondly, the scope of compensation: The client shall compensate for any losses caused by the termination, which typically includes the invested material costs, labor costs, equipment idle time, and reasonable lost profits. This should be supported by purchase receipts, work time records, and cost information. Thirdly, the results and materials: For completed work results, semi-finished products, and unused materials, the parties shall negotiate a fair settlement. The contractor may claim corresponding payment or request the return of materials in exchange for compensation. Fourthly, contractual restrictions: Where the contract stipulates other conditions for termination, penalties, or loss sharing, these provisions shall prevail unless they violate mandatory legal provisions. However, clauses that exempt the client from statutory compensation obligations may not be upheld. Fifthly, procedural points: The termination notice should be timely, clear, and delivered in a traceable manner to avoid disputes arising from unclear notifications. After receiving the termination notice, the contractor should take prompt measures to mitigate losses and prevent their expansion, as any expanded losses may not be supported. Sixthly, evidence-gathering strategies: The contractor should promptly secure evidence of investments and losses, while the client may argue that the losses do not correspond to reality or that there are recoverable portions, in order to reasonably determine the compensation amount.

IV. Practical suggestions and legal basis

Practical advice: First, if the client indeed needs to terminate the contract, they should notify and explain the situation as soon as possible to minimize losses and prevent further damage. Second, after receiving the termination notice, the contractor should take timely measures to mitigate losses and preserve evidence of materials, labor, and project duration investments. Third, the two parties should negotiate the settlement of completed and semi-finished products and clarify the ownership of materials. Fourth, when claiming compensation for losses, prepare cost information and evidence of potential profits. Fifth, the contract should stipulate the conditions for termination, the allocation of losses, and dispute resolution methods. Sixth, if no agreement can be reached, the parties may apply for appraisal or resolve the compensation amount through litigation. For more information, please refer to the platform's services.Business and contract disputes in enterprises、Creditor's rights and debts, and enforcement、Real estate transactions and construction projects、\nFinancial capital and cross-border transactions involving foreign entitiesAndSpecial servicesLegal basis: Articles 566 and 787 of the Civil Code of the People's Republic of China (both of which came into effect on January 1, 2021). The specific application shall be subject to the currently effective laws, regulations, and judicial rulings.

5. Henglu Law Firm's Reminder

Firstly, the client may terminate the contract at any time before the contractor completes the work, but shall compensate for the contractor's losses. Secondly, if the client claims to terminate the contract at will after the work is completed, the claim will usually not be supported. Thirdly, the compensation for losses includes materials, labor and reasonable expected profits, which need to be supported by evidence. Fourthly, the contractor should take timely measures to prevent the losses from expanding and the compensation for losses may not be supported. Fifthly, the completed results and semi-finished products should be settled and disposed of through consultation. Sixthly, if the contract stipulates the conditions for termination and the sharing of losses, the provisions of the contract shall generally prevail. Seventhly, the notice of termination should be timely and clear, and the evidence of delivery should be preserved. In case of major disputes, it is advisable to consult a professional lawyer.

VI. Frequently Asked Questions

Q1: Can the client really terminate the contract for contracted work at any time?

It's allowed before the work is completed. According to Article 787 of the Civil Code of the People's Republic of China, the client may terminate the contract at any time before the contractor completes the work, but shall compensate for the losses caused to the contractor. This right does not presuppose the contractor's breach of contract and is a statutory right of arbitrary termination.

Q2: What losses must the contractor compensate for if the contract is terminated?

It generally includes the material costs, labor costs, losses due to equipment idleness, and reasonable losses of available benefits that have been incurred. The contractor needs to use purchase receipts, work time records, and cost information to prove the authenticity and reasonableness of the losses; for parts that can be recycled or reused, they should be deducted from the losses accordingly.

Q3: If the contractor refuses to accept the termination and continues to work, what should they do?

It is necessary to give clear notice and take timely measures to mitigate losses. If the client has already notified the contractor to terminate the contract, the contractor may not be supported for the part of the expanded losses that it continues to incur. It is recommended that the contractor stop the operation, inventory the completed and used materials after receiving the notice, negotiate the settlement with the client, and, if necessary, determine the scope of compensation through litigation.

Q4: If the contract stipulates that it cannot be terminated prematurely, is it valid?

The effectiveness is limited. The right to arbitrary rescission is a legal provision, and the clause that completely excludes its application may not be supported. However, the agreement on compensation and loss sharing arising from the rescission is usually effective. The specific effectiveness needs to be judged in combination with the content of the clause and legal provisions. It is recommended to have it reviewed by a professional lawyer to determine the claim path.

Q5: Who owns the semi-finished products that have been made?

It should be handled through consultation. For the completed work results and semi-finished products, the client usually pays the corresponding price to obtain them, or the contractor handles them on his own and claims compensation for the input. The specific arrangements should be determined according to the contract and the principle of fairness. It is recommended to conduct an inventory and confirm it in writing when the contract is terminated, so as to avoid subsequent disputes.

The above answer is based on the judicial practice in Beijing. The adjudicative standards 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, to avoid missing the statutory time limits.Corporate commercial legal services·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. In case of disputes, please consult a practicing lawyer in time.