# Dispute And Performance Risk > Trigger this skill when the user submits a contract text, transaction arrangement, commercial agreement, or description of a legal relationship and needs an assessment of potential legal disputes or breach-of-contract risks. Typical trigger scenarios include, but are not limited to: - The user asks for a contract review and identification of potential risks - The user asks whether a transaction arrangement has performance obstacles - The user describes difficulties in contract performance and needs a judgment on whether they constitute breach - The user asks for a risk rating of contract clauses - The user provides an agreement between two or more parties and asks to identify likely dispute focal points - The user describes an already-occurred performance deviation and needs an assessment of legal consequences - Forward-looking risk identification in contract review, due diligence, deal negotiation, and similar scenarios This skill focuses on two core questions—"whether legal disputes may arise" and "whether - Skill: `thuyran/dispute-and-performance-risk-2` (Agent Skill) - Install (CLI): `npx skillmds@latest add thuyran/dispute-and-performance-risk-2` - Raw SKILL.md: https://api.skillmd.com/api/skills/thuyran/dispute-and-performance-risk-2/raw - Safety review: pending - Works with: Claude Code, Claude.ai, OpenAI Codex - Category: Coding & Dev Tools - Author: thuyran (https://skillmd.com/u/thuyran) - Updated: 2026-09-17 - Page: https://skillmd.com/skills/thuyran/dispute-and-performance-risk-2 --- > **Chinese source (authoritative):** [`../../skills/dispute-and-performance-risk/SKILL.md`](../../skills/dispute-and-performance-risk/SKILL.md) # Identifying Dispute and Performance Risks ## Overview Table | Item | Content | |------|------| | **Capability name** | Identifying Dispute and Performance Risks | | **Capability ID** | 13 | | **Core objective** | Systematically identify risk points in a contract or legal relationship that may give rise to disputes or breach | | **Input** | Contract text, description of the transaction arrangement, performance status notes, party background information | | **Output** | Structured risk inventory (including risk level, risk description, legal basis, and response recommendations) | | **Related capabilities** | Contract clause parsing, legal relationship identification, breach liability analysis, dispute resolution path planning | | **Applicable jurisdiction** | Primarily the legal system of mainland China; expandable to other jurisdictions | | **Typical users** | In-house counsel, lawyers, compliance officers, commercial negotiators, investors | --- ## Legal Disclaimer > **Important notice:** > 1. Output from this skill is a reference legal risk analysis and does not constitute a formal legal opinion. > 2. Risk identification is inferred from the information provided; incomplete information may lead to omissions. > 3. Legal risk assessments are time-sensitive; changes in laws and regulations may affect the conclusions. > 4. For high-risk matters, engage a qualified lawyer for in-depth review. > 5. The final determination in a specific case rests with the judicial authority's findings. --- ## Core Concepts ### I. Distinguishing Dispute Risk and Performance Risk | Dimension | Dispute Risk | Performance Risk | |------|----------|----------| | **Definition** | Risk that contract clauses or a legal relationship may give rise to disagreement or confrontation between the parties | Risk that one or more parties may be unable to perform obligations as agreed | | **Time dimension** | May arise at any stage—before signing, during performance, or after performance | Mainly surfaces during the performance stage | | **Manifestations** | Divergent clause interpretations, disputes over rights and obligations, disputes over allocation of liability | Delayed performance, incomplete performance, impossibility of performance, refusal to perform | | **Root causes** | Ambiguous clauses, conflicting rights, imbalanced interests, external change | Insufficient capacity, lack of willingness, changed conditions, force majeure | | **Consequences** | Negotiation, mediation, arbitration, litigation | Breach liability, contract termination, damages | ### II. Three-Layer Risk Structure Model ``` ┌─────────────────────────────────────────────┐ │ Layer 1: Clause-level risk │ │ (Defects, ambiguity, omissions, conflicts │ │ in the contract text itself) │ ├─────────────────────────────────────────────┤ │ Layer 2: Transaction-level risk │ │ (Deal structure, commercial logic, │ │ counterparty capacity and credit) │ ├─────────────────────────────────────────────┤ │ Layer 3: Environment-level risk │ │ (Legal/policy change, market shifts, │ │ force majeure) │ └─────────────────────────────────────────────┘ ``` ### III. Key Legal Concepts 1. **Breach of contract (违约)**: A party fails to perform contractual obligations or performs inconsistently with the agreement. 