[Direct answer]If the other party clearly states that it will not perform the contract before the performance period expires, it constitutes an anticipated breach of contract, and it is not necessary to wait until the expiration of the performance period to hold them accountable. According to Article 578 of the Civil Code (effective January 1, 2021), you can directly request them to bear the liability for breach of contract; you can also terminate the contract in accordance with Article 563 Paragraph 1 Item 2, and request the return of the paid amounts and compensation for losses in accordance with Article 566. The right of termination shall be exercised within one year from the date of knowing the grounds for termination (Article 564). It is recommended to send a written reminder to the other party and collect evidence of their refusal to perform the contract as soon as possible. You can also seek legal advice for this matter.Legal services for corporate commercial and contract disputesor throughHenglue Law FirmMake an appointment for an evaluation.

1. Problem background and typical scenarios

The performance period of contracts such as sales, processing and contracting, equity transfer, and film and television investment often lasts for months or even years. It's not uncommon for one party to change their mind halfway through. Typical scenarios include: the supplier explicitly informing that "they won't supply this batch of goods" before the delivery deadline; the payer notifying in advance that their funding chain has broken down and they won't pay subsequent payments; the cooperation partner sending a letter to terminate cooperation in handling procedures such as transfer of ownership and acceptance; or, although not explicitly stated, indicating that they will no longer perform their obligations through actions such as transferring assets, removing equipment, suspending work and withdrawing from the site, or going missing for a long time. What the parties are most concerned about is: Can they sue now that the performance period hasn't arrived yet? Should they first issue a notice of default or directly terminate the contract? What should they do with the advance payments and deposits that have already been made? Waiting until the deadline to take action often misses the opportunity to preserve assets and mitigate losses.

II. Key points of contention

  • Determination and proof of anticipated breach of contract: If the party explicitly states that it will not perform the contract, it can be determined by leaving written or audio evidence; if the party indicates that it will not perform the contract by its actions, it needs to provide evidence such as asset transfer records, the fact of suspension of work, and repeated reminders without results. If the evidence is insufficient, the court may require waiting until the performance period expires.
  • Terminate or continue to pursue the matter: Choosing to terminate the contract can help mitigate losses and claim for return and compensation, but the right to terminate is subject to the one-year statute of limitations set forth in Article 564 of the Civil Code. After being urged by the other party, the right to terminate must be exercised within a reasonable timeframe. The notice of termination takes effect upon its receipt by the other party, and the other party may request the court to confirm it if they have any objections (Article 565).
  • Range and calculation of losses: According to Article 584, the amount of compensation includes the benefits that can be obtained after the performance of the contract, but shall not exceed the scope that can be foreseen at the time of concluding the contract; if both the penalty for breach of contract and the deposit are agreed upon, only one of them can be claimed in accordance with Article 588.

III. Professional analysis by Henglue Lawyers

A dispute over an investment contract handled by Henglue Law Firm is a typical case of timely terminating the contract and seeking accountability when there is no hope of performance. In January 2021, Xu * signed a "Transfer of Profit Rights Agreement" with Company A, transferring a 0.25% profit right in a film with a total value of 120 million yuan and investing 300,000 yuan. The agreement explicitly promised that the film would be released before December 31, 2022, otherwise all investment funds would be refunded. However, the film failed to be released, and Xu * also found that Company A was not the producer of the film. By 2024, the film had still not been released, and the contractual purpose could no longer be achieved. Therefore, Xu * entrusted Attorney Wang Dong of Beijing Henglue Law Firm to sue Liu *, Zhang *, and Zhao *, demanding the termination of the agreement, the return of the 300,000 yuan investment and interest, and attorney fees. The three defendants raised defenses such as equity holding on behalf of others, the nominal shareholders being unaware of the situation, and A Company's involvement in criminal activities, which should be rejected. Attorney Wang Dong pointed out that the agreement was a true expression of the parties' intentions and Xu * had fully paid the investment. The failure to fulfill the release promise resulted in the failure to achieve the contractual purpose, and the breaching party had the right to terminate the contract and demand the return of the investment and compensation for the loss of funds. At the time of signing the agreement, Liu * was the sole shareholder of Company A, and failed to prove that the company's assets were independent of his personal assets. According to Article 63 of the Company Law, he should bear joint and several liability. Zhang *, Zhao *, and Liu * signed a "Commitment Letter of All Investors" promising to settle all creditor's rights and debts, and should still repay the debts after the company's dissolution. The first-instance court adopted the lawyer's opinion and ordered the three defendants to jointly repay the 300,000 yuan and attorney fees. After the three defendants appealed, the second-instance court rejected the appeal and upheld the original judgment. This case shows that when the other party refuses to perform or there is no hope of performance, it is effective to timely terminate the contract, claim the return of funds and compensation according to Article 566 of the Civil Code, and simultaneously pursue the liability of the shareholders to recover the funds.

