Authoritative cases to help you win the case!
As long as a letter is sent to the contractor within the statutory period claiming the right of priority in reimbursement of the construction project price, the contractor can be found to have exercised this right. ——Supreme People's Court (2021) Supreme People's Court Minshen No. 2026 Case
<h1 class="pgc-h-decimal" data-index="01" data-track="10" > case brief</h1>
Longxin Energy Company and MCC Tiangong Company have signed a number of construction contracts and contracted a coal coking project to MCC Tiangong Company for construction.
After the project stopped construction, the two parties entrusted the consulting company to review the completed project, and jointly confirmed the settlement value of the project in the settlement report in July 2008.
From January 2008 to October 2016, MCC Tiangong Company has repeatedly issued reminder letters to Longxin Energy Company, requesting payment of the remaining project payment, otherwise it will exercise the right of priority to receive reimbursement of the construction project price in accordance with the law.
In March 2019, MCC Tiangong Company filed a lawsuit with the court, requesting confirmation that it had the right of priority in receiving the repayment of the construction project price for the principal claim of the project.
< h1 class="pgc-h-decimal" data-index="02" data-track="34" > views clashed</h1>
According to the relevant provisions, the contractor should exercise the right of priority to be reimbursed for the construction project price within the statutory time limit, but did not clearly stipulate the mode of exercise, which led to disputes in practice over whether it could claim the right of priority to be reimbursed by means other than sending letters and other litigation.
The time of filing the lawsuit in this case is very long from the time of settlement between the two parties in 2008, during which MCC Tiangong Company only sent a letter to Longxin Energy Company, and did not file a lawsuit to claim the right of priority to be reimbursed, and the two parties had a fierce dispute over whether MCC Tiangong Company still enjoyed the right of priority to be reimbursed.
MCC Tiangong argued that sending a letter was also a way for the parties to claim the priority of the project funds. The collection document issued by MCC Tiangong Company to Longxin Energy Company clearly stated that it claimed the right of priority to be reimbursed, which proved that it had claimed the right of priority to be reimbursed and that there was no loss of the right of priority to be reimbursed.
Longxin Energy Company claimed that according to Article 286 of the Contract Law, there are two ways to claim the right of priority to reimbursement of the construction project price: to agree on the discount or to apply to the people's court for auction. The collection letter of MCC Tiangong Company does not belong to any of the statutory forms and cannot be regarded as having claimed the right of priority to reimbursement of the construction project price.
<h1 class="pgc-h-decimal" data-index="03" data-track="35" > court decision</h1>
The court's final judgment confirmed that MCC Tiangong Company had the right of priority to be reimbursed for the discount or auction price of the construction project. The Supreme Court ruled for the following reasons:
Article 286 of the former Contract Law stipulates: "If the contract issuer fails to pay the price as agreed, the contractor may urge the contractor to pay the price within a reasonable period of time." If the contract issuer fails to pay within the time limit, the contractor may, except for those who are not suitable for discounting or auctioning according to the nature of the construction project, the contractor may agree with the contract issuer to discount the project, or may apply to the people's court to auction the project in accordance with law. The price of a construction project shall be reimbursed in priority in respect of the discounted price of the project or the price of the auction". (Note: Corresponding to Article 807 of the Civil Code)
The law does not stipulate in what manner the right of priority to be reimbursed for the construction project price must be exercised, so as long as MCC Tiangong Company claims the right of priority to be reimbursed to Longxin Energy Company within the statutory period, it can be determined that it has exercised the right of priority to be reimbursed. Declaring the right of priority to be reimbursed through the letter of collection is the exercise of the right of priority to reimbursement of the construction project price.
<h1 class="pgc-h-decimal" data-index="04" data-track="36" > lawyer suggests</h1>
1. The contractor shall claim the right of priority in the reimbursement of the construction project price in a timely manner through appropriate means, either by sending a letter or signing an agreement, or by litigation or arbitration. When sending a letter, attention should be paid to retaining the mailing documents and service records of the letter, and if necessary, notarization means can be introduced.