2. **Anticipatory breach (预期违约)**: Before the performance period expires, a party clearly indicates, or demonstrates by conduct, that it will not perform its main obligations. 3. **Fundamental breach (根本违约)**: A breach that renders the purpose of the contract unattainable. 4. **Change of circumstances (情势变更)**: After contract formation, a material change in objective circumstances makes continued performance clearly unfair. 5. **Force majeure (不可抗力)**: Objective circumstances that could not be foreseen, avoided, and overcome. 6. **Contract interpretation dispute**: Parties have different understandings of the meaning of contractual clauses. 7. **Standard-form clause risk (格式条款风险)**: The party providing standard-form clauses fails to fulfill reasonable notice and explanation duties. 8. **Validity defect (效力瑕疵)**: The contract may be held void or voidable for reasons such as violation of mandatory legal provisions. --- ## Complete Workflow ### Stage 1: Information Gathering and Preprocessing ``` Step 1.1 → Confirm the object of analysis ├── Clarify the scope of the contract/agreement/transaction arrangement to analyze ├── Confirm the parties' identities and roles (Party A / Party B / third party) ├── Confirm the user's stance (on whose behalf risk identification is conducted) └── Confirm the analytical focus (full review vs specific clauses / specific risks) Step 1.2 → Collect background information ├── Background to signing and commercial purpose ├── Basic party information (qualifications, credit, performance capacity) ├── Current performance status (not yet performed / partially performed / completed) ├── Known disputes or disagreements └── Relevant industry practice and regulatory requirements Step 1.3 → Text preprocessing ├── Read the full text and build an overall contract framework understanding ├── Mark key clauses (core rights and obligations, breach liability, dispute resolution) ├── Identify contract type (sale, lease, services, cooperation, investment, etc.) └── Mark missing or ambiguous information ``` ### Stage 2: Clause-Level Risk Scan ``` Step 2.1 → Review core clauses one by one Systematically review each of the following clause categories: ┌─ Party clauses ────────────────────────────────┐ │ □ Are the contracting parties properly qualified │ │ □ Are there agency / representative authority │ │ issues? │ │ □ Do party qualifications meet contractual │ │ requirements? │ └──────────────────────────────────────────────────┘ ┌─ Subject-matter clauses ───────────────────────┐ │ □ Is the subject matter / service description │ │ clear and specific? │ │ □ Are quality standards clear and measurable? │ │ □ Are quantity / scope determined? │ └──────────────────────────────────────────────────┘ ┌─ Price and payment clauses ────────────────────┐ │ □ Is the pricing method clear? │ │ □ Are payment conditions and timing clear? │ │ □ Is there a price adjustment mechanism? │ │ □ Are invoicing and tax arrangements clear? │ └──────────────────────────────────────────────────┘ ┌─ Performance clauses ──────────────────────────┐ │ □ Is the performance period clear? │ │ □ Is the method of performance specific? │ │ □ Is the place of performance determined? │ │ □ Are acceptance standards and procedures clear? │ │ □ Are delivery conditions complete? │ └──────────────────────────────────────────────────┘ ┌─ Breach liability clauses ─────────────────────┐ │ □ Are breach scenarios sufficiently enumerated? │ │ □ Is the liquidated damages ratio reasonable │ │ (too high / too low)? │ │ □ Is the scope of damages clear? │ │ □ Are liability limitation clauses fair? │ │ □ Are exemption clauses lawful and valid? │ └──────────────────────────────────────────────────┘ ┌─ Amendment and termination clauses ────────────┐ │ □ Are termination conditions clear? │ │ □ Are unilateral termination rights reciprocal? │ │ □ Are consequences of termination clearly agreed?│ │ □ Are amendment procedures proper? │ └──────────────────────────────────────────────────┘ ┌─ Dispute resolution clauses ───────────────────┐ │ □ Is the dispute resolution method clear │ │ (litigation / arbitration)? │ │ □ Is the competent court / arbitral institution │ │ determined? │ │ □ Is the governing law clear? │ │ □ Are there pre-dispute procedures │ │ (negotiation / mediation)? │ └──────────────────────────────────────────────────┘ Step 2.2 → Review relationships among clauses ├── Check for contradictions or conflicts among clauses ├── Check whether rights and obligations are reciprocal and balanced ├── Check for logical gaps (e.g., a condition triggers with no corresponding consequence) ├── Check consistency between annexes and the main text └── Check that defined terms are used consistently Step 2.3 → Identify omitted clauses ├── Compare against a checklist of common clauses for this contract type; identify gaps ├── Assess how much missing clauses affect risk └── Mark key clauses that should be supplemented ``` ### Stage 3: Transaction-Level Risk Assessment ``` Step 3.1 → Analyze transaction structure ├── Is the transaction structure reasonable and lawful? ├── Is the flow of funds clear? ├── Are there special arrangements such as circular deals or related-party transactions? ├── Are security / credit enhancement measures adequate? └── Are the links among transaction stages tightly connected? Step 3.2 → Assess counterparty risk ├── Counterparty performance capacity (financial condition, technical capability, resource reserves) ├── Counterparty willingness to perform (historical credit, industry reputation) ├── Counterparty legal risk (litigation, administrative penalties, dishonest-debtor records) └── Organizational stability (equity changes, management changes) Step 3.3 → Validate commercial logic ├── Does the contractual arrangement accord with ordinary commercial sense? ├── Is profit allocation sustainable? ├── Are there fragile links that over-depend on a single condition? └── Is the exit mechanism feasible? ``` ### Stage 4: Environment-Level Risk Assessment ``` Step 4.1 → Legal and policy risk ├── Does the industry involved have special regulatory requirements? ├── Is administrative approval / filing required? ├── Is there a reasonable expectation of legal or policy change? ├── Do special regimes such as foreign investment or cross-border transactions apply? └── Do compliance requirements such as antitrust or data protection apply? Step 4.2 → Market and economic risk ├── Is there potential for large price swings in the subject matter? ├── Exchange-rate risk (cross-border contracts) ├── Supply-chain risk └── Industry cyclical risk Step 4.3 → Force majeure and unexpected events ├── Does the force majeure clause cover major risk scenarios? ├── Are notice duties and burden of proof clear? └── Is the handling of force majeure consequences reasonable? ``` ### Stage 5: Comprehensive Risk Rating and Output ``` Step 5.1 → Classify and aggregate risks Classify all identified risks along these dimensions: ├── By risk type: dispute risk / performance risk / compliance risk / validity risk ├── By risk layer: clause-level / transaction-level / environment-level └── By affected party: own-side risk / counterparty risk / shared risk Step 5.2 → Rate risks Rate each risk (see "Confidence and Risk-Level Annotation System") Step 5.3 → Generate response recommendations For each risk, propose: ├── Preventive measures (contract amendment suggestions) ├── Control measures (performance management suggestions) └── Remedial measures (response strategy after a dispute arises) Step 5.4 → Output a structured report Generate the final report according to the "Output Format Templates" ``` --- ## Common Domains and Legal Sources Cross-Reference ### I. General Legal Sources | Law / regulation | Relevant provisions | Applicable scenarios | |----------|----------|----------| | 《民法典》 Civil Code, Book on Contracts (Book Three) | Arts. 464–988 | Baseline rules for all contract types | | 《民法典》 Civil Code, General Provisions | Arts. 143–157 | Validity of civil juristic acts | | 《民法典》 Civil Code, Contracts · General Rules | Arts. 509–534 | Rules on contract performance | | 《民法典》 Civil Code, Contracts · General Rules | Arts. 577–594 | Breach liability | | 《民法典》 Civil Code, Contracts · General Rules | Arts. 535–542 | Contract preservation (subrogation, revocation) | | 《最高人民法院关于适用〈中华人民共和国民法典〉合同编通则若干问题的解释》 SPC Interpretation on Several Issues Concerning the Application of the General Rules of the Contracts Book of the Civil Code of the PRC | Full text | Guidance for adjudicating contract disputes | ### II. Specialized Sources by Contract Type | Contract type | Primary legal sources | Key focus provisions / areas | |----------|----------|-------------------| | **Sale contracts** | Civil Code Arts. 595–647; SPC judicial interpretation on sale contracts | Risk transfer of subject matter, quality objection period, retention of title | | **Construction project contracts** | Civil Code Arts. 788–808; Construction Project Judicial Interpretation (I) | Project quality, schedule delay, price settlement, actual constructors | | **Lease contracts** | Civil Code Arts. 703–734 | Lease-term limits, right of first refusal to purchase, sublease restrictions | | **Loan contracts** | Civil Code Arts. 667–680; private lending judicial interpretation | Interest-rate caps, upfront interest ("cutting the head"), security validity | | **Labor contracts** | Labor Contract Law, Labor Law | Termination restrictions, economic compensation, non-compete | | **Equity transfer / investment agreements** | Company Law, Foreign Investment Law | Validity of valuation adjustment (VAM) clauses, priority rights, shareholder information rights | | **IP license contracts** | Copyright Law, Patent Law, Trademark Law | Scope of license, warranty against title defects, infringement risk | | **Guarantee / security contracts** | Civil Code Arts. 681–702; judicial interpretation on the security system | Scope of security, independent