IV. Practical suggestions and legal basis

At the legal basis level: Article 577 of the Civil Code (effective January 1, 2021) stipulates that failure to fulfill contractual obligations shall entail such breach of contract liabilities as continued performance, remedial measures, or compensation for losses; Article 578 establishes the anticipatory breach of contract system; Article 563 (1) (2) lists "the party's clear expression or actions indicating its failure to perform the main obligations before the expiration of the performance period" as a statutory ground for termination; Article 564 prescribes the one-year statute of limitations for the right of termination and the reasonable timeframe after giving notice; Article 565 stipulates that the contract is terminated when the notice of termination reaches the other party; Article 566 allows the terminating party to request restoration of the status quo and compensation for losses, and the right of termination due to breach of contract may simultaneously request the breaching party to bear breach of contract liabilities; Article 584 defines the compensation for foreseeable losses and the limitation of damages; Article 585 stipulates that the court may adjust the amount of the breach of contract penalty if it is too high or too low. At the practical advice level: If the other party refuses to perform, first send a written notice of reminder to respond within a specified timeframe, and preserve WeChat records, audio recordings, and correspondence; if deciding to terminate the contract, the notice of termination shall specify the grounds for termination and the claim for damages, and apply for property preservation to lock the other party's assets; when suing, list the claims in layers according to "return of payments + loss of funds + foreseeable benefits", and review the other party's shareholder contributions and liquidation documents to determine whether to add additional liable parties.

5. Henglu Law Firm's Advice

The value of the anticipatory breach of contract system lies in enabling the party in compliance to avoid waiting for the loss to escalate. Even before the deadline, the window for accountability has already opened, but the right to rescind the contract will be extinguished if it is not exercised within one year. Delay often means being passive. In terms of the order of action, it is more prudent to first send a notice with evidence, then evaluate whether to rescind the contract or continue to perform the contract, and simultaneously apply for preservation of evidence. If the other party is a company, it is also necessary to verify its shareholder structure and whether it has been deregistered or reduced its capital, so as to avoid winning the lawsuit but having no property to enforce. If necessary, this can be combined with other measures.Creditor-debtor relations and enforcement case servicesEvaluate the repayment plan. This case is handled by Beijing Henglu Law Firm.Wang DongThe lawyer (practice license number: 11101201910090334, subject to the document issued by the judicial administrative organ) acts on behalf of the client. In both the first and second instances, the lawyer supported the client's request to terminate the agreement and recover the investment of 300,000 yuan and the attorney's fees.

Q1: If the other party just verbally said they wouldn't supply the goods, and there's no written document, can this be considered a breach of contract in anticipation?

