Interpretation of Typical Cases of Construction Project Quality Protection of the Supreme People's Court (Part 1)
Author | Attorney Liao Shuting
Introduction:On November 3, 2025, the Supreme People’s Court released six typical cases concerning the protection of construction project quality, covering key issues such as resolving quality-related impasses, determining warranty liabilities within the reasonable service life, addressing hidden quality defects, apportioning liability for mixed faults in design and construction, imposing joint and several liability on entities that lend their qualifications, and using judicial recommendations to promote root-cause governance.
This article, from a lawyer’s perspective, will provide an in-depth analysis of six cases in two parts, examining the legal principles applied and the courts’ reasoning in each case, and offering practical recommendations.
01
Case One
Li v. A Certain Resource Company Construction Engineering Contract Dispute Case
Basic Facts of the Case
A certain resource company entered into a Construction Contract with Li, whereby the two parties agreed on Li’s undertaking of a certain construction project. Due to the resource company’s failure to pay the project funds as agreed, Li withdrew from the site before the work was completed. The two parties have a dispute over the settlement of the project payment in question. The resource company refused to pay the project funds on the grounds that the project had quality defects and that Li’s party had failed to fulfill its repair obligations. Li filed a lawsuit requesting that the Resource Company pay RMB 460,000 in outstanding construction fees, together with interest.
Judgment result
The court of first instance held that, because Li did not possess the requisite qualifications, the construction contract in question is invalid. Li is entitled to request price compensation from the resource company only after delivering a construction project that meets the required quality standards. There is no dispute between Li and the resource company that the portions of the project with quality defects shall be repaired.
Settling the project payment after the engineering repairs have been completed helps to improve the efficiency of dispute resolution and ensures that materials are utilized to their fullest potential. After trial, the court facilitated mediation, and the parties ultimately reached a settlement agreement: the parties will first repair the project and complete theCompletion acceptance (completion acceptance), followed by the finalSettlement (settlement) of the project payment. After the mediation agreement was signed, the project in question underwent repairs and was ultimately completed and passed the final acceptance inspection.
The court of first instance ruled on Li’s other claims and ordered the Resource Company to pay RMB 390,000 in project payment plus interest.
The focal point of the dispute
In a dispute over a construction project contract, if the employer raises a defense based on alleged defects in theProject quality, does the contractor have the right to claim payment for the works?
Relevant legal provisions
Article 793 of the Civil Code of the People's Republic of China: If a construction contract is invalid but the construction project has passed acceptance, the contractor may be compensated by reducing the project price in accordance with the contract provisions on the project price. If a construction project fails to pass acceptance inspection, it shall be handled as follows: (I) If the repaired construction project passes acceptance inspection, the employer may request the contractor to bear the repair costs; (II) If the repaired construction project still fails to pass acceptance inspection, the contractor has no right to request price reduction compensation in accordance with the contract provisions on the project price.
(I) Article 6 of the "Interpretation of the Supreme People's Court on Certain Issues Concerning the Application of Law in the Trial of Disputes over Construction Project Contract Cases": If a construction project contract is invalid but the construction project has been accepted as qualified upon inspection, the contractor may be compensated by means of price reduction in accordance with the contract provisions regarding the project price.
Lawyer's analysis
(I) If a contract is invalid, the contractor’s right to claim price compensation is premised on “theThe project quality is qualified..”
The guiding judicial value conveyed in this case is that the quality of a construction project is the primary consideration in resolving disputes over construction contracts, and the exercise of the right to claim payment for the project cannot be divorced from the prerequisite of compliance with quality standards.
In this case, the court first determined that Li lacked the requisite qualifications, rendering the construction contract invalid. It then clarified that Li is entitled to request a price reduction compensation from the resource company only upon delivering a construction project that meets the required quality standards. This determination adheres to the fundamental rule established in Article 793 of the Civil Code: where a contract is invalid, the contractor’s right to claim compensation at a reduced price does not arise automatically, but is contingent upon the construction project having passed quality acceptance.
This means that although a contractor’s defective construction qualifications do not affect its right to receive payment for the project, ensuring the quality of the work remains its fundamental obligation and the foundation upon which its right to payment is based.