guarantees, maximum-amount security | ### III. Specialized-Domain Sources | Domain | Legal sources | Risk focus | |------|------|------------| | Antitrust | Anti-Monopoly Law | Monopoly agreements, abuse of dominant market position | | Data compliance | Personal Information Protection Law, Data Security Law | Authorization for data processing, cross-border transfer | | Consumer protection | Law on the Protection of Consumer Rights and Interests | Validity of standard-form clauses, punitive damages for fraud | | Bidding and tendering | Bidding and Tendering Law | Consistency between winning bid contract and tender documents | | International trade | CISG, UCP600, Incoterms | Trade terms, letter-of-credit conditions, governing law | --- ## Verification and Screening Rules ### I. Verification Standards for Risk Identification Each identified risk must pass the following "Four-Element Verification": ``` ┌──────────────────────────────────────────────────┐ │ Four-Element Risk Verification │ │ │ │ 1. [Factual basis] Is the risk grounded in │ │ contract text or facts? │ │ → Must point to specific clauses or facts │ │ → No speculation from thin air │ │ │ │ 2. [Legal basis] Is the risk supported by legal │ │ norms? │ │ → Cite specific statutes or judicial │ │ interpretations │ │ → Or cite recognized legal principles / │ │ judicial practice │ │ │ │ 3. [Causal logic] Is the reasoning chain from │ │ facts to risk complete? │ │ → Clause defect → possible dispute scenario → │ │ adverse consequence │ │ → No leaps in the logic chain │ │ │ │ 4. [Realistic possibility] Does the probability │ │ of occurrence warrant reasonable attention? │ │ → Exclude extremely remote events (unless │ │ consequences are extremely severe) │ │ → Consider common dispute types in industry │ │ practice │ └──────────────────────────────────────────────────┘ ``` ### II. Risk Screening Rules ``` Rule 1: Materiality screening → Prioritize risks that may render the contract void / voidable → Prioritize risks that may cause material economic loss → Prioritize risks that may render the contractual purpose unattainable Rule 2: Actionability screening → Prioritize risks preventable by contract amendment → Prioritize risks controllable through performance management → For uncontrollable risks, still report but mark as "uncontrollable" Rule 3: Deduplication → Merge multiple manifestations arising from the same root cause into one risk item → Annotate relationships among risks Rule 4: Stance relevance → Adjust priority ranking according to the user's represented stance → Prioritize reporting risks adverse to one's own side ``` --- ## Output Format Templates ### Template 1: Full Risk Analysis Report ```markdown # Dispute and Performance Risk Analysis Report ## Basic Information - **Contract name**: [contract name] - **Contract type**: [contract type] - **Parties**: [Party A] vs [Party B] (analytical stance: [represented party]) - **Analysis date**: [date] - **Information completeness**: [complete / partially missing (specify missing items)] ## Risk Overview | Risk level | Count | Share | |----------|------|------| | 🔴 High risk | X items | X% | | 🟡 Medium risk | X items | X% | | 🟢 Low risk | X items | X% | **Overall risk assessment**: [one-sentence summary] ## Risk Inventory ### 🔴 High Risk #### Risk 1: [risk name] - **Risk type**: dispute risk / performance risk / compliance risk / validity risk - **Risk layer**: clause-level / transaction-level / environment-level - **Related clause(s)**: Art. X, para. X (quote original text) - **Risk description**: [specific description of the risk and possible dispute scenarios] - **Legal basis**: [cite specific legal provisions] - **Probability of occurrence**: high / medium / low - **Impact severity**: severe / substantial / ordinary - **Response recommendations**: - Prevention: [contract amendment suggestions] - Control: [performance management suggestions] - Remedy: [response after a dispute arises] - **Confidence**: [high / medium / low, with explanation] ### 🟡 Medium Risk [same format as above] ### 🟢 Low Risk [same format as above] ## Key Recommendations Summary 1. [most important recommendation] 2. [next most important recommendation] 3. ... ## Limitations of the Analysis - [explain how missing information affects the analysis] - [explain uncertainty in legal application] - [other reservations] ``` ### Template 2: Brief Risk Alert (for quick review) ```markdown # Risk Snapshot: [contract name] ⚠️ **High-risk alerts** (X items in total): 1. [risk name]: [one-sentence description] → Recommendation: [one-sentence recommendation] 2. ... ⚡ **Medium-risk alerts** (X items in total): 1. [risk name]: [one-sentence description] → Recommendation: [one-sentence recommendation] 2. ... 💡 **Low-risk alerts** (X items in total): 1. [risk name]: [one-sentence description] 2. ... 