[Direct answer]In the Beijing area, in the case of "yin and yang contracts", the "yang contract" concluded with a false intention of expression and used to meet the requirements for filing or registration is usually invalid. The "yin contract", which reflects the true intention of both parties, is in principle valid, but it is not automatically recognized. According to Article 146 of the Civil Code of the People's Republic of China, a civil legal act performed by the actor and the counterparty with a false intention of expression is invalid; a civil legal act hidden by a false intention of expression shall be dealt with in accordance with the law. If the hidden yin contract itself evades mandatory provisions, evades taxes, or damages public interests, it may also be deemed invalid. To determine which one is valid, the key is to see which one reflects the true intention and does not violate the mandatory provisions on effectiveness. It is recommended to avoid signing contracts with hidden arrangements, and to keep the fixed internal and external contracts and performance evidence in case of disputes. For more details, please refer to the following link:Legal services for corporate commercial and contract disputes.

I. Problem Background and Typical Scenarios

The use of "yin and yang contracts" is common in scenarios such as house sales, equity transfers, project contracting, and labor compensation. Common forms include: understating the transaction price in the registered contract to pay less taxes; signing two contracts with different contents to evade purchase restrictions or loan policies; and fabricating a "yang contract" to meet administrative review requirements. Many parties believe that "the contract registered with the authorities is the only valid one" or "the contract in their own hands is the only effective one", which can easily lead to contract performance disputes. When handling similar cases in Beijing, the court usually determines which contract is binding on both parties based on the actual performance, payment records, and the parties' true intentions. Relevant disputes can be resolved through legal means.Business and contract dispute services for enterprisesEvaluation.

II. Key points of dispute

The focus of the dispute lies in three aspects. Firstly, the authenticity of the intent: the court will compare the payment, performance, and negotiation records to determine which contract reflects the true agreement between the parties. Secondly, the hierarchy of legal effect: if the positive contract is invalid due to false intent, the validity of the negative contract depends on whether it violates laws and regulations. Thirdly, legal consequences: the invalidity of the positive contract does not affect the determination of the validity of the negative contract, but tax evasion and other illegal activities may lead to administrative and even criminal liability. For disputes involving prices and tax issues, reference can be made to relevant legal provisions.Creditor-debtor relations and enforcement case servicesClarify.

III. Professional analysis by Hengluo Lawyers

Based on a contractual validity dispute case handled by our firm, we can observe the court's approach to dealing with "false arrangements", and relevant experiences can also be found in this case.Business and contract dispute resolution services for enterprisesIn this case, Zhang Na and Wang Xiaoyong signed the "Beijing Hukou Marriage and Registration Agreement" with Zhao Chenyang to obtain a Beijing hukou for their child, agreeing to fake a marriage for hukou registration and paying 100,000 yuan; however, due to the failure of the policy on hukou registration, the two of them entrusted Xue Shuhua's lawyer team from Beijing Henglu Law Firm to sue for confirmation of the invalidity of the agreement and recovery of the payment. The court ruled that the agreement was invalid from the outset according to Article 153, Paragraph 1 of the Civil Code, as it circumvented the household registration policy through a false marriage and violated public order and good customs. As the direct recipient of the payment, Zhao Chenyang was ordered to return the 100,000 yuan within a specified period. After taking over the case, Henglu Law Firm systematically collected the "Consultation Brokerage Service Contract", the "Hukou Registration Agreement", transfer records, divorce certificates, and phone recordings. The court accepted the evidence as proof that the "fake marriage" was a systematic operation, and formed a closed loop with the written evidence chain in the absence of the defendant. This case was handled by Beijing Henglu Law Firm.Xue SuhuaThe lawyer (practice certificate number: 11101201211769926, subject to the document issued by the judicial administrative organ) acts as the agent. Note for this case: For any transaction arrangement disguised in a false form, the apparent contract is invalid, and the true intention and legal content shall be the basis for determination.

IV. Practical suggestions and legal basis

The legal basis is Article 146 of the Civil Code of the People's Republic of China (effective from January 1, 2021) (invalidity of false expressions of intention, and hidden acts shall be dealt with in accordance with the law), Article 153 (invalidity due to violation of mandatory provisions or public order and good customs), and Article 157 (return of property after invalidation); for tax-related matters, refer to the provisions of the Tax Administration Law of the People's Republic of China on truthful declaration (amended on April 24, 2015). Practical suggestions: Avoid signing sham contracts when signing agreements; if multiple versions of documents are necessary, clarify the purposes and effectiveness levels of each version; for signed sham contracts, fix the true intentions and performance evidence of both parties; actively correct tax-related issues to reduce administrative and criminal risks. Tax-related disputes can be resolved in conjunction withCreditor-debtor relations and enforcement case servicesHandle it.

