Opinions on Several Issues Concerning the Trial of Cases of Disputes over Construction Project Contracting Contracts

Opinions of the Shandong Provincial High People's Court on Several Issues Concerning the Trial of Cases of Disputes over Construction Contracts

Issuing Authority: Shandong Provincial High People's Court

Date of issue: 30 October 1998

In order to correctly and timely hear construction project contract dispute cases, protect the legitimate rights and interests of citizens and legal persons in accordance with the law, standardize construction project contracting activities, and ensure the healthy and orderly development of the construction industry and the construction market, in accordance with the "Construction Law of the People's Republic of China" and other laws, regulations and policies of the state and the relevant provisions of the Supreme People's Court, combined with the actual situation of our province and the practical experience of adjudication. The following opinions are hereby put forward on several issues in the trial of construction project contract dispute cases for reference in the trial of such cases.

1. Confirmation of the subject of the litigation

1. In the trial of the construction team's project contract dispute case, the parties to the contract are generally the subject of litigation.

2. If one of the parties to the contract sues the court after a dispute arises between the functional departments or branches of the construction unit that does not have the conditions of a legal person, the construction unit shall be the subject of the litigation and sue or respond to the lawsuit.

If the construction unit sues in the name of the internal functional department or branch, it shall be informed to replace the parties, and if it insists on suing, it shall rule to dismiss the lawsuit.

If the contractor sues the branch of the construction unit, it shall also inform it to replace the party, and if it insists on suing, it shall rule to dismiss the lawsuit.

3. If a dispute arises and then files a lawsuit against a construction contract signed by a branch of a construction enterprise with a business license (such as a branch, engineering office, work area, project management department, construction team, etc.), the branch is generally the subject of the litigation. If the branch does not have independent property, the construction enterprise shall be recovered as a joint litigant.

If a branch of a construction enterprise does not have a business license, and a dispute arises and is brought to the court, in principle, the construction enterprise shall be the subject of litigation to sue or respond to the lawsuit. Where the branch of the construction enterprise insists on suing the contractor of the construction project, it shall rule to reject the lawsuit.

Where a construction unit sues a branch of the construction enterprise, it may be handled in accordance with Article 2 of these Opinions.

4. If an enterprise with legal personality under a construction group enterprise signs a construction project contract with a foreign party and files a lawsuit to the court after a dispute arises, the enterprise shall be the subject of the litigation.

5. If a construction enterprise transfers, lends a qualification certificate or otherwise allows others to use the name of the enterprise to contract a project and files a dispute with the court, the lender and the borrower shall sue or respond to the lawsuit as joint litigants.

6. If a dispute arises in a construction project carried out due to joint contracting or joint contracting and is brought to the court, the joint contractor or joint contractor shall be the joint litigant to sue or respond to the lawsuit; Where the contract-issuing party sues only one contractor or only one contractor sues the contract-issuing party, it shall notify or add other contractors to participate in the litigation.

Where a joint contractor or a joint contractor forms a joint venture and has the status of a legal person, the joint venture shall be the subject of litigation.

7. In the case of a construction project constructed in accordance with the provisions of the Measures for the Implementation of General Subcontracting of Construction and Installation Projects, after a dispute arises due to the subcontracted project, the subject of the subcontract shall determine the parties to the litigation in principle. If the construction unit sues the general contractor for subcontracting the project, the subcontractor shall be added as a co-defendant, and if the construction unit directly sues the subcontractor, the general contractor shall be added as a co-defendant.

If a subcontractor sues the general contractor over the subcontract, it may be listed as a third party if the party's claim is for the recovery of project money or building materials, or if the construction unit is liable. If the subcontractor directly sues the construction unit for the subcontracted project, it shall rule to dismiss the lawsuit.

8. In the case of a construction contract dispute arising from subcontracting, if the construction unit sues, the subcontractor and the subcontractor shall be listed as co-defendants; If a dispute arises due to a subcontract, the subcontractor and the subcontractor shall be the subject of litigation, and if the construction unit fails to perform its obligations under the contract, it may be listed as a third party; Where there is multi-level subcontracting, the other parties shall be listed as third parties except for the litigants.

9. If a construction enterprise with an affiliated business relationship signs a construction contract in its own name or in the name of the affiliated unit, it shall generally sue or respond to the lawsuit with the affiliated operator and the affiliated unit as joint litigants after a dispute arises.

