[Direct answer]In the Beijing area, the key to distinguishing between the two is whether the perpetrator has the intention of illegal possession and whether he/she fraudulently obtains property by fabricating facts under the guise of signing contracts. Contract disputes are civil disputes, and the breaching party shall bear responsibilities such as continuing to perform the contract and compensating for losses; contract fraud, as defined in Article 224 of the Criminal Law of the People's Republic of China, refers to the act of fraudulently obtaining the other party's property during the signing and performance of the contract with the purpose of illegal possession, and the amount involved is generally more than 20,000 yuan in judicial practice. When making a judgment, factors such as whether the contracting parties are genuine, whether they have the ability to perform the contract, the whereabouts of the funds, and whether they have absconded are usually comprehensively considered. If a civil case is identified as having suspected economic crimes, the court may rule to dismiss the lawsuit and refer it to the public security organ. It is recommended to fix the contract, payment receipts, and communication records as soon as possible, and then let a professional lawyer determine whether to pursue civil or criminal litigation. For related ideas, please refer to the following materials:Legal services for corporate commercial and contract disputes.

I. Problem Background and Typical Scenarios

In business transactions, issues such as unpaid debts, non-conforming goods, and unfinished projects often exhibit both "breach of contract" and "fraud" characteristics, leaving parties often torn between reporting the case to the police and filing a lawsuit. Typical scenarios include: the other party disappearing after receiving the advance payment; signing contracts with fraudulent projects or entities and quickly transferring the funds; repeatedly collecting payments from multiple transaction parties with the same entity; and misidentifying normal performance difficulties as fraud. When handling similar cases in Beijing, public security authorities and courts are more cautious in distinguishing between "economic disputes" and "economic crimes," and cases may be rejected when reported to the police or dismissed when sued. In criminal proceedings, the following factors should be taken into account:Criminal defense and criminal case filing servicesEvaluation.

II. Key points of contention

The focus of the dispute lies in three aspects. Firstly, subjective intent: fraud is committed with the aim of illegal possession, and the perpetrators often lack the willingness or ability to fulfill their obligations at the time of signing the contract. Parties to contract disputes usually have genuine transactional intentions, but encounter obstacles in performance. Secondly, objective actions: whether the perpetrators fabricate entities, use others' names, forge guarantees, or deceive the other party into continuing to make payments by first fulfilling small-amount contracts. Thirdly, amount and consequences: if the case meets the prosecution standards and causes significant losses, it may proceed to criminal proceedings; if it fails to meet the standards or lacks sufficient evidence, it will still be handled as a civil dispute. In practice, if a civil or commercial case must rely on the outcome of a criminal case for adjudication and the criminal case remains unresolved, the court may rule to suspend the litigation; if there are suspected economic crimes, the lawsuit may be dismissed and the case referred to the public security organ. For cases involving debt recovery, the process can be seamlessly connected.Creditor-debtor relations and enforcement case services.

III. Professional analysis by Henglue Law Firm

恒略律师代理的一起买卖合同纠纷颇具代表性：A公司与B公司于2016年签订《图书供销合同》，账期六个月；2022年6月23日双方再次签约，账期三个月，A公司另与刘某签订《最高额抵押合同》，由刘某以宣武区（现西城区）1102号不动产提供最高额抵押担保，担保数额1400万元。A公司持续供货，B公司未按约付款，截至2022年9月30日逾期货款8352470.85元。诉讼中刘某抗辩其签字系B公司与C公司串通诈骗所致，并提交材料证明案外人C公司诈骗案已由公安机关立案，受害人二十余人、涉案金额2亿元、房产五十余套。恒略律师团队梳理关键协议与受害人线索，指出本案并非单纯违约，抵押合同效力有赖刑事侦查查明，主张依《最高人民法院关于审理经济纠纷案件中涉及经济犯罪嫌疑若干问题的规定》（法释〔1998〕7号）第十一条裁定驳回起诉、移送公安机关。法院采纳该意见，裁定驳回起诉并将材料移送公安。

