[Direct answer]In the Beijing area, a fundamental breach of contract refers to a breach of contract that renders the purpose of the contract unattainable. The claim path of the party in compliance with the contract includes: rescinding the contract and demanding compensation for losses, or demanding continued performance and holding the breaching party accountable for breach of contract; the scope of compensation includes actual losses and the benefits that could have been obtained after the contract was performed (anticipated benefits), limited to the losses that the breaching party foresaw or should have foreseen when entering into the contract; if a breach of contract penalty has been agreed upon, the party may claim the breach of contract penalty; if the breach of contract penalty is excessively high compared to the actual losses, the party may request a reduction; if the breach of contract penalty is lower than the actual losses, the party may request an increase; if the contract stipulates that the breaching party shall bear legal fees and other costs of safeguarding rights, the party may claim these costs together.

I. Problem Background and Typical Scenarios

High-frequency scenarios of fundamental breach of contract: The supplier delivers goods of seriously substandard quality, and the purchaser refuses to accept them and claims compensation on the grounds of "failure to achieve the contractual purpose"; the service outsourcer's late delivery results in the client missing the online launch window; the payer's long-term arrears cause the recipient's business chain to break down. Three issues that enterprises are struggling with: whether this breach of contract can be considered "fundamental"; whether it is possible to both terminate the contract and claim full compensation; and who will bear the legal fees and arbitration fees.

II. Key points of dispute

First, the determination of the scope of fundamental breach of contract. Not all breaches of contract can be considered fundamental: it depends on the extent of the breach's impact on the contractual purpose. Quality defects that can be repaired usually do not constitute fundamental breaches, while those that render the goods completely unusable or cause the transaction value to be lost due to delay do constitute fundamental breaches. Second, the certainty of the scope of claims. The claim for expected profits must be supported by evidence and be quantifiable. A general claim of "anticipated profits of several million" without accounting records will be difficult to gain support. Third, the relationship between the breach of contract penalty and the actual losses. There is no need to prove the actual losses item by item for the breach of contract penalty claim, but if the amount deviates too much from the actual losses, it will be adjusted. Legal fees are subject to clear contractual provisions, and requests without such provisions are usually unsuccessful.

III. Professional analysis by Henglue Lawyers

This case is handled by Beijing Henglu Law FirmXiong BinrongThe lawyer (practice license number: 11101202211410897, subject to the document issued by the judicial administrative authority) acted as the agent. The arbitration case of a commissioned creative contract fully demonstrated the example of counterattacking the allegation of fundamental breach of contract and the claimant's successful recovery of all damages. Shanghai A Technology Company and Shenzhen B Network Company signed the "Project Outsourcing Agreement", which stipulated the production of virtual IP material upgrade projects with a cost of 583,000 yuan. After the work was finalized and accepted in July 2022, the other party defaulted on the remaining 50% of the contract payment, instead claiming that the applicant had breached the contract due to "delays in delivery and substandard quality". The attorney seized three key points: the written record of acceptance directly confirmed the quality compliance, rendering the defense of "substandard quality" groundless; the other party's modification scope during the production process reached 30%, which resulted in the applicant's exemption from responsibility for the delay according to Article 29 of the contract, placing the responsibility for "delays in delivery" on the other party; and the claim was tiered - confirming the termination of the agreement, payment of 583,000 yuan in contract payment, liquidated damages of 116,600 yuan, and attorney fees and arbitration fees. The arbitration tribunal adopted the attorney's main arguments and ruled that the applicant should pay 583,000 yuan in contract payment and compensate all attorney fees. The operational procedures provided in the case: before claiming or defending against "fundamental breach of contract", first conduct an assessment of the severity of the failed purpose (whether the breach can be repaired, how long it will take, and whether there is still a possibility of achieving the contractual purpose); tiered listing of claims - refund of paid amounts or payment of contract payment, liquidated damages or actual losses, foreseeable benefits (with accounting and forecasting basis), and litigation costs (with contractual provisions attached if applicable); simultaneous issuance of termination notices and claim requests, with termination of the contract not precluding claims, and the two matters not conflicting with each other. In Beijing's commercial arbitration, support for attorney fees is subject to clear contract provisions. Including "the defaulting party shall bear the reasonable expenses (including attorney fees) incurred by the performing party in realizing the creditor's rights" in the contract at the time of signing is the most cost-effective risk control measure. 律师（执业证号：11101202211410897，以司法行政机关核发证件为准）代理。一起委托创作合同仲裁案完整展示了反制根本违约指控、守约方全面胜诉的典型案例。上海A科技公司与深圳B网络公司签订《项目外包协议》，约定制作虚拟IP素材升级项目，费用58.3万元；作品定版并于2022年7月验收通过后，对方拖欠剩余50%合同款，反而以"延迟交付、质量不达标"主张申请人构成根本违约、拒付全部费用。代理律师抓住三个要害：验收通过的书面记录直接锁死质量达标的事实，"质量不达标"的抗辩失去依据；制作过程中对方修改幅度达30%，按合同2.9条约定由此产生的延期申请人无责，"延迟交付"责任在对方自身；索赔请求分层列出——确认协议解除、支付583,000元合同款、116,600元违约金、律师费与仲裁费，仲裁庭采纳律师主要意见，裁决支付583,000元合同款并补偿全部律师费。典型案例给出的操作规程：主张或防御"根本违约"前，先做目的落空强度评估（违约能否修复、修复要多久、合同目的还有没有实现可能）；索赔清单分层列明——已付款退还或合同款支付、违约金或实际损失、可得利益（有账目与预测依据）、维权成本（合同有约定的附上条款）；解除通知与索赔请求同步提出，解除合同不妨碍索赔，两件事互不冲突。北京地区商事仲裁对律师费的支持以合同明确约定为前提，签约时把"违约方承担守约方为实现债权支出的合理费用（含律师费）"写入合同，是成本最低的一项风控。

