[Direct answer]In the Beijing area, it is necessary to examine the reasons for the failure and the contractual provisions, and handle the consequences of contract termination in accordance with the contract. Article 563 of the Civil Code of the People's Republic of China (effective January 1, 2021) stipulates the statutory circumstances for termination; Article 566 stipulates that after the contract is terminated, the party that has not yet performed the obligation shall terminate its performance, and the party that has already performed the obligation may, according to the performance situation and the nature of the contract, request the other party to restore the original state or take other remedial measures, and have the right to request compensation for losses. The handling methods vary depending on the reasons for the failure: if the failure is caused by the trustee's reasons and the trustee still fails to perform after being urged, the client may terminate the contract and request the return of the fees paid and compensation for losses; if it is caused by the client providing inaccurate information or frequent changes in requirements, the responsibility shall be correspondingly reduced or borne by the client; if the research and development fails due to insurmountable technical difficulties, the parties shall agree on or reasonably share the risks in accordance with Article 858; if the trustee breaches the contract, the client may claim breach of contract liability in accordance with Article 854.

I. Problem background and typical scenarios

The handling of costs after the failure of a commissioned development project is a common dispute in corporate technical cooperation. Typical scenarios include: the developer repeatedly postponing the deadline and ultimately failing to deliver usable results, leading the client to demand a full refund; the client making significant adjustments to requirements midway, causing a sharp increase in development costs and project suspension; the project failing due to technical difficulties exceeding expectations, with both parties disagreeing on how to share the costs already invested; and disputes arising due to the absence of contractual provisions on the consequences of failure and settlement methods. The core issues lie in the reasons for failure, the attribution of breach of contract, and the value of the work completed. When handling such disputes in Beijing, contracts, requirement documents, phase results, and payment records are important evidence, and relevant practices can be referenced for guidance.Business and contract disputes in enterprisesThe processing approach of this problem.

II. Key points of contention

Focus 1: Who is to blame for the failure? Is it due to the trustee's incompetence, the client's changing requirements, or objective technical difficulties? Focus 2: Does it constitute a fundamental breach of contract? If the trustee is still unable to complete the task or the results are unusable after being urged to do so, it's easier to support termination. Focus 3: Settlement rules after termination: Terminate the unfulfilled part and restore the fulfilled part to its original state or compensate it based on the circumstances. Focus 4: How to allocate risks? For failures caused by insurmountable technical difficulties, allocate risks according to the contract or in a reasonable manner. Focus 5: How to determine the scope of losses? This includes payments already made, alternative development costs, and reasonable business losses. Focus 6: Handling of results and materials: Whether the code, documents, and data should be delivered or returned. Focus 7: Application and adjustment of liquidated damages: The reasonableness of the agreed-upon standard and its alignment with actual losses. The above disputes determine the specific amounts of refunds and compensation.

III. Professional analysis by Henglue Lawyers

The practical experience of Henglue Lawyers is that the success or failure of a claim for a refund in the event of a failed commissioned development depends on the evidence of the reasons for the failure and the application of the contract terms. Firstly, review the contract: check the provisions on the scope of development, delivery standards, acceptance methods, termination conditions, and consequences of failure, which are the starting point for judgment. Secondly, define the reasons: if the failure is caused by the contractor's insufficient technical capacity or negligent performance, it constitutes a breach of contract, and the client can claim termination and request a refund and compensation; if it is due to the client's frequent changes to requirements or inaccurate information, the corresponding responsibilities will be transferred. Thirdly, grasp the rules of termination: after termination, the unperformed part of the contract shall be terminated, and the performed part shall be handled according to the performance situation and the nature of the contract. The client may request restoration to the original state or compensation at a discounted price. Fourthly, reasonably share the risks: if the failure is due to insurmountable technical difficulties, according to Article 858 of the Civil Code, the parties shall agree on the allocation of responsibilities. If there is no agreement or the agreement is unclear, the parties shall reasonably share the responsibilities. Fifthly, calculate the value of the completed work: evaluate the delivered phase results and use them as a basis for deducting the refund amount. Sixthly, handle the transfer of results: claim the delivery or return of source code, documents, and data to avoid the loss of information. Seventhly, preserve evidence: requirement confirmations, change records, phase acceptance, and payment receipts are all key materials for determining responsibilities. The above approach is consistent with the relevant provisions of the Civil Code.Business and contract disputes in enterprisesIt is consistent with my practical experience.

