Practical issues
A change of circumstances refers to an abnormal change in the objective circumstances that are the basis or environment of the transaction due to reasons that cannot be attributed to the parties after the conclusion of the contract, and it is obviously unfair to continue to perform the obligations in accordance with the contract. The legal consequence of a change of circumstances is to allow a disadvantaged party to request a variation or rescindation of the contract. Traditional civil law adheres to the principle that "contracts must be strictly observed", holding that after the parties conclude a contract, they should bear the transaction risks themselves, and no matter what abnormal changes occur in the trading environment, the validity of the contract should not be affected. After entering the modern society, large-scale emergencies such as the financial crisis have caused severe social and economic turbulence several times, and many originally fair contracts have lost fairness due to currency depreciation, soaring prices, etc. Modern civil law or jurisprudence generally establishes the principle of change of circumstances to correct the unfair contract. The principle of change of sic stantibus is a restriction on freedom of contract based on the principles of fairness and good faith. Since last year, the price of building materials has increased to varying degrees, and among the cases being handled by the team, five construction and dispute cases involve problems such as material adjustment. For the increase in material prices is force majeure or a change of circumstances, the parties to the contract are fighting and arguing, and if they cannot reach an agreement, they can only resort to judicial channels to resolve, let's take a typical case of the Supreme People's Court, combined with several similar cases, to see how the court adjudicates the relevant facts and reasons in judicial practice.
Court Highlights
Article 4 of the General Principles of the Civil Law stipulates that "civil activities shall follow the principles of voluntariness, fairness, equal remuneration and good faith" [the content of this provision is inherited by Articles 4-7 of the Civil Code], and the Supreme People's Court <中华人民共和国合同法>on ApplicationArticle 26 of the Interpretation of Several Issues (II) stipulates that [the content of this article is inherited by Article 533 of the Civil Code], after the conclusion of the contract, the objective circumstances have undergone major changes that are not commercial risks that the parties could not foresee at the time of the conclusion of the contract and are not caused by force majeure, and the continued performance of the contract is obviously unfair to one party or cannot achieve the purpose of the contract, and the parties request the people's court to modify it, the people's court shall modify it in accordance with the principle of fairness. In this case, the price of diesel fuel was 550 yuan per ton when the parties signed the contract in July 2005 and rose to 1,250 yuan per ton at the end of construction in August 2007.
Summary of the case
1. On July 25, 2005, Sun Jianfa and Shenyang Highway Equipment Company signed the "Highway (Construction) Engineering Contracting Construction Agreement", agreeing that Sun Jianfa would undertake the construction of the highway project of the B5 contract section of Xinyang Expressway (roadbed five teams).
2. Due to the proposed party's repeated changes to the project and heavy rainfall, the project was only completed and opened to traffic on December 19, 2007. As the parties could not agree on the specific quantity of work, the construction fee was not settled.
3. On October 27, 2012, upon the application of Sun Jianfa, the court of first instance entrusted Zhumadian Zhengtai Engineering Management Co., Ltd. to evaluate the disputed project and issue an appraisal opinion. Shenyang Highway Company refused to accept the appraisal opinion on the grounds that the evidence for the appraisal was unilaterally provided by Sun Jianfa. Subsequently, Sun Jianfa applied for appraisal again, and provided 18 volumes of construction records and other evidence compiled by Shenyang Highway Company, and re-evaluated the content of Sun Jianfa's appeal.
4. The court of first instance found that before the signing of the agreement, Shenyang Highway Company and Xinyang Expressway Construction Investment Co., Ltd. signed the construction contract for the B5 contract section of Xinyang Expressway, and Shenyang Highway Equipment Company was not a contractor and Shenyang Highway Equipment Company was a subsidiary of Shenyang Highway Company.
