The first diagnosis of major corporate disputes

When a client consults a lawyer, it is not always that there is no answer. On the contrary, he often already has a fairly complete answer: the other party is in arrears with the payment, or he himself is entitled to be a shareholder, and the case is just lacking a single lawsuit document. He believes that what the lawyer should do next seems to be merely expressing his conclusion in a more professional way.

Such consultations always require careful consideration.

The client's judgment may not be wrong. He has experienced the entire process of the event and knows what he has done and what the other party promised. However, in major disputes, the conclusion formed first often becomes the most difficult to be re-examined. It is usually based on the party's own experience, but it may not include how the other party would explain, how far the evidence can prove, and how the law would evaluate the same set of facts. Therefore, when a lawyer first assesses a major dispute, it is usually not advisable to rush to discuss with the client how to draft the lawsuit.

The following two scenarios are summarized based on similar problems repeatedly encountered in years of case handling, and do not correspond to a specific case.

Two common scenarios of major disputes

The final payment has not been made, but the case is not merely "the other party owes the payment".

An enterprise executive who took on a project, due to the other party's delay in paying nearly 30% of the final payment, is preparing to file a lawsuit.

The project has been completed and has been inspected and accepted. According to his understanding, the matter is not complicated: the work has been completed, the project has been inspected and accepted, but the payment has not been made. The various reasons proposed by the other party later were just excuses for the payment arrears.

If only the acceptance materials and the amount of unpaid payment are reviewed, this judgment is not problematic, and the payment request is not difficult to organize, but contract disputes usually cannot start from "how much payment is still owed". Whether the payment obligation has expired still needs to be examined in the complete performance process of both parties.

After re-organizing the materials in chronological order, other facts emerged.

The project delivery was forty days later than the contract stipulation, and the other party raised written quality objections before and after the acceptance. Although the enterprise promised to rectify, there was no complete record of the content, completion time, and whether the other party recognized it.

At this point, the nature of the problem has changed.

This does not mean that the other party's deduction is justified. Whether the delay constitutes a breach of contract needs to be judged in combination with the contract terms, the reasons for the delay, and the specific arrangements during the performance of both parties; whether the quality objections can support the refusal to pay or deduction also needs to be judged based on the severity of the problem, the rectification situation, and the payment conditions. The other party cannot establish an defense merely based on a few objection documents.

However, in this situation, the enterprise cannot simply regard it as a case of collecting the final payment. Because once the lawsuit is filed, the other party is likely to raise a defense of performance, or raise counterclaims around the delay, rectification costs, or other losses. Even if the enterprise is the plaintiff, it may also face the risk of being held accountable in the same case.

What needs to be done at this point is not to simply calculate the final payment, but to comprehensively calculate both parties' responsibilities: the specific content of the quality objections, whether the rectification process can be restored, the scope of the delay responsibility, and whether the other party's claimed losses have contractual and evidentiary basis. The lawsuit amount on the books, after deducting possible defenses, counterclaims, and implementation costs, is close to the result that the enterprise needs to weigh.

Operators often do not fully agree with this. The common reason heard is that delays in project performance are not uncommon, and the situation of pursuing responsibility by the day outside the contract is also rare.

This statement is not uncommon and is not difficult to understand. When business cooperation is smooth, there are indeed a lot of tacit understandings in the contract; but when disputes occur, whether the tacit understanding can become rules depends on whether it has been fixed through the exchanges and actual performance of both parties. Industry practice can be called tacit understanding; when it cannot provide support, it is often just empty talk without evidence.

In such cases, it is usually not advisable to proceed directly according to the "prior lawsuit" thinking. A complaint can be drafted quickly, but a dispute that is wrongly defined may take a long time to be corrected.

The "righteousness" of the client is often a feeling, while that of the lawyer is more like a calculation. Factors such as who performed first, which node the other party deviated from the agreement at, what consequences the deviation caused, and the extent to which evidence could support it, all should be taken into consideration. Omitting any one of these items can sometimes mean that the distance between the plaintiff and the defendant is not as far as imagined.

The funds have been paid, but what is the nature of this payment in law?

Let's look at another operator, who is facing an issue of equity.

He transferred a considerable amount of funds to a friend he had been cooperating with for many years. The other party said at that time that it would reserve a certain proportion of the company's equity for him. Several years later, the enterprise's operating conditions were good, and the enterprise value increased accordingly. However, both parties had a dispute over the nature of this money and whether he had equity.

The evidence he valued most was a bank receipt. In his view, the investment relationship was real and the shareholder status naturally should not be in doubt.

The lawyer, however, had to separately review the above judgment.

The receipt showed that the funds had entered the other party's personal account, with a note that was not clearly defined as "transferring funds". The two parties did not sign an investment agreement, did not have corresponding company resolutions, shareholder registers, or business changes; in the following years, the payer did not participate in the company's decision-making or receive income distribution as a shareholder.

These circumstances do not directly lead to "he does not have any rights". The absence of business registration does not necessarily exclude all equity or contractual rights; the absence of a properly named investment agreement does not mean that other evidence cannot prove that both parties had made an arrangement.

But the problem is that the payment fact, investment agreement, company recognition, and shareholder status are not the same concept.

The transfer record can prove that the funds have been paid, but it cannot alone prove the legal nature of this payment.