📋 **Priority action items**: 1. [most urgent matter to address] 2. [next most urgent matter] ``` --- ## Confidence and Risk-Level Annotation System ### I. Risk-Level Rating Matrix ``` Impact severity Severe Substantial Ordinary Oc High 🔴High 🔴High 🟡Med cur ren Medium 🔴High 🟡Med 🟡Med ce pro Low 🟡Med 🟡Med 🟢Low ba- bil- ity ``` **Criteria for impact severity:** - **Severe**: Contract void / voidable; contractual purpose unattainable; material economic loss (exceeding 30% of contract value); criminal law risk - **Substantial**: Partial clauses void; significant breach liability; project delay; breakdown of commercial relationship - **Ordinary**: Minor economic loss; resolvable by negotiation; does not affect the main purpose of the contract **Criteria for probability of occurrence:** - **High**: Based on the contract text and known facts, triggering conditions already exist or are highly likely - **Medium**: Triggering conditions partly exist; reasonably possible under ordinary commercial conditions - **Low**: Triggering requires a combination of specific conditions; unlikely under ordinary circumstances ### II. Analytical Confidence Annotation | Confidence | Marker | Meaning | Applicable scenarios | |--------|------|------|----------| | **High confidence** | `[Confidence: High]` | Conclusion based on clear contractual clauses and settled legal rules | Clause clearly violates mandatory provisions; clauses contain clear contradictions | | **Medium confidence** | `[Confidence: Medium]` | Conclusion based on reasonable inference and ordinary judicial practice | Ambiguous clauses may cause disputes; counterparty performance capacity is doubtful | | **Low confidence** | `[Confidence: Low]` | Inference from limited information with substantial uncertainty | Incomplete information; disputed legal application; involves judicial discretion | ### III. Special Annotations - `[Information needed]`: Marks risk points that require more information from the user for accurate assessment - `[Legal controversy]`: Marks issues where legal application itself is disputed - `[Regional variation]`: Marks issues where judicial practice may differ across regions - `[Time-sensitive]`: Marks risks heavily affected by timing (e.g., statute of limitations, exclusion periods) --- ## Common Errors and Prevention ### I. Fatal Error Table | ID | Fatal error | Error description | Possible consequences | Prevention | |------|----------|----------|----------|----------| | F-01 | **Omitting validity risk** | Failing to identify circumstances that may render the contract void or voidable | User transacts on an invalid contract and suffers major loss | Conduct validity review first; check item by item against Civil Code Arts. 143–157 | | F-02 | **Ignoring mandatory provisions** | Failing to identify clauses that violate mandatory provisions of laws or administrative regulations | Relevant clauses held void | Maintain a mandatory-provisions checklist; match applicable special laws by contract type | | F-03 | **Confusing regulatory vs validity mandatory rules** | Mistaking regulatory (administrative) mandatory rules for validity mandatory rules, or vice versa | Incorrect judgment of contract validity | Distinguish by reference to the latest judicial interpretations and guiding cases | | F-04 | **Omitting related-contract risk** | Reviewing only a single contract and ignoring cross-effects of related contracts | Missing systemic risk | Ask whether related contracts, supplemental agreements, framework agreements, etc. exist | | F-05 | **Ignoring limitation / time-bar risk** | Failing to flag statutes of limitations, exclusion periods, objection periods, and similar time limits | User loses avenues for rights relief | Annotate all clauses and statutory periods involving time limits | | F-06 | **Incorrect legal application** | Using repealed laws or inapplicable jurisdictional rules as the analytical basis | Analytical conclusions entirely wrong | Confirm that cited laws remain currently in force; confirm the applicable jurisdiction | ### II. Common Traps | ID | Trap name | Description | Response | |------|----------|------|----------| | T-01 | **Surface-compliance trap** | Clause wording appears compliant, but actual operations will inevitably lead to breach | Simulate real performance scenarios; test clause enforceability | | T-02 | **One-sided perspective trap** | Analyzing only from one's own side, ignoring the other party's possible claims and defenses | Conduct a "counterparty simulation"—review the contract from the other party's stance | | T-03 | **Static analysis trap** | Analyzing only based on circumstances at signing, ignoring changes during performance | Consider risk evolution across the full contract lifecycle | | T-04 | **Over-riskification trap** | Labeling every uncertainty as a risk, causing the report to lose focus | Strictly apply risk screening rules; distinguish risk from ordinary commercial uncertainty | | T-05 | **Template trap** | Applying a generic risk checklist and ignoring case-specific features | First understand the commercial logic of the specific