[Direct answer]To prevent contract risks for SMEs, there are five key steps: 1. Verifying the counterparty's qualifications and creditworthiness before signing the contract. 2. Specifying the subject matter, price, payment terms, acceptance, breach of contract liability, and dispute resolution clauses in a written contract during signing. 3. Retaining delivery receipts, reconciliation records, and payment vouchers during contract performance. 4. Setting payment term alerts and promptly collecting overdue payments for accounts receivable. 5. Immediately evaluating payment orders, asset preservation, and litigation paths upon dispute occurrence. According to Article 490 of the Civil Code of the People's Republic of China, a contract is established upon both parties signing, stamping, or affixing fingerprints. Article 509 requires full performance in accordance with the contract. Article 577 stipulates that the breaching party shall bear responsibilities such as continued performance and compensation for losses. Article 153, on the other hand, states that contracts violating mandatory provisions or public order and good customs are invalid. It is recommended to establish a full-process contract management system and, when necessary, entrust lawyers to draft and review standard contract templates.

1. Problem background and typical scenarios

SMEs have limited staffing resources, and contract management often relies on the operators' personal experience. The risks are concentrated in four scenarios: long-term cooperation with old clients, where verbal agreements replace written contracts, and delivery notes lack the other party's signature; copying online templates without key clauses or contradictory provisions; changing payment periods or consignees during performance without keeping written records; and only remembering to collect overdue payments months later, by which time the evidence has already been scattered everywhere. Once disputes arise, it's often difficult to even clarify the other party's accurate name or the authorized personnel involved, which significantly increases the cost of protecting rights. The essence of preventing contract risks is to make every transaction a process that can be verified and traced.

II. Key points of contention

  • Substantive and authorization risks: If the other party signs the contract under the name of a branch company, project department, or individual, and the signature and the name on the business license do not match, or the person handling the matter lacks authorization documents, it will be difficult to identify the responsible party when disputes arise, and suing the wrong target is equivalent to wasting time and effort on litigation.
  • Terms and conditions defects: The payment condition is written as "payment after acceptance", but there are no acceptance standards or deadlines. The penalty clause is either missing or too high, and the jurisdiction clause is unclear. During the performance of the contract, each party has a different interpretation, so the court can only determine the liability based on the most unfavorable interpretation.
  • Evidence of performance and risk of effectiveness: Changes without leaving a trace, failure to sign the reconciliation statement, and a broken chain of evidence; if the content of the contract violates mandatory provisions or goes against public order and good customs, even if both parties voluntarily sign it, it may be deemed invalid, and the claim for rights will lose its contractual basis.

III. Professional analysis by Henglue Lawyers

After handling a large number of contract dispute cases, Henglue Lawyers found that the most common points of failure for small and medium-sized enterprises are not errors in legal application, but rather issues with evidence and subject qualifications. In a typical case, Xu * signed a "Transfer of Profit Rights Agreement" with a certain cultural company to invest 300,000 yuan in a film, stipulating that the film should be released before December 31, 2022, otherwise all investment funds would be refunded. However, the film was delayed in release, and the company had already been deregistered. The court ruled that the agreement was legally valid, but the contractual purpose could not be achieved. At the time of signing, the company was a one-person limited liability company, and the sole shareholder failed to prove that the company's assets were independent of his personal assets, so he should bear joint and several liability for the debts. The shareholder who issued a liquidation commitment before the company's deregistration should also make repayments. Ultimately, the court ordered the joint repayment of 300,000 yuan in investment funds and compensation for attorney fees and other losses. This reminds enterprises: Before conducting transactions with any party, they must verify their qualifications and performance capabilities. Additionally, company deregistration does not automatically exempt shareholders from liability. In another case, a company sued its trading partner to recover more than 8.35 million yuan in debt, but the mortgagor claimed that the mortgage of his property was fraudulently obtained by a third party under the guise of "real estate mortgage cooperation". After review, the court determined that the case involved suspected economic crimes and ruled to dismiss the lawsuit and refer it to the public security organ. This shows that once a trading partner is involved in criminal risks, the civil recovery process will be disrupted, so due diligence must be conducted in advance. Effectiveness risks should also not be ignored: In a dispute handled by Henglue Lawyers, the parties signed an agreement involving "fake marriage" to handle household registration and paid 100,000 yuan. The court ruled that the agreement evaded household registration policies by means of false marriage and violated public order and good customs, and declared it invalid according to Article 153, Paragraph 2 of the Civil Code. The recipient was ordered to return the 100,000 yuan within a specified timeframe. Contracts with illegal content are not protected even if they are signed voluntarily.

