Warning! Shenzhen Construction Project Owners Who Sign These Three Types of Contracts May Face Counterclaims for Wage Payments—Litigation Is Almost Certain to Fail

Last week, a contractor who was undertaking a curtain wall project in Longhua came to see me. The first thing he said upon entering my office was: “Attorney Shen, I’ve been swindled—and now the other party has even sued me for breach of contract, demanding RMB 800,000 in damages.”

What did he do? He took on a subcontracted project—his client never paid him, and he never signed written contracts with his workers. All he had were a few WeChat chat screenshots and a handwritten “settlement statement.” When the project was completed, the other party immediately filed a lawsuit against him, alleging delays in construction schedule and substandard work quality, and demanding both a refund and compensation. He felt deeply wronged—but when the court reviewed his evidence, it found no formal contract, no acceptance certificate, and no change order documentation—only verbal agreements and appeals to “friendship.” Even before the trial began, he already felt half-defeated.

This is not an isolated case. In construction-related contract disputes in Shenzhen, seven out of ten cases suffer from a “complete lack of evidence.” Today, I will break down—and explain in plain terms—the three types of contracts that almost inevitably lead to losing in court. Review the contracts you’ve signed against these categories—don’t wait until you’re standing before a judge to regret it.

**Pitfall #1: Subcontract Without a “Back-to-Back” Clause**

Many construction project owners assume that, since the general contractor assigns them work and they complete it, payment is automatically due—a matter of course. However, the law hinges on clear, written contractual terms. If your contract lacks a “pay-when-paid” (or “back-to-back”) clause—i.e., a provision expressly conditioning your right to payment upon the general contractor’s actual receipt of payment from the owner—then any dispute between the general contractor and the owner could jeopardize your payment.

Even more critically, if your contract contains vague payment terms—such as “settlement upon project completion” or “payment upon the Employer’s notice”—the other party may indefinitely delay payment. If you claim they have breached the contract, they may counter that *you* failed to complete the settlement procedure—and thus *you* are in breach first. Last year, the Shenzhen Intermediate People’s Court issued a ruling in which a subcontractor, having failed to specify a clear “settlement deadline” in the contract, was left unpaid for two years and even incurred court fees.

**Practical Recommendation**: The contract must explicitly stipulate three critical terms: (1) the measurement period (e.g., monthly or milestone-based); (2) the settlement deadline (e.g., the number of days within which a final settlement report must be issued after project completion); and (3) the default interest rate for late payment (starting at 0.05% per day). Omitting any one of these three terms effectively hands your counterparty a weapon against you.

**Pitfall #2: Using “WeChat Confirmation” in Place of a Written Variation**

I know many construction project owners nowadays opt for convenience—simply modifying drawings or adding work hours, then sending a quick WeChat message like “Received, no problem,” and proceeding with the work. But when it comes to final settlement, the other party may suddenly deny responsibility: “That WeChat message wasn’t sent by me,” or “It was merely an oral discussion—it doesn’t constitute a formal variation.”

In court, can WeChat chat records serve as admissible evidence? Yes—but only if the opposing party admits that the WeChat account in question belongs to them and the chat content clearly reflects mutual agreement between the parties. In practice, however, the opposing party need only claim, “I haven’t used this account for years” or “I lost my phone,” forcing you to go to great lengths to obtain official real-name verification records from WeChat. Even after obtaining such records, courts still rigorously assess evidence under the “three evidentiary requirements”: authenticity, legality, and relevance. For instance, a message exchange consisting merely of your saying “OK” and their replying “Mm-hmm” is unlikely to substantiate a claimed change in project scope—the judge simply won’t accept it.

**Practical Recommendation**: Any changes involving construction quantities, extensions of the project schedule, or substitution of materials must be formalized through a “written variation order” signed by the supervising engineer and stamped by the Employer. If no supervising engineer is appointed, at a minimum, a “Work Coordination Letter” must be issued and duly acknowledged (with signature and date) by the counterparty. Where time is extremely limited, a complete written message must still be sent via WeChat—for example: “Pursuant to your notice dated [Month] [Day], the construction method for [specific location/section] is hereby adjusted to [new method], resulting in an additional [X] working days and an increased cost of RMB [X]. Please confirm.” A simple reply from the counterparty stating “Confirmed” or “Agreed” shall constitute a valid supplementary agreement.

