Author: Li Hongfei Lawyer 2016-12-28

The following eight difficult problems mainly exist in the current judicial practice in the case of project payment disputes in construction contract disputes:

1. Under the background of serious arrears of project funds, how to protect migrant workers' wages as the lowest level?

2. A project has signed several contracts in succession, that is, black and white contracts. What should be taken as the valuation basis?

3. Interest should be accrued on the project payment in arrears. How should the interest be accrued?

4. When the contract agreement is unclear, how to determine the actual completion period of the project?

5. Whether the advance money is effective, how to identify it accurately and how to deal with it?

6. What should be the basis for the Employer's delay in confirming the project settlement?

7. How to grasp the cost appraisal and how to control the scope of appraisal?

8. In case of any conflict between the audit report and the settlement agreement, what shall prevail?

The reason why the above problems become difficult legal problems is that the complex situation in judicial practice was unexpected at the beginning of the legislation, and the legislation itself did not make clear provisions on these problems. The existing laws and regulations are difficult to find a clear and direct legal basis to solve the problems. In the face of such actual situation, the Judicial Interpretation of the Supreme Court can be regarded as the most effective response under the premise that it is difficult to improve the legislation at the current stage.

Countermeasures I: special protection for migrant workers' wages with joint and several liability system

The arrears of migrant workers' wages is a major problem derived from the arrears of project funds, which directly affects social stability. Moreover, the problem of migrant workers' wages is often more complicated because of project subcontracting or non-standard subcontracting. At the legislative level, The issue of migrant workers' wages has made special protective provisions: "If the actual constructor brings a lawsuit with a subcontractor or an illegal subcontractor as the defendant, the people's court shall accept it according to law. If the actual constructor claims rights with the employer as the defendant, the people's court may take additional subcontractors or illegal subcontractors as the parties to the case. The employer shall only be responsible for the actual constructor within the scope of the unpaid project price." Judicial Interpretation To make such a provision is to find the basis from Article 97 of the Civil Procedure Law of China. The law stipulates that: "The people's court may, on the application of the party concerned, rule to advance the execution of the following cases: (1) those claiming alimony, alimony, upbringing, pension and medical expenses; (2) those claiming labor remuneration; and (3) those urgent circumstances require advance execution." The author believes that the judicial interpretation has a legal basis for such provisions as solving the wages of migrant workers.

In addition, for the labor contract directly related to the wages of migrant workers in practice, Article 7 of the Judicial Interpretation also stipulates that: "The labor subcontracting contract signed by a contractor with legal qualifications for labor operations with the general contractor and subcontractor, if the party concerned requests confirmation of invalidity on the ground that the subcontracting construction project violates the legal provisions, it will not be supported." The corresponding provisions of this Judicial Interpretation in fact confirm the legitimacy of the labor contract. As for the division between labor contract and subcontract. It mainly depends on the target of these two contracts. The labor contract only involves labor costs, not subcontracting projects; The subcontract not only involves labor service, but also mainly refers to the project for which the contract is contested. From the technical perspective, the labor contract only calculates labor remuneration, that is, only includes labor; The subcontract calculates the price of the subcontracted project, and its contracting form is to contract labor and materials.

Countermeasures II: Black and white contracts shall be settled based on the pricing standard of the contract for bid winning and filing

At present, another prominent contradiction in judicial practice is that both parties to the contract sign two or more contracts for a project before and after winning the bid, while the pricing methods of several contracts are different. During the construction process, both parties often actually perform black contracts that have not been recorded in the bid. In such cases, many judges are at a loss and have different ideas. Article 21 of the Judicial Interpretation stipulates that: "If the substantive content of the construction contract of the construction project separately concluded by the parties in respect of the same construction project is inconsistent with that of the registered bid winning contract, the registered bid winning contract shall be used as the basis for settling the project price." Only the settlement basis of the project funds of the black and white contract is uniformly stipulated, which has made the most useful prescription for the main contradiction of the black and white contract in judicial practice, and is helpful for the practical solution of such difficult cases.