10. Where a construction enterprise implements contracted operation, the enterprise shall be the contractor. If a dispute arises due to a construction contract, the enterprise shall be the subject of litigation or respond to the lawsuit if the enterprise is a legal person, and if the enterprise does not have the status of a legal person, the employer and the contracting enterprise shall be listed as joint parties to the litigation.

11. If a project is contracted in the name of the preparatory unit or a temporary institution, if the unit has been approved for establishment after a dispute arises, the preparatory unit or the provisional organization shall sue or respond to the lawsuit by the organization that established or opened the unit, and if the temporary institution has been revoked before the lawsuit, the unit that revoked the temporary institution or took over the project shall sue or respond to the lawsuit.

12. In the case of a dispute over a construction contract signed between an individual construction team or an individual partnership construction team and the construction unit, if it is an individual construction team, the head of the household or the owner indicated on the industrial and commercial registration shall be the party to the litigation, and if there is a business name, it shall be noted in the legal documents. If it is an individual partnership construction team, in principle, all partners should be the parties to the litigation, and if there is a business name, it should be indicated in the legal documents, and if the individual partnership construction team is registered as a partnership by industry and commerce, the partnership enterprise should be the party to the litigation.

13. In the event of a dispute arising from a construction team set up by a rural collective economic organization contracting a construction project, the rural collective economic organization that opened the construction team shall be the subject of litigation or response, regardless of whether the construction team has a business license or not.

2. Confirmation of the validity of the contract

14. The people's court shall respect the true intention of the parties in the trial of a dispute over a construction contract, and shall confirm the legal validity of the contract signed by the parties as long as it does not violate the prohibitions of laws, regulations and policies.

15. Attention should be paid to reviewing the formal requirements of the contract, and the validity of the contract that meets the requirements of laws and regulations and the contract that has fulfilled the relevant approval procedures shall be confirmed in accordance with the law. If the contract lacks the relevant formal requirements of an administrative nature required by the general administrative department, the validity of the contract will generally not be affected unless there is a special agreement between the parties to the contract.

16. According to the Construction Law of the People's Republic of China, when signing the contract, the contractor must have a construction permit or commencement report, and the contractor must have legal personality and qualification certificate. Where two or one of the parties does not meet the above conditions and signs a construction team project contract, it shall be deemed invalid.

17. In accordance with the provisions of the Ministry of Construction's "Measures for the Management of the Qualifications of Village and Town Construction Craftsmen", construction craftsmen engaged in village and town housing construction projects must obtain the "Village and Town Construction Craftsman Qualification Certificate". If the certificate is not obtained, the signed building contract shall be deemed invalid. However, this does not apply to village and town housing construction contracts concluded before 1 October 1996.

18. The construction contract signed by the internal functional department of the construction unit in its own name shall generally be deemed invalid, but if the legal person recognizes it retrospectively or expresses objection and has actually performed it, it can be confirmed as valid.

19. The construction project contract signed by a temporary organization or preparatory unit established with legal approval shall be deemed to be valid.

20. The construction contract signed by the construction enterprise in the name of another person shall be deemed invalid if it uses, fraudulently uses or steals the business license or qualification certificate of another person and the construction contract signed in the name of another person.

21. The construction contract signed by the construction enterprise beyond the business scope and qualification level shall be deemed invalid. However, during the performance of the contract, if the construction enterprise obtains the corresponding qualification level for the contracted project, the contract may be deemed valid.

22. If a construction team that does not have a qualification certificate or does not have a corresponding qualification certificate is affiliated with other construction enterprises to contract construction projects, whether it is signed in its own name or signed in the name of the affiliated unit, it shall be deemed invalid. However, if the affiliated unit signs a construction project contract with the construction unit in its own name, and hands over the contracted project to the affiliated unit for construction, the validity of the construction project contract shall not be affected.

23. A construction contract signed by a branch of a construction enterprise in its own name shall generally be deemed invalid.

24. For two or more construction enterprises to jointly contract a construction project, the contracting qualification of each contractor shall be examined, and the contract shall be signed in accordance with the scope of the business license of the construction enterprise with a low qualification level, and the joint contracting contract that meets the above conditions shall be deemed valid.

