[Direct answer]In the Beijing area, a second-hand housing sales contract cannot be invalidated arbitrarily. It can only be deemed invalid if it falls into one of the statutory circumstances. According to the Civil Code of the People's Republic of China (effective January 1, 2021), civil legal acts performed by persons with no capacity for civil conduct are invalid (Article 144); civil legal acts performed by the actor and the counterparty with a false intention are invalid (Article 146), which is commonly referred to as collusion and fraudulent representation; civil legal acts that violate the mandatory provisions of laws and administrative regulations or that are contrary to public order and good customs are invalid (Article 153); and civil legal acts that are performed by the actor and the counterparty in bad faith and harm the legitimate rights and interests of others are invalid (Article 154). After a contract is confirmed to be invalid, the property obtained through the contract shall be returned. If it cannot be returned or there is no need to return it, compensation in the form of a discounted price shall be made. The party at fault shall compensate the other party for the losses (Article 157). If a party claims invalidation solely on the grounds of rising housing prices or changing their mind, the court will not support such claims.

I. Problem Background and Typical Scenarios

The disputes over the contractual validity in second-hand housing transactions are mainly concentrated in several scenarios: purchasing a house under someone else's name to obtain a bank loan or evade purchase restrictions, signing "yin-yang contracts" to declare a low price to avoid taxes, a spouse unilaterally disposing of a house registered in both parties' names, fake transactions of using a house to offset debts, selling the same house to two different buyers, and the parties lacking the corresponding civil capacity. When the house price rises, the seller changes his mind, or the transaction is blocked, the parties often claim that the contract is invalid to evade the obligation to perform the contract. Therefore, accurately distinguishing between "invalid" and "revocable" is the first step in determining the direction of the case.

II. Key points of contention

First, the boundary between invalidity and revocability. Fraud, coercion, major misunderstanding, and manifestly unfairness belong to revocable circumstances, and the right of revocation must be exercised within the statutory period. If it is exceeded, the right will be lost; while invalidity means that the contract is legally binding from the outset. Second, the identification of mandatory provisions. Purchase restrictions and loan restrictions generally belong to administrative regulations and usually do not directly lead to the invalidity of the contract; however, if they violate mandatory provisions such as land, planning, and rural housing transfer, they may be deemed invalid. Third, the burden of proof. Those who claim collusion, fraudulent representations, or malicious collusion usually bear the burden of proof and need objective evidence such as capital flows, transaction prices, and communication records to support their claims. Fourth, the legal consequences of invalidity. In addition to returning property and compensating for damages, the scope of the liable party's compensation and the connection with the bona fide acquisition system will all have a significant impact on the ultimate gains and losses of the parties involved.

III. Professional analysis by Henglue Lawyers

A dispute over a commercial housing sales contract we handled can help us understand the threshold of "effectiveness": On April 30, 2021, the party involved, Zhang Quan, signed a "Beijing Municipal Commercial Housing Pre-sale Contract" with Beijing A Real Estate Development Co., Ltd. to purchase a house in a certain residential community, with a floor area of 99.41 square meters and a total price of 6,841,972 yuan. It was agreed that the house would be delivered by June 15, 2023. On the same day, a supplementary agreement was signed, stipulating that if the developer failed to deliver on time due to its own reasons, a 90-day grace period would be granted. After the grace period expired, the developer would pay a penalty of 1/10,000 of the total price per day of delay. However, the developer did not deliver the house until March 5, 2024, nearly nine months later than the agreed date. The developer argued that the pandemic, bad weather, government meetings, and other circumstances during the construction period constituted force majeure, and the grace period could be cumulative, so it should not bear breach of contract liability. After reviewing the contract and supplementary agreement, the attorney pointed out that: The contract was signed in 2021, when the pandemic had already become a normal situation. The developer had the ability to foresee it and it did not constitute force majeure. Bad weather, meetings, and exams did not necessarily lead to a full suspension of work and could not be used as excuses. The grace period should be strictly applied as agreed, and the developer should pay the breach of contract penalty after the grace period expired. The court adopted the attorney's opinion, determined that the contract and supplementary agreement were legal and valid, and ordered the developer to pay a breach of contract penalty of 118,366.12 yuan and bear the litigation costs. This case was handled by Beijing Henglu Law Firm.Tian JiayanThe lawyer (practice license number: 11101202111381309, subject to the document issued by the judicial administrative organ) acts as an agent. This case shows that the disputes over the validity of the contract and the disputes over the performance of the contract are two different paths: if one party performs the contract with defects, it does not mean that the contract is invalid. Only when the contract truly falls into the circumstances specified by law will it be invalid.