2. Article 41 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 Project Contracts (I), which came into effect on 1 January 2021, has changed the period for the contractor to exercise the right of priority in reimbursement of the construction project price to a maximum of 18 months, and the date on which the contractor shall pay the construction project price is calculated, which is more conducive to protecting the legitimate rights and interests of the contractor.
3. The original 2018 Interpretation of the Supreme People's Court on Issues Concerning the Application of Law in the Trial of Cases Involving Disputes over Construction Project Contracts (II) stipulates that the time limit for the contractor to exercise the right of priority in reimbursement of the construction project price is 6 months, and the above-mentioned 2021 new judicial interpretation changes the time limit to 18 months, which will produce the fact that some cases will cross the issue of the convergence and application of the old and new judicial interpretations.
In this regard, the First Civil Trial Division of the Supreme People's Court, in its book "Understanding and Application of the Judicial Interpretation (I) of the Supreme People's Court on New Construction Project Construction Contracts", on page 426, held that if a construction contract signed before the implementation of the new judicial interpretation in 2021 has expired according to the provisions of the old judicial interpretation of 2018, the right of priority for reimbursement has not lasted until the implementation of the new judicial interpretation in 2021, and the period for exercising the priority right should still apply to the provisions of the old judicial interpretation of 2018. This is 6 months; if after the implementation of the new judicial interpretation in 2021, the right of priority to be reimbursed has not yet reached the 6-month exercise period, and the right is still in the performance period, the provisions of the new judicial interpretation in 2021 for a maximum period of 18 months may apply.
4. According to Article 40 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 Project Contracts (I), the scope of priority payment of the contractor's construction project price does not include interest, liquidated damages, damages, etc. of overdue payment of the construction project price.
<h1 class="pgc-h-decimal" data-index="05" data-track="37" > similar cases</h1>
1. The form in which the contractor exercises the right of priority to be reimbursed for the construction project price includes but is not limited to notification, consultation, litigation, arbitration, etc., and if the contractor has claimed the right of priority to be reimbursed for the construction project price in the above form during the exclusion period, it shall be determined that its claim has not exceeded the statutory period for the exercise of the right of priority to be reimbursed. ——Supreme People's Court (2020) Supreme People's Court Minzai No. 352 Case
2. The exercise of the right of priority in reimbursement of the construction project price is not only to apply to the court for the auction of the project and claim priority compensation, but also to claim the right of priority compensation by sending a letter from a lawyer. ——Supreme People's Court (2019) Supreme People's Court Min Zhong No. 750 Case
3. The right of priority to reimbursement of the construction project price does not have to be confirmed through litigation procedures to be established, and the person with the preferential right to reimbursement can directly submit a claim to the enforcement department of the court. ——Supreme People's Court (2019) Supreme People's Court Minshen No. 5070 Case
4. If the contractor urges the project payment in the form of a notice and declares that it enjoys and claims the right of priority to be reimbursed, and the contractor indicates on the notice that there is no objection, it is generally determined to be a valid form of exercising the right of priority to be reimbursed in law, and does not require that the notice must specifically state the meaning of discounting the project. ——Supreme People's Court (2019) Supreme People's Court Enforcement Supervision No. 71 Case
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About the Author
Yang Wei is a lawyer and certified public accountant in Beijing. He holds a master's degree in law from China University of Political Science and Law and a double bachelor's degree in law and management from Southwest University of Political Science and Law. He once worked in the legal affairs department of a large state-owned enterprise in Beijing and Beijing Zhong Lun Law Firm.
His main practice areas are litigation and arbitration, real estate, investment and financing, minerals, etc. He is good at solving fundamental problems in a variety of ways from the perspective of the customer's business purpose, and litigation and arbitration is only one of the ways to achieve the purpose.
He is the author of "Practical Guide to Winning Cases of State-Owned Land Use Rights", "Contract Law in Judgments", "Practical Guide to Winning Cases of Mineral Resources", and "Practical Guide to Winning Cases of Private Lending Disputes", published by China Legal Publishing House;
This article is an original article published by the author authorized by the headline number "Merchants and Civil Litigation", and the reprint must be authorized by the author.