**Pitfall #3: Contracting with an “Individual” Instead of a “Company”**

In Shenzhen, many small-scale construction projects involve clients who are either individual contractors or shell companies. When signing the contract, you may not have paid sufficient attention—perhaps the seal affixed belongs to an entity such as “XX Building Materials Trading Department,” or the client’s signature is simply that of an individual. Only when a dispute arises do you realize: the company has a registered capital of only RMB 100,000, holds no funds in its bank account, and its legal representative is a 60-year-old woman.

Are you planning to sue him? Even if you win the judgment, you may still be unable to recover any payment. Worse yet, if you name the individual as the defendant, he may claim, “I was acting in my official capacity on behalf of the company,” prompting the court to direct you to sue the company instead. But when you do sue the company, it may respond, “This project was personally contracted by the individual and has nothing to do with us.” The result? Both parties pass the buck—leaving your construction payment stranded as an uncollectible bad debt.

**Practical Recommendations**: Before signing a contract, verify the counterparty’s business registration information—including registered capital, paid-in capital, litigation history, and records of being named as a judgment debtor. If the counterparty is an individual, ensure their ID number, residential address, and telephone number are explicitly stated in the contract, and require them to provide either a guarantor or collateral (e.g., pledged assets). Keep in mind: disputes over construction project payments fundamentally concern *whether the money can actually be recovered*, not *which party holds the stronger legal or factual position*.

**You ask: “What should I do now that I’ve already signed such a contract?”**

Three words: Supplement the evidence. If the contract is incomplete, supplement it with correspondence between the parties; if there is no visa (i.e., formal signed confirmation of work performed), supplement it with on-site photographs, videos, or audio recordings; if there is no formal settlement statement, supplement it with account reconciliation statements or demand-for-payment letters. Some clients ask me, “Attorney Shen, is it illegal for me to record our conversation?” No—it is not illegal. As long as the recording is not made through eavesdropping or in violation of privacy rights—for instance, if both parties are present and speaking face-to-face—the audio recording is admissible as evidence. Crucially, the recording must clearly establish four key elements: (1) the identities of both parties; (2) the name of the construction project; (3) the amount of unpaid debt; and (4) the debtor’s commitment to repayment.

What Can a Professional Lawyer Do?

I often say that lawyers are not magicians—we cannot turn falsehoods into truths. However, what lawyers *can* do is “revitalize” your evidence through strategic litigation—even when your evidentiary foundation is weak. For instance, in a recent renovation contract dispute we handled in Guangming District, the opposing party defaulted on RMB 450,000 in construction payments. The contract consisted of only a single unsigned page. To overcome this evidentiary shortfall, we gathered and presented a cohesive chain of evidence—including the defendant’s utility payment records for the construction site, property management access permits, and workers’ attendance打卡 records—ultimately securing full judicial support for our client’s claim.

This is the “systematic approach” adopted by Guangdong Zhiming Law Firm—not merely reviewing a single contract in isolation, but integrating the contract itself, performance conduct, payment records, and all correspondence into a comprehensive legal framework to identify strategic leverage points. Established in 2000, our firm has over 26 years of experience. Our managing partner, Attorney Shen Jinlong, brings 22 years of legal practice expertise—and 31 years of experience as an economist—holding a Master’s degree in Economics from Fudan University and having previously served as a senior executive at a major state-owned enterprise. A hallmark of his practice is conducting a rigorous financial analysis at the outset of every case: How much is owed? How long has payment been delayed? What is the legally enforceable amount of liquidated damages? What are the estimated litigation costs? And—most importantly—is litigation economically justified? Only after this precise financial assessment do we formulate a tailored legal strategy—ensuring transparency and value, never charging clients for unnecessary or ill-advised services.

