Does the actual constructor enjoy the priority of compensation for the construction project price? The judges’ meeting suggested that the actual constructor does not enjoy the priority of compensation for the construction project price.
If the Employer does not organize the acceptance according to the contract and the corresponding specifications or standards, but accepts the construction project, the quality of the construction project shall be deemed to be qualified with reference to Article 9 and Article 14 of the Interpretation of the Supreme People’s Court on Applicable Legal Issues in the Trial of Construction Contract Disputes Cases of Construction Projects (I) (hereinafter referred to as the Construction Interpretation (I)).
Legal issues.
If the project passes the acceptance, the contract letting party shall pay the price as agreed and accept the construction project.
The main reason is that according to Article 807 of the Civil Code of the People’s Republic of China, the condition that the contractor enjoys the priority of compensation for the construction project price is that the construction project should be discounted and auctioned.
The construction of the construction project has certain periodicity and complexity.
In the case that the construction contract of the construction project is invalid and there is no more scientific, reasonable, simple and effective discount compensation standard, It is quite reasonable to compensate the Contractor by referring to the agreed discount on the project price in the construction contract of the construction project.
Therefore, the premise for the contractor to enjoy the priority right of compensation for construction project price is that the completed construction project can be circulated according to law.
The agreement of both parties in the contract to a certain extent represents the reasonable expectation of both parties for the signing and performance of the contract and the pre arrangement of relevant contract risks.
According to Article 807 of the Civil Code of the People’s Republic of China and Article 35 of the Construction Interpretation (I), only contractors who have signed construction contracts with the Employer enjoy the priority of compensation for the construction project price.
3、 The actual constructor does not enjoy the priority of compensation for the construction project price (Minutes of the 21st Professional Judge Meeting of the First Civil Adjudication Tribunal of the Supreme People’s Court in 2021).
Although the first paragraph of Article 793 of the Civil Code uses the expression of “can be referred to”, the people’s court should not arbitrarily interpret “can be referred to” as “can be referred to” or “can not be referred to” in specific judgments if there is no large-scale design change in the project construction, or the agreement on the project price in the contract does not seriously violate the true intention of the parties.
The actual constructor is not a “contractor who has signed a construction contract with the Employer”, and does not enjoy the priority of compensation for the construction project price.
Legal issues.
Does the actual constructors specified in Article 43 of the Construction Interpretation (I) include the actual constructors in the borrowing qualification and multi-level subcontracting and illegal subcontracting relationships? The opinions of the judges’ meeting may, in accordance with Article 43 of the Construction Interpretation (I), break through the principle of privity of contract and request the contract letting party to assume the responsibility within the scope of the unpaid project funds, excluding the actual constructors in the borrowing qualification and multi-level subcontracting and illegal subcontracting relationships, That is, the actual constructors specified in Article 43 of the Construction Interpretation (I) do not include the actual constructors in the borrowing qualification and multi-level subcontracting and illegal subcontracting relationships..
Under the premise of ensuring the quality of the construction project, this way can ensure that neither party can obtain benefits beyond the validity of the contract from the invalid contract, which conforms to the reasonable expectations of the parties and the reality of China’s construction market, and can ensure the social effect of the case adjudication.
In practice, the reason why there is a dispute on what standard to calculate the discount compensation when the construction contract of the construction project is invalid but the project is completed and delivered for use is that the provisions of the first paragraph of Article 793 of the Civil Code have not been accurately understood.
1、 If the construction contract of a construction project is invalid but the project is completed and delivered for use, the discount compensation shall be calculated according to the contract agreement on the project price (Minutes of the 22nd Meeting of Professional Judges of the First Civil Adjudication Tribunal of the Supreme People’s Court in 2022).
4、 The actual constructors specified in Article 43 of the Construction Interpretation (I) do not include the actual constructors in the borrowing qualification and multi-level subcontracting and illegal subcontracting relationships (the minutes of the 20th professional judges’ meeting of the First Civil Adjudication Tribunal of the Supreme People’s Court in 2021).
2、 The Contractor does not enjoy the priority of compensation for construction project price for illegal buildings (Minutes of the 21st Professional Judge Meeting of the First Civil Trial Chamber of the Supreme People’s Court in 2021).
Does the Contractor enjoy the priority of compensation for construction project price for illegal buildings? The judges’ meeting suggested that the system of priority right of compensation for construction project price is to pay off the creditor’s right of construction project price enjoyed by the contractor with the price of construction project discount or auction.
As the illegal buildings are not suitable for discount and auction, the Contractor does not have the priority of compensation for the construction project price of the illegal buildings.
After the completion of the construction project, the Employer shall timely carry out the acceptance according to the contract agreement and the construction acceptance specifications and quality inspection standards issued by the state.
The main reason for the priority of compensation for the construction project price is that when the Employer fails to pay the project fund within a reasonable period after being urged by the Contractor to pay the project fund, the Contractor has the right to agree with the Employer to discount the project or request the people’s court to auction the project according to law, and has the priority of compensation for the project discount or auction price.
Legal issues.
If the construction contract of a construction project is invalid but the project is completed and delivered for use, what standard should be used to calculate the discount compensation? According to the opinion of the judges’ meeting, the construction contract of construction project is a contract in which the contractor carries out the project construction, delivers the work results, that is, the construction project, and the contract letting party pays the price.
Legal issues.
The main reason is that the first paragraph of Article 793 of the Civil Code of the People’s Republic of China (hereinafter referred to as the “Civil Code”) stipulates: “The construction contract of a construction project is invalid, but if the construction project passes 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 the construction project is invalid but the project is completed and put into use, the Contractor shall calculate the discount compensation according to the provisions of the contract on the project price.