As for the different manifestations and evaluation criteria of black and white contracts, the author believes that there are three main situations of black and white contracts: first, for projects that should be tendered according to law, whether to judge black and white contracts through bidding or not; Second, if the local government has provisions on the filing or approval of the project contract, the black and white contract shall be judged by whether it has been filed or reviewed; Third, it does not belong to the above two situations. The parties have signed two contracts with different contents successively, which is judged by whether they have actually performed. In view of the above three different situations, the validity of the contract is determined accurately in accordance with the relevant provisions of the law. First, if the contract is subject to bidding without bidding, the black and white contract will prevail. Second, if the contract should be filed according to the government regulations, and the two contracts signed successively do not belong to the specific requirements above, then the actual performance of the two contracts shall prevail. This is the standard for judging the effectiveness of black and white contracts.

Response 3: Accrued interest of project funds in arrears, starting time shall be calculated according to different situations

Another specific problem in hearing the case of arrears of project funds is how to calculate the interest of the arrears of project funds. Due to the defects in the contractor's performance management and data accumulation, it is often difficult to determine when the project payment in arrears starts in judicial practice, and the starting time of interest calculation also becomes a difficult problem in the trial. Article 17 of the Judicial Interpretation clearly stipulates this: "If the parties have agreed on the calculation and payment standard of interest on the unpaid project price, the agreement shall prevail; if there is no agreement, the interest shall be calculated according to the same loan interest rate issued by the People's Bank of China for the same period." Article 18 stipulates: "The interest shall be calculated and paid from the date when the project price is payable. If the parties have not agreed on the time of payment or the agreement is unclear, the following time shall be deemed as the time of payment: (1) If the construction project has been actually delivered, it shall be the date of delivery; （2） If the construction project is not delivered, it shall be the date of submission of completion settlement documents; （3） If the construction project has not been delivered and the project price has not been settled, it shall be the date on which the party concerned files a lawsuit. "

At the same time, for projects contracted with advance funds, Article 6 of the Judicial Interpretation stipulates that: "If the parties have an agreement on the advance money and the interest of the advance money, and the contractor requests to return the advance money and the interest according to the agreement, it shall be supported, except for the part where the agreed interest calculation standard is higher than the interest rate of the same loan in the same period issued by the People's Bank of China. If the parties have no agreement on the advance money, it shall be treated as the project arrears. If the parties have no agreement on the interest of the advance money, and the contractor requests to pay the interest, it shall not be supported." Judicial Interpretation As for the calculation of the interest on the project payment in arrears, the above two judicial interpretations have made different provisions on different situations of the project payment in arrears, which has been able to adapt to the actual situation of hearing such different cases.

Countermeasure 4: The construction period directly affects the settlement of project price, and the actual completion time is determined in three cases when the contract agreement is unclear

There is also a common complex problem about how to determine the deadline for project completion in the trial of the case of project payment collection: the contractor has filed a lawsuit for being in arrears with the project payment, and the employer often raises a counterclaim on the ground of delay in the construction period, and frequently raises hundreds of millions or tens of millions of yuan of overdue compensation, with the purpose of offsetting the contractor's litigation claims. A key problem in such cases is how to determine the time for project completion, The reason lies in the lack of management in the performance process. Some projects have been actually completed or even put into use, but the contractor has no evidence to prove that the completion report has been submitted; Some employers, after receiving the contractor's completion report, delay in organizing the completion acceptance for various reasons, or organize the acceptance but fail to issue the acceptance report, or fail to go through the filing procedures for completion acceptance; A more common but more complicated legal issue is that the Employer uses the project without completion acceptance or acceptance. These various actual conditions related to the completion of the project have led to a rather difficult operation problem in judicial practice, which is how to determine the actual time of completion.