25. The following conditions must be met for legal general subcontracting:

(1) The general contract is legal;

(2) The subcontractor has the corresponding qualification level of the subcontracted project;

(3) The external subcontracted project must be agreed in the general contract or approved by the construction unit;

(4) The main structure of the construction project must be completed by the general contractor itself;

(5) The subcontractor shall not subcontract the subcontracted project.

A general subcontract that does not meet the above conditions shall be deemed invalid.

26. If a construction enterprise subcontracts a contracted construction project, it shall be deemed invalid regardless of whether the construction unit agrees or approves it.

If a party to a contract transfers all or part of the rights and obligations in the construction contract to a third party, the transfer may be deemed valid if the following conditions are met.

(1) The assigned contract must be a valid contract;

(2) The consent of the other party to the contract shall be obtained for the assignment of the contract;

(3) The transferee must be a construction enterprise with corresponding qualifications;

(4) The transferor shall not make profits, violate the law, or damage the public interest;

(5) The assignment of the contract shall comply with the procedures prescribed by law.

If the construction contract is not allowed to be transferred as stipulated by law and the contract, the transfer shall be invalid.

27. After the Ministry of Construction, the State Development Planning Commission and the Ministry of Finance issued the Circular on Prohibiting the Contracting of Projects with Funds and the Construction of Advances on June 4, 1996, if the parties to a construction contract agree in the contract to contract the project with funds or advance construction with funds, the agreed clause shall be deemed invalid.

28. In the trial of a construction contract dispute case, if both parties do not claim the validity of the contract, the court shall also examine the validity of the contract and confirm and explain it in the legal documents.

3. On the handling of valid construction contracts

29. In the trial of construction contract dispute cases, it is necessary to enhance the awareness of the contract, and the contract should generally be used as the basis for handling the dispute for the contract that is confirmed to be valid in accordance with the law. However, after the conclusion of the contract, if there are factors that cannot be foreseen and overcome by the parties, such as the adjustment of national industrial policies, national policy price adjustments, tax rate adjustments, national fee adjustments, etc., which make it obviously unfair for both parties or one party to continue to perform the contract, the principle of change of circumstances shall be applied and the content of the contract shall be changed or terminated fairly and reasonably.

With regard to the foreseeable market risks of the parties, the parties' request to modify or terminate the contract shall not be supported.

30. In the trial of disputes over arrears of construction projects, the settlement shall generally be made in the manner agreed by the parties in the contract for the project cost and settlement; However, if the agreed price is obviously more than or less than 30% of the market price, and the labor remuneration is obviously more than or less than 30% of the same labor standard, resulting in a serious imbalance between the interests of both parties, the agreed price shall be changed fairly and reasonably. If the agreed price is not much different from the market price or the agreed price is unfavorable to one party, but due to the party's poor management or subjective judgment errors in the performance of the contract, its own interests are lost, and the party claims to change the project cost, it should not be supported.

31. If the employer and the contractor have negotiated the settlement of the project and signed the project settlement statement, in principle, the project settlement statement signed and approved by both parties shall be used as the basis for the finalization; In litigation, if one of the parties has an objection to the project settlement statement and cannot provide sufficient evidence to request the court to appraise it, it shall not be supported in principle.

32. Where one party entrusts a relevant department to conduct an appraisal or audit on its own during litigation or litigation, and the other party recognizes the appraisal or audit conclusion, it may be used as the basis for a verdict. If the other party submits that there are indeed missing items in the appraisal or audit conclusion, the people's court may separately entrust the appraisal or audit for the missing part. Where a party denies that the other party has entrusted a relevant department to make an appraisal or audit conclusion, it cannot be used as the basis for a verdict.

33. If the two parties are unclear on the settlement agreement of the project payment or have a large dispute over the settlement, they may, according to the application of the parties, entrust the appraisal conclusion issued by the appraisal department to conduct a careful review, and the parties can only use it as the basis for the verdict after cross-examination by the parties.

34. Where during the first instance period, the court entrusts the relevant departments to conduct an appraisal of the project settlement and make a judgment in accordance with the law, and during the second instance, if the parties are dissatisfied with the appraisal conclusion and the judgment results made by the original trial court based on the conclusion, and apply to the court for a new appraisal, it shall not be supported, unless the parties have sufficient evidence to prove that the appraisal conclusion is indeed wrong.