Reasons for the Court's decision
1. The court of first instance held that:
Sun Jianfa and Shenyang Highway Equipment Company signed the "Highway (Construction) Project Contracting and Construction Agreement", although the official seal affixed to the agreement was Shenyang Highway Equipment Company, but the project in this case was contracted by Shenyang Highway Company, and Shenyang Highway Equipment Company, as a subsidiary of Shenyang Highway Company, affixed the official seal to the agreement should be regarded as an act entrusted by Shenyang Highway Company. Therefore, the two parties to the agreement in this case should be Sun Jianfa and Shenyang Highway Company. Sun Jianfa's request that Shenyang Highway Equipment Company bear the responsibility for paying for the project was not supported.
If the construction contract of a construction project is invalid, but the construction project has passed the completion inspection and acceptance, and the contractor's request to pay the project price in accordance with the provisions of the contract, it shall be supported. Both parties have no objection to the works that are within the contract, and the price shall be calculated by reference to the quantity and price agreed in the contract.
For the sharp increase in the price of diesel fuel in Sun Jianfa's construction, the two parties did not agree on how to deal with the situation, and it was not fair to consider that the price of the increased part should be borne by Sun Jianfa, so the calculation of the construction cost of several of the construction contents in this part should be calculated according to or by reference to the unit price of the contract list and considering the oil price, and the other construction contents should be calculated according to the appraisal amount if there is no basis or reference basis.
The court of first instance ruled that: 1. Shenyang Highway Company should pay Sun Jianfa 3,906,230.07 yuan and interest within 10 days of the effective date of the judgment; Both parties appealed.
2. The court of second instance held that:
1. Determination of the standard for drawing the price of the project in this case. The first-instance judgment did not improperly calculate the construction price for the work in the contract agreed upon by the parties by reference to the unit price agreed in the contract. Because the two parties could not reach an agreement on the price of the part of the project, and did not clearly stipulate the price of each construction content in the contract, the first instance judgment did not improperly calculate the construction content according to the budget fixed amount, which was in line with the price settlement practice of the construction industry. The first-instance judgment held that in addition to the contents of the 18 volumes, the construction project of Sun Jianfa signed and approved by the personnel of Shenyang Highway Company was not improper in the actual construction situation if the unit price of the Sun Jianfa construction project was agreed upon in the contract list, and the construction quantity agreed upon in the contract list was calculated according to the list unit price and taking into account the oil price, and the construction content not agreed in the contract list was priced according to the national fixed amount. Therefore, the method of collecting fees according to the content of the dispute between the parties is appropriate and should be upheld. This court does not support Shenyang Highway Company's appeal claim that all the disputed quantities are charged at the unit price of the contract.
2. Determination of the quantity of work other than those recorded in the 18 volumes of the completion file of the project in this case. The first-instance judgment did not improperly determine the quantity of work signed and confirmed by the on-site staff of Shenyang Highway Company, and Shenyang Highway Company only raised its views on this issue in the appeal brief, and did not list the evidence that the first-instance judgment found that the quantity was improper, and it should bear the legal consequences of failing to adduce evidence. Therefore, this court does not support Shenyang Highway Company's grounds of appeal.
3. The Supreme Court held in a retrial
The focus of the dispute between the parties in this case was whether the calculation standard and the determination of the quantity involved in the project were correct
Determination of the standard for calculating the project price. Shenyang Highway Company subcontracted part of the highway project it contracted to Sun Jianfa, because Sun Jianfa did not have highway engineering construction qualifications, and the "Highway (Construction) Project Contracting and Construction Agreement" signed by the two parties violated the mandatory provisions of relevant laws and administrative regulations and was an invalid agreement. According to Article 2 of the Interpretation of the Supreme People's Court on Issues Concerning the Application of Law in the Trial of Cases Involving Disputes over Construction Contracts, the project price shall be settled by reference to the contract. Therefore, for the quantity of work within the scope agreed in the contract agreed upon by both parties, the construction amount can be calculated by referring to the unit price agreed in the contract; According to Article 61 of the Contract Law of the People's Republic of China, "after the contract takes effect, if the parties have not agreed on the quality, price or remuneration, place of performance, etc., or the agreement is unclear, they may agree to supplement it; If a supplementary agreement cannot be reached, it shall be determined in accordance with the relevant provisions of the contract or trading customs", and the original judgment ruled that the pricing of this part of the construction content according to the budget quota conformed to the practice of price settlement in the construction industry, and was not improper. With regard to whether the calculation of the cost of the works should take into account the increase in oil prices. The court held that Article 4 of the General Principles of the Civil Law stipulates that "civil activities shall follow the principles of voluntariness, fairness, equal remuneration, and good faith", and the Supreme People's Court <中华人民共和国合同法>on ApplicationArticle 26 of the Interpretation (II) of Several Issues stipulates that after the conclusion of a contract, a major change occurs in the objective circumstances that is not a commercial risk that the parties could not foresee at the time of the conclusion of the contract and is not caused by force majeure, and the continued performance of the contract is obviously unfair to one party or cannot achieve the purpose of the contract, and the parties request the people's court to modify it, the people's court shall make the change in accordance with the principle of fairness. In this case, the price of diesel fuel was 550 yuan per ton when the parties signed the contract in July 2005 and rose to 1,250 yuan per ton at the end of construction in August 2007.
