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Judgment Rules of the High People's Court on the Trial of Construction Project Cases III

The contractor claims on the grounds that the price is below cost.

Leaving aside the contractual agreement to settle the project payment is not supported.

Rules of Judgment:If the contractor claims to set aside the contractual settlement of the project price on the grounds that it is lower than the cost price, the court will not support it.

Key words:The validity of the contract is lower than the cost of the project price settlement.

Trial summary:The construction project has the characteristics of single piece and huge investment, and the construction process has the characteristics of complex technology, fine division of specialization, high degree of socialization and long periodicity. Therefore, the calculation of the construction cost is very complicated. The individual costs of enterprises vary greatly due to their technical strength, management level and operating conditions, and the project itself has its own characteristics. Therefore, it is difficult to identify the individual costs of the enterprise. In view of this, even if the contractual price is lower than the average social cost assessed (by the construction enterprise through the appraisal agency), the project payment should be settled by reference to the contractual price from the point of view of respecting "party autonomy.

【Typical case] Case of Dispute over Construction Contract between Company A and Company B [(2013) Zhejiang Min Zhong Zi No. 27]]

On December 27, 2004, Company A and Company B signed a "Steel Structure Residential Contract", which agreed that Company A would undertake the construction of the second phase of the residential building project of Century Home, and at the same time agreed on the contract price and payment method in a timely manner. Among them, the project pricing method is the comprehensive lump sum unit price, the contract comprehensive lump sum unit price is RMB 1100 yuan/m2, the total contract price is tentatively set at RMB 250.36 million yuan, and finally the final accounts are based on the measured construction area of the real estate department. Among them, the steel structure is 68 million yuan and the civil construction is 182.36 million yuan. In addition, the contract also provides for the payment of progress payments and the manner of compensation for advances made by the construction party. After the contract was signed, Company A started construction on May 1, 2006 and completed the project on May 21, 2006 after acceptance. The second phase of the century home residential building by the Wuhan Land and Real Estate Surveying and Mapping Center measured an area of 251397.47 square meters.

On August 7, 2009, Company A won the bid at a price lower than cost, requiring Company B to make final accounts according to the average social cost of the industry, pay its project funds, and sue the other party to the court. Request for judgment: 1. Company B immediately pays 163893094 yuan for the project; 2. The plaintiff has the legal priority to be paid for the target project. 3. The judgment confirms that the target contract is invalid; 4. The defendant shall bear the litigation costs in this case......

The Hangzhou Intermediate People's Court of first instance ascertained that:

1. On December 27, 2004, Company A and Company B signed a "Steel Structure Residential Contract", which agreed that Company A would undertake the construction of the second phase residential building project of Century Home. At the same time, the contract price and payment method were agreed upon in a timely manner. The project pricing method was the comprehensive lump sum unit price of 1100 yuan/m2, and the total contract price was tentatively set at RMB 250.36 million yuan. Finally, the final accounts were made based on the actual construction area measured by the real estate department.

2. As of June 2012, Company B has paid Company A 251540688.9 yuan for the project.

3. During the trial of the first instance, the court entrusted Zhejiang Zhonghui Engineering Consulting Co., Ltd. to appraise the cost price of the project involved in the case according to the plaintiff's application. The appraisal result is that the social average cost price of the project is 377,307,703 yuan.

After hearing the case, the court of first instance held that the project involved in the 1. case is a construction project that must be tendered according to law, and the parties illegally carry out bidding, regardless of whether the winning contract is filed and registered, or if the parties enter into a separate construction contract, the two contracts are invalid according to law. According to Article 2 of the "Interpretation of the Supreme People's Court on the Application of Legal Issues in the Trial of Construction Contract Disputes", "The construction contract of the construction project is invalid, but the construction project has passed the completion acceptance, and the contractor requests to pay the project price with reference to the contract. Support", the settlement of the project payment in this case should comprehensively consider the true meaning of the parties and the specific performance during the construction, and determine the settlement basis. Accordingly, although the "Steel Structure Residential Contract" signed by Company A and Company B on December 27, 2004 is invalid, it is an expression of the true intention of both parties, and both parties actually perform according to the above-mentioned contract, and the terms of the project price shall be used as the basis for the settlement of this case. However, the "Steel Structure Residential Contract" clearly stipulates that "the comprehensive lump sum unit price of the contract is RMB 1100 yuan/m2, and the total contract price is tentatively set at RMB 250.36 million yuan, which will be finally settled on the basis of the actual construction area measured by the real estate department." That is, the project involved in the case is a fixed unit price, the price cannot be adjusted within the risk range agreed in the contract, and the plaintiff's request for settlement in accordance with the appraisal report of Zhonghui Company is insufficient. The case shall be settled by reference to the settlement method agreed upon in the contract signed by both parties. According to the survey by Wuhan Land and Real Estate Surveying and Mapping Center, the construction area of the residential building of Century Home Phase II is 251397.47 square meters, so the plaintiff's due project price is 276537217 yuan (251397.47 square meters * 1100 yuan). Therefore, the court of first instance did not support the plaintiff's request for settlement of the project price. 2. According to Article 286 of the the People's Republic of China Contract Law, "If the contractor 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 contractor fails to pay within the time limit, the contractor may, in addition to the nature of the construction project, agree with the contractor to discount the project, or apply to the people's court to auction the project in accordance with the law. The price of the construction project is paid in priority to the price of the project at a discount or auction." Therefore, the plaintiff's request to order the construction project price priority compensation has a legal basis.