The other case is a typical evaluation of civil effectiveness: Zhang Na and Wang Xiaoyong signed the "Beijing Hukou Marriage and Registration Agreement" with Zhao Chenyang to help their child obtain a Beijing hukou, agreeing to use a fake marriage to register the hukou and pay 100,000 yuan. However, the registration failed due to policy restrictions. The two entrusted lawyer Xue Suhua to sue, requesting to confirm the invalidity of the agreement and return the payment. The lawyer fixed the agreement, transfer records, divorce certificates, and phone recordings to form a complete chain of evidence, citing Article 153, Paragraph 1 of the Civil Code of the People's Republic of China, arguing that the agreement was invalid from the beginning because it evaded the household registration policy and violated public order and good customs. The court adopted this opinion, confirming the invalidity of the agreement and ordering the direct recipient to return the 100,000 yuan within a specified period. Comparing the two cases, it can be seen that whether there is an illegal possession motive and whether the property is fraudulently obtained are the dividing lines between civil disputes and fraud crimes. This case was handled by Beijing Henglue Law Firm.Xue SuhuaThe attorney (practice license number: 11101201211769926, subject to the document issued by the judicial administrative organ) acts as the agent.

IV. Practical suggestions and legal basis

The legal basis is Article 224 (Fraud by Contract) of the Criminal Law of the People's Republic of China (amended on December 26, 2020 and implemented on March 1, 2021); Article 148 (Revocability of Fraud) and Article 577 (Liability for Breach of Contract) of the Civil Code of the People's Republic of China (implemented on January 1, 2021); Article 11 of the "Provisions of the Supreme People's Court on Several Issues Concerning Economic Crimes Suspected in the Trials of Economic Disputes" (Interpretation of the Law No. 7 of 1998); and the provisions on large-scale contract fraud in the Standards for Filing and Prosecuting Criminal Cases. Practical suggestions: First, verify the other party's subject qualifications, business scope, and litigation and enforcement information before signing a contract; Second, conduct all transactions through official accounts and retain contracts and communication records to avoid large-scale cash transactions; Third, immediately send written reminders and report the case to the police if you discover that the subject is fraudulent, the funds are transferred abnormally, or the other party has gone missing; Fourth, if the police refuse to file a case, you can apply for a review or request the procuratorial organ to supervise the filing of a case, while retaining the option of civil litigation; Fifth, parallel design can be adopted for criminal asset recovery and civil compensation. For major and complex transactions, compliance review can be conducted in conjunction with other relevant departments.Special services and other case servicesAdvance.

5. Henglu Law Firm's Reminder

The cost of misjudging the legal path is often significant: treating fraud as a breach of contract may result in losing the best opportunity for recovery due to criminal seizures taking precedence; reporting a breach of contract as fraud may lead to the case not being registered and delaying the statute of limitations. It is recommended to first conduct an objective legal qualification assessment and then decide whether to proceed with criminal or civil litigation first, or to advance both in parallel. At the same time, it should be noted that the three-year statute of limitations begins to run from the date when the right holder becomes aware of the damage to their rights. Demands for payment and partial payments can constitute an interruption of the statute of limitations. Evidence is the basis for qualification. Clauses such as "actual controller" and "guarantor" in the contract, and the ultimate destination of the fund flow, are often more convincing than verbal promises. If you need to clarify the legal path, it is recommended to make an appointment with a professional lawyer as soon as possible to discuss the case with them and obtain professional advice.

VI. Frequently Asked Questions

Q1: Can I be identified as a victim of contract fraud in this situation, and is it possible to recover the money?

Whether it constitutes contract fraud depends on whether there is evidence to prove that the other party intended to illegally possess the funds at the time of signing and performing the contract, and combined with whether the subject is fictitious, whether there is the ability to perform the contract, and the whereabouts of the funds, etc. No one should make any commitment about the outcome. If the case enters the criminal process, the victim can learn about the recovery of the stolen funds in the criminal litigation, and file a civil lawsuit separately for the uncompensated losses; if it is ultimately handled as a civil dispute, the victim can sue to claim the return of the payment, compensation for the losses, and apply for preservation of the evidence. The possibility of recovery mainly depends on whether the other party still has enforceable assets, so it is more beneficial to fix the evidence as soon as possible and take measures of preservation or report the case as soon as possible.

