[Direct answer]If the other party breaches the contract, you may, in accordance with Article 577 of the Civil Code of the People's Republic of China, claim for the other party to continue to perform the contract, take remedial measures, or compensate for losses; the scope of compensation shall, in accordance with Article 584, include actual losses and the benefits that could have been obtained after the performance of the contract, and shall be limited to the losses that the breaching party could have foreseen or should have foreseen at the time of concluding the contract; if the contract stipulates a penalty, you may claim for it in accordance with the agreement. If the penalty is excessively higher or lower than the actual losses, you may request the court to appropriately reduce or increase it (Article 585). Recovery path: send a written reminder to fix evidence, send a lawyer's letter to exert pressure, negotiate and mediate, or arbitrate or litigate. If there are signs that the other party is transferring assets, apply for property preservation simultaneously, and pay attention to the three-year statute of limitations (Article 188 of the Civil Code of the People's Republic of China).

1. Problem background and typical scenarios

Breach of contract claims are concentrated in several high-frequency scenarios: delayed payment after the completion of supply, repeated collection attempts being delayed by the other party citing funding constraints; refusal to pay the final balance after the delivery of equipment, projects, or services due to quality defects; tenants withdrawing from the lease midway and leaving behind renovation costs and vacancy losses; refusal to pay after the acceptance of commissioned creative or outsourced projects; and fundamental breaches of contract that render the contractual objectives unfeasible, requiring the termination of the contract and the pursuit of compensation. The most common dilemma faced by enterprises is that, despite the losses being clearly evident, they do not know what claims can be asserted, how to provide evidence, or how long the legal process will take. Some miss the opportunity to secure evidence and observe time limits during repeated negotiations, ultimately winning the legal argument but losing the ability to enforce the judgment.

II. Key points of dispute

  • Can the losses be verified? The actual losses must be supported by contracts, payment receipts, and invoices for additional expenses; for the loss of anticipated profits, it is necessary to prove their certainty—that is, the profits that could have been obtained if the contract had been performed normally. Claims that are too high or lack sufficient evidence are usually not supported.
  • The matching of the penalty clause with the actual losses: If the penalty clause is set too high, judicial practice usually takes the actual losses as the basis, and comprehensively evaluates it in combination with the performance of the contract and the degree of the parties' fault. The part that is obviously too high will be reduced accordingly; the absence of a penalty clause does not affect the claim for compensation for losses.
  • The cost of protecting rights and collecting payments: Whether the lawyer's fees, preservation fees, etc. can be borne by the other party depends on the contractual provisions or arbitration rules; the collection of payments after the judgment depends on the other party's financial situation, and the preservation measures taken during the lawsuit are often more crucial than the actual success of the litigation itself.

III. Professional analysis by Henglue Lawyers

The handling approaches of the three cases can illustrate the key actions in breach of contract claims. The first case involves a breach of contract for a preliminary agreement: A commercial management company signed a "House Lease Confirmation Letter" with the lessee, Zhang *. The agreement stipulated that Zhang * would lease a store with a monthly rent of 83,333 yuan for three years. The company would customize the decoration according to Zhang *'s requirements and pass the inspection. However, Zhang * delayed signing the formal contract and explicitly refused to lease the property, leaving the house vacant for a long time. The company sued for damages of over 700,000 yuan for decoration and other losses, but the defendant argued that the confirmation letter only had Zhang *'s signature and did not constitute a contract. The court determined that the parties had reached an agreement on the leasing subject, the house, the rent, and the lease term, establishing a preliminary contract relationship. Zhang *'s refusal to sign the formal contract constituted a breach of contract. The court ordered Zhang * to compensate for the decoration costs of 365,000 yuan—lower than the amount claimed because the compensation scope was limited to the decoration costs agreed in the confirmation letter and the causal relationship with the breach of contract. The second case involved an arbitration of a commissioned creation contract: A Shanghai-based technology company and a Shenzhen-based online company signed a project outsourcing agreement with a contract amount of 58,300 yuan. After the work was accepted, the other party delayed payment on the grounds of unsatisfactory quality. The arbitration tribunal reviewed the WeChat version of the project, the acceptance record, and the payment commitment record, and ruled that the other party should pay the contract amount of 58,300 yuan and compensate for all legal fees. The third case was a film investment dispute: An investor invested 300,000 yuan in the film's revenue rights, but the film failed to be released on schedule. Both the first and second instance courts ordered the three defendants to jointly return the investment and bear the legal fees. The common point of the three cases is that they firmly established through evidence who breached the contract, the losses caused, and the causal relationship between the losses and the breach of contract. The scope of the claim was then narrowed down to the part that could be supported according to the contract provisions and legal standards. Regarding the enforcement of the recovered funds, it can be combined with the following explanation:Creditor-debtor relations and enforcement case servicesConsider things comprehensively; for real estate disputes involving shops, renovations, etc., you can refer to the relevant provisions.Real estate sales and construction project services.

IV. Practical suggestions and legal basis

At the legal basis level: Article 577 of the Civil Code of the People's Republic of China establishes the general form of breach of contract liability; Article 584 defines the scope of compensation and foreseeable rules; Article 585 stipulates the penalty for breach of contract and its judicial adjustment. If the agreed penalty is lower than the actual losses, the party may request an increase; Article 588 stipulates that the penalty for breach of contract and the deposit can only be applied alternatively. If the deposit is insufficient to compensate for the losses, the party may request compensation for the insufficient part; Article 591 is a mitigation rule. If the party in breach fails to take appropriate measures to cause the expansion of losses, the party may not request compensation for the expanded part. The three-year limitation of action stipulated in Article 188 of the Civil Code of the People's Republic of China also applies to the right to claim compensation for breach of contract. At the practical advice level: Send a letter of reminder and keep the evidence of delivery to interrupt the statute of limitations at the first time of overdue; Fix the amount of the creditor's claim in writing through account statements, repayment plans, and IOUs; For those claiming attorney's fees, ensure that there are clear provisions in the contract; Before suing, survey the other party's property and evaluate preservation to avoid winning the lawsuit but not getting the money; For themselves, it is also a legal obligation to stop losses in time and avoid the expansion of losses.

