[Direct answer]When signing a contract, it is most important to guard against four types of risks: false representations about the contracting parties and their ability to perform the contract; clauses that violate mandatory regulations or public order and good customs and are therefore invalid; unclear provisions of key rights and obligations; and difficulties in holding the other party accountable for breach of contract or involvement in crimes. Before signing the contract, you should verify the other party's qualifications and creditworthiness, and clearly specify the subject matter, price, performance period, and breach of contract liability. You can first verify the other party's qualifications and creditworthiness through the following methods:Legal services for corporate commercial and contract disputesReview the text, or visitBeijing Henglue Law FirmObtain professional support. Proactive review of risks is far more effective than taking passive measures to protect rights after a dispute arises.

I. Problem Background and Typical Scenarios

Contracts are the cornerstone of commercial activities, but in practice, disputes arising from hasty contract signing are on the rise. Typical scenarios include: signing agreements with names and contents that do not match to evade policies, and later claiming the agreements are invalid; discovering that the other party may be involved in fraud during the performance of sales contracts, resulting in both money and goods being lost; agreeing on profit returns in investment contracts but failing to set refund conditions, making it difficult to recover funds if the goals are not achieved; and the other party refusing to refund deposits and service fees after terminating online service contracts. These situations often stem from failing to review the validity of contract terms and the other party's creditworthiness during the contract signing process, leading to a sharp increase in the cost of protecting rights and interests.

II. Key points of contention

  • Determination of validity: Whether the contract is invalid due to violating mandatory legal provisions or public order and good customs directly determines whether it is possible to claim restitution and compensation.
  • Performance and breach of contract: Whether it is possible to prove a fundamental breach of contract and terminate the contract when the other party fails to perform the contract depends on the design of the terms and the preservation of evidence.
  • Intersection of criminal and civil law: If criminal suspects are found during the performance of a contract, the civil litigation process may be turned into a dismissal of the lawsuit and the case will be transferred to the public security organ, which will affect the way of holding the parties accountable.

III. Professional analysis by Henglue Lawyers

The contract cases handled by Henglue Lawyers show that many losses could have been avoided at the contract signing stage. For example, there was a case where a party signed an agreement with a false name for their child's household registration and paid over 100,000 yuan, which was deemed invalid due to violating public order and good customs, and the full amount was recovered through litigation. There was also a case where a supplier was owed over 8 million yuan in unpaid debts. During the trial, it was found that the counterparty might be involved in a series of frauds, and the court determined that there were suspicions of economic crimes. The court ruled to dismiss the lawsuit and referred the case to the public security organ. There was also a case where the investor recovered 300,000 yuan from a film and television investment contract that stipulated a refund if the release deadline was not met. These cases collectively demonstrate that reviewing the validity of contract terms and the counterparty's creditworthiness before signing is the most cost-effective firewall; seeking remedies after the fact not only takes time, but may also be subject to legal restrictions due to criminal involvement. Criminal clues can be combined with other evidence to investigate further.Special services and legal services for other casesHandle it.

IV. Practical suggestions and legal basis

In terms of legal basis, Article 509 of the Civil Code of the People's Republic of China (effective January 1, 2021) requires parties to fully perform their obligations and abide by the principle of good faith; Article 577 stipulates that non-performance shall entail breach of contract liability; Articles 153 and 157 regulate the invalidity of contracts and its consequences; Articles 127 and 157 of the Civil Procedure Law of the People's Republic of China (amended on September 1, 2023) involve the application of dismissal of suits; Article 11 of the Supreme People's Court's "Provisions on Several Issues Concerning Suspected Economic Crimes Involved in Economic Disputes" (amended on December 23, 2020) stipulates that if it is determined through trial that the case does not involve economic disputes but suspected economic crimes, the court shall rule to dismiss the suit and transfer the case to the public security organ or the procuratorate. Practical suggestions: Verify the subject's qualifications and credit before signing the contract; specify the subject matter, price, time limit, breach of contract and jurisdiction in the contract; set up guarantee and acceptance nodes for large-scale transactions; and promptly fix evidence and consult a lawyer if the other party loses contact or there are clues of criminal involvement.

5. Henglu Law Firm's Advice

The cost of contractual risks is often several times higher than the cost of review. Spending a small amount of time verifying the subject, clarifying the terms, and setting up remedies for breach of contract before signing a contract can take the initiative when disputes arise; for contracts that violate public order and good customs or involve criminal activities, it is necessary to stop them decisively. It is recommended that enterprises establish a hierarchical review mechanism for contracts, and major transactions must be reviewed by lawyers. This case was handled by Beijing Henglu Law Firm.Xue SuhuaAttorney (Practice Certificate No.: 11101201211769926, subject to the certificate issued by the judicial administrative organ) acting on behalf of the client. If you are about to sign an important contract, it is recommended that you submit the text for review as soon as possible to avoid potential risks before signing the contract.

