Breach of Contract Remedies in China

When a Chinese counterparty breaches your contract, what legal remedies are available? Understanding your options under Chinese law is crucial for protecting your business interests.

Types of Contract Breach

Anticipatory Breach

When a party indicates they won't perform before the due date:

• Express refusal to perform
• Actions making performance impossible
• Right to suspend your own performance
• Can demand adequate assurance

Actual Breach

• Non-performance
• Delayed performance
• Defective performance
• Partial performance

Available Remedies

1. Continued Performance (Specific Performance)

Forcing the breaching party to fulfill their obligations:

• Available for most contract types
• Court can order specific performance
• Not available if performance is impossible
• May be denied if cost is disproportionate

2. Damages

Monetary compensation for losses:

• Direct losses: Actual damages suffered
• Consequential losses: Foreseeable indirect damages
• Lost profits: Must be proven with reasonable certainty

3. Liquidated Damages

Pre-agreed damages in the contract:

• Enforceable if reasonable
• Courts may adjust if grossly disproportionate
• Generally capped at 30% of actual loss
• Can be increased if actual loss exceeds agreed amount

4. Contract Termination

Right to end the contract when:

• Fundamental breach occurs
• Performance becomes impossible
• Breach defeats contract purpose
• After reasonable cure period expires

5. Deposit Forfeiture

If a deposit was paid:

• Breaching party forfeits deposit
• Or must return double the deposit
• Deposit limited to 20% of contract value
• Cannot claim both deposit and liquidated damages

Proving Your Damages

Evidence requirements:

• Original contract and amendments
• Communication records showing breach
• Financial records of losses
• Expert reports if needed
• Mitigation efforts documentation

Duty to Mitigate

The non-breaching party must:

• Take reasonable steps to reduce losses
• Cannot recover avoidable damages
• Document mitigation efforts
• Mitigation costs are recoverable

Limitation Periods

• General contract claims: 3 years
• International sale of goods: 4 years
• Starts from when breach is known or should be known
• Maximum 20 years from breach date

Enforcement Challenges

• Locating defendant's assets
• Asset concealment by debtors
• Local protectionism in some areas
• Execution delays

Practical Tips

• Include clear breach definitions in contracts
• Specify reasonable liquidated damages
• Require performance bonds or guarantees
• Choose favorable dispute resolution venue
• Act quickly when breach occurs
• Preserve all evidence