Principles for signing a construction contract, latest 2024

Signing a construction contract is an important step in negotiating and implementing construction projects. When signing, the parties need to comply with legal principles to ensure rights and benefits and prevent future risks. To avoid disputes, the parties need to clearly state the terms of the contract. The article below will advise on the latest principles for signing a construction contract in 2024.

What is a construction contract?

Construction contracts are of great importance in construction projects, helping to clearly define the scope of work, rights and obligations of the parties in the relationship and are the basis for resolving disputes when there are conflicts in the relationship. contract implementation process.

Construction contract is a civil contract agreed in writing between the principal and the contractor to perform part or all of the work in construction investment activities, in which:

• The contractor is the investor or representative of the investor or general contractor or main contractor.
• The contractor is the general contractor or main contractor when the contractor is the investor; is a subcontractor when the principal is the general contractor or main contractor. The contractor may be a consortium of contractors.

Pursuant to the content of Clause 1, Article 138 of the Law on Construction 2014, Clauses 1, 2, 3, Article 2 of Decree 37/2015/ND-CP dated April 22, 2015 of the Government detailing construction contracts.

Common types of construction contracts

Choosing the right contract type helps effectively manage construction projects. Construction contracts will be classified according to the nature and content of the work performed and classified according to the applicable contract price form, specifically as follows:

According to the nature and content of the work performed, construction contracts include:

• Construction consulting contract;
• Construction contract;
• Contract to supply equipment to be installed in construction works;
• Design contracts – procurement of materials and equipment – construction, turnkey contracts;
• Other construction contracts.

According to the applicable contract price form, the construction contract includes:

• Package contract;
• Contract based on fixed unit price;
• Contract according to adjusted unit price;
• Time-based contracts;
• Cost-plus-fee contracts;
• Contract based on combined price;
• Other construction contracts.

Based on the content of Article 140 of the Law on Construction 2014, amended in 2020.

The latest principles for signing a construction contract

When signing a construction contract, the parties need to comply with the principles of signing a construction contract. Pursuant to Clause 2, Article 138 of the Construction Law 2014, Article 4 of Decree 37/2015/ND-CP (amended and supplemented in Clause 3, Article 1 of Decree 50/2021/ND-CP), the principles of signing a construction contract includes:

1. Voluntary, equal, cooperative, not contrary to law and social ethics;
2. Ensure there is enough capital to make payments according to contract agreements;
3. Completed contractor selection and concluded the contract negotiation process;
4. In case the contractor is a joint venture contractor, there must be a joint venture agreement. Joint venture members must sign and stamp (if any) the construction contract, unless the parties have otherwise agreed.
5. At the time of signing a construction contract, the contractor must meet the conditions for practice capacity and operational capacity according to the provisions of construction law.
6. The investor or the investor’s representative may sign a contract with one or more main contractors to perform the work.
7. The general contractor and main contractor may sign a contract with one or several subcontractors, but these subcontractors must be approved by the investor, and these subcontracts must be consistent and synchronized with the main contract. signed with the investor.
8. The contract signing price must not exceed the winning bid price or the results of construction contract negotiations, except for volumes arising outside the scope of work of the bidding package as permitted by the person competent to decide on investment.
9. Before signing an EPC contract (Design Contract – Procurement of Materials and Equipment – Construction Construction), the parties must specifically agree on the main contents in accordance with the law.

Conditions ensuring the validity and legality of construction contracts

A construction contract is valid when all prescribed conditions are met, including:

• Signatories have full civil capacity;
• Meet the above contract signing principles
• The form of contract is in writing and signed by legally authorized representatives of the parties to the contract. In case a party to the contract is an organization, that party must sign and stamp according to the provisions of law.

The legality of a construction contract is determined as follows:

• A valid construction contract is the highest legal basis that the principal, contractor and related parties are obliged to implement;
• A valid construction contract is the highest legal basis for resolving disputes between parties. Disputes that have not been agreed upon by the parties in the contract will be resolved on the basis of relevant legal provisions;
• State management agencies, control agencies, allocation agencies, capital lenders, inspection agencies, auditing agencies and other relevant agencies must base on the content of legally valid construction contracts. to perform its functions and duties according to regulations, without violating the legitimate rights and interests of the parties to the contract.

Pursuant to the content of Article 6 of Decree 37/2015/ND-CP

Basic content in construction contracts

Construction contracts need to include the main contents as prescribed by law. Based on the content of Article 141 of the Law on Construction 2014, the contents that must be included in the construction contract include:

• Applicable legal basis;
• Applicable language;
• Content and workload;
• Quality, technical requirements of work, acceptance and handover;
• Time and progress of contract implementation;
• Contract price, advance payment, currency used in payment and settlement of construction contracts;
• Guarantee of contract performance, guarantee of contract advance;
• Adjusting construction contracts;
• Rights and obligations of the parties to the construction contract;
• Liability for breach of contract, rewards and penalties for breach of contract;
• Suspension and termination of construction contracts;
• Resolving construction contract disputes;
• Risks and force majeure;
• Final settlement and liquidation of construction contracts;
• Other content.

It should be noted that, for a general construction contract, in addition to the above contents, the content and management responsibilities of the general construction contractor must also be supplemented.

Based on the content of Article 141 of the Law on Construction 2014.

Consulting services for signing a construction contract

At Long Phan, we provide construction contract consulting services to support parties in the process of negotiating, drafting and signing a construction contract with the following service scope:

• Review contracts, ensure construction contracts meet validity conditions and content according to regulations
• Consulting on choosing a construction contract suitable to the project and the content of the agreement between the parties
• Drafting construction contracts
• Representing customers to participate in negotiating and signing a construction contract
• Consulting on construction contract risk management
• Provide risk management solutions and prevent disputes that may arise during contract implementation.

Customers need to clearly understand the principles of signing a construction contract to ensure the validity and legality of the contract. Construction contracts must have clear, complete content and comply with legal regulations. If customers still have questions related to signing a construction contract, please contact Long Phan via hotline: 0906.735.386 for support.