deal, then analyze accordingly | | T-06 | **Literal-text trap** | Analyzing only the written contract, ignoring oral agreements, trade customs, and industry practice | Proactively ask for background information beyond the contract text | | T-07 | **Liquidated-damages panacea trap** | Believing that agreeing liquidated damages fully protects rights | Assess enforceability (counterparty ability to pay) and the likelihood of judicial adjustment | | T-08 | **Arbitration-clause neglect trap** | Failing to review the validity of the arbitration clause and its pros/cons for one's own side | Specifically review dispute resolution clauses; weigh arbitration vs litigation | --- ## Special Scenario Handling ### Scenario 1: Contract Partially Performed ``` Handling points: 1. Distinguish risks for performed vs unperformed portions 2. Assess whether the performed portion has defects (which may trigger retrospective disputes) 3. Focus on whether changes during performance were confirmed in writing 4. Compare the risks of continued performance versus terminating the contract 5. Note limitation periods / time bars that have already run or are about to expire ``` ### Scenario 2: Standard-Form / Form Contracts ``` Handling points: 1. Focus on whether notice and explanation duties for standard-form clauses were fulfilled 2. Identify clauses that may be held to "exempt one's own liability, aggravate the other party's liability, or exclude the other party's main rights" 3. Assess conflicts between standard-form clauses and non-standard clauses (handwritten / supplemental clauses) 4. Focus on application of Civil Code Arts. 496–498 5. For consumer contracts, additionally apply the Law on the Protection of Consumer Rights and Interests ``` ### Scenario 3: Cross-Border Contracts ``` Handling points: 1. Confirm the validity of the governing-law clause 2. Assess uncertainty of applying foreign law 3. Review dispute resolution clauses (international arbitration vs domestic litigation) 4. Focus on foreign-exchange controls and approval requirements 5. Assess feasibility of cross-border enforcement 6. Note application of international treaties (e.g., automatic application and opt-out of CISG) ``` ### Scenario 4: Multi-Party Contracts / Related-Party Transactions ``` Handling points: 1. Map the rights-and-obligations relationships among all parties 2. Identify "chain-break" risk (one party's breach triggering cascading effects) 3. Assess conflicts of interest among the parties 4. Review fairness of related-party transactions 5. Focus on information asymmetry risk 6. Assess the impact of one party's exit on the overall transaction ``` ### Scenario 5: Severely Insufficient Information ``` Handling points: 1. Clearly inform the user how insufficient information affects analytical quality 2. List key information that needs to be supplemented 3. Conduct limited analysis based on available information, clearly annotating assumptions 4. Mark all conclusions with low confidence 5. Provide conditional "if... then..." analysis 6. Recommend that the user supplement information before a full analysis ``` ### Scenario 6: Doubtful Contract Validity ``` Handling points: 1. Prioritize validity analysis (validity is the premise for all other risks) 2. Distinguish void, voidable, and pending-effectiveness situations 3. Assess whether partial invalidity affects the validity of other clauses 4. Analyze property restitution and damages after contract invalidity 5. Consider whether the contract can be cured into validity 6. Cite Civil Code Arts. 143–157 and related judicial interpretations ``` --- ## Quality Checklist Before outputting the final report, verify each item on the following checklist: ### A. Completeness Check - [ ] Have all core contractual clauses been reviewed? - [ ] Have risks at the clause, transaction, and environment layers all been covered? - [ ] Have both dispute-risk and performance-risk dimensions been considered? - [ ] Has contract validity been checked? - [ ] Have dispute resolution clauses been reviewed? - [ ] Have limitation / time-bar issues been considered? - [ ] Have omitted clauses been identified? ### B. Accuracy Check - [ ] Has each risk passed the "Four-Element Verification"? - [ ] Are cited legal provisions accurate and currently in force? - [ ] Does the risk-level rating conform to the rating matrix? - [ ] Have definitive conclusions been distinguished from speculative judgments? - [ ] Has confidence been correctly annotated? ### C. Practicality Check - [ ] Does each risk include specific response recommendations? - [ ] Are the recommendations actionable? - [ ] Are risks prioritized? - [ ] Does the report clearly mark information the user needs to supplement? - [ ] Are priority action items provided? ### D. Normative Check - [ ] Is a legal disclaimer / liability notice included? - [ ] Are limitations of the analysis explained? - [ ] Does the output format conform to the templates? - [ ] Is the language