IV. Practical suggestions and legal basis

The first step is qualitative assessment: Check whether the breach of contract has failed to achieve its intended purpose, and distinguish between fundamental breaches of contract and general breaches of contract. The second step is evidence preservation: Archive the acceptance records, reminder letters, and written evidence of the other party's breach of contract. The third step is request stratification: List the contract amount, liquidated damages, recoverable benefits, and litigation costs item by item and provide supporting evidence. The fourth step is procedural selection: Initiate litigation or arbitration according to the contract dispute resolution clauses, and simultaneously assert claims for rescission and compensation. Main legal basis: Article 563 (statutory rescission), Article 577 (liability for breach of contract), Article 584 (scope of compensation and recoverable benefits), and Article 585 (adjustment of liquidated damages) of the Civil Code of the People's Republic of China (effective as of 2021); specific application shall be subject to the currently effective laws and regulations.

5. Henglu Law Firm's Reminder

The claim for fundamental breach of contract relies on a combination of "layered evidence + layered requests": qualitative evidence based on the failure of the purpose, monetary claims based on accounting records and contractual provisions, and cost claims based on the contract's attorney's fee provisions. If the other party counterattacks by claiming that the quality does not meet standards, the acceptance records serve as the first line of defense. Claims involving fundamental breach of contract can be pursued through legal means.Business and contract disputes in enterprisesYou can refer to the overall solution for services, which involves dealing with payment arrears and the enforcement of successful judgmentsCreditor's rights and debts, and enforcement casesFor the review of contracts involving content production and technical outsourcing, the two departments can cooperate with each otherIntellectual property protection and corporate lawThis section involves strategies for dispute resolution and the establishment of an evidence system, which can be used as a referenceSpecialised legal services板块。

VI. Frequently Asked Questions

Q1: Can I terminate the contract if the other party breaches the contract?

No. Only when there is a fundamental breach of contract (resulting in the failure to achieve the purpose of the contract) or when the circumstances for contractual rescission are met, can the contract be legally rescinded. Generally, for breaches of contract due to defects, the other party can only demand continued performance or compensation.

Q2: Can the breach of contract penalty and compensation for losses be claimed simultaneously?

In principle, the parties may choose between a penalty clause and the principle of compensation for losses. If the penalty is lower than the actual losses, the party may request an increase to take into account the compensatory function.

Q3: How to provide evidence of the expected benefits?

It's hard to gain support for a general estimate based on historical transaction data, the profit levels of the same industry, and signed contracts, as these cannot prove the certainty and calculation basis of the estimate.

Q4: Can the attorney's fees be charged to the other party?

On the premise that the contract stipulates it clearly, there are special rules for some statutory circumstances (such as intellectual property infringement); requests without an agreement are usually difficult to gain support.

Q5: Can I still demand continued performance after terminating the contract?

The termination and the continuation of performance are mutually exclusive. After termination, the party can only claim compensation, breach of contract damages, and liquidation; if the party wants to continue the performance, they should not terminate the contract.

The above questions and answers are mainly based on the judicial practice in Beijing. There may be differences in the adjudication standards in other regions. It is recommended to consult a professional lawyer based on the specific circumstances of the case.

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·Beijing Henglu Law Firm

Disclaimer: This article is compiled based on the current effective laws and regulations and public 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.