This money could be interpreted as equity payment, or as a loan, a deferred payment, or other fund transactions. How it is ultimately characterized still requires reviewing the agreement reached by both parties at that time, whether the company was aware and accepted it, the way the funds were credited, and the actual performance. Chat records, company accounts, representations of identity made to third parties, participation in operations and income distribution situations, etc., could all change the final judgment.

Moreover, the determination of the legal relationship is not a purely conceptual question. Different determinations behind it are different responsibility subjects, litigation requests, burden of proof tasks, and legal consequences.

If the party wants to be a shareholder, they need to look for evidence around the investment agreement and company recognition; if they are more concerned about the safety of the funds, they need to re-evaluate the contractual basis of this money, the return conditions, and the liability assumption. Different claims may interact in the determination of facts, and it should not be decided temporarily at the time of filing a lawsuit to choose an advantageous expression.

Therefore, in such cases, lawyers cannot simply confirm the shareholder status based on "the funds have been paid", nor should they rush to make the opposite conclusion. They should first try to find out the payment reason for this money as much as possible, and then discuss what rights the payer has obtained as a result and which solution path is closer to the result they hope to achieve.

Operators often interpret signing documents as an act that may damage emotions. When the cooperation goes smoothly, it is easy to feel that agreements, resolutions, and registers are just formalities; when interests change, they realize that these formalities were not intended to prevent friends, but to let everyone know where the boundaries are after the relationship changes.

Legal documents cannot create a right that never existed. But a real arrangement, if it does not leave evidence matching its nature, may become difficult to identify in the future. The law will not simply recognize a long-ago un-signed investment agreement for the party based on a single receipt.

The core logic of the first diagnosis

The first diagnosis requires a simultaneous review of evidence, responsibility, and objectives

In the past, when explaining such issues, a relatively brief statement was often used: The client lives in the world of facts, while the court lives in the world of documents. Now it seems that this statement only covers a part.

The court certainly does not only look at paper documents. Electronic data, witness testimony, financial processing, and the actual behavior of the parties can all be used to prove a certain fact. The real difference lies in that the party knows something through personal experience, while the court must recognize it through evidence. What is considered "everyone knows" in business does not automatically acquire a certain legal nature; the fact that the party is certain that something happened does not mean that the dispute procedure can make a judgment based on it.

However, being able to prove is not the end of the diagnosis.

A fact being proved merely meets the prerequisite for entering the legal process. And it can support what request, whether it will simultaneously lead to the other party's defense or counterclaim, even if supported, whether it can be achieved, are still issues to be considered in the future.

The more experienced the practitioner is, the more they can recognize that "whether there is evidence" should not be directly equated with "whether this case is worth filing a lawsuit". Having evidence does not mean that the enterprise can obtain a favorable result after the procedure is initiated. The truly troublesome aspect of a major dispute often lies in one fact changing another responsibility, and one procedure triggering another consequence. And what the lawyer needs to do is to, before the client's actions, as much as possible, assess and understand these chain reactions.

In the first dispute, what needs to be compared is not only the final payment amount, but also the possible exposed responsibilities; in the second dispute, what needs to be identified is not only the nature of the funds, but also what the party truly pursues - identity, income, or financial security. The goals are different, and the paths will be different.

Therefore, the first diagnosis of a major dispute should not rush to answer "whether it is possible to file a lawsuit". What is more important is to judge: What result does the enterprise truly want to achieve, what is the complete fact and the sequence of performance, where is the most disadvantageous material, how the other party may organize counterattack, and what actions are being taken now, is it improving the position of the enterprise or providing a new countermeasure path for the other party.

Lawyers cannot just repeat the client's conclusion.

The client usually does not intentionally conceal anything, nor is it necessarily making false statements.

Those involved in the dispute will naturally organize their memories according to their goals. The amount of money that was paid less often leaves a deep impression; the number of days of overdue delivery by the party is often easily understood as an industry norm. The fact that the funds have been transferred out is often clearly remembered; the reason why the document was not required to be signed by the company at the beginning is often not recalled until after the dispute occurs.

If lawyers only reinforce the client's statements of these facts, the value is very limited. The client hiring a lawyer is not for the lawyer to repeat their views in more cautious language.

Usually, the approach is to first restore the client's account as a timeline and confirm item by item: which have original materials, which only exist in personal memory, which facts are unfavorable to the client, how the other party will explain the same set of materials. Lawyers of course should stand on the client's side, but in internal analysis, they should also temporarily consider the issue from the other party's perspective to consider their own representation position; this step cannot be omitted.

It is also necessary to further ask: If the other party first submits the most reluctant-to-face fact to the court, does the original plan still hold?

Plans that cannot withstand this test, even if written into the litigation documents, will not become stable for this reason.

What the client brings is the truth he remembers, and what the lawyer handles is the truth that can be proved. What the enterprise truly needs is a judgment that can be used to make a decision.

These elements do not mutually negate each other. What the lawyers do is to clarify the discrepancies, identify the facts that can change the liability structure, and then explain to the enterprises: if they take action now, where they will face relevant risks, what results they might achieve by continuing, and what costs they might incur.

A truly responsible diagnosis is not to simply replace the client's initial conclusion with a more professional formulation, but to help them ultimately form a judgment that is closer to the overall picture.

This judgment may not be readily accepted, but it is better than facing it for the first time in court.