Case Index
Supreme People's Court Civil Ruling on Retrial Review and Trial Supervision of Shenyang Gao and Sun Jianfa Construction Contract Disputes [(2017) Supreme Law Min Shen No. 3108; Date of referee: 2017.09.20; Judges: Yang Lichu, Liu Xuemei, Mei Fang]
Brief analysis
Article 533 of the Civil Code After the conclusion of the contract, if the basic conditions of the contract have undergone major changes that the parties could not foresee at the time of concluding the contract and are not commercial risks, and the continued performance of the contract is obviously unfair to one of the parties, the adversely affected party may renegotiate with the other party; If the negotiation fails within a reasonable period of time, the parties may request the people's court or arbitration institution to modify or rescind the contract.
The people's court or arbitration institution shall, in light of the actual circumstances of the case, modify or terminate the contract in accordance with the principle of fairness.
A change of circumstances means that after the contract is validly established, due to reasons that cannot be attributed to the parties, the basis of the contract is shaken or lost, and if it is unfair to continue to maintain the original validity of the contract, it is allowed to change the content of the contract or rescind the contract. Both require that what happens is an objective situation that is "unforeseeable, unavoidable and insurmountable", so the "circumstances" of the two often coincide. Therefore, in asserting the relevant fact of force majeure or change of circumstances, a careful distinction must be made between the two.
| force majeure | Change of circumstances | |
| 1. Objective performance | Human irresistible natural forces, such as natural disasters, social anomalies. | Unexpected events, drastic changes in the socio-economic situation, soaring prices, severe currency depreciation, financial crises and changes in national policies. |
| 2. Scope of application | Statutory exemptions apply in both contractual and tort liability. | The essence of the principle of contract performance is to give the parties the right to request modification or rescission of the contract. |
| 3. Direct consequences | Rendering the contract impossible to perform, including total and partial failure, permanent inability and temporary inability. | The contract can still be performed, but it is too difficult or costly to perform and is therefore unfair to one of the parties. |
| 4. Degree of Exemption | If the party that fails to perform obtains evidence in accordance with the law and performs its legal obligations, it may be exempted from liability for breach of contract and directly notify the other party to rescind or modify the contract. | The court must be requested to decide. If the judge rejects the request, the contractual obligation shall still be performed. Even if you agree to vary or rescind the contract, it does not automatically exempt you from liability for compensation or compensation. |
| 5. Nature of the rights of the parties | The right of the parties to postpone, partially perform or rescind the contract is a right of formation without the consent of the other party. | If the parties cannot make their own decisions, they must apply to the people's court or arbitration institution for a decision. |
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Statement
This number of collation, summary and induction of relevant cases, only for the purpose of team learning and improvement, the court's fact determination, adjudication reasons, adjudication views, are neutral, do not rule out due to the duty lawyer's knowledge limitations, misunderstood the meaning of the original text of the judgment, so the article is for reference only, each case has a case index, it is recommended to read the original text of the judgment document.