professional, accurate, and unambiguous? - [ ] Have absolute formulations (e.g., "certainly," "inevitably") been avoided? ### E. Error-Prevention Check - [ ] Have the six fatal errors in the "Fatal Error Table" been checked item by item? - [ ] Have the eight traps in "Common Traps" been checked? - [ ] Has a "counterparty simulation" (review from the other party's stance) been conducted? - [ ] Has risk across the full contract lifecycle been considered? --- ## Complete Examples ### Example 1: Simple Scenario—Risk Identification for a Premises Lease Contract **User input:** > I am the lessee and signed a shop lease for a 5-year term at an annual rent of RMB 500,000. Please help me identify risks. The main clauses are as follows: > - Art. 3: Rent increases by 8% each year > - Art. 5: Lessee may not sublease > - Art. 7: Lessor may immediately terminate the contract upon lessee's breach and forfeit the entire deposit (deposit equals 6 months' rent, i.e., RMB 250,000) > - Art. 9: Lessee's fit-out investment in the shop belongs to the lessor upon contract termination > - Art. 11: Disputes are subject to the jurisdiction of the court at the lessor's domicile > - No agreement on a preferential renewal right > - No agreement on the lessor's repair obligations **AI output:** --- # Dispute and Performance Risk Analysis Report ## Basic Information - **Contract name**: Shop Lease Contract - **Contract type**: Premises lease contract - **Parties**: Lessor (Party A) vs Lessee (Party B) (analytical stance: Lessee) - **Analysis date**: [current date] - **Information completeness**: Partially missing (full contract text not seen; analysis based only on main clauses provided by the user) ## Risk Overview | Risk level | Count | Share | |----------|------|------| | 🔴 High risk | 2 items | 29% | | 🟡 Medium risk | 3 items | 43% | | 🟢 Low risk | 2 items | 29% | **Overall risk assessment**: Overall, the contract is relatively unfavorable to the lessee, with multiple clauses markedly skewed toward the lessor; substantive negotiation and amendment before signing are recommended. ## Risk Inventory ### 🔴 High Risk #### Risk 1: Termination right and deposit-forfeiture clause are clearly unfair - **Risk type**: Dispute risk + validity risk - **Risk layer**: Clause-level - **Related clause(s)**: Art. 7—"Lessor may immediately terminate the contract upon lessee's breach and forfeit the entire deposit" - **Risk description**: This clause has two serious problems: (1) "breach" does not distinguish minor breach from fundamental breach; any breach may trigger termination, giving the lessor an excessively broad unilateral termination right; (2) "forfeit the entire deposit" is in substance liquidated damages, and RMB 250,000 may be held excessive for a minor breach. The greater risk is that the lessor may use this clause to terminate on a minor breach, forfeit the deposit, and reclaim a shop that has already appreciated in value. - **Legal basis**: - 《民法典》 Civil Code Art. 563 (conditions for statutory termination rights) - 《民法典》 Civil Code Art. 585, para. 2 (judicial adjustment of excessive liquidated damages) - 《民法典》 Civil Code Art. 497 (invalidity of standard-form clauses that unreasonably aggravate the other party's liability) - **Probability of occurrence**: High (the clause itself constitutes risk, and the lessor has incentive to use it) - **Impact severity**: Severe (may lose both the business premises and RMB 250,000 deposit at once) - **Response recommendations**: - Prevention: Amend Art. 7 to enumerate severe breach scenarios that justify termination; replace deposit forfeiture with compensation for actual loss; add written notice and a reasonable cure period (e.g., 30 days) before lessor termination - Control: Strictly comply with all contractual obligations; retain all performance evidence - Remedy: If the lessor terminates for a minor breach, argue improper exercise of the termination right and seek judicial reduction of liquidated damages - **Confidence**: `[Confidence: High]` Clause content is clear; legal application is clear #### Risk 2: Fit-out attribution clause may cause major economic loss - **Risk type**: Dispute risk - **Risk layer**: Clause-level - **Related clause(s)**: Art. 9—"Lessee's fit-out investment in the shop belongs to the lessor upon contract termination" - **Risk description**: Shop operations usually require large fit-out investment. This clause means that regardless of the reason for termination (including termination caused by lessor breach), all of the lessee's fit-out investment belongs to the lessor. Combined with Art. 7's broad termination right, the lessor may seek a pretext to terminate after the lessee completes fit-out and obtain the fit-out results for free. Fit-out investment over a 5-year lease may reach hundreds of thousands or even over RMB 1 million. - **Legal basis**: - 《民法典》 Civil Code Art. 715 (lessee who improves with lessor's consent may request appropriate compensation) - 《民法典》 Civil Code