To sum up, according to Article 286 of the the People's Republic of China Contract Law and Articles 2 and 21 of the Interpretation of the Supreme People's Court on the Application of Laws in Hearing Disputes over Construction Contracts, the court partially supported Company A's litigation request and ruled as follows: the Steel Structure Residential Contract signed by the plaintiff and the defendant on December 27, 2004 was 1. invalid; company B, the second defendant, paid the plaintiff 24996528 yuan for the project within 15 days from the effective date of the judgment. From May 22, 2009 to the date when this judgment is determined to be performed, the interest on the overdue project will be paid to the plaintiff according to the loan interest rate of the People's Bank of China for the same period. 3. the plaintiff has the priority to receive compensation for the project within the scope of his right to 24996528.21 yuan. The 4. rejected the plaintiff's remaining claims......

After the verdict was pronounced, Company A refused to accept it and appealed to the Zhejiang Higher People's Court, saying: The original trial used the "Steel Structure Residential Contract" signed by both parties on December 27, 2004 as the basis for the pricing of the project in this case. The project in this case is the first steel structure demonstration residence in the country. Both parties have no corresponding basis for the project cost. The comprehensive lump sum unit price agreed in the "Steel Structure Residence Contract" is RMB 1100 yuan/square meter, which is not in line with the actual situation......

The Zhejiang Provincial High Court confirmed the relevant facts found in the first instance. According to the arguments of both parties, the High Court concluded that the focus of the dispute in this case is: whether the settlement clause of the "Steel Structure Residential Contract" signed on December 27, 2004 is the basis for the pricing of the project in this case; 2. Whether there is an increase or deduction project in the amount of project funds in this case (specifically involving the increase in construction area, design changes, and the increase and deduction of other project funds)......

Regarding the focus of the dispute, whether the settlement clause of the Steel Structure Residential Contract is the basis for the pricing of the project in this case. Due to the existence of illegal bidding situations such as "black and white contract" and "beyond qualification contract" in the project involved in this case, both parties have no objection to the "construction project construction contract", "steel structure housing contract" and supplementary invalidity of the project involved in the case. The core of the dispute between the two parties in the second instance is what criteria should be used to settle the project after the contract is invalid. Company A advocates pricing according to the quota of Hubei Province, which should be based on the appraisal report issued by Zhonghui Company entrusted by the court of first instance. Company B, on the other hand, advocates settlement in strict accordance with Article 2.1.1 "Comprehensive lump sum unit price" of the Steel Structure Residential Contract. The court believes that under the condition that the "steel structure housing contract" and the supplementary agreement signed by both parties are invalid but the project has been completed and accepted, the case shall be based on the provisions of Article 2 of the interpretation of the Supreme People's Court on the application of legal issues in the trial of construction contract disputes, The contract that conforms to the true intention of both parties and is specifically performed during the construction shall be taken as the basis for the settlement of the project price. Thus, the court of first instance to the actual performance of the two sides of the "steel structure residential contract" as the basis for settlement is correct. At the same time, according to the "Steel Structure Housing Contract", the project involved in the case implements the "comprehensive lump sum unit price", that is, except for statutory reasons, there is no situation that should be adjusted. The court of first instance based on the surveying and mapping conclusions of the Wuhan Land and Real Estate Surveying and Mapping Center The determination of the total cost of the project is in line with the law and the agreement of both parties. Company A's claim and reason that the actual cost of the project involved in the case is much higher than the "comprehensive lump sum unit price of 1100 yuan/m2" agreed in the contract and then requires settlement at cost price cannot be established. According to law, Company A's relevant application in the retrial was rejected and Hangzhou Intermediate People's Court (2009) Zhejiang Hangzhou Minchu Zi No. 12 civil judgment was upheld.

referee rule analysis]

In the case of the invalidity of the contract, the construction enterprise claims that the contract price is lower than the cost price and requires the adjustment of the project price. At this time, how is "below cost" considered? If "below cost" is allowed to adjust?

The term "below cost" as used in article 33 of the Tendering and Bidding Law refers to the individual cost that is lower than the bidder's expenditure to complete the bidding project. The management level, technical ability and conditions of each bidder are different, and even if the same bidding project is completed, its individual cost may be completely different. There are differences between individual costs and industry average costs, which is a normal phenomenon in a market economy environment. Even the industry average cost assessed by the assessment agency is not exactly the same as the individual cost of the construction company. Again, according to the relativity of the contract, and the signing of the contract does not exist major misunderstanding and coercion, and does not violate the mandatory provisions of the state, is the true intention of both parties, the court can only follow the principle of "party autonomy" and the original intention of the relevant contract terms to make a corresponding ruling. (Legal Department: Xu Hui, Wang Furong)