(II) The practical significance of the tiered handling model of "quality repair first, payment settlement later."
In this case, the court did not follow the customary practice of adjudicating both the quality-defect issue and the construction-payment dispute concurrently. Instead, it facilitated mediation, enabling the parties to reach an agreement on the quality-defect issue: first, the defective work would be repaired and the project would undergo completion acceptance; only then would the construction payment be settled.
This tiered approach—prioritizing quality remediation while deferring payment settlement—carries at least three practical implications: first, it prevents the unfair outcome whereby the contractor would lose its right to claim the project price due to the contract’s invalidity; second, it ensures that any defects in theProject quality are substantively rectified rather than merely compensated through monetary damages, thereby facilitating the prompt delivery and commissioning of the project and safeguarding the employer’s interests; third, upon completion of the quality remediation and passing of the final acceptance inspection, an objective basis is established for the ultimate settlement of the project price, while also obviating the need for complex judicial appraisals, thus enabling the court to efficiently adjudicate the contractor’s claim for the project price.
In this case, the judicial approach of prioritizing quality remediation over payment settlement provides a model resolution to the common impasse in judicial practice where the employer refuses to pay the project cost on the grounds of quality defects, while the contractor claims full payment based on the contract’s invalidity. In complex disputes involving both the settlement of construction payments and quality repairs, the court’s tiered approach—prioritizing quality repairs first and deferring payment settlement—both preserves the value of the project, ensuring optimal utilization of resources, and efficiently resolves the parties’ disputes while balancing their respective interests.
02
Case II
A certain automobile company sues a certain construction company.
Construction project construction contract dispute case
Basic Facts of the Case
A construction company entered into a Construction Contract with an automobile company, pursuant to which the construction company agreed to undertake the civil works and steel structure construction for the automobile company’s vehicle assembly plant, with the project quality required to comply with the national or industry standards for quality inspection and assessment. The design life of the project is 50 years, and the warranty period shall commence from the date of project acceptance.
Ten years after the project was completed and put into service, cracks appeared in the main structural crane girders, compromising operational safety. The construction company has been delaying its warranty obligations on the grounds that the project has been completed and passed acceptance inspection. The automobile company subsequently carried out its own repairs and reinforcement, and then filed a lawsuit seeking to compel the construction company to fulfill its warranty obligations and compensate it for the costs incurred in the self-repair, totaling RMB 1.
75million.
In the litigation, the expert appraisal institution, entrusted by the court, issued an opinion stating that it is necessary and reasonable for the automobile company to level and rectify the uneven track and to reinforce crane girders that are fractured or have quality defects, and proposed maintenance plans such as replacing the existing precast reinforced concrete crane girders with new ones.
Judgment result
The trial court held that Article 62 of the Construction Law of the People's Republic of China stipulates that a quality warranty system shall be implemented for construction projects. The warranty period shall be determined in accordance with the principle of ensuring the normal use of the building throughout its reasonable service life and safeguarding the legitimate rights and interests of users. Within the design life of the project (50 years), quality defects have appeared in the crane girders of the main structural framework; accordingly, the construction company shall be obligated to replace them with new precast reinforced concrete crane girders under the warranty.
The construction company delayed fulfilling its warranty obligations, prompting the automobile company to take protective repair measures. The reasonable repair costs incurred amounted to over RMB 1.27 million, which should be borne by the construction company. Therefore, the court rules as follows: The construction company shall replace and repair the originally substandard portions of the work to ensure compliance with the design and construction drawing specifications, and complete the project within six months, passing final acceptance inspection; the construction company shall also compensate the automobile company for quality defect remediation costs in the amount of over RMB 1.
27million.
The focal point of the dispute
After the project has been completed and put into use for several years, if quality defects appear in the main structure, can the contractor be exempted from its warranty obligations?
Relevant legal provisions
Article 62 of the Construction Law: A quality warranty system shall be implemented for construction projects. The warranty period shall be determined in accordance with the principle of ensuring the normal use of the building throughout its reasonable service life and safeguarding the legitimate rights and interests of users. The specific scope of warranty and the minimum warranty period shall be prescribed by the State Council.