This can be confirmed, but the key lies in providing evidence. Oral expressions of intent also constitute the "clear indication of non-performance" as stipulated in Article 578 of the Civil Code. Chat records, call recordings, meeting minutes, and correspondence emails can all serve as evidence. According to Article 14 of the "Several Provisions of the Supreme People's Court on Evidence in Civil Proceedings" (effective May 1, 2020), instant messaging records such as WeChat are considered electronic data evidence, and can be admitted as long as the identity of the parties and the integrity of the content can be verified. If the other party explicitly states in a group chat or conversation, "We're not doing this anymore" or "We can't supply the goods," and your side subsequently sends a written reminder to respond within a specified timeframe but the other party fails to rectify the situation, this can generally form a chain of evidence to support the determination.

Q2: The performance period hasn't arrived yet. Should I sue now or wait until the deadline to file a lawsuit?

Claims can be made now. According to Article 578 of the Civil Code, if a party explicitly states or demonstrates by actions that they will not perform their obligations, the other party may request them to bear breach of contract liability before the performance period expires. Waiting for the expiration of the performance period will only increase losses and increase the other party's chances of transferring assets. If it is decided to terminate the contract, according to Article 563 Paragraph 1 Item 2, the anticipated breach of contract itself constitutes a statutory ground for termination. The notice of termination takes effect when it reaches the other party in accordance with Article 565. The only thing that needs to be considered is the strength of the evidence: if there are only verbal statements but insufficient evidence of actions, the party can first issue a reminder and then terminate the contract; if the evidence is sufficient, it is recommended to initiate litigation and proceed with asset preservation simultaneously.

Q3: After terminating the contract, can I get back the advance payment and deposit that I have already paid?

Yes. According to Article 566 of the Civil Code, after the contract is rescinded, the party that has not yet performed the contract shall terminate its performance, and the party that has already performed the contract may request the other party to restore the original state or take other remedial measures, and has the right to request compensation for losses. The advance payment shall be refunded. Regarding the deposit, according to Article 587, if the party receiving the deposit fails to perform its obligations and the purpose of the contract cannot be achieved, it shall return the deposit in double; according to Article 588, if both the penalty and the deposit are agreed upon, only one of them may be applied. If the deposit is insufficient to compensate for the losses, the party may continue to claim compensation for the excess part. When making a claim, attention should be paid to including the interest on the occupied funds in the claim.

Q4: If there's no penalty clause in the contract, how should the losses be calculated?

The absence of a penalty clause does not affect the claim. According to Article 584 of the Civil Code, the amount of compensation for losses shall be equivalent to the losses caused by the breach of contract, including the benefits that could be obtained after the performance of the contract, but limited to the losses that the breaching party could foresee at the time of concluding the contract. In practice, evidence is usually provided item by item according to "actual expenditure losses + interest on funds occupied + obtainable benefits", such as the price difference of the transferred purchases, losses from production and work stoppages, and paid storage and transportation costs, all of which require supporting documents. If a penalty clause has been agreed upon but is obviously lower than the losses, an increase may be requested in accordance with Article 585. In judicial practice, a reference line of more than 30% of the actual losses is usually used as a criterion for determining whether the increase is excessive. Conversely, this can also help determine the appropriate increase in compensation.

Q5: What should I do if the other party refuses to pay after winning the lawsuit?

After the judgment takes effect, if the other party refuses to perform the obligation, the party concerned shall apply for enforcement in a timely manner after the expiration of the performance period. During the enforcement process, the court may inquire into, freeze, and transfer the other party's bank accounts, seize and auction the real estate and vehicles, and may also include the party refusing to perform the obligation in the list of dishonest people and restrict its high consumption. At the litigation stage, it is necessary to apply for property preservation simultaneously to control the other party's accounts and assets before the judgment, which is the most effective way to recover the payment. If the other party is a company that has been deregistered or is insolvent, the shareholders who have not carried out the statutory liquidation may be held liable in accordance with the relevant provisions of the Company Law. It is recommended to handle it through legal means.Creditor-debtor relations and enforcement case servicesDevelop an implementation and recovery plan.

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. →Business and commercial legal services·Attorney Wang Dong·Beijing Henglue Law Firm