The main reason is that Article 793 (1) of the Civil Code of the People’s Republic of China (hereinafter referred to as the “Civil Code”) stipulates: “If the construction contract of a construction project is invalid, but the construction project has passed the acceptance inspection, the contractor may be compensated at a discount according to the agreement on the project price in the contract.” According to the above provisions, if the construction contract of a construction project is invalid, but the project is completed and delivered for use, The contractor shall calculate the discount compensation according to the contract agreement on the project price according to law.
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The construction contract for the construction project is invalid but the project is completed and delivered for use, “The discounted compensation should be calculated in accordance with the agreement on the project price in the contract (Minutes of the 22nd Professional Judges’ Meeting of the First Civil Trial Division of the Supreme People’s Court in 2022).
“If the project passes the acceptance check, the employer shall pay the price and receive the construction project as agreed.”.
Legal issues: If the construction contract for a construction project is invalid but the project is completed and delivered for use, what standard should be used to calculate the discounted compensation?”? The opinion of the judge’s meeting is that a construction project construction contract is a contract whereby the contractor carries out project construction, delivers the work results, i.e., the construction project, and the contract letting party pays the price.
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This approach can ensure that both parties cannot obtain benefits beyond the validity of the invalid contract on the premise of ensuring the quality of the construction project, in line with the reasonable expectations of the parties and the reality of the construction market in China, and can ensure the social effect of the case adjudication.
In the absence of a more scientific, reasonable, simple and effective discount compensation standard for the invalid construction contract, It is quite reasonable to compensate the contractor at a discount based on the agreement on the project price in the construction contract of the construction project.
The invalidity of a construction contract does not necessarily lead to the invalidity of a contract signed by the parties concerned regarding the payment method, time, and liability for breach of contract for failure to pay the project price (discount compensation) after the termination of the construction contract relationship.
2、 “The invalidity of the construction contract does not affect the validity of the settlement agreement (Minutes of the Third Judges’ Meeting of the First Civil Trial Division of the Supreme People’s Court in 2022) Legal issues: The construction contract for the construction project is invalid, and the construction project has passed the acceptance check.
The agreements made by both parties in the contract to a certain extent represent the reasonable expectations of both parties for the signing and performance of the contract, as well as the advance arrangements for the relevant contract risks.
The construction of a construction project has a certain periodicity and complexity.
Although the expression “may be referred to” is used in the first paragraph of Article 793 of the Civil Code, if there are no large-scale design changes in the project construction, or if there are no serious violations of the parties’ true intentions expressed in the contract regarding the project price, the people’s court should not arbitrarily interpret “may be referred to” as either may or may not be referred to in specific judgments.
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After the completion of the construction project, the Employer shall conduct timely acceptance in accordance with the contract agreement and the construction acceptance specifications and quality inspection standards issued by the state.
Is the settlement agreement signed by the parties effective?”? The opinions of the judges’ meeting are that the parties have the right to determine the rights and obligations of the invalid contract through agreement.
Therefore, the invalidity of the construction contract does not affect the validity of the settlement agreement.
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In practice, the reason why there is a dispute about the standard for calculating the discounted compensation when the construction contract of a construction project is invalid but the project is completed and delivered for use lies in the failure to accurately understand the provisions of Article 793, paragraph 1, of the Civil Code.
The first paragraph of Article 793 of the Civil Code of the People’s Republic of China stipulates: “If the construction contract for a construction project is invalid, but the construction project has passed the acceptance check, the contractor may be compensated at a reduced price by referring to the agreement on the project price in the contract.” According to this paragraph, the construction contract for a construction project is invalid, but the construction project has passed the acceptance check, the employer and the contractor shall agree on the amount of the project price (the reduced compensation) Making an agreement on the method and time of payment is the right of the parties, a manifestation of the principle of voluntariness, and does not violate the mandatory provisions of the law.
Source | Statement of the First People’s Court of the Supreme Court | This article is for communication and learning only.
If the Employer fails to organize acceptance inspection in accordance with the contract provisions and corresponding specifications or standards, but accepts the construction project, it shall be deemed to have passed the quality of the construction project by referring to Articles 9 and 14 of the Interpretation of the Supreme People’s Court on Applicable Legal Issues in the Trial of Construction Contract Disputes (I).
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