Article 40 of the Regulations on Quality Management of Construction Projects: Under normal conditions of use, the minimum warranty period for construction projects shall be as follows: (1) For infrastructure projects, foundation works of buildings, and main structural works, the warranty period shall be the reasonable service life of the project as specified in the design documents;…
Article 7 of the Measures for the Warranty of Construction Quality of Housing Projects: Under normal conditions of use, the minimum warranty period for housing construction projects shall be as follows: (1) For foundation and main structural works, the warranty period shall be the design-specified service life of the project.
Article 801 of the Civil Code: If the quality of a construction project fails to meet the agreed standards due to reasons attributable to the contractor, the employer shall have the right to require the contractor to carry out free repairs, rework, or reconstruction within a reasonable time. If, as a result of repair, rework, or reconstruction, the delivery is delayed, the contractor shall bear liability for breach of contract.
Lawyer's analysis
(I) The warranty period for the main structure equals the design service life and is not subject to contractual limitations.
The judicial reasoning in this case that “the warranty period for the main structure equals the design service life” is derived from Article 40, Paragraph (I) of the Regulations on Quality Management of Construction Projects and Article 7 of the Measures for Quality Warranty of Housing Construction Projects, which stipulate that the minimum warranty period for foundation engineering and main structure engineering is “the reasonable service life of the project as specified in the design documents.”
The project in this case has been in use for 10 years, far exceeding the warranty period for individual sub-items as stipulated in the standard contract. However, crane girders are integral components of the main structural system and remain within the 50-year design life. The construction contractor may not refuse to fulfill its warranty obligations on the grounds that the warranty period has expired. The court ordered a certain construction company to perform its statutory warranty obligations within the reasonable service life, thereby clarifying both the entity responsible for the quality of the project and the duration of such responsibility.
(II) The contractor may still be liable for warranty obligations many years after the completion and acceptance of a construction project.
The successful completion of theCompletion acceptance (completion acceptance) merely indicates that the quality of the construction project at the time ofAcceptance inspection (acceptance) meets the required standards; it does not signify the termination of the contractor’s quality liability. With respect to the individual sections and items of the works, the Contractor shall be responsible for rectifying any quality defects during the warranty period stipulated in the Contract. For foundation works and the main structural works, the contractor’s warranty liability extends throughout the entire design service life.
This judgment once again serves as a reminder to construction contractors that, even decades after the completion of a construction project, they may still be liable for warranty obligations arising from defects in the workmanship or quality. This is of great significance for safeguarding the quality and safety of engineering projects, maintaining order in the construction market, and ensuring safe production.
03
Case Three
A construction and installation company sues a construction investment company.
Construction project construction contract dispute case
Basic Facts of the Case
A certain construction investment company entered into a construction contract with a certain construction and installation company, under which the latter was contracted to undertake the shantytown redevelopment project of the former. The contract stipulates that the warranty period for the waterproofing works shall be five years, commencing from the date of completion and acceptance of the project. In October 2013, the project in question passed its completion acceptance inspection.
In December 2015, a supervisory spot check conducted by the administrative authority revealed that the basement slabs and exterior walls of certain buildings in the project in question were severely leaking, and corrective measures were required. Jian’an Company filed a lawsuit seeking payment from Construction Investment Company of the outstanding construction payments and the corresponding interest. In turn, Construction Investment Company counterclaimed, requesting that Jian’an Company pay for the costs of rectifying defects in theProject quality.
In the litigation, the expert appraisal institution, commissioned by the court, issued an opinion stating that the waterproofing works for the underground garage and basement did not comply with the drawing specifications and relevant standards; the repair costs amounted to over RMB 7.35 million.
Judgment result
The court held that Article 281 of the Contract Law of the People's Republic of China (now Article 801 of the Civil Code) stipulates that if the quality of a construction project fails to meet the agreed standards due to the contractor's reasons, the employer has the right to require the contractor to repair or redo/reconstruct the project free of charge within a reasonable period.
The contractor is responsible for the construction quality of the project. Although the project in question has passedCompletion acceptance, the existing evidence demonstrates that, due to reasons attributable to the contractor, certain buildings have developed quality defects in their waterproofing systems during the warranty period, necessitating repair