Back To Business Guide – Commercial Contracts/Disputes

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1. Vendors are chasing debts aggressively, can I rely upon economic hardship as a basis for delay or terminating commercial contracts?

"Economic hardship" is not a basis for termination of contracts under the PRC law. That said, there is a doctrine called "change of circumstances" under the PRC law. A party invoking this doctrine needs to prove that:-

• a material change in circumstances has occurred after the formation of the contract;
• such material change was unforeseeable when concluding the contract and out of the usual scope of commercial risks; and
• the party's obligation to perform would be dramatically unfair or the purpose of the contract has been frustrated due to such material change.