Article 14 of the Judicial Interpretation makes a unified provision on this: "If the parties dispute the actual completion date of the construction project, they shall deal with it respectively according to the following circumstances: (1) if the construction project has passed the completion acceptance, the date of completion acceptance shall be the completion date; (2) if the contractor has submitted the completion acceptance report, and the employer delays the acceptance, the date of submission of the acceptance report by the contractor shall be the completion date; (3) If the construction project is used by the Employer without the completion acceptance, the date of transfer of possession of the construction project shall be the date of completion. " According to the three specific situations often encountered in judicial practice, the corresponding provisions of the Judicial Interpretation have made different targeted treatment principles, which is conducive to the practical solution of difficult problems related to the determination of the construction period, while warning the contractor to submit the completion report in a timely manner, the employer should organize the acceptance in a timely manner, and the use of the project without acceptance should bear adverse consequences, which is also conducive to the unified law enforcement on the construction period in cases of arrears of project funds.

Response 5: Effectively deal with the principle of advance payment to become a unified law enforcement standard

In the case of arrears of project funds, another major dispute is the legality of contracting projects with advanced funds. In judicial practice, people's courts at all levels have their own standards when dealing with such cases. The unified legal standard of contracting projects with advanced funds has become a difficult and complex problem to be solved urgently.

As a matter of fact, it is very common for the contractor to advance funds for construction, and some projects have even advanced funds in full. The problem is that, due to the different understandings and standards of the courts in various places mentioned above, some of the judges' advance judgments in judicial trials are invalid and some of them are valid; Some of the loans were judged to have interest, and some were judged to have no interest. Whether the advance fund is effective and its different disposal will cause a huge contrast in the interests of the parties involved in the trial of cases involving huge project funds. Article 6 of the Judicial Interpretation makes a conclusion on this: "If the parties have an agreement on the advance money and the interest of the advance money, and the contractor requests to return the advance money and its interest according to the agreement, it should be supported, but the agreed interest calculation standard is higher than the interest of the same loan in the same period issued by the People's Bank of China, and there is no agreement, and the contractor requests to pay the interest, it should not be supported." This unified determination of the advance money confirms the legitimacy of the advance money in fact, It not only conforms to the reality of the market and international practices, but also benefits the competent government departments and the parties to make corresponding management requirements and response measures according to the uniform provisions of the Supreme Court. This judicial interpretation should be considered as a very important provision, which deserves the attention of all parties.

Response 6: If the Employer fails to reply to the settlement report submitted by the Contractor within the time limit, it will be deemed that it has been confirmed

An important reason for the increasingly serious arrears of project funds is that many employers deliberately delay the settlement of the project. In some cases, the employer delays the confirmation of the settlement by various legal or illegal means, and delays the confirmation of the project settlement price submitted by the contractor for several years. However, the current laws and regulations do not stipulate the time limit within which the Employer should confirm the project settlement. Article 20 of the Judicial Interpretation gives a good prescription for this: "The parties agree that if the Employer does not reply within the agreed period after receiving the completion settlement documents, it will be deemed to recognize the completion settlement documents, and it will be handled in accordance with the agreement. If the Contractor requests to settle the project price according to the completion settlement documents, it shall be supported." This good prescription is only applicable to cases where the contract has clearly agreed on the time limit for settlement of the project price, If both parties have not agreed on the specific period of settlement in the project contract, it cannot be applied. However, Article 33 "Completion Settlement" of the General Terms of the 99 Edition Construction Contract (Model Text) jointly recommended by the Ministry of Construction and the Administration for Industry and Commerce has a clear agreement on the settlement period. In other words, as long as the above model text is adopted, the settlement period has been agreed, and this judicial interpretation can be applied.

