In practice, because the contractor is in a relatively weak position, the employer requires the contractor to advance funds for construction
. 
There are many ways to advance funds for construction, some contractors advance all the project funds for construction, and some contractors advance part of the project funds for construction
.
1、 There are several forms of advance fund construction
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At present, the advance fund construction in practice mainly includes the following forms: first, the full amount of advance fund construction, that is, the employer does not pay any project price to the contractor in the process of project construction, but has to wait until the project construction is completed and the completion acceptance is qualified, and the employer pays the project price to the contractor according to the agreement
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At present, BT Construction mode appears in the construction market, which means “construction transfer”
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It usually refers to a financing mode in which the government uses non-governmental funds to carry out non operating infrastructure construction projects
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Some market-oriented entities also use BT Construction mode to carry out financing and engineering construction
.
In essence, BT Construction mode is that the contractor advances funds in full
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Second, advance funds by way of payment according to the progress of the project
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It is a common project payment method in practice to pay the project according to the construction progress
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The most common is that after the construction of the contractor reaches a certain progress, the employer or the supervisor will review the quantities and project payment, and pay the corresponding project payment to the contractor
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If the employer does not advance this part of the project payment, the contractor needs to advance funds for construction before obtaining the project progress payment
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In addition, some construction contracts also stipulate that after the contractor reaches a certain progress, the employer only pays a certain proportion of the progress payment, and the unpaid part needs the contractor to advance funds
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Third, some construction contracts stipulate that the contractor should pay the employer a security deposit, which will not be returned until the construction project is completed and accepted
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In fact, the security deposit is also a kind of advance money, and also has the function of performance guarantee
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2、 The validity of the agreement on the construction of advance funds has been controversial in practice
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The former Ministry of construction, the former State Planning Commission and other ministries and commissions have repeatedly standardized the advance funds for construction by construction enterprises
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On June 4, 1996, the former Ministry of construction, the Ministry of Finance and the former State Planning Commission promulgated the notice on strictly prohibiting contracting with funds in engineering construction
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Article 4 of the notice stipulates that “no construction unit shall require the construction unit to contract with funds as the bidding conditions, and shall not force the construction unit to write such contents into the project contract.” Article 5 stipulates: “construction units shall not contract projects with funds as a means of competition, nor shall they use the method of defaulting payment for goods from manufacturers of building materials and equipment to settle the resulting capital gap.” In judicial practice, the notice is often used as the basis for negating the effectiveness of the advance construction agreement
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On October 1, 1999, the contract law was promulgated and implemented
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Article 44 of the contract law stipulates that a contract established in accordance with the law shall come into force when it is established
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Where laws and administrative regulations provide that approval, registration and other procedures shall be completed and come into force, such provisions shall apply
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Since then, the value orientation of judicial practice is more inclined to encourage transactions and maintain transaction security, and the legal basis leading to contract invalidation is limited to laws and administrative regulations
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Departmental rules, local laws and regulations and other normative documents are no longer used as the basis for determining the invalidity of the contract
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Article 4 of the judicial interpretation of the contract law (1) stipulates: “after the implementation of the contract law, the people’s court’s confirmation of the invalidity of the contract shall be based on the laws formulated by the National People’s Congress and its Standing Committee and the administrative regulations formulated by the State Council, and shall not be based on local laws and administrative rules.” Article 14 of judicial interpretation of Contract Law (2) stipulates that “mandatory provisions” in Item 5 of Article 52 of Contract Law refer to mandatory provisions of effectiveness
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” The notice on strictly prohibiting contracting with funds in engineering construction does not belong to laws and administrative regulations, but is a normative document of ministries and commissions, and does not belong to the mandatory provisions of validity
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According to the contract law and judicial interpretation of Contract Law (1), the notice should not be used as the legal basis for determining the invalidity of the contract
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However, in judicial practice, there are also views that the advance construction includes the agreement of the employer to finance the contractor, and the loan between enterprises was prohibited by law at that time
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This behavior belongs to issuing loan in disguised form, which disrupts the order of financial market and construction market, so it should be considered invalid
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Article 6 of the judicial interpretation of construction contract stipulates: “if the parties have an agreement on the advance funds and the interest of the advance funds, and the contractor requests to return the advance funds and the interest in accordance with the agreement, it shall be supported, except for the part whose agreed interest calculation standard is higher than the same loan interest rate issued by the people’s Bank of China in the same period
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If the parties have no agreement on the advance payment, it shall be handled according to the arrears of the project
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If the parties have not agreed on the interest on the advance payment and the contractor requests to pay the interest, it shall not be supported
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” The regulation embodies the value orientation of encouraging transactions, respecting the market and maintaining fairness
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In the construction market, the contractor is in a weak position and has no choice but to promise the advance construction
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If the advance construction contract is invalid, it will not get the agreed interest, which is unfair to him
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Moreover, there are objective laws in the market
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It is not that the phenomenon of advanced construction can be eliminated without judicial protection
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Weigh the pros and cons, the final judicial choice to protect the interests of the contractor
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According to Article 6 of the judicial interpretation of construction contract of construction project, the judicial practice tends to think that the contract between the employer and the contractor about advance construction is valid
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Article 11 of the “provisions on private lending” stipulates that “the people’s court shall support the private lending contracts concluded between legal persons, other organizations and each other for the purpose of production and operation, except for the situations specified in Article 52 of the contract law and Article 14 of these Provisions, if the parties claim that the private lending contract is valid.” According to the article, private lending activities between enterprises for production and operation are legal and effective
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Therefore, there are no legal and legal obstacles to the validity of the agreement
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In July 2019, the State Council’s regulations on government investment will come into effect
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Article 22 of the Regulations stipulates: “the funds required for government invested projects shall be ensured to be in place in accordance with the relevant provisions of the state
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Government invested projects shall not be advanced by construction units
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” This provision can be understood as a mandatory provision of management, not a mandatory provision of effectiveness, so it is not appropriate to determine the invalidity of the advance construction contract
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Because the purpose of the regulation is to protect the interests of the construction unit
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If the advance construction contract is deemed invalid, it will not protect the interest interests of the Contractor under the contract, but will damage the interests of the construction unit
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Source: understanding and application of contract part of civil code of the people’s Republic of China (3)
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