Recently, in the construction project contract dispute case between Plaintiff J Company and Defendant L Company, represented by Attorney Zhang Xiaoying of Landing Law Offices, the People’s Court of Nanxun District, Huzhou City, Zhejiang Province rendered a first-instance judgment in accordance with the law, which has now taken effect. The court fully upheld our core claims, ordering L Company to refund overpaid project funds of more than RMB 14.63 million, pay overdue liquidated damages of more than RMB 400,000, and bear the majority of litigation and appraisal costs. As a result, economic losses exceeding RMB 15 million were successfully recovered for the client, achieving highly significant legal results.

Case Background: Serious Breach by the Contractor Left the Client Trapped in a Production Deadlock

In January 2021, Plaintiff J Company and Defendant L Company entered into two General Contracting Agreements. The two contracts stipulated different fixed lump-sum prices—RMB 46.51 million and RMB 59.89 million respectively—while all other terms were identical. Under the contracts, L Company was to undertake the construction of J Company’s new plant project. When applying for the construction permit and bank financing, J Company submitted the General Contracting Agreement with a contract price of RMB 59.89 million, which was also reflected as such on the construction permit.

In February 2021, the parties executed a supplemental agreement confirming that the contract price should be RMB 46.51 million. However, during performance, L Company not only seriously delayed the construction schedule and caused quality issues, but also refused to cooperate with completion acceptance and refused to hand over completion documentation after the project was finished. This prevented J Company from completing completion filing and property registration, rendering the new plant unusable and severely affecting the company’s production operations and development plans. To protect its lawful rights and interests, J Company entrusted our firm to initiate litigation, while L Company filed a counterclaim.

Overcoming Difficulties: Precisely Resolving Three Core Disputes

This case involved a large amount in controversy and numerous complex legal and factual issues. Relying on her solid professional expertise, Attorney Zhang Xiaoying accurately identified and successfully resolved the following core issues:

1. Dispute over the Contractual Basis: Identifying the True Contract to Lay the Foundation for Victory

Two general contracting agreements existed in this case with a price difference of as much as RMB 13.38 million. Attorney Zhang Xiaoying demonstrated from three perspectives that the RMB 46.51 million General Contracting Agreement was the contract actually performed by the parties, while the RMB 59.89 million agreement was executed solely to facilitate J Company’s bank financing and did not reflect the true intention of both parties.

(1) By comprehensively reviewing correspondence during contract execution, contract terms, discussions on total pricing, payment vouchers during performance, exchanged letters, and the key Supplemental Agreement, a complete chain of evidence was established to prove that the RMB 46.51 million agreement was the contract actually performed.

(2) It was argued that the project did not fall within the construction projects required to be tendered under Article 3 of the Bidding Law, nor was it subject to public tendering, but rather concluded through mutual negotiation. Therefore, this case did not fall under the circumstances set forth in Article 2 of the Supreme People’s Court Interpretation (I) on Issues Concerning the Application of Law in the Trial of Construction Contract Disputes, and the RMB 46.51 million agreement actually performed should be adopted.

(3) Pursuant to the Notice of the General Office of the State Council on Launching Pilot Reforms of the Approval System for Construction Projects (Guo Ban Fa [2018] No. 33), contract filing review was abolished as of May 14, 2018. The RMB 59.89 million agreement was uploaded unilaterally by J Company solely for obtaining the construction permit, without requiring the defendant’s consent and without legal relevance to the parties’ actual performance. Uploading a contract for permit purposes does not equate to tendering, nor does it represent the winning bid price or actual performance amount.

All three arguments were accepted by the court, which confirmed that project settlement and related matters should be conducted in accordance with the RMB 46.51 million General Contracting Agreement.

2. Project Price Settlement: Comprehensive Review to Reduce Excessive Claims

In response to more than twenty large-value variation and compensation claims raised by L Company in its counterclaim, Attorney Zhang Xiaoying conducted a meticulous item-by-item review. By strictly applying contractual price adjustment formulas and refuting claims that violated the “lump-sum contract” principle, she successfully reduced numerous unreasonable claims and deducted quality penalties and amounts for unperformed work.

3. Breaking the Acceptance Deadlock through Contract Termination

Due to the defendant’s refusal to submit key completion documents, the acceptance process fell into a deadlock. To ultimately enable acceptance and production, and given the lengthy trial process, Attorney Zhang Xiaoying initially requested a judgment ordering the defendant to cooperate with completion filing and sought provisional enforcement. After multiple communications revealed the difficulty of this approach, and learning that termination of the contract was required before third-party handling in cases of non-cooperation, the litigation strategy was adjusted to seek termination of the general contracting agreement. The request was fully supported on three grounds: frustration of the plaintiff’s contractual purpose, the defendant’s lack of performance capability, and the fact that termination would serve both the plaintiff’s operational needs and government investment objectives. These arguments were accepted by the court, which ordered termination of the contract, fundamentally removing obstacles to production.

Through precise settlement calculations, the total project price was ultimately fixed at approximately RMB 55.04 million. Previously, J Company had paid L Company more than RMB 60.12 million in project funds, and its parent company had also lent RMB 9.55 million to L Company, bringing total payments to nearly RMB 69.67 million. The court confirmed that L Company had overcharged more than RMB 14.63 million, which must be refunded. Together with the dismissal of all counterclaims and the awarded liquidated damages, the total economic loss recovered for the client exceeded RMB 15 million. More importantly, the contract termination judgment broke the completion deadlock, enabling the client to proceed with acceptance filing, property registration, and production, thereby avoiding even greater indirect losses.

Case Conclusion

The comprehensive victory in this two-year-long case not only directly recovered more than RMB 15 million in economic losses, but also fundamentally resolved the client’s operational dilemma regarding plant commissioning, achieving unity between legal effectiveness and commercial value. Through precise evidence construction, deep insight into core legal disputes, and innovative litigation strategies aimed at fulfilling the client’s fundamental business objectives, Attorney Zhang Xiaoying transformed a seemingly difficult contract dispute into a comprehensive solution, fully demonstrating her outstanding professional competence and exceptional client value delivery in the field of construction engineering law.

Attorney Profile

Zhang Xiaoying
Senior Partner, Director of Capital Markets and Asset Management Department
Landing Law Offices

Practice Areas
Capital Markets (Listings, Equity Incentives, Bonds, Funds, etc.),
Mergers and Acquisitions and Corporate Legal Affairs,
Major Civil and Commercial Disputes

Contact
xiaoying.zhang@landinglawyer.com
+86 136 2160 2486