Zhiheng original | After settlement, the interests of the code packet of the released version were damaged and claimed? Zhiheng Foshan successfully protected its rights, helped the company win the lawsuit and won 800,000 compensation!
Author | Attorney Liang Hezhen, Attorney Li Chuandong
Introduction: The project was settled solely through written statistical records, and a settlement agreement was signed. However, after the project settlement was completed, the employer discovered that the actual construction area differed from the settled area, and the contractor had overcharged progress payments.However, the construction contractor not only refused to return the funds but also filed a lawsuit demanding the payment of the due warranty deposit and claiming liquidated damages for late payment.How can one break through what appears to be a passive situation?
Zhiheng (Foshan) Law Firm, upon the entrustment of the contracting party A Company (hereinafter referred to as “A Company”), is acting as counsel in a dispute concerning a construction project contract between A Company and the contractor B Company (hereinafter referred to as “B Company”), and has assigned Senior Equity Partner Attorney Liang Hezhen and Partner Attorney Li Chuandong to handle the case.。
In an unfavorable situation where more than a year had passed since both parties had completed the settlement of project payments and the opposing party’s claims appeared legally well-founded, the two lawyers delved deeply into the key issues of the case. By employing a combination of strategies—such as filing a counterclaim, obtaining expert appraisals, and initiating a separate lawsuit—they proactively protected their client’s rights and ultimately facilitated a settlement. Company A is not required to pay any warranty deposits or liquidated damages.Approximately 600,000 yuan, successfully secured compensation of RMB 800,000; the contractor remains liable for all subsequent repair and compensation obligations related to the project, thereby effectively resolving a challenging situation and earning high recognition from the client.
Case Dilemma:
After settlement, the contracting party is sued and finds itself in a disadvantaged position.
In 2023, Company A entered into a construction contract with Company B, under which Company B was contracted to undertake the construction of a factory building and a logistics warehouse project. Upon completion of the project, both parties completed the final acceptance and the final settlement of the project payment in January 2024, and signed a settlement confirmation. Company A paid 97% of the project payment as agreed. The remaining 3% of the payment is to be disbursed at 1% within one year and 2% within two years after the expiration of the warranty period.
In February 2024, after conducting on-site measurements, Company A determined that the actual construction area was more than 3% less than the billed construction area. As the construction contract stipulated that payment would be based on the actual constructed area, Company B had overcollected progress payments. Consequently, Company A requested that Company B refund the overpayment; however, several rounds of negotiations between the two parties failed to reach an agreement.
In May 2025, Company B filed a lawsuit against Company A in court, citing the expiration of the warranty period and Company A’s refusal to make payment, and demanded payment of a construction warranty deposit equal to 1% of the settlement price, together with late-payment damages. On the surface, the settlement agreement between the two parties is clear, and the contractual provisions are well-defined, making B Company’s claims appear reasonable. As a result, A Company suddenly found itself in a highly vulnerable position with an extremely high risk of losing the case and urgently retained Zhiheng’s Foshan lawyers to handle the matter on its behalf.
Key to Breaking the Impasse:
Thoroughly investigate quality defects and establish that the other party has committed a fundamental breach of contract.
After the Zhicheng Foshan legal team took over the case, they were not constrained by the apparent settlement agreement. They promptly engaged in in-depth communication with Company A and quickly identified multiple instances of fundamental breach of contract by Company B:
1. The project’s gross floor area was “reduced” by several hundred square meters, resulting in Company A overpaying the corresponding construction costs based on the as-built drawings. 2. Cracking and leakage occurred in the warehouse flooring, and the concrete strength of columns in multiple locations across the factory and warehouse fell far short of the design standards; a random inspection revealed a 100% failure rate, posing a serious safety hazard. 3. Due to the reduction in area, Company A incurred additional expenses, including urban infrastructureAccompanying facilities fees and fire protection engineering payments, totaling over RMB 90,000. 4. Company A repeatedly urged Company B to carry out corrective repairs, but was met with excuses and refusals, as Company B refused to fulfill its warranty obligations.
The legal team has determined that Company B’s delivery of the project contains significant quality defects and that it has refused to rectify them, thereby constituting a fundamental breach of contract. As a result, Company B is not entitled to claim the retention money or liquidated damages, which has become the pivotal factor in resolving this case.
Multidimensional Rights Protection:
Take the initiative and seize control of the litigation.
In response to the unfavorable situation in the case, the Zhiheng Foshan legal teamFormulate a comprehensive strategy based on defenses, with counterclaims as the primary approach, expert opinions as supporting evidence, and separate lawsuits as a supplementary measure., break free from the confines of a purely defensive litigation strategy and take the initiative:
1. Precise Defense:File a statement of defense with the court, pointing out from a legal perspective the other party’s fundamental breach of contract and challenging the legitimacy of its claims.
