[Direct answer]In the Beijing area, after the contract is terminated, the party in compliance with the contract can usually claim compensation for losses, including the anticipated profits. According to Article 566 of the Civil Code of the People's Republic of China, after the contract is terminated, the parties may request compensation for losses; Article 584 stipulates that the amount of compensation for breach of contract shall be equivalent to the losses caused by the breach of contract, including the profits that could be obtained after the performance of the contract, but shall not exceed the losses that the breaching party could foresee or should have foreseen when entering into the contract. Whether the compensation can be obtained depends on whether the anticipated profits are specific, certain, foreseeable, and have a causal relationship with the breach of contract. It is recommended to fix the profit calculation, transaction practices, and negotiation records as evidence at the same time when terminating the contract. For more details, please refer to the following link:Legal services for corporate commercial and contract disputes.

I. Problem background and typical scenarios

After the contract is terminated, one of the most concerned issues for commercial entities is whether they can recover the "potential profits they could have earned". Typical scenarios include: the seller's fundamental breach of contract leads to the termination of the sales contract, and the buyer claims the loss of resale profits; after the termination of the cooperation contract, one party claims the expected operating income; the termination of the engineering or service contract, and the party in compliance claims the potential profits during the remaining performance period; and the unilateral termination of the long-term supply contract, and the claim for the price difference of the substitute transaction. Many parties believe that "since the contract has been terminated, they can only recover the paid price", ignoring the legal protection of potential profits. However, potential profits are not an arbitrary claim, and they must be quantifiable and predictable. For cases involving price differences, they can be combined with other evidence to prove the potential profits.Creditor-debtor relations and enforcement case servicesEvaluate the collection of payments.

II. Key points of contention

The focus of the dispute centers on three points. Firstly, predictability: whether the breaching party could foresee the loss when entering into the contract is the core of the compensation cap. Overly indirect and special profits are usually not supported. Secondly, certainty: the expected benefits must have a reasonable basis for estimation, such as the contract price difference, market practices, and historical profit margins. Vague claims are easily dismissed. Thirdly, causality and mitigation: whether the contract-abiding party took timely mitigation measures. The unmitigated portion will not be compensated. For matters involving the validity of the contract and the conditions for termination, reference can be made to relevant provisions.Intellectual property protection and corporate legal servicesClarify the terms and conditions.

III. Professional analysis by Hengluo Lawyers

Based on the contract termination cases handled by our firm, the path for the contract-abiding party to claim compensation according to law after the contract is terminated is clear and feasible. In the mutual exchange contract dispute represented by Attorney Tian Jiaoyan of Henglue Law Firm, Liu * and Li * signed a car purchase contract on September 1, 2023. Liu * delivered the vehicle and paid an additional 130,000 yuan to exchange for the transfer of the Beijing A license plate. However, Li * delayed the transfer of the license plate. On November 10, 2023, Liu * notified the termination of the contract and entrusted a lawyer to sue, claiming to confirm the termination of the contract and the return of the discounted price of 420,000 yuan. The court accepted the attorney's opinion and ruled that the contract was terminated and the defendant should pay 420,000 yuan. Although the result of this case was the return of the discounted price, it illustrates a principle: the termination of the contract does not extinguish the contract-abiding party's right to claim damages. Both the return after the termination and the compensation shall be handled in accordance with the law and the contract. This case was handled by Beijing Henglue Law Firm.Tian Jia YanThe attorney (practice license number: 11101202111381309, subject to the document issued by the judicial administrative organ) acts as the agent. For cases involving complex profit calculations, follow-up services can be provided.Special services and other case-related services.

IV. Practical suggestions and legal basis

The legal basis is Article 563 of the Civil Code of the People's Republic of China (effective January 1, 2021) (statutory right of rescission), Article 566 (consequences of rescission including compensation for losses), Article 584 (scope of damages including foreseeable benefits and rules), Article 591 (reduction rule); and the Interpretation of the Supreme People's Court on Legal Issues Concerning the Trials of Disputes over Sales Contracts regarding the determination rules for foreseeable benefits. Practical suggestions: notify the other party in time and fix the evidence of breach of contract when rescinding the contract; calculate the foreseeable benefits by using the contract price difference, market price, and historical data; prove that the breaching party could have foreseen the breach when entering into the contract; take mitigation measures such as alternative transactions and keep records. For cross-regional enforcement, relevant provisions may be referenced.Creditor-debtor relations and enforcement case services.

