[Direct answer]In the event of contract fraud, you should report the case to the public security organ at the place where the crime occurred or where the suspect resides as soon as possible. First, organize evidence such as the contract text, payment receipts, the other party's basic information, chat and call records, and then submit written report materials. If the public security organ believes that there are criminal facts that require criminal responsibility and fall within its jurisdiction, it shall initiate an investigation (Article 110 of the Criminal Procedure Law of the People's Republic of China). The key to determining whether it constitutes a crime lies in whether the other party committed acts such as fabricating a subject, providing false guarantees, and absconding after receiving payment, as listed in Article 224 of the Criminal Law of the People's Republic of China, with the aim of illegally obtaining possession. If it is a case of ordinary contract breach or contract invalidation dispute, it is advisable to claim for rescission, return of property, and compensation through civil litigation. For more information, please refer to the following link:Legal services for corporate commercial and contract disputesAndBeijing Henglu Law Firm.

I. Problem Background and Typical Scenarios

Contract fraud often disguises itself as normal transactions: fabricating a company's qualifications or signing contracts under others' names; using forged or altered documents or false property ownership certificates as collateral; making small-scale performance first to gain trust despite lacking the ability to fulfill obligations, then luring the other party to continue increasing their investment; and disappearing after receiving goods or payments. Victims often initially believe it's an ordinary contract dispute, but realize they've been cheated only after repeated demands go unanswered. By then, the other party may have already transferred assets or vanished without a trace. The choice between reporting the case for criminal prosecution and suing for civil rights is not simple: if the direction is wrong, reporting the case will be rejected, wasting time; if only civil action is taken without securing criminal evidence, the opportunity to seize and freeze assets may be missed. Understanding the boundaries between the two is the first step to recovering losses.

II. Key points of contention

  • The boundary between guilt and non-guilt: The purpose of illegal possession requires a comprehensive assessment of the contractor's ability to perform the contract at the time of signing, the actual destination of the funds, and whether there are circumstances of squandering and evading responsibility. The distinction between civil fraud and criminal fraud often becomes a point of contention in individual cases.
  • Procedural choices in the intersection of civil and criminal law: If the court discovers a criminal suspect during the trial of an economic dispute, it may rule to dismiss the lawsuit and transfer the materials to the public security organ; if the victim has already reported the case, the civil case may be suspended, and the order of proceedings will affect the pace of rights realization.
  • The quality of the reporting materials and the efficiency of case filing: Reports that only contain emotional statements but lack a list of evidence are likely to be required to be supplemented; reports with clear timelines, corresponding evidence, and clearly defined suspected crimes can significantly speed up the review and acceptance process.

III. Professional analysis by Henglue Law Firm

During the handling of contract dispute cases, Henglue Lawyers found that situations where the purpose of payment is unfulfilled do not necessarily constitute fraud. It is safer to first secure evidence and then determine the legal path. In a case of contract dispute, Ms. Wang and her husband signed a household registration agreement with Zhao * and paid 100,000 yuan to assist their child in obtaining a Beijing household registration through marriage registration. However, due to policy changes, the registration failed and negotiations on the return of the payment were unsuccessful. After taking over the case, the lawyers systematically secured written evidence such as the agreement text, transfer records, and communication recordings, and argued that the agreement was invalid as it circumvented household registration policies through fraudulent marriage and violated public order and good customs. The court ruled that the agreement was invalid from the outset according to Article 152 of the Civil Code of the People's Republic of China, and ordered Zhao *, as the direct recipient of the payment, to return the 100,000 yuan and bear the case acceptance fees within a specified period. The funds were ultimately recovered in full through civil litigation. In another case of sales contract dispute, a company sued to recover the payment and claimed priority compensation for the mortgaged property. The mortgagor argued that his signature was obtained through fraudulent collusion, and the public security organ had already registered a case against the third-party fraudsters. The court determined that the case involved suspected economic crimes and, in accordance with Article 11 of the "Provisions of the Supreme People's Court on Several Issues Concerning Economic Crimes in Economic Disputes Cases", ruled to dismiss the lawsuit and transfer the materials to the public security organ for further investigation. The two cases correspond to two legal paths: for transactions that violate the law or public order and good customs, handle them through civil invalidation and return of funds; for cases involving suspected crimes, promptly report the case to the police and strive for transfer to criminal investigation.

IV. Practical suggestions and legal basis

Legal basis: Article 224 of the Criminal Law of the People's Republic of China stipulates the crime of contract fraud, including signing contracts under the guise of a fictitious entity or using others' names, using forged or altered bills or other false property ownership certificates as collateral, and absconding after receiving the other party's payment or advance payment; Article 110 of the Criminal Procedure Law of the People's Republic of China stipulates that any unit or individual who discovers a criminal fact has the right to report it, and victims have the right to file a complaint against crimes that infringe their property rights; Article 148 of the Civil Code of the People's Republic of China (implemented on January 1, 2021) stipulates that a contract signed under fraud may be requested to be rescinded, Article 563 stipulates that the contract may be terminated if the purpose of the contract cannot be achieved due to breach of contract, and Article 577 stipulates the liability for breach of contract; Article 11 of the "Provisions of the Supreme People's Court on Several Issues Concerning Economic Crimes Suspected in the Trials of Economic Disputes" establishes the rule that those suspected of economic crimes rather than economic disputes shall be ruled to reject the prosecution and transferred to the public security or procuratorial organs. Practical operation: First, organize evidence, including contracts, payment records, subject's business information, chat records, call recordings, and the other party's whereabouts and property clues; Second, prepare the report materials, stating the facts according to the timeline and listing the suspected crimes and corresponding evidence; Third, report the case to the criminal investigation department of the public security organ at the crime scene or the suspect's residence; Fourth, if the decision to not file a case is made, you can apply for a review or apply to the people's procuratorate for supervision of the filing of a case; Fifth, simultaneously evaluate the civil litigation path, and civil litigation can apply for property preservation to prevent the other party from transferring property. For those involved in the criminal filing process and defense connection, you can learn more about it.Criminal defense and legal services for criminal case filing.