Countermeasures VII: The cost appraisal should be carried out in an orderly manner according to law. The people's court should strictly control and review the appraisal conclusions

In the trial of project fund cases, once both parties have disputes over project settlement, or have different opinions on the amount of project settlement and pricing principle, the judge's countermeasure in judicial practice is to submit to judicial expertise. Because the appraisal of project funds involves a series of specialized technical problems, the judges are not very familiar with them, and the judicial appraisal of project funds lacks operational legal provisions, many problems arise in the operation. In addition, the judicial expertise of the project funds is lack of operational legal provisions, and there are many problems in the operation. Some cases fail to reach a conclusion in the first instance for several years; Some appraisal units make their own decisions and substitute trial for judgment, but the judges are in a subordinate position, resulting in the improper consequence that the judicial power is partially sidelined; Some identification scope expands disorderly, wasting human and financial resources, and judges often do not carry out necessary restrictions and reviews on the identification principle, scope and identification period.

The Judicial Interpretation adopts two provisions to take countermeasures. Article 22 of the Judicial Interpretation stipulates that "if the parties agree to settle the project price at a fixed price, the request of one party for appraisal of the construction project cost will not be supported." Article 23 stipulates that "if the parties dispute some facts of the case, only the facts in dispute will be appraised, except that the scope of the facts in dispute cannot be determined, or both parties request appraisal of all facts." These two Judicial Interpretations It stipulates that the judge should strengthen the control and review of the judicial appraisal of project funds, play an active and effective role in regulating the appraisal of project costs, and in judicial practice, it will also determine the scope of the appraisal of project costs, whether the appraisal should be initiated and carried out in accordance with the law and the contract, which will have a good practical effect.

Response 8: The former shall prevail in case of conflict between the cost settlement agreement and the audit report

In judicial practice, there is still a difficult and complicated specific problem related to cost confirmation. After repeated efforts, the contractor has determined the project settlement through self negotiation or market price review. However, the employer later submitted an audit report through the audit department on the grounds that the project cost should pass the audit. The audit report differs from the confirmed settlement. If yes, The trial of the case fell into a new dilemma because of the conflict between the settlement agreement and the audit report. Because of the special status of audit and the contradiction between the administrative management involving the loss of state-owned assets and the civil law's party autonomy and equal legal relations, judges often find it difficult to choose and solve such situations in the trial of cases. Article 23 of the Judicial Interpretation clearly stipulates that "if the construction contract of a construction project has an agreement on project settlement matters, and one party claims to adjust the project price according to the audit decision made by the national audit authority on the construction project, it is not supported." It remains to be seen whether this provision can be retained when it is officially announced, However, on April 2, 2001, the Supreme Court gave the Henan Higher People's Court the "Telephone Reply Opinions on How to Apply Legal Issues when the final settlement price of the project confirmed by both parties in the construction project contract case is inconsistent with the final settlement price of the project audited by the audit department", which stipulates that: "Audit is a kind of administrative supervision of the state over the construction unit, which does not affect the validity of the contract between the construction unit and the contractor. The agreement of the parties involved in the construction project contract case should be the basis for the court's judgment. Only when the contract clearly stipulates that the audit conclusion should be the basis for settlement, or the contract agreement is not clear, or the contract agreement is invalid, can the audit conclusion be the basis for the judgment." Therefore, Regardless of whether the above Article 23 can be retained, as long as the contract is valid, when the cost settlement agreement conflicts with the audit report, the former shall be taken as the basis for judgment.

Based on the above eight countermeasures and the current situation of contract management of construction enterprises, the forthcoming Judicial Interpretation not only makes strong law enforcement rules for solving the difficult and complicated problems of project payment arrears cases, but also puts forward new and revolutionary requirements for contract performance management of construction enterprises. If the construction enterprise does not pay attention to it, and does not make great efforts to strengthen the contract performance management, and does not take corresponding measures, especially the special management measures for the information of visa claims, it will only be in a passive position in case of litigation. At the same time, this situation should also attract our lawyers' attention. After the promulgation and implementation of the Judicial Interpretation, the majority of construction enterprises will further recognize the extreme importance of strengthening contract performance management. Lawyers will provide non litigation performance management services for construction enterprises, which will suddenly create a broad space. This is not only an important opportunity for our lawyers to expand their business sources, It also reminds us that we must make preparations for providing corresponding non litigation legal services as soon as possible.

Lawyer Li Hongfei arranges