Art. 584 (scope of damages) - **Probability of occurrence**: High (contract termination is inevitable; fit-out attribution disputes are extremely common) - **Impact severity**: Severe (may lose the entire fit-out investment) - **Response recommendations**: - Prevention: Amend Art. 9 to distinguish fit-out compensation schemes for normal expiry, lessee breach, and lessor breach; agree a method for calculating residual fit-out value (e.g., annual depreciation); agree full compensation of fit-out investment if lessor breach causes termination - Control: Retain all fit-out contracts, invoices, and payment vouchers - Remedy: If termination is caused by the lessor, claim fit-out compensation under the principle of fairness - **Confidence**: `[Confidence: High]` ### 🟡 Medium Risk #### Risk 3: Rent escalation rate is too high - **Risk type**: Performance risk - **Risk layer**: Clause-level + transaction-level - **Related clause(s)**: Art. 3—"Rent increases by 8% each year" - **Risk description**: An 8% annual increase means Year-5 rent will reach about RMB 680,000 (500,000 × 1.08⁴ ≈ 680,200), roughly 36% above Year 1. If shop revenue growth underperforms expectations, later rent burden may cause operating difficulty and thus performance risk. An 8% escalation also significantly exceeds the 3%–5% market practice for ordinary commercial leases. - **Legal basis**: 《民法典》 Civil Code Art. 533 (change of circumstances)—if the market environment changes materially, adjustment may be requested - **Probability of occurrence**: Medium (depends on operating results and market conditions) - **Impact severity**: Substantial (may lead to inability to pay rent and thus breach) - **Response recommendations**: - Prevention: Negotiate escalation down to within 5%, or agree a floating mechanism linked to CPI / market rent; set an escalation cap - Control: Plan finances carefully and reserve room for rent growth - Remedy: If the market environment changes materially, invoke change-of-circumstances principles to seek adjustment - **Confidence**: `[Confidence: Medium]` Whether the risk materializes depends on future operating results #### Risk 4: Missing preferential renewal right - **Risk type**: Dispute risk - **Risk layer**: Clause-level - **Related clause(s)**: Contract does not agree a preferential renewal right - **Risk description**: After the 5-year term expires, the lessee has no contractual preferential renewal right. If the shop performs well and has accumulated customer resources and goodwill, the lessor may sharply raise rent or refuse renewal; the lessee faces forced relocation, and previously accumulated commercial value may be heavily impaired. Although 《民法典》 Civil Code Art. 734 provides a preferential leasing right on equal terms, its protection is weaker than an express contractual agreement. - **Legal basis**: 《民法典》 Civil Code Art. 734 (upon expiry of the lease term, the lessee has a preferential right to lease on equal terms) - **Probability of occurrence**: Medium (depends on market conditions and lessor's willingness at the time) - **Impact severity**: Substantial (may lose the business premises and commercial accumulation) - **Response recommendations**: - Prevention: Add a preferential renewal clause specifying renewal conditions and procedures; agree advance notice by the lessor (e.g., 6 months) - Control: Maintain a good relationship with the lessor during the term; begin renewal negotiations one year in advance - Remedy: Assert the preferential leasing right under Civil Code Art. 734 - **Confidence**: `[Confidence: Medium]` #### Risk 5: Missing lessor repair obligations - **Risk type**: Dispute risk - **Risk layer**: Clause-level - **Related clause(s)**: Contract does not agree the lessor's repair obligations - **Risk description**: During use of the shop, the main structure, common facilities, etc. may need repair. Absence of an agreed allocation of repair duties may lead to disputes over repair responsibility. Although 《民法典》 Civil Code Art. 712 provides that the lessor shall perform repair obligations, the specific scope and response time lack agreement, which may cause delayed repairs that affect operations. - **Legal basis**: 《民法典》 Civil Code Arts. 712–713 (lessor's repair obligations and cost bearing when the lessee repairs itself) - **Probability of occurrence**: Medium (probability of repair needs over a 5-year term is relatively high) - **Impact severity**: Ordinary (usually resolvable by negotiation; statutory rules provide a fallback) - **Response recommendations**: - Prevention: Add repair-obligation clauses clarifying that the lessor is responsible for the main structure and common facilities, and agree response times and cost allocation - Control: Upon discovering a repair need, promptly notify the lessor in writing - Remedy: If the lessor fails to repair, the lessee may repair itself and require the lessor to bear the costs - **Confidence**: `[Confidence: High]` ### 🟢 Lo …(truncated)