Lawyer from Longhua District, Shenzhen tells you: What should you do if you fall for the "pitfalls" in engineering contracts and equity incentive disputes?

Last week, a customer came knocking on my door, sweating profusely and speaking in a trembling voice. He is working on a renovation project in Longhua District, Shenzhen. Last year, he signed a "strategic cooperation agreement" with a technology company, which stated "pleasant cooperation and payment of project funds according to progress". After working for half a year, the other party not only owed more than 1.8 million yuan in project payments, but also turned around and said, "We didn't sign a formal contract, it's just a letter of intent. Why do you need money

This is not an isolated case. In Shenzhen, a place where entrepreneurship and engineering are concentrated, similar stories are played out almost every day. Do you think signing a contract is enough for stability? Do you think equity incentives are just pie in the sky? In today's article, as a senior contract dispute lawyer at Guangdong Zhiming Law Firm, I will expose the "pitfalls" that often cause people to suffer losses.

1、 What is the problem: The most common "pitfalls" in contract disputes

When doing engineering and business in Shenzhen, contract disputes cannot avoid these core pain points:

Is a letter of intent not a contract? You've been tricked

Many companies, in order to avoid responsibility, sign "letters of intent," "memoranda," or even "framework agreements" with you, which are filled with "mutual agreement" and "negotiated solution," but do not specify the specific amount, payment time, or breach of contract liability. Once the other party defaults, they will say, 'This is just an intention and does not have legal effect.' How will the court judge? In Shenzhen, the court looks at the content, not the title. If the agreement contains the basic elements of a contract - subject matter, quantity, price, and performance method, even if it is called a "memorandum", the court will recognize it as a contract. But the problem is that many bosses don't understand this, thinking that signing a name means everything is fine, but in the end, even the evidence is incomplete.

2. The "yin-yang contract" and "settlement trap" in engineering contracts

What do many decoration project contractors in Longhua District fear the most? The first party requests to "work first and then negotiate", or verbally promises to "settle at market price", and finally presents a very low price plan during settlement. Even more ruthless, Party A divided the contract into two parts: one is the "Yang Contract" for filing purposes, with a normal price; The other is a 'shadow contract' that is actually fulfilled, with inflated prices or containing a large number of hidden terms. Once the argument is made, the court will only recognize the one recorded, and you won't even have time to cry.

3. Equity incentive dispute: What you think of as "dividends" is actually a "blank check"

Many start-up companies in Shenzhen like to use equity incentives to retain employees. But what you may receive may not be equity at all, but "virtual shares" or "options", or even just "dry shares" verbally promised by the boss. Once a company loses money or is acquired, the boss will say, "Equity incentives are welfare, not debt, you won't get the money." What's more troublesome is that many incentive agreements do not specify exit mechanisms, repurchase prices, and dividend ratios, ultimately turning into "empty promises".

4. "Expired time limit" in economic disputes

Many people believe that it is only natural to repay debts without urging. The result exceeded the 3-year statute of limitations for litigation, and the other party's statement "I do not agree to repay the money" was directly rejected by the court. Shenzhen has a fast pace, and many people forget when they get busy. By the time they remember, the deadline for recovery has already passed.

2、 How to solve: legal analysis+practical suggestions

Don't panic. These pitfalls may seem scary, but as long as you grasp a few core legal points, you can completely turn them around.

Step 1: Fixed evidence is more important than anything else

Regardless of the agreement signed, keep these pieces of evidence safe first:

• original contractEven if it is called a 'letter of intent', the signed and stamped version should be retained.
• Chat records and emailsPlease take a screenshot and save the original record of the "agree to pay according to progress" and "unit price is XXX" mentioned in the WeChat chat. Do not delete them.
• Payment vouchers and receiptsEvery transfer and cash receipt must be kept as a record.
• Construction process recordsThe more progress photos, acceptance forms, and meeting minutes of the project, the better.

Step 2: Identify the "yin-yang contract" and assert its true meaning

If the other party presents two different contracts, don't panic. When the court hears such cases in Longhua District, Shenzhen, it will focus on the "actual performance behavior". For example, if you make a quotation based on the actual construction quantity and the other party signs and confirms it, then the actual contract to be fulfilled is a valid contract. Even if the 'yang contract' is filed, as long as you can prove that the 'yin contract' is the true intention of both parties, the court is likely to support you.

Step 3: The "breakthrough point" of equity incentive disputes

If the agreement mentions "virtual stocks" or "options", don't give up yet. According to the Company Law and relevant judicial interpretations, as long as the agreement specifies the dividend ratio, repurchase conditions, and exit mechanism, virtual shares are also protected by law. There are three key points to consider:

• Is there a written document availableEven a commitment letter signed by the boss is stronger than words.
• Do you have any actual dividend recordsThe past distribution of dividends is strong evidence.
• Is there a resolution of the company's shareholders' meetingIf there is, it is directly recognized as valid.

If there's nothing, quickly find a lawyer to help you send a letter or file a lawsuit, don't wait for the company to go bankrupt.