IV. Practical suggestions and legal basis

Action suggestions: First, specify the development scope, acceptance standards, consequences of failure, and settlement methods in the contract; Second, confirm the changes in requirements in writing and adjust the project period and costs accordingly; Third, retain phase acceptance reports, meeting minutes, and communication records to objectively reflect the performance; Fourth, when deciding to terminate the contract, simultaneously claim the return of payments and handle the handover of results and materials; Fifth, if necessary, apply for an evaluation of the completed work as a basis for settlement. Legal basis: Articles 563, 566, 577, and 854 of the Civil Code of the People's Republic of China (effective January 1, 2021) regarding the termination of contracts, the consequences of termination, breach of contract liability, and the sharing of technological development risks. For contract disputes, please refer to the relevant provisions.Business and contract disputes in enterprisesFor matters concerning the ownership of technical achievements and intellectual property, you may refer to the following document for reference.Intellectual property protection and corporate lawFor cases involving the recovery of funds, you can refer to the following methods.Creditor's rights and debts, and enforcementThe specific application shall be subject to the currently effective laws, regulations, and judicial rulings.

5. Henglu Law Firm's Reminder

Firstly, whether a refund can be implemented depends on the proof of the cause of failure, and the responsibility attribution determines the refund ratio. Secondly, any change in requirements must be confirmed in writing, otherwise it will be difficult to clarify responsibilities. Thirdly, termination does not equate to a full refund, and the value of the work already completed usually needs to be deducted. Fourthly, the handover of source code, documents, and data should be handled together to avoid secondary losses. Fifthly, insurmountable technical difficulties fall under the category of risk sharing, which should be distinguished from breach of contract-related refunds. Matters involving the execution phase can be addressed through legal means.Creditor's rights and debts, and enforcementUnderstand the path.

VI. Frequently Asked Questions

Q1: If the development fails, can we request a full refund of the development fee?

Not necessarily. It depends on the cause of the failure: if it is caused by the trustee's breach of contract, the client can claim termination and request the return of the payment and compensation; if it is caused by insurmountable technical difficulties, the client shall bear the risks in accordance with the agreement or have the parties reasonably share the risks; if it is caused by the client's reasons, the client may bear the responsibility himself or correspondingly reduce the other party's responsibility.

Q2: How to determine whose responsibility the failure is?

The main factors to consider are the contractual provisions and the performance records. The assessment can be based on the technical capabilities of the developer, the level of investment, the records of delays and reminders, as well as the client's changing requirements and the provision of relevant materials. If necessary, conclusions can be drawn through technical appraisals or professional evaluations. Additionally, the specific reasons for the failure can be identified through technical appraisals or professional evaluations, if necessary.

Q3: After terminating the contract, how should we calculate the expenses that have already been incurred?

Handle it according to the consequences of the termination: Terminate the performance of the unfulfilled part, and for the fulfilled part, depending on the performance and the nature of the contract, you can request the restoration of the original state or take other remedial measures. The work results that have been completed and can be utilized will usually be deducted accordingly from the amount to be refunded.

Q4: What are the insurmountable technical difficulties, and how can they be shared among different parties?

It refers to objective obstacles that are truly difficult to overcome under existing technical conditions, leading to the failure or partial failure of research and development. This risk shall first be agreed upon by the parties; in the absence of an agreement or an unclear agreement, it shall be reasonably shared by the parties, usually requiring consultation based on the input and results or determination by the court.

Q5: What evidence do I need to prepare for a refund request?

These mainly include technology development contracts and supplementary agreements, requirement documents and change records, phase results and acceptance materials, payment vouchers, and reminder and communication records. The evidence can reflect the reasons for the failure and the performance of all parties, which is the basis for claiming refunds and compensation. The more the evidence can reflect the reasons for the failure and the performance of all parties, the more support there will be for claiming refunds and compensation.

The above questions and answers are mainly based on the judicial practice in Beijing. There may be differences in the adjudication guidelines 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, 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.