5. Henglu Law Firm's Reminder

The key to winning a breach of contract lawsuit lies in "quantifying and proving the losses": First, identify the items that can be claimed according to the contract provisions and legal standards - principal, liquidated damages or compensation for losses, attorney's fees based on the agreement, and then support each item with payment receipts, acceptance records, reconciliation statements, additional expense invoices, and profit data. Finally, ensure that the money can be recovered through preservation and enforcement measures. Appointment documents, stamped confirmations, and WeChat confirmations are equally binding. Don't give up your rights just because the other party says "we haven't signed a formal contract". The amount claimed should also be reasonable and based on evidence. Exceeding the scope of support may actually slow down the overall progress. This case was handled by Beijing Henglu Law Firm.Zhu GuiyingThe lawyer (practice license number: 11101202011246828, subject to the document issued by the judicial administrative organ) acts as the agent.

Q1: Can the breach of contract penalty and the deposit be claimed at the same time?

You cannot choose both. According to Article 588 of the Civil Code of the People's Republic of China, if the parties have agreed on both a breach of contract penalty and a deposit, the other party may choose to apply either the breach of contract penalty or the deposit clause when one party breaches the contract, but may not claim both at the same time; if the deposit is insufficient to compensate for the losses caused by the breach of contract by one party, the party may claim compensation for the losses exceeding the amount of the deposit. When making the choice, first estimate the actual losses: if the losses are obviously higher than the amount of the deposit, claiming the breach of contract penalty is usually more advantageous; if the losses are relatively small and the penalty for the deposit is sufficient to cover them, claiming the deposit is more direct. Regardless of which option is chosen, the party should keep evidence of the losses for the court to refer to when adjusting the breach of contract penalty or calculating the difference in damages.

Q2: If the contract does not stipulate a penalty for breach of contract, can I still request the other party to compensate me?

Yes. The penalty for breach of contract is just a pre-agreed form of damages. The absence of such an agreement does not mean there is no remedy. According to Articles 577 and 584 of the Civil Code of the People's Republic of China, the party in breach of contract shall still compensate the party in compliance for the actual losses and the loss of expected benefits caused by the breach of contract. However, the burden of proof is heavier: it requires payment receipts, bills for additional expenses, profits from similar transactions, industry practices, etc. to prove the certainty of the losses and the directness of the causality. If the parties have confirmed the amount of the debt in the dispute, the settlement statement and the repayment commitment themselves are strong evidence. At the remedial level, after the dispute occurs, the parties can sign a repayment plan or a compensation agreement with each other to fix the amount in writing again.

Q3: Does the court support the loss of potential profits? How can it be proven?

Conditional support. The concept of "available benefits" refers to the profits that could have been realized and obtained after the proper performance of the contract. According to Article 584 of the Civil Code of the People's Republic of China, these benefits can be included in the scope of compensation, but subject to two restrictions: first, the benefits must be certain, not purely speculative or based on guesswork. To prove their reality, usually operational data, historical profits, order quotations, etc. are required; second, the benefits must be foreseeable, limited to the losses that the breaching party could have anticipated when entering into the contract. The proof approach includes: providing gross profit and net profit data of similar transactions during the same period, the inventory or investments completed for this contract, downstream orders, and evidence of external compensation due to the breach of contract. The amount claimed should be reasonable and supported by evidence. Making unrealistic demands will only undermine the overall credibility of the claim.

Q4: What is the general process and timeframe for pursuing debt repayment through litigation?

The regular process is: preparing the complaint and evidence (contracts, invoices, reminder letters, payment records), filing a case with a court of jurisdiction, and applying for property preservation simultaneously if eligible; the summary procedure is generally concluded within three months, the ordinary procedure is generally concluded within six months, and the second instance will take several months longer if the other party appeals; if the other party still fails to perform after the judgment takes effect, apply for compulsory execution. The overall cycle is greatly affected by jurisdiction, preservation, and service methods. If the other party's whereabouts are unknown and need to be served by public announcement, the cycle will be significantly prolonged. Techniques for controlling the cycle include: stipulating clear and favorable jurisdiction in the contract, applying for preservation to facilitate settlement when suing, and fixing the evidence admitted by the other party during the reconciliation stage of account settlement and collection.

Q5: If the other party says they don't have the money and you can't get the compensation even if you win the lawsuit, what should you do?

There are multiple measures in the execution stage: applying to the court to query the debtor's bank accounts, securities, third-party payment accounts, and vehicle and property registrations through the online investigation and control system, and freezing and transferring the directly accessible deposits; seizing and auctioning real estate and equipment; adding the debtors who refuse to perform their obligations to the list of dishonest individuals, restricting their high-consumption and overseas travel; and, if eligible, applying for audits and posting bounty notices to hold those who transfer assets accountable for their refusal to perform their obligations. Even if the current execution cannot conclude the execution process, the creditor can apply for resuming the execution at any time after discovering the debtor's assets. Therefore, debt collection should be proactive: conducting an asset survey before suing and applying for preservation during litigation is much more effective than searching for assets after winning the lawsuit.

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 Zhu Guiying·Beijing Henglu Law Firm