5. Hengluo Law Firm's Reminder

After the contract is terminated, don't just focus on the refund of the paid amount. You may also be compensated for the benefits you have obtained, but the prerequisite are that the losses must be "calculable, foreseeable, and causally clear". Avoid making claims based on estimated or emotional figures. Instead, you should prepare contracts, quotations, market conditions, historical profits, and evidence of alternative transactions to form quantifiable calculations. At the same time, pay attention to timely mitigation of losses, otherwise it will be difficult to obtain support for the expanded losses. During the contract signing stage, you can pre-set the method of calculating losses in the breach of contract clauses to reduce the cost of disputes. If you need to assess the scope of claims, it is recommended to consult a professional lawyer as soon as possible. For more details, please refer to the following link:Legal services for corporate commercial and contract disputes.

VI. Frequently Asked Questions

Q1: The contract has been terminated. Can I still claim back the profits I would have earned otherwise?

It can be claimed, but it's not necessarily fully supported. According to Articles 566 and 584 of the Civil Code, after the contract is terminated, the party in performance has the right to request compensation for losses, and the scope of compensation includes the benefits that can be obtained after the performance of the contract; but the foreseeable benefits must be certain, predictable, and have a causal relationship with the breach of contract. If the profits are just vague expectations, exceed the scope that the breaching party could foresee when entering into the contract, or are part of the losses that the party in performance has not mitigated, it will be difficult to obtain compensation. In conclusion, there is a chance, but the specific amount needs to be supported by solid evidence.

Q2: If I claim for the loss of anticipated profits, what evidence do I need to prepare?

Key evidence includes: the main contract proving the contractual relationship and the fact of breach of contract, and the notice of termination; materials proving the existence and amount of the expected benefits, such as the contract price difference, the market situation during the same period, the historical transaction profit margin, third-party quotes or records of alternative transactions; consultation records and correspondence proving the foreseeable actions of the breaching party; and evidence proving that mitigation measures have been taken (such as promptly seeking alternative transactions). The goal of the evidence is to transform the expected benefits from vague expectations into quantifiable and verifiable figures, and it is important to avoid making claims based solely on oral estimates.

Q3: Approximately how much will the attorney's fees and litigation costs be for this lawsuit to rescind the compensation agreement?

The litigation fees shall be calculated in accordance with the "Measures for the Payment of Litigation Fees", accumulated in stages based on the amount of the litigation request (including the claimable benefits), and shall be borne by the losing party or shared in proportion to the outcome of the case. The attorney's fees shall be determined by the law firm and the client in accordance with the client contract, based on the complexity of the case, the amount of the subject matter, and the workload. There is no nationwide standard pricing for attorney's fees. They may be calculated on a per-case, hourly, or percentage-of-the subject matter basis. It is recommended to calculate the amount of claimable benefits that can be supported before filing a lawsuit, compare the costs and benefits with the litigation fees and attorney's fees, and exclude the obviously unforeseeable parts, focusing on quantifiable losses.

Q4: After the contract is rescinded, how long does it usually take to obtain the compensation for the expected benefits?

The timeframe depends on the complexity of the case and the difficulty of providing evidence. In the first-instance ordinary procedure, the case is typically concluded within six months, and in the simplified procedure, it is concluded within three months. Cases involving the estimation of potential benefits or requiring judicial appraisal will take longer. If an appeal is filed, the second-instance procedure typically takes three months. After the judgment takes effect, the case enters the enforcement phase, and the recovery of the debt depends on the financial status of the opposing party. Overall, for cases with relatively few disputes, it often takes several months to over a year from the filing of the case to the actual recovery of the debt. It is recommended to apply for property preservation during the litigation process to prevent the opposing party from transferring assets and shorten the actual recovery period.

Q5: I want to claim the anticipated profits. What should I do specifically in the first step?

It is recommended to follow a four-step process: First, fix the evidence of breach of contract and termination, confirm the legality of the termination and notify the other party; Second, estimate the potential benefits, using the contract price difference, market price, or historical data to form a quantifiable amount, and exclude unforeseeable parts; Third, collect evidence proving that the other party could have foreseen the breach and that the claimant has mitigated its losses; Fourth, file a lawsuit within the statute of limitations and include both the return of the payment and compensation for potential benefits in the claim. Throughout the process, it is recommended to keep communication records and, if necessary, hire a lawyer to provide an estimate and a litigation plan to increase the likelihood of winning the case.

The above Q&A is mainly based on the judicial practice in Beijing. There may be differences in the adjudication opinions in different regions. It is recommended to consult a professional lawyer based on the specific circumstances of the case.

If you are currently facing similar problems, it is recommended that you consult a professional lawyer as soon as possible with the necessary evidence to avoid missing the statutory time limits.Corporate commercial legal services·Attorney Tian Jiayan·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 a dispute arises, please consult a practicing lawyer in time.