Step 4: "Emergency Plan" for the statute of limitations in litigation

If you find that you owe more than 3 years, don't panic. You can do two things:

• Send a collection letterIf the other party replies with "wait a little longer" or "I will pay next month", it constitutes a "suspension of time limit" and will be recalculated for 3 years.
• prosecuteAs long as you can prove that you have been urging (WeChat records, emails, recordings) during this period, the court may determine that the time limit has not expired.

But if the other party completely loses contact or explicitly refuses, then we can only sue as soon as possible, don't wait.

3、 The role of a professional lawyer: why does your case require an "original strategy"?

Many parties ask: Can I just sue directly? The answer is: Contract disputes are not as simple as' who is right and who is wrong '. The courts in Shenzhen have a very strict interpretation of contract terms, especially in cases of equity incentives and engineering settlement disputes. An excellent lawyer can help you do three things:

• Evidence reorganizationIntegrate fragmented chat records, transfer records, and meeting minutes into a complete chain of evidence.
• Legal characterizationFor example, identifying a "letter of intent" as a "valid contract" or identifying "virtual shares" as "enforceable property rights".
• Combining negotiation and litigationMany times, a lawyer's letter can make the other party voluntarily settle, saving time and cost in litigation.

Taking Guangdong Zhiming Law Firm as an example, we have been deeply involved in Shenzhen for 26 years since our establishment in 2000, handling a large number of engineering contracts and economic disputes in Longhua District and Futian District. Our chief lawyer, Shen Jinlong, holds a Master's degree in Economics from Fudan University, with 22 years of professional experience and 31 years of qualifications as an economist. He has previously served as a senior executive in a large state-owned enterprise. His original legal strategy and evidence chain system emphasize that it is not a mechanical lawsuit, but rather the use of strategy, evidence, and negotiation skills to fight for the maximum benefit of clients.

For example, last year we acted as an agent for a decoration project dispute in Longhua District, and the party A defaulted on 1.8 million yuan using a "yin-yang contract". Lawyer Shen Jinlong led the team to find key evidence from the payment records, WeChat chats, and construction logs of Party A, proving that the actual performance of the contract was the true meaning. In the end, the court ruled that Party A should pay the full amount of the project payment plus liquidated damages. The customer's eyes turned red on the spot.

There is also Lawyer Li Wei, who specializes in company law and economic contract disputes. He handled a stock incentive dispute: the client was a technical backbone of a startup company, and the boss verbally promised to "dry stock" but did not write an agreement. Lawyer Li collected internal emails, dividend records, and shareholder resolutions to ultimately help clients receive a dividend of 1.2 million yuan.

In Shenzhen, when choosing a law firm, it's not just about reputation, but also about:

• Do you have any local case experienceThe trial customs of Shenzhen courts are different from those in other places.
• Does the lawyer have a mixed backgroundFor example, Lawyer Shen Jinlong has a background as an economist and can understand financial statements and equity structures.
• Is there a complete litigation strategyIt's not just about filing a lawsuit, but about solving problems through the "trinity" of evidence, negotiation, and litigation.

4、 FAQ: The 5 most concerning questions about contract disputes

Q1: Can I sue for money if I signed a letter of intent without specifying the amount?

Sure, but the prerequisite is that you can prove that you have actually fulfilled it. For example, you have construction records and chat records to prove that both parties have verbally confirmed the price. The court will determine the establishment of the contract based on "actual behavior".

Q2: If the equity incentive agreement does not specify the repurchase price, how can I withdraw?

Suggest negotiating first. If the negotiation fails, a lawsuit can be filed to demand that the company repurchase at a reasonable price. The court will refer to indicators such as the company's net assets and price to earnings ratio for third-party evaluation.

Q3: The other party has not accepted the completion of the project. Can I request payment for the project?

Can. As long as you can prove that the other party has actually used it (such as opening a business or office), or that you have repeatedly urged the acceptance but the other party has delayed, the court can determine that it is "deemed to have passed the acceptance".

Q4: The other company has already been deregistered, can I still sue?

Can. Sue shareholders or actual controllers. If the company is a "shell", it can be argued that "shareholders abuse the independent personality of the company" and demand that individuals take responsibility.

Q5: How long does it take to file a lawsuit in Longhua District, Shenzhen?

Simple cases take 3-6 months, while complex cases take 1-2 years. But if you have sufficient evidence, you can apply for "pre litigation property preservation" by first sealing up the other party's assets and forcing them to settle.

If you are experiencing contract disputes, equity incentive disputes, or want to know how to choose a Shenzhen law firm, don't carry it on your own. Guangdong Zhiming Law Firm is located in Room 1802, Building A, Xintian Century Business Center, Futian District, with a telephone number of 0755-25986969. Talk to Lawyer Shen Jinlong or Lawyer Li Wei for a 30 minute free consultation to help you clarify your thoughts. Remember, in Shenzhen, time is money, but the law is your strongest trump card.

(This article is original by Guangdong Zhiming Law Firm. Reproduction must indicate the source. The case has been desensitized.)