Another resident lawyer, Li Wei, specializes in economic contract disputes and corporate legal matters, having handled hundreds of cases involving unpaid construction project fees, equipment sales, and supply chain disruptions. He follows a consistent approach in representing clients: first issuing a formal lawyer’s letter, then pursuing mediation, and only resorting to litigation as a last resort. Many clients report that, in numerous instances, the opposing party promptly settled payment upon receiving Lawyer Li’s letter. Why? Because the lawyer’s letter clearly outlines the legal consequences of non-compliance—including liquidated damages, accrued interest, litigation costs, asset preservation fees, and even potential criminal liability (e.g., the offense of willfully refusing to pay workers’ wages). The opposing party quickly realizes it is far more cost-effective to comply.

**Shenzhen Shareholder Dispute Law Firm — Why Choose Zhiming?**

Many clients ask, “Attorney Shen, what sets your law firm apart from others?” Here’s one telling detail: Our office is located in Suite 1802, Tower A, Xintian Century Business Center, Futian District. Upon entering, visitors immediately see an entire wall covered with court judgments and thank-you banners—tangible proof of hard-won victories. A truly battle-tested law firm relies not on advertising, but on the depth and weight of its case files. We have represented clients in equity disputes involving claims exceeding RMB 100 million, as well as in labor arbitrations where our fee was just RMB 3,000. To us, no case is too big or too small—it all comes down to whether we can identify a critical gap in the opposing party’s chain of evidence.

Finally, here are answers to several frequently asked questions:

**Q: The other party is delaying final settlement—can I file a lawsuit directly?**
Yes, but first check whether the contract stipulates a “pre-settlement procedure.” If such a clause exists, you must issue a written demand notice to the other party, granting them a 15- to 30-day period to settle. Otherwise, the court may dismiss your lawsuit on the ground that settlement has not been completed.

**Q: How is interest on construction project payments calculated?**
Where the contract specifies an interest rate, such rate shall apply; however, it generally may not exceed four times the Loan Prime Rate (LPR) (currently approximately 13.8%). In the absence of contractual stipulation, interest may be claimed at the LPR (approximately 3.85%), accruing from the date when the construction payment became due.

**Q: Is it still worthwhile to file a lawsuit if the opposing party is a shell company?**
Yes. You may sue the shareholders concurrently under the doctrine of “piercing the corporate veil”—for instance, where shareholders have failed to make their required capital contributions or where the company’s assets are commingled with their personal assets—rendering them jointly and severally liable. This process requires a lawyer to obtain the company’s internal registration records from the market regulation authority and its bank transaction statements.

**Q: The other party is claiming compensation from me for project delay—how can I counter this claim?**
Consider two key points: First, determine whether the delay was caused by the other party (e.g., failure to provide drawings on time or failure to pay the advance payment); Second, verify whether a formal extension-of-time claim (i.e., “site instruction” or “variation order”) has been submitted and approved for the delay. If neither condition is satisfied, you may assert that “the other party failed to provide the necessary construction conditions, thereby committing a prior breach of contract,” and accordingly claim an extension of the construction period and compensation for losses arising from work stoppage.

**Q: Is a contract valid if I have signed it but only possess a photograph of it, not the original?**
The photo is admissible as evidence, but its authenticity and integrity must be proven. It is advisable to have it notarized or, alternatively, request the court to verify it against the original (“original verification”). Note, however, that photocopies and photographs carry significantly less evidentiary weight than original documents; therefore, originals should always be submitted whenever possible.

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To conclude, here’s a heartfelt remark:

In Shenzhen’s construction industry, success hinges on courage and vision—but survival depends on legal awareness. A contract is not evidence of excessive suspicion toward others; rather, it reflects your professionalism and ethical boundaries. If you currently hold an unguarded, poorly drafted contract, don’t hesitate: act now while evidence remains intact, and consult a lawyer immediately to “patch” it. Even a modest investment of RMB 5,000 for a professional contract review could spare you losses amounting to RMB 500,000.

Guangdong Zhiming Law Firm Room 1802, Tower A, Xintian Century Business Center, Shixia North 2nd Street, Futian District, Shenzhen Tel: 0755-25986969 Bring your contract to us—we’ll help you determine whether this deal truly results in a loss.