35. Where one party fails to appear in court to debate the appraisal conclusion during the first-instance trial, and the original trial court makes a default judgment based on the appraisal result, and the party raises objections to the appraisal conclusion during the second-instance trial and requests a new appraisal, it is generally not supported.

36. If the contract is valid, the construction project shall be handled in strict accordance with the contract. However, if the two parties have a supplementary agreement on the increase in the project price due to design changes in the performance of the contract, it shall be handled according to the agreement, and if there is no supplementary agreement, it shall be settled according to the current local quota standard. For unfinished projects, the cost of the unfinished works calculated according to the current project quota standards shall be deducted from the total contract price.

37. The quality of construction projects should generally be based on the quality assessment documents issued by the construction quality supervision and inspection department. The application for re-appraisal of the construction project quality assessment documents submitted by the parties is generally not supported. In the litigation, if the parties have any objection to the quality assessment documents issued by the construction engineering quality inspection department, they should inform the parties to apply to the quality inspection department for processing. During the processing period by the quality inspection department, a ruling may be made to suspend the litigation. If the quality inspection department does not handle it, it will be deemed that the parties cannot present evidence, and the objections of the parties will not be recognized.

38. In the trial of construction project quality disputes, attention shall be paid to distinguishing the responsibilities of the construction unit, the survey and design unit and the construction unit, and shall be dealt with in accordance with the relevant laws and regulations.

39. If there is a clear agreement on liquidated damages in the construction contract, it shall be handled in accordance with the agreement, but the total amount of liquidated damages shall generally be limited to the price not exceeding the unperformed part of the contract. If there is no agreement on liquidated damages in the contract, or the agreement is unclear, it shall be handled as if there is no agreement, and the parties' claim for liquidated damages shall not be supported.

40. If both parties fail to properly and fully perform the contract and cause economic losses to the other party, in addition to the liability for breach of contract, they shall also compensate the other party for the actual economic losses caused by the breach of contract, and the scope of the losses shall be proved by the parties.

4. On the handling of invalid construction contracts

41. After the construction contract is confirmed to be invalid, the respective liabilities of the parties to the contract shall be determined according to the degree of fault of the parties to the contract.

If the contract has not been performed after it has been confirmed to be invalid, the economic losses caused thereby shall be reasonably borne according to the degree of fault of both parties.

42. If the construction project has been completed and the quality is qualified, the construction unit shall pay the corresponding price to the construction enterprise according to the actual cost of the completed project, and the economic losses caused by the invalid contract shall be determined according to the degree of fault and responsibility of both parties.

43. For projects that have been performed but not yet completed, the cost of the existing projects shall be appraised, and the construction unit shall pay the corresponding price to the construction enterprise according to the actual cost of the existing projects. The economic losses caused shall be based on the degree of fault and the degree of responsibility of both parties. Determine the amount of compensation to be borne by the company.

44. The subcontractor, the subcontractor, the lender and the borrower shall be jointly and severally liable for the losses caused by the invalidity of the contract caused by the subcontracting, lending the qualification certificate or otherwise allowing others to contract the project in the name of the enterprise.

45. If the subcontracting of a construction enterprise includes illegal subcontracting, resulting in the loss of the project not meeting the quality standards, the enterprise and the unit accepting the subcontract or subcontract shall be jointly and severally liable for compensation.

46. The scope of losses caused by an invalid contract shall generally include: the cost of work stoppage, the cost of dispatching machinery and equipment, the cost of reversing the freight, the backlog of building materials and components, the storage fee, the idle cost of machinery and facilities, the lease fee, the construction fee of temporary facilities, and other expenses directly related to the project and incurred independently.

47. For the quality defects of existing projects, the quality responsibility shall be determined in accordance with the provisions of the law, and the responsible person shall bear the corresponding responsibility for repair and compensation.

V. Supplementary Provisions

48. The Provincial High People's Court is responsible for the interpretation of these Opinions.

49. These Opinions shall be implemented as of the date of issuance, and where the implementation of these Opinions conflicts with laws, regulations, and judicial interpretations of the Supreme People's Court, they shall be enforced in accordance with the laws, regulations, and judicial interpretations of the Supreme People's Court.