On June 20, Company B submitted the project settlement report to Company A, and the total project cost was more than 120 million yuan.
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Basic Case On December 6, 2011, the Employer Company A and the Contractor Company B signed the General Contract Agreement for Construction Engineering Construction (hereinafter referred to as the “Agreement”), stipulating that Company B should undertake the construction of a project.
Company A has not replied to the settlement of Company B, and failed to reach an agreement on the project settlement.
The price of the construction project shall have priority in compensation with respect to the project discount or auction price.” According to the above provisions, the priority 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.
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In this case, the project involved in the case has not obtained the construction land planning permit, construction project planning permit and other administrative approval procedures, which belongs to the illegal building, cannot be transferred, and does not meet the basic conditions for exercising the priority of project price.
Company B filed a lawsuit to the court, requesting the termination of the Agreement, and requesting Company A to pay more than 43 million yuan of project funds, confirming that Company B has the priority to be compensated within the scope of project funds.
During the construction period, both parties shall handle monthly settlement, and the total settlement amount is more than 98 million yuan.
Tang Xuyang Tel: 137551395960731-85927856 Lawyer and bid inviter.
Party B should submit the budget of the completed project of the month on the 25th of each month, and Party A should pay 80% of the project progress payment before the 20th of the next month.
Company B is not satisfied and files an appeal.
Note: This case is a civil dispute caused by legal facts before the implementation of the Civil Code, and the Contract Law applies.
Therefore, the premise for the contractor to enjoy the priority of compensation for construction project price is that the completed construction project can be discounted, auctioned and circulated according to law.
Editor’s note: The premise for the contractor to exercise the priority of compensation for the construction project price is that the construction project can be discounted and auctioned.
As of January 21, 2014, Party A had paid more than 54 million yuan of project funds in total, which has not been paid since then.
On December 19, Company B officially entered the site for construction.
It confirmed the amount of project funds that Party B requested Party A to pay, but the project involved in the case was an illegal building and could not be discounted or auctioned, so it did not support its claim of priority to be paid for the construction project price.
Therefore, the contractor’s claim for the priority of compensation for the construction project price cannot be supported.
On October 14, 2019, the court of first instance made a judgment, determining that the project involved in the case did not obtain the construction land planning permit, construction project planning permit and other administrative approval procedures, and the Agreement was invalid.
On May 27, 2013, due to Party A’s failure to pay the project progress payment as agreed in the contract, Party B issued a notice to Party A to suspend the construction and stopped the work on June 15.
He started his practice in April 1999 and is now the senior partner of Hunan Tiandiren Law Firm and the director of the bidding and auction professional committee.
Zhou Meng, a trainee lawyer of Hunan Tiandiren Law Firm and a full-time master of law from Hunan University, is good at bidding, government procurement, engineering construction, private lending, labor arbitration and other fields.
Main problem: Does the contractor have the priority right to be compensated for the construction project price for the illegal buildings? The lawyer analyzed that the contractor did not have the priority right to be compensated for the construction project price for the illegal buildings, The specific analysis is as follows: Article 286 of the Contract Law of the People’s Republic of China stipulates that: “If the contract letting party fails to pay the price as agreed, the contractor may urge the contract letting party to pay the price within a reasonable period of time.
The contractor company B has no basis for claiming the priority of project price, and it is correct that the court does not support it.
Tang Xuyang, a lawyer, holds part-time positions as an expert in Hunan government procurement review, an expert in the PPP expert pool of Hunan government and social capital cooperation, an expert in the PPP expert pool of Hunan Development and Reform Commission, a member of the Criminal Professional Committee of Hunan Lawyers Association, a legal adviser of Hunan Federation of Industry and Commerce (General Chamber of Commerce), a legal adviser of Changsha Federation of Industry and Commerce (General Chamber of Commerce), and an arbitrator of Changsha Arbitration Commission.
On December 30, 2020, the court of second instance rejected the appeal and upheld the original judgment.
If the contract letting party fails to pay the price within the time limit, the contractor may either agree with the contract letting party to discount the project or request the people’s court to auction the project according to law, except that it is not appropriate to discount or auction the project according to the nature of the project.
There are difficulties in the implementation of illegal buildings and they cannot be auctioned.