VI. Frequently Asked Questions

Q1: What legal risks are most easily overlooked when signing a contract?

There are four types of risks that are most easily overlooked: first, the principal risk, which refers to failing to verify the other party's business license, authorization, and performance capacity, and signing contracts with unqualified or deregistered entities; second, the effectiveness risk, where clauses violate mandatory provisions of laws and regulations or go against public order and good customs and are therefore invalid, such as agreements that evade policies through false transactions; third, the content risk, which includes unclear subject matters, vague payment milestones, and a lack of default liability, making it difficult to provide evidence in the event of disputes; fourth, the enforcement risk, where there are no provisions on jurisdiction, guarantees, or preservation measures, making it difficult to enforce judgments after winning the case. Conducting a systematic review before signing contracts can greatly reduce the probability of the above risks. It is recommended to entrust a professional to review the relevant contracts.Legal services for corporate commercial and contract disputesTeam.

Q2: Are the provisions in the contract that are illegal or contrary to public order and good customs valid?

Invalid. According to Article 153 of the Civil Code of the People's Republic of China (effective January 1, 2021), a civil legal act that violates the mandatory provisions of laws and administrative regulations is invalid, and a civil legal act that violates public order and good customs is also invalid; Article 157 further stipulates that after the contract is invalidated, the property obtained from the contract shall be returned, and the party at fault shall also compensate the other party for the losses. For example, an agreement to evade household registration policies through a false marriage is deemed invalid because it violates public order and good customs, and the direct recipient must return the funds already received. When signing a contract, do not harbor the misconception that "any agreement made voluntarily is valid". Even if the illegal clauses are performed, they may still be deemed invalid and subject to legal review.

Q3: What should I do if the other party signs the contract but fails to fulfill their obligations?

First, distinguish between fundamental breach of contract and general defects: If the other party refuses to perform its main obligations, resulting in the failure of the contractual purpose, the contract may be rescinded and compensation may be requested in accordance with Articles 563 and 566 of the Civil Code; if there is only a partial delay, the party may demand continued performance or corresponding damages. The recommended action sequence is: preserving the contract, communication records, and performance certificates; issuing a written notice and setting a reasonable time limit; assessing whether the conditions for rescission exist; and, if necessary, initiating litigation and applying for property preservation. Refund documents and statements of account signed by the other party are legally binding, and defenses based on "no signature or approval from superiors" usually cannot negate their external validity.

Q4: What should I do if I find that the contract might involve fraud?

If you find that the other party may be involved in contract fraud, you should stop making further payments and gather evidence: save the contract, transfer receipts, the other party's basic information and communication records, sort out the flow of funds and similar victim situations; explain the suspected crime to the court and strive to have the lawsuit dismissed and the materials transferred to the public security organ; if the case must be based on the criminal results, you can file a lawsuit after the criminal investigation or claim rights according to the compensation procedures. It should be noted that once economic crime suspicion is identified in civil litigation, the lawsuit will usually be dismissed rather than proceed with substantive litigation. Parties should prepare for both criminal reporting and civil recovery simultaneously. For cases involving collection of arrears, you can refer to the relevant provisions.Legal services for creditor-debtor relations and enforcement cases.

Q5: Can I get back the money I've already paid after the contract is terminated?

Generally, this is possible, but it requires proactive assertion. According to Article 566 of the Civil Code, after the contract is terminated, the party that has not yet performed its obligations shall cease to perform them, and the party that has already performed its obligations may request the restoration of the original state or take other remedial measures and have the right to claim compensation for losses. For example, in an investment contract with a refund condition, if the target is not achieved, the party that complies with the contract may terminate it and recover the investment funds and the losses caused by the occupation of funds; for an invalid contract, the property obtained from the contract shall be returned in accordance with Article 157. It should be noted that termination or invalidation does not automatically lead to restitution. It is necessary to assert this claim in the request and have a lawyer provide evidence of performance, payment, and breach of contract to avoid the embarrassment of "the other party agreeing to terminate the contract but refusing to refund".

The above content is based on the judicial practice in the Beijing area. The facts of individual cases and the jurisdiction of the court may affect the conclusions. Welcome to consult Henglue Lawyers about specific situations.

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