[Direct answer]When SMEs encounter contract disputes, it is recommended to handle them in five steps: First, fix the evidence by collecting the original contract, delivery notes, acceptance notes, invoices, transfer certificates, and WeChat/email correspondence; Second, verify the other party's identity and credit status to identify the responsible party; Third, send a reminder letter or lawyer's letter to assert rights in writing and interrupt the statute of limitations; Fourth, evaluate the paths of negotiation, mediation, arbitration, or litigation, noting that the general statute of limitations is three years (Article 188 of the Civil Code of the People's Republic of China); Fifth, if the other party shows signs of transferring assets, apply for property preservation in time. According to Article 577 of the Civil Code of the People's Republic of China, the party in breach of contract may be required to continue performance, take remedial measures, or compensate for losses. For large-scale disputes, where the other party has been deregistered, lost contact, or is suspected of fraud, it is recommended to engage a lawyer as soon as possible.

1. Problem background and typical scenarios

SMEs are a high-risk group for contract disputes, with disputes concentrated in several scenarios: buyers defaulting on payments in credit sales transactions, suppliers unable to collect debts; after completing customized processing or decoration projects, clients deduct prices or refuse to pay final payments on the grounds of quality defects; franchise cooperation and channel agency agreements breaking down due to one party unilaterally changing terms or withdrawing midway; the other party's company being deregistered, losing contact, or even operating under the name of an affiliated company; and verbal promises made during contract signing being retracted during performance. Compared with large enterprises, SMEs generally lack dedicated legal departments, sign contracts casually, and fail to maintain sufficient evidence of contract performance. After disputes arise, they often face the dilemma of "having difficulty proving the existence of the relationship," while their cash flow cannot afford to wait for lengthy legal procedures. Therefore, their dispute resolution strategies need to prioritize efficiency and evidence collection.

II. Key points of contention

  • Can the contractual relationship and the facts of breach of contract be proven? If there is no written contract, delivery notes, receipt records, invoicing records, WeChat confirmations, and transfer notes can all serve as evidence. When the other party defends with arguments such as "no contract was signed" or "the quality is not up to standard," the allocation of the burden of proof directly affects the outcome of the case.
  • The scope of losses and the determination of breach of contract liability: how to calculate the loss of anticipated profits, how to adjust the agreed breach of contract penalty if it is too high or too low, and how to share the liability when both parties are at fault are the core disputes in compensation-related disputes.
  • Program path and timing: For contracts stipulating arbitration, it is necessary to apply for arbitration first; whether to apply for property preservation before suing, how to design the claim (continuing performance or terminating compensation), and how to determine the defendant's subject (including the shareholder's liability of a company that has been deregistered) determine whether the execution can be implemented.