5. Henglu Law Firm's Reminder

When reporting a case, timing and evidence are crucial: the earlier you take action, the higher the likelihood of seizing and freezing the assets involved in the case; the later you organize the evidence, the more opportunities the other party will have to transfer assets. If you're unsure whether it's criminal fraud or a civil breach of contract, you can first ask a lawyer to evaluate the evidence in terms of criminal or non-criminal liability, and then decide whether to report the case or file a lawsuit to avoid wasted effort. At the same time, we remind you: Before making a transaction, check the other party's qualifications and litigation records carefully; when signing a contract, insist on the principle of equal exchange of money and goods and installment payments, which is the most cost-effective anti-fraud measure. This case is handled by Beijing Henglue Law Firm.Xue SuhuaThe attorney (practice certificate number: 11101201211769926, subject to the certificate issued by the judicial administrative organ) acts as the agent.

Q1: How to distinguish between contract fraud and ordinary contract breach of contract?

The key is to determine whether the other party's purpose is to illegally acquire property. Contract fraud typically manifests as follows: fabricating entities, forging qualifications or property ownership certificates at the time of signing the contract; having no actual ability to fulfill the contract but first fulfilling small obligations to gain trust; squandering money, transferring assets, or directly absconding after receiving the payment. Ordinary breach of contract refers to a situation where the contract is signed genuinely and the other party has the willingness to fulfill the contract, but fails to do so due to objective reasons such as changes in business operations. When making a judgment, the focus should be on reviewing three points: whether the other party's qualifications are genuine at the time of signing the contract, where the funds actually flow, and whether there are acts of absconding or squandering of assets afterward. If uncertain, you can first entrust a lawyer to evaluate the evidence and then decide whether to report the case to the police or file a lawsuit. The procedural costs of the two approaches differ significantly.

Q2: What materials do I need to prepare when reporting a case?

It is recommended to prepare five categories of materials: 1. A report of the case, detailing the transaction process, payment status, the other party's breach of trust behavior, and the suspected criminal charges in chronological order. 2. Basic materials, including the reporter's identity proof and the other party's business registration information. 3. Contract documents, including agreements, supplementary agreements, and guarantee documents. 4. Financial evidence, including transfer records, receipts, and invoices. 5. Communication evidence, such as chat records, phone call recordings, emails, and clues about the other party's whereabouts and assets. The materials should be bound according to the index, with the originals kept and copies submitted. The clearer the evidence is organized, the smoother the case filing and review process will be, and the more efficient the subsequent investigation and evidence collection will be.

Q3: What should I do if the public security organ refuses to file a case after I report the crime?

There are three steps to seek relief: request the public security organ to issue a notice of refusal to initiate a case, stating the specific reasons and basis; if you disagree with the decision, apply for a review to the public security organ that made the decision; if the review upholds the decision, you can apply to the people's procuratorate at the same level for case filing supervision. The procuratorate will require the public security organ to explain the reasons for refusing to initiate a case. If the reasons are unfounded, the procuratorate will notify the public security organ to initiate a case. At the same time, you should evaluate whether to switch to civil litigation. Even if it does not constitute criminal fraud, it does not mean there are no rights in civil law. Contracts signed under fraud can be requested to be rescinded in accordance with Article 148 of the Civil Code of the People's Republic of China, and the return of property can be claimed in accordance with Article 157. The two approaches are not mutually exclusive.

Q4: If a case has already been reported to the police, can I also file a civil lawsuit at the same time?

It depends on the relationship between the cases. If the criminal and civil cases involve different legal relationships and liability subjects, they can be handled separately; if the same facts constitute both criminal and civil cases, the practice usually handles the criminal case first and the civil case later, and the civil case may be suspended pending the criminal outcome. If the court discovers a criminal suspect during the trial of an economic dispute, it may also rule to dismiss the suit and transfer the case to the public security organ in accordance with Article 11 of the "Regulations of the Supreme People's Court on Several Issues Concerning Economic Crimes Involved in Economic Disputes". During the waiting period for criminal proceedings, attention should be paid to the statute of limitations for civil litigation, and necessary measures should be taken to preserve rights. It is recommended to coordinate the pace of the two lines of investigation under the guidance of a lawyer to avoid mutual constraints of the procedures.

Q5: Can the money I was scammed for be recovered?

There is still a chance, but it depends on the speed of reporting the case and the control of the property. In criminal proceedings, the public security organ may, in accordance with the law, seal up, freeze, and seize the property involved in the case, and return it to the victim through the procedures of recovering and compensating for the losses after the case is concluded; if the suspect voluntarily returns the money and compensates for the losses, it can also be regarded as a mitigating circumstance. In civil litigation, after winning the case, the plaintiff can apply for forced execution of the defendant's property. The common prerequisite of the two paths are that the property has not been completely transferred. Therefore, the earlier the case is reported and the earlier the property is preserved, the higher the probability of recovery. If the other party has squandered or transferred all the funds, even if the judgment supports the plaintiff, the execution may still fail. Don't miss the window of disposal because of hesitation and waiting.

If you are currently facing similar problems, it is recommended that you consult a professional lawyer as soon as possible with the relevant evidence materials, to avoid missing the statutory time limits. →Business and commercial legal services·Attorney Xue Suhua·Beijing Henglu Law Firm