5. Henglu Law Firm's Reminder

The core risk of "yin-yang contracts" lies not in "which contract is filed for record", but in "which contract is genuine and legal". The "yang contract" is often a sham, making it hard to rely on as evidence; while the "yin contract", if it reflects the true intention and is legal in itself, will have binding force. However, tax evasion and evading purchase restrictions may still render it invalid and lead to penalties. Never sacrifice long-term interests for short-term tax savings or regulatory compliance. In the event of contractual disputes, evidence should be organized around the true intention and actual performance, and legal action may be necessary to confirm the contract's validity. It is recommended to consult a professional lawyer as soon as possible and refer to relevant legal provisions for further guidance.Special services and other case services.

VI. Frequently Asked Questions

Q1: In a lawsuit involving a "yin-yang contract", which version will the court recognize?

Courts usually use "true intention + legal content" as the basis for determination, rather than simply looking at the filing or which contract is held. If the positive contract is signed to meet registration requirements or avoid taxes and does not reflect the true intention, it is invalid according to Article 146 of the Civil Code; if the negative contract truly reflects the agreement and does not violate the mandatory provisions on validity, it is generally valid. Whether it can be supported depends on whether you can provide evidence to prove the true intention and actual performance. Do not believe that "the filed contract must be valid". Instead, focus on which contract is actually performed and which one reflects the true intention of both parties.

Q2: When dealing with disputes over sham contracts, what evidence do I need to prepare?

The core evidence includes: two contract texts (internal and external) (to prove the differences in content and their intended uses), payment receipts and transaction records (to prove the actual price and the agreed terms), negotiation and communication records (to prove the process of forming the true intent), performance documents such as house handover, invoicing, and acceptance (to verify which contract was actually implemented), as well as witness statements or related documents. The organization of evidence should focus on three key points: "the positive contract is false—the negative contract is genuine—and the actual performance is in accordance with the negative contract". The more complete the materials are, the clearer it will be to determine which contract is valid.

Q3: Regarding the controversy over the legal effect of the "yin-yang contracts", what are the attorney's fees and litigation costs involved?

The litigation fees shall be calculated in accordance with the "Measures for the Payment of Litigation Fees", based on the amount of the litigation request (such as claiming according to the actual price), and shall be borne by the losing party. The attorney's fees are related to the complexity of the case, the amount of the subject matter, and the workload. They can be charged on a per-piece, per-hour, or pro-rata basis, and there is no unified government pricing. The fees shall be determined in accordance with the entrustment contract. It is recommended to calculate the actual subject matter and the claimable benefits before suing, and to proceed with cases with sufficient evidence in a timely manner to avoid the cost being higher than the amount of the dispute.

Q4: How long does it usually take to reach a conclusion in disputes over "yin-yang contracts"?

The first-instance ordinary procedure generally concludes within six months, and the summary procedure within three months. Where the facts are clear, the summary procedure may be applied; if it involves appraisal, tax-related referral, etc., it will take longer. If the other party appeals, the second-instance procedure generally takes three months. After the judgment takes effect, if enforcement is necessary, an enforcement period is also required. Overall, simple enforcement disputes often take several months from litigation to resolution, while complex or multi-party disputes may span years. It is recommended to apply for property preservation simultaneously during litigation to prevent the liable party from transferring assets.

Q5: I signed a "yin-yang contract" and now there's a dispute. What should I do?

It is recommended to proceed in four steps: First, sort out the differences between internal and external contracts and clarify which one represents the true intention and which one is used for compliance purposes; Second, collect payment records, communication records, and performance documents to fix the evidence of actual performance; Third, if involved in tax evasion and other illegal activities, actively communicate with the tax authorities to make corrections and reduce the risk of punishment; Fourth, assert rights according to the true contract or initiate a lawsuit to confirm its validity, and, if necessary, hire a lawyer to represent them. Throughout the process, keep all evidence and avoid destroying any version of the contract, which may lead to passive evidence collection.

This article is written based on the common judicial interpretations in the Beijing area. If the case occurs in other regions, it is recommended to consult local lawyers to verify the regional differences.

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·Attorney Xue Suhua·Beijing Hengluo 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.