Government Service Team Huaicheng lawyer
Edit | July
Author | Huaicheng Li Wanchi
Li Wanchi
Liaoning Huaicheng Law Firm
Civil Litigation Corporate Counsel Government Services
In the construction industry, the settlement and payment of project funds often affect the interests of many participants.
In practice, construction contracts often stipulate that "the cost shall be approved by the employer as the basis for payment".
If the employer fails to pass the audit for a long time, can't the contractor or subcontractor legally claim the project payment?
1
The project has not been audited for a long time after its completion
The construction party had no choice but to recover the project payment
In 2014, a municipal housing and urban-rural development bureau signed a construction contract with a construction company in Ningxia, agreeing that a construction company in Ningxia would undertake the construction of an affordable housing project.
In the same year, a construction company in Ningxia signed the "Project Construction Contracting Agreement" with Wang, and contracted a part of the public rental housing project to Wang for construction, and the agreed bid price was 66,763,937.18 yuan, and the contracting method was contracted labor and materials, and the project payment was finally based on the approved total project settlement price, and the settlement was based on the facts.
After the contract was signed, Wang Moumou fulfilled the construction obligation, and the project has been completed, accepted and delivered.
However, because the construction unit has not submitted audit materials to the Finance Bureau, Wang Moumou has failed to ask for the remaining project money.
As a result, Wang Moumou sued the court, requesting that a construction company in Ningxia be ordered to pay Wang Moumou the outstanding project money and interest, and that the Municipal Housing and Urban-Rural Development Bureau bear joint and several liabilities.
2
Failure to audit within a reasonable period of time
The parties' applications for appraisal shall be granted
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The court of first instance in this case held that both Wang and a construction company in Ningxia were well aware of the agreement that "the approved cost of a certain municipal finance bureau should be used as the basis for payment", but the approved cost had not yet been made, and the conditions for Wang Moumou to demand payment of the project money had not yet been fulfilled, so it ruled to reject Wang's litigation claim.
Wang Moumou was dissatisfied with the ruling and appealed.
The court of second instance held that the project involved in the case had been completed and accepted on May 8, 2019, and was completed for the record on August 9, 2019, and that Wang's lawsuit as the actual constructor of the project involved in the case complied with the provisions of the Civil Procedure Law of the People's Republic of China.
If the Municipal Bureau of Housing and Urban-Rural Development did not submit it to the Municipal Finance Bureau for review, or the Municipal Finance Bureau refused to review, or the Municipal Finance Bureau could not make an audit within a reasonable period of time set by the court, or the audit results of the Municipal Finance Bureau could not be used as the basis for determining the cost of the project involved in the case, it should be explained to Wang whether to apply for a cost assessment of the project involved in the case, and a substantive trial should be made on Wang's claim.
Where it is stipulated in the construction contract that the government audit conclusion shall be used as the basis for the settlement of the project price, the people's court shall not reject the contractor's lawsuit on the grounds that the government has not issued an audit conclusion.
In the substantive trial of the case, if the audit department fails to start the audit procedure within a reasonable period of time, or issues an audit conclusion, the people's court shall approve the party's application for appraisal in accordance with law.
3
Huaicheng lawyer reminded
In view of the construction contract disputes, combined with the court's adjudication rules and practical experience, Huaicheng lawyers remind:
1. If it must be stipulated in the construction contract that the government audit conclusion shall be used as the basis for the settlement of the project price, it is recommended to report to the government for audit in a timely manner according to the contract, and the refusal to pay the project price on this ground will not be supported by the court.
2. If the construction contract has agreed to take the government audit conclusion as the basis for the settlement of the project price, and Party A fails to audit within a reasonable period of time, the parties may apply for project cost appraisal in the lawsuit.
3. In addition, special attention should be paid to the invalidity of four types of contracts in the construction contract:
Where the contractor has not obtained the qualification of a construction enterprise or exceeds the qualification level, the actual constructor without qualifications borrows the name of a qualified construction enterprise, the construction project must be tendered but the bidding is not carried out or the winning bid is invalid, or the contractor has signed a construction contract with others due to subcontracting or illegal subcontracting of the construction project.
4. The contractor shall pay attention to the statute of limitations when exercising the right of priority to be compensated for the price of the construction project, which shall not exceed 18 months.
5. Where the employer and the contractor agree to waive or restrict the right of priority to be compensated for the price of the construction project, harming the interests of the construction workers, and the employer claims that the contractor does not enjoy the priority right to be compensated for the price of the construction project in accordance with such agreement, the agreement shall be invalid.
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Applicable Law:
Interpretation of the Supreme People's Court on Issues Concerning the Application of Law in the Trial of Cases Involving Disputes over Construction Contracts (I)
Article 43: Where the actual constructor sues with a subcontractor or illegal subcontractor as the defendant, the people's court shall accept it in accordance with law.
Where the actual contractor claims rights with the employer as the defendant, the people's court shall add the subcontractor or illegal subcontractor as the third party in the case, and after ascertaining the amount owed by the employer to the subcontractor or the illegal subcontractor for the construction project price, make a judgment that the employer shall bear responsibility for the actual contractor within the scope of the unpaid construction project price.
Case Source:
Ningxia Hui Autonomous Region Yinchuan Intermediate People's Court, Wang Moumou, Ningxia Company, et al., Construction Contract Dispute Case, (2021) Ning 01 Min Chu No. 18.
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