IV. Practical suggestions and legal basis

According to Articles 144, 146, 153 and 154 of the Civil Code of the People's Republic of China (effective January 1, 2021) regarding the invalidity of civil legal acts, and Article 157 regarding the return of property, compensation for damages and fault-based compensation after invalidation, it is recommended that: First, verify the seller's subject qualifications and capacity for action before signing the contract, and confirm that all co-owners of the shared property agree and retain written documents; Second, refuse to sign "yin-yang contracts", ensuring that the price terms are consistent with the actual transaction to avoid disputes over validity and prevent tax risks; Third, when purchasing a house under someone else's name, it is necessary to retain investment certificates, agency agreements and communication records. In the event of a dispute, the true legal relationship can be asserted; Fourth, before claiming invalidity, first conduct evidence inventory and path judgment. If it is a revocable cause, the right of revocation should be exercised within the statutory period in a timely manner, rather than forcefully claiming "invalidity" in litigation. The rules for handling housing purchase disputes and contract disputes are similar, and can be combined for reference.Contract disputesThe experience in handling litigation requests involves overall design of the lawsuit, while assessing the feasibility of three claims: return, discount, and compensation.

5. Henglue Law Firm's Reminder

In practice, the most common misunderstanding is mistaking "the other party's breach of contract" for "the contract being invalid". Breach of contract entails continued performance, termination, and liability for compensation; while invalidity means the contract is not binding from the outset, with both parties required to return what they have received. The transaction costs and losses from price fluctuations are often borne by the party at fault or shared by both parties, which may not necessarily be more advantageous to the claimant. Additionally, three points should be noted: First, the invalidity of some contract clauses does not necessarily lead to the invalidity of the entire contract, and the court will handle them separately; Second, if the claim for invalidity is rejected and the period for exercising the right of rescission has passed, the party may face a passive situation where they cannot terminate the contract or seek compensation; Third, if the house has been transferred and resold to a bona fide third party, the request for return may not be achievable, and compensation may become the only option. When encountering such disputes, it is recommended to conduct a feasibility assessment of the legal effect and consequences before filing a lawsuit.The sale and purchase of second-hand houses and construction projectsThe workload of sorting out the facts of similar cases is quite large, and we can also take advantage of some tools to assist with this process.Specialised legal servicesComplete the organization of the evidence.Beijing Henglue Law FirmTip: It's more important to make sure you're on the right path than to keep working on the wrong one.

VI. Frequently Asked Questions

Q1: Is there a high chance of winning if we argue that the second-hand house contract is invalid?

Only in cases specified by law can one have a chance of winning, such as when a person with no civil capacity signs a contract, when both parties collude to make false declarations, when mandatory regulations are violated, or when there is malicious collusion. Claiming invalidity simply because the housing prices have risen or the seller has changed his mind will usually not be supported. In such cases, it is more appropriate to consider the liability for breach of contract or the path to terminate the contract.

Q2: What evidence do I need to prepare?

The purchase and sale contract and supplementary agreement, payment receipts and bank transaction records, online signing and filing materials, property rights and identity documents, co-owners' consent documents, tax payment receipts, and communication records via WeChat or text messages. For those claiming collusion, fraud, or malicious collusion, the most crucial evidence includes the closed-loop of funds and the actual transaction price compared with the actual use of the property.

Q3: How much does it cost to litigate such cases?

The litigation fees are calculated according to the amount of the disputed subject matter. For applying for property preservation, the applicant shall pay the preservation fees and provide a guarantee; for matters involving house value evaluation and loan verification, the applicant shall pay the evaluation fees; the attorney's fees shall be determined according to the provisions of the entrustment contract, which are usually related to the amount of the subject matter and the complexity of the case. It is recommended to first conduct a cost-benefit analysis.

Q4: How long does it take from filing a case to obtaining results?

The first-instance ordinary procedure usually lasts three to six months, and the time will be extended accordingly if it involves appraisal, expert evaluation, or the addition of new parties to the case; if either party appeals, the second-instance procedure generally takes another three to four months; and if enforcement is necessary after the judgment takes effect, the enforcement period will be calculated separately.

Q5: What should I do first?

First, determine whether the dispute involves invalidity, revocability, or simple breach of contract, then secure evidence of the intention to perform and the flow of funds. At the same time, verify the current status of the property and its registration status, assess whether the return or compensation can be implemented, and finally determine the litigation claims to avoid wasting the trial time due to an incorrect choice of claims.

This article is written based on the common judicial interpretations in the Beijing area. If the case occurs in other regions, it is recommended to consult local lawyers to verify the regional differences.

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 limit. →Legal services for real estate transactions·Attorney Tian Jiaoyan·Beijing Henglu Law Firm

Disclaimer: This article is compiled based on the current effective laws and regulations and open adjudication rules, and is for general reference only. It does not constitute a formal legal opinion on specific cases. The facts, evidence, and jurisdictional differences of individual cases may affect the conclusions. In case of disputes, please consult a practicing lawyer in time.