Liability for compensation in construction contracts

Article overview

Compensation for damages in construction contracts is an important factor ensuring fairness and responsibility among stakeholders. When an incident or breach of contract occurs, determining compensation liability not only protects the rights of the damaged party but also encourages the parties to comply with their obligations. In the article below, Long Phan will analyze legal regulations and propose solutions to effectively handle compensation issues in construction.

Compensation for damages in construction contracts
Compensation for damages in construction contracts

In case of compensation for damages in a construction contract

Construction activities always have potential risks of causing damage. Therefore, liability for damages in construction contracts often arises in common cases including:

  • Damage caused by violations of labor safety at the construction site
  • Delayed construction progress causes damage
  • The quality of the work does not meet the requirements
  • Violation of regulations on environmental protection
  • Providing materials and equipment on time
  • Temporarily stop illegal construction
  • Late payment of completed volume
  • Unilateral termination of the contract without just cause.
Cases arising from compensation
Cases arising from compensation

Regulations on compensation for damages in construction contracts

Construction activities always have potential risks of causing damage. Therefore, the responsibility to compensate for damages will include both the principal and the contractor in the following cases:

The contractor must compensate the principal for damage in the following cases:

  • The quality of work does not meet the requirements as agreed in the contract;
  • Completion time is prolonged due to errors from the contractor;
  • Damage to people and property occurring during the warranty period is caused by the contractor.

The principal must compensate the contractor in the following cases:

  • Work under the contract is interrupted, delayed or has problems due to the contractor’s cause, including management of machinery, equipment, materials and components in inventory for the contractor;
  • The contractor provides necessary documents and conditions that are not in accordance with the agreement in the contract, leading to the contractor having to re-perform, suspend or adjust the work;
  • In a construction contract, if the contractor is responsible for providing materials, equipment or other requirements but does not comply with the deadline and criteria;
  • The contractor is late in paying according to the terms agreed in the contract.

General compensation liability:

  • If one party does not perform its contractual obligations or does not comply with regulations, then after completing the obligation or applying remedial measures, that party must still compensate the other party for damages, with a corresponding compensation level. amount to actual loss.
  • In case of breach of contract due to a third party, the violating party is still responsible to the other party, and the dispute between the violating party and the third party will be resolved according to the provisions of law.

Violations causing harm:

  • If a party’s breach of contract causes harm to the body, rights or property of the other party (such as an accident caused by equipment that does not meet quality standards), the injured party has the right to claim the other party. Violation of compensation as agreed in the contract and relevant legal regulations.

Legal basis: Clauses 3, 4, 5, 6, 7, Article 146 of Law on Construction 2014.

How to resolve disputes about compensation for damages in construction contracts

When a dispute over compensation occurs, the parties need to follow these steps:

  • Negotiate directly: The parties discuss to find a solution to the dispute. This method saves time and costs, while preserving relationships.
  • Mediation with third parties: If negotiations are unsuccessful, the parties can ask a neutral party to assist in reaching an agreement. Mediation is usually quicker and less expensive.
  • Commercial Arbitration: When conciliation is not effective, the parties can refer the dispute to arbitration. The arbitrator’s decision is binding and is usually quick.
  • File a lawsuit in Court: If the above methods do not work, the injured party can sue. This procedure is often complicated and lengthy but is official and enforceable.

The choice of settlement method must respect contractual agreements and commitments during implementation, ensuring equality and cooperation.

The parties are responsible for negotiating to resolve the dispute.

If an agreement cannot be reached, the dispute will be resolved through mediation, commercial arbitration or court in accordance with the law.

Legal basis: Clause 8, Article 146 of the Law on Construction 2014.

Forms of settlement of compensation for damages
Forms of settlement of compensation for damages

Consulting services on compensation for damages in construction contracts in Long Phan

Long Phan provides in-depth consulting services on compensation for damages in construction contracts. With a team of experienced experts in the field of legal consulting, we will best support customers with the problems they are facing. The services we provide include:

  • Consulting on regulations related to compensation for damages in construction contracts.
  • Drafting compensation clauses in construction contracts for businesses.
  • Evaluate the level of damage and compensation liability for each specific case.
  • Negotiate and negotiate with the violating party, on the principles of respect and equality.
  • Representing commercial arbitration dispute resolution.
  • Consulting on risk prevention on compensation in construction contracts.
  • Support compensation complaint procedures in cases where businesses give priority.

Compensation in construction contracts plays an important role in protecting the rights of the parties to the contract. Clearly defining compensation terms not only helps minimize disputes but also creates an environment of cooperation and trust between the principal and the contractor. Contact Long Phan immediately via the hotline: 0906735386 get support from our team of experienced experts.