Q2: To distinguish between contract fraud and contract disputes, what evidence do I need to prepare?

It is recommended to collect evidence from four aspects: 1. Primary evidence, including business licenses, the identity information of employees, and the registration information of affiliated enterprises, to verify whether the entity is fictitious or using others' identities; 2. Transactional evidence, including contracts, orders, supplementary agreements, and settlement documents, to verify whether the agreed terms align with the actual performance; 3. Financial evidence, including transfer receipts, transaction records, and invoices, to track whether the funds were misused or quickly transferred elsewhere; 4. Communication evidence, including WeChat messages, emails, call recordings, and collection letters, to demonstrate the other party's promises and the process of losing contact with them. In addition, it is necessary to compile records of the other party's litigation, enforcement, and abnormal business operations to form a chain of evidence proving their lack of willingness or ability to fulfill their obligations.

Q3: How much does it cost to file a criminal report and to initiate a civil lawsuit, respectively?

Criminal reporting itself is free of charge. Submitting materials to the public security organ initiates the review process, and the main costs lie in the preparation of materials and assistance from lawyers. If the case is not registered, applying for a review or requesting the procuratorial organ to register the case for supervision does not incur any fees. For civil litigation, parties are required to pay the case acceptance fee in advance, which is calculated according to the amount of the litigation request in accordance with the "Measures for the Payment of Litigation Fees". The losing party bears the cost, or the cost is shared according to the proportion of winning and losing. Applying for property preservation also requires paying preservation fees and providing guarantees. Purchasing preservation liability insurance can reduce the occupation of funds. Lawyer's fees are negotiated between the parties and are usually charged on a per-case basis, a percentage of the subject matter, or on an hourly basis. The specific charges are subject to the contract of entrustment, and there is no unified national standard.

Q4: How long does it usually take for such cases to reach a conclusion?

The duration of the criminal process depends on the pace of the investigation: After accepting the report, the public security organ will generally make a decision on whether to initiate a case within the statutory review period. After the case is initiated, there are statutory periods for each stage of investigation, review and prosecution, and trial. Major and complex cases may last more than a year. In the civil process, the first-instance ordinary procedure is concluded within six months, and the summary procedure is concluded within three months. If the case must be based on the result of the criminal trial but the criminal case has not been concluded, the court may order a suspension of the litigation, and the resumption time depends on the progress of the criminal case. The recovery of the repayment also depends on the situation of the property investigation and control. It is recommended to apply for preservation simultaneously in the litigation to shorten the actual repayment cycle.

Q5: If I encounter suspected contract fraud, what should I do specifically?

It is recommended to proceed in four steps: First, immediately stop subsequent deliveries or payments to prevent losses from escalating, and formalize the communication between the two parties in writing; Second, comprehensively preserve the original documents such as contracts, transfer receipts, chat records, and audio recordings, and, if necessary, have them notarized or timestamped; Third, report the case to the public security organ at the other party's location or the place of contract performance, and submit written reports and evidence lists. If the case is not registered, you can apply for a review or request the procuratorial organ to register the case for supervision; Fourth, simultaneously evaluate the feasibility of civil litigation and property preservation to avoid missing the best window for seizing assets due to the lengthy criminal proceedings. Throughout the process, it is recommended to have professional lawyers coordinate both criminal and civil litigation to avoid conflicts between the two.

The above content is based on the judicial practices in the Beijing area. The facts of individual cases and the jurisdiction of the courts may differ, which may affect the conclusions. Welcome to consult Henglue Lawyers for specific situations.

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 Xue Suhua·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. If you encounter disputes, please consult a practicing lawyer in time.