IV. Practical suggestions and legal basis

At the legal basis level: Articles 490 and 502 of the Civil Code (effective January 1, 2021) clarify the basic rules for the formation and effectiveness of contracts; Articles 509 and 577 establish the rules for full performance and breach of contract liability; Articles 153, 157 stipulate the circumstances of contract invalidity and the rules for property restitution and compensation after invalidation; Article 188 stipulates that the statute of limitations for requesting protection of civil rights from the people's court is three years, and Article 195 stipulates that circumstances such as requesting performance and filing lawsuits can interrupt the statute of limitations and restart the calculation. At the practical advice level: Establish a classified contract template library, manage procurement, sales, and services separately, and invite lawyers to review them regularly; verify the business license, legal representative identity, and power of attorney during contract signing; ensure that all contract amendments are in writing and signed with proof of receipt; issue early warnings seven days before the expiration of the payment period; send written payment reminders to interrupt the statute of limitations before assessing the order of payment orders, preservation measures, and litigation; and integrate accounts receivable collection and enforcement efforts.Creditor-debtor relations and enforcement case servicesAdvance.

5. Henglue Law Firm's Advice

The core of contract risk management is to put rules in place beforehand. Most disputes already lay hidden during the contract signing process: failing to verify the identity of the contracting parties, copying contract terms verbatim, and failing to leave records of contract amendments. It is recommended that enterprises conduct an annual contract review to sort out existing contracts and accounts receivable, and adjust the settlement methods for high-risk clients or require them to provide guarantees. In the aforementioned case of an invalid agreement to evade household registration policies through "fake marriage", the court, while confirming the invalidity of the contract, ordered the direct payee to return 100,000 yuan within a specified period, confirming that contracts with illegal content are not protected from the outset. 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. If you are currently facing similar disputes, it is recommended that you consult with us as soon as possible, bringing along the contract and transaction receipts. You can contact us via the following methods:Legal services for corporate commercial and contract disputesDevelop prevention and response plans.

Q1: If the only contractual evidence we have are WeChat chat records and fax documents, what should we do if a dispute arises?

WeChat chat records are a form of legal evidence. If they can prove the establishment and performance of a contract, they can be used as the basis for adjudication. The key is to identify the other party's identity, confirm that the user of the chat account is the other party's employee or legal representative, and preserve the original carrier. Faxes have weaker legal effect and should be combined with invoices, delivery receipts, and payment records to form a complete chain of evidence. For daily transactions, it is recommended to repeat and confirm key items such as quantity, unit price, and payment terms in the chat, and regularly export and back up the records. When suing, you can apply for notarization or have the court verify the original records in court to avoid the authenticity of the evidence being questioned solely due to screenshots.

Q2: The other company has been deregistered. Can I still recover the payment?

Depending on the cancellation procedures. If the company is cancelled without going through legal liquidation, and the shareholders promise in the registration authority that the creditor's rights and debts have been settled, the creditors may require the shareholders to bear the responsibility for the company's debts; if the shareholders of a one-person company cannot prove that the company's property is independent of their personal property, they shall bear joint and several liability for the company's debts according to law; if the shareholders withdraw their investment or fail to pay the full amount of the investment, they may also bear responsibility within the corresponding scope. Therefore, the cancellation of the company does not mean the elimination of the debt. It is necessary to retrieve the cancellation files and liquidation commitment documents, and transfer the responsibility subject from the company to the shareholders for continued recovery of the debt.

Q3: If the contract does not stipulate a breach of contract penalty, can I claim compensation?

Yes. The absence of a penalty clause does not affect the liability for breach of contract: according to Articles 577 and 584 of the Civil Code, if the other party's breach of contract causes losses, the party can claim compensation for the actual losses and the benefits that could have been obtained after the contract was performed, but the amount shall not exceed the scope that the breaching party could have foreseen or should have foreseen at the time of concluding the contract. Interest on the use of funds, losses caused by the suspension of work, and reasonable expenses for protecting rights can all be included in the claim. In the future, it is recommended to clearly specify the standard of the penalty or the method of calculating losses in the contract, which can not only simplify the subsequent evidence collection, but also form an effective deterrent to the performance of the contract.

Q4: Are contracts signed with the department's stamp or the person in charge's signature valid?

It depends on the specific circumstances. If the other party's official seal and the name on the business license are consistent, and the person handling the matter has authorization or constitutes apparent agency, the contract is valid; if only the department seal is stamped and there are no traces of authorization, the validity of the contract is disputable. However, if the other party actually receives the goods, makes payments, or partially performs the contract, it is generally still treated as valid. Prevention points: When signing the contract, check whether the official seal and the name of the main body are consistent, request the legal representative's identity certificate and power of attorney, and verify the position of the person handling the matter through public channels; for large-value contracts, it is recommended to require the official seal to be stamped and the legal representative or a clearly authorized person to sign and confirm it.

Q5: What is the statute of limitations for contract disputes, and how can it be interrupted?

Generally, the statute of limitations is three years, calculated from the date when the right holder knows or should have known that the rights have been infringed and the obligee's identity. It is more common to calculate it from the expiration of the agreed payment period. Each written collection notice, the other party's promise to repay, the initiation of litigation or the application for arbitration, all have the effect of interrupting the statute of limitations, and the statute of limitations shall be restarted from the date of interruption. Practical suggestions: Send a written collection notice immediately after the expiration of the payment period and keep the receipt or mailing certificate; for clients who have lost contact, you can interrupt the statute of limitations by suing or applying for a payment order; for old accounts that have not been dealt with for more than two years, first let a lawyer assess the statute of limitations status and then decide on the solution to avoid encountering a statute of limitations defense after suing.

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