III. Professional analysis by Henglue Lawyers

Here are two experiences of Henglue Lawyers in handling contract dispute cases, which are of particular reference value for small and medium-sized enterprises. Firstly, the agreement on contract termination and refund can be fixed by "stamped documents + communication records". In the contract dispute between Wang * and a certain company over network services, after Wang * paid a 50,000 yuan equipment deposit, the two parties agreed to terminate the contract, but the other party refused to refund the money and instead counter-sued Wang * for defaulting on the balance payment and demanding breach of contract penalties. Henglue Lawyers presented the equipment details attached to the contract (stating that the equipment was provided by the company), the WeChat records of the termination agreement between the two parties, and the refund application form stamped by the company, proving that the two parties had reached an agreement on the termination and refund amount, and that there was no breach of contract penalty clause in the contract. The first-instance court ordered the company to refund 34,433 yuan in service fees and pay 3,000 yuan in attorney fees, and the second-instance court dismissed the company's appeal and upheld the original judgment. Secondly, the parties responsible for the breach do not have to be limited to the contractual counterparties. In another film investment dispute, an investor contributed 300,000 yuan to acquire the right to receive film revenue, and the agreement promised that the film would be released before December 31, 2022, and all investment funds would be refunded if the film was not released on time. However, the film was never released, and the project company had been liquidated. Henglue Lawyers argued that the sole shareholder at the time of signing the contract failed to prove that the company's assets were independent of personal assets and should bear joint and several liability, and that the shareholders who promised to liquidate the company's debts and obligations when it was liquidated should also make repayments. Both the first-instance and second-instance courts supported this argument, ordering the three defendants to jointly return the investment funds of 300,000 yuan and attorney fees. The liquidation of the counterparty company and the breakdown of the capital chain are not the end of the matter. It is equally important to investigate and safeguard the liability subjects. Those who need to establish daily contract risk control mechanisms in their enterprises can learn more about it. 恒略律师在处理合同纠纷案件中的两点经验，对中小企业尤有参考价值。其一，解除与退款的合意可以靠“盖章文件+沟通记录”固定。在王某与某公司网络服务合同纠纷中，王某支付5万元设备押金后双方协商解除合同，对方却拒绝退款，反而反诉王某拖欠尾款并索要违约金。恒略律师出示合同所附设备明细（载明设备由该公司提供）、双方微信解除记录及该公司盖章的退款申请表，证明双方已就解除与退款金额达成一致，且合同并无违约金条款；一审法院判令该公司退还服务费34433元并支付律师费3000元，二审驳回公司上诉、维持原判。其二，追责对象不必局限于合同相对方。在另一起影视投资纠纷中，一位投资人出资30万元受让电影收益权，协议承诺影片于2022年12月31日前上映、逾期退还全部投资款，但影片迟迟未上映，项目公司也已注销。恒略律师主张签约时的唯一股东未能证明公司财产独立于个人财产、应承担连带责任，注销时承诺债权债务清算完结的股东亦应清偿，一、二审法院均予支持，判令三名被告连带退还投资款30万元及律师费。对对方公司注销、资金链断裂并非终点，责任主体的排查与保全同样重要。需要建立企业日常合同风控机制的，可了解更多信息。Intellectual property protection and corporate legal servicesFor those who need to evaluate the path of preservation and enforcement, they can refer to the following content.Creditor-debtor relations and enforcement case services.

IV. Practical suggestions and legal basis

Legal basis: Article 188 of the Civil Code of the People's Republic of China (effective January 1, 2021) stipulates that the statute of limitations for suing in the people's court to protect civil rights is three years, calculated from the date when the right holder knows or should know that his rights have been infringed and the obligations of the other party; Article 577 stipulates that the defaulting party shall bear such contractual liabilities as continuing performance, taking remedial measures, or compensating for losses; Article 563 stipulates the statutory right of rescission under circumstances such as force majeure, anticipated breach of contract, and delay in performance after being urged but still failing to perform; Article 584 determines that the amount of compensation includes the actual losses and the benefits that could have been obtained after the performance of the contract, within the scope that the defaulting party could have foreseen at the time of contracting; Article 152 stipulates that contracts that violate mandatory legal provisions or violate public order and good customs are invalid. Practical suggestions: 1. Establish a contract database, keeping records of each stage of contract signing, performance, and payment. 2. Send written reminder letters to the other party as soon as possible after their default and retain the delivery proof, which not only applies pressure but also interrupts the statute of limitations. 3. Before suing, evaluate the other party's enforceable assets and apply for property preservation simultaneously. 4. If the company has been dissolved, verify the liquidation responsibilities and shareholders' commitments and list the shareholders as co-defendants. 5. If the other party is suspected of contract fraud, promptly report the case to the public security organ and explain the intersection of civil and criminal law to avoid delaying the opportunity for criminal recovery of assets.

5. Henglue Law Firm's Advice

For SMEs, contract disputes are not about who is more justified, but rather who can provide better evidence and act faster. At the prevention stage, verify the other party's qualifications and performance capabilities before signing the contract, and do not skip written agreements for complex transaction structures. At the performance stage, make changes to orders and extend payment deadlines as much as possible in written or traceable communication channels. At the response stage, identify signs of breach of contract first to fix evidence, then send a letter of reminder, and evaluate the statute of limitations and preservation window before deciding whether to negotiate or sue, to avoid losing procedural benefits in emotional confrontations. This case was handled by Beijing Henglu Law Firm.Xue SuhuaThe attorney (practice license number: 11101201211769926, subject to the document issued by the judicial administrative organ) acts as the agent.

Q1: If there's no written contract, only WeChat chat records and transfer records, can I sue to recover the payment?

It's possible to file a lawsuit. A written contract is not the only proof of the establishment of a contractual relationship. According to Article 469 of the Civil Code of the People's Republic of China, a contract may be concluded in written, oral, or other forms. WeChat chat records, emails, delivery notes, receipts, invoices, and transfer records can corroborate each other and reflect that the parties have reached an agreement on the subject matter, quantity, and price. The court may determine that a contractual relationship has been established. Before filing a lawsuit, it is recommended to fully preserve the WeChat records as evidence and retain related evidence of the other party's identity information, such as the mobile phone number and real-name information associated with the WeChat account. If necessary, apply to the court to retrieve the information, and then combine it with the transfer records to form a complete chain of evidence.

Q2: What is the statute of limitations for contract disputes? Can I still sue if it has exceeded the time limit?

The general statute of limitations is three years. According to Article 188 of the Civil Code of the People's Republic of China, the statute of limitations shall be calculated from the date when the right holder knows or should know that his rights have been infringed and the date when the obligee knows or should know that his obligations have been breached; for contracts with a performance period, the statute of limitations generally starts from the date when the performance period expires. Even if the statute of limitations has passed, one can still file a lawsuit. The court shall not apply the statute of limitations on its own initiative, but if the other party raises a statute of limitations defense and there are no grounds for suspension or interruption, the right to win the lawsuit will be lost. Each time a written collection letter is sent and the delivery certificate is retained, or the other party makes a repayment commitment or makes partial payments, the statute of limitations will be recalculated. Therefore, regular written collection of overdue accounts is not only a commercial action, but also an important legal action.

Q3: If the other party defaults on the payment of the goods, can we apply to freeze his bank account?

Yes, it can be achieved through property preservation. If the situation is urgent and failure to apply for preservation immediately will cause irreparable damage to their legitimate rights and interests, they may apply to the court for pre-litigation preservation before suing, but must sue within the statutory time limit after the court takes preservation measures; in more cases, they apply for litigation preservation when suing or during the litigation, and the court freezes the other party's bank accounts and seizes their real estate and vehicles after providing guarantees. Preservation can not only prevent the other party from transferring assets, but also often directly promotes reconciliation. It should be noted that there is a risk of compensation for errors in preservation, and it is recommended that lawyers evaluate and design the guarantee method and the scope of preservation. After preservation, the litigation should be advanced within the time limit to avoid the preservation being in vain.

Q4: If the contract stipulates an arbitration clause, can I still sue in court?

Generally, this is not possible. A valid arbitration clause excludes court jurisdiction. If one party files a lawsuit with the court over the same dispute and the other party raises a jurisdiction objection before the first court hearing, the court will either refuse to accept the case or dismiss the lawsuit. The parties can only apply for arbitration to the agreed arbitration institution, and arbitration is final and binding. In practice, it is important to review whether the arbitration clause is clear and specific: if the name of the agreed arbitration institution is inaccurate, or if it is agreed that both arbitration and litigation are available, the clause may be invalid, and in this case, the parties can still file a lawsuit with the court. When signing the contract, the parties should choose a good dispute resolution method based on the characteristics of the transaction to avoid repeated procedural disputes after the dispute arises.

Q5: Even after winning the lawsuit, the other party still refuses to pay. What should I do?

After the judgment, mediation agreement, or arbitration award takes effect, you can apply to the court for enforcement. The court can inquire into and freeze the transfer of their bank deposits and third-party payment accounts, seize and auction off their property and vehicles, and, depending on the circumstances, add them to the list of dishonest debtors and restrict their high-consumption activities. If enforcement is unsuccessful this time, you can provide clues to the other party's assets and apply for resumption of enforcement. If you discover that the other party has transferred assets during the litigation period, you can also legally hold them accountable for refusing to enforce the judgment or arbitration award. The debt collection cycle is often longer than the trial cycle. Property investigation before litigation and preservation during litigation are the key to ultimately recovering the money. It is recommended to simultaneously plan the enforcement scheme during the litigation stage.

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.Business and commercial legal services·Attorney Xue Suhua·Beijing Henglu Law Firm