2. File a counterclaim decisively:File a counterclaim, seeking compensation from Company B for losses including the project payment, ancillary fees, and fire protection costs;
3. Apply for appraisal:Submit an application for forensic appraisal, requesting a professional assessment of the engineering quality defects and repair costs to strengthen the evidentiary basis.
4. File a separate lawsuit:Separate lawsuits have been filed regarding costs forProject quality repair and inspection fees, thereby creating multiple layers of litigation pressure.
Under the concerted efforts of the Zhiheng Foshan legal team, Company B recognized that its breach of contract was clear and well‑documented, and proactively expressed its willingness to settle.
A successful outcome:
Win-win reconciliation, maximizing corporate interests.
Acting as the exclusive agent for Company A, the Zhicheng Foshan legal team assisted Company A in conducting multiple rounds of negotiations with the opposing party, steadfastly upholding the client’s core demands. Ultimately, the two parties signed a settlement agreement, and the court approved their joint withdrawal of the lawsuit, bringing the case to a successful conclusion.
1. Company A is not required to pay any warranty deposit or liquidated damages, and the other party’s unreasonable claims are hereby completely dismissed.
2. Company B shall pay Company A a compensation of RMB 800,000 in two installments, covering the entire amount of losses, including the shortfall in the project payment, inspection fees, attorney’s fees, and other expenses.
3. Company A has withheld approximately RMB 600,000 as a quality guarantee deposit, which is earmarked for project maintenance and shall remain the property of Company A.
4. Company B shall bear all costs for the repair and compensation of the project. If the retention money is insufficient, Company A may engage a third party to perform the repairs, with all associated costs to be borne by Company B, which shall also remain liable for any subsequent quality issues.
The outcome of the case far exceeded the client’s expectations, and Company A has highly commended our firm’s attorneys for their professional competence and successful protection of rights.
Lawyer’s reminder: Project settlement does not mark the end of rights protection; keep these key points in mind.
This case provides an important reference for protecting one’s rights after settlement in the construction engineering field; in particular, enterprises should take note of the following:
1. Project settlement does not signify the termination of the contractor’s obligations; if there are significant quality defects and the contractor refuses to perform warranty repairs, the employer has the right to withhold the warranty deposit.
2. In the event of an unreasonable lawsuit, do not adopt a passive defense; promptly retain a professional attorney, thoroughly investigate the other party’s breach of contract, and proactively assert your rights to maintain the initiative.
3. Upon discovering any engineering quality issues, promptly secure evidence through professional inspections, written notices, and other means to lay a solid foundation for safeguarding your rights.
4. Construction project disputes are highly specialized; after project settlement, engaging a professional lawyer to develop a precise strategy is essential to maximize the protection of one’s rights and interests.
Attorneys Liang Hezhen and Li Chuandong have been deeply engaged in the field of construction engineering law for many years, specializing in handling complex disputes such as project settlement, quality claims, and warranty deposit controversies. They consistently provide professional and efficient legal services, safeguarding corporate development and serving as a reliable legal support for businesses.
Lawyer
Introduction
Attorney Liang Hezhen
Guangdong Zhiheng (Foshan) Law Firm, Senior Equity Partner
Member of the Marriage and Family Law Professional Committee of the Guangdong Provincial Lawyers Association
Arbitrator of the Zhaoqing Arbitration Commission
Provincial Model Individual in Village Legal Advisory Services, Municipal Outstanding Lawyer
Outstanding Member of the Municipal Bar Association
Since commencing practice, Attorney Liang Hezhen has accumulated over a decade of extensive practical legal experience, specializing in civil and commercial litigation (arbitration) and non-litigation matters, including real estate and construction engineering disputes, contract disputes, corporate legal affairs, matrimonial and family disputes, as well as labor and personnel compliance and dispute resolution. She also handles criminal and administrative litigation cases. She serves as long-term legal counsel to numerous government departments, state-owned enterprises, and private companies, with the aggregate value of cases she has handled approaching RMB 1 billion. She has successfully represented many significant, complex, and challenging cases, earning the trust of her clients through professional, efficient, and high-quality legal services.
Attorney Li Chuandong
Partner, Zhiheng (Foshan) Law Firm
Arbitrator of the Zhaoqing Arbitration Commission
Member of the Expert Advisory Committee on Civil and Administrative Litigation Supervision Cases of the People’s Procuratorate of Zhaoqing City
People’s Supervisor of the People’s Procuratorate of Zhaoqing City
Attorney Li Chuandong holds a Bachelor of Laws degree from Sun Yat-sen University. With over twenty years of practice, he has specialized in civil and commercial dispute resolution and criminal defense, developing a professional service model that integrates both litigation and non-litigation approaches. Attorney Li Chuandong consistently adheres to the principle of providing meticulous, high-quality services, and is committed to offering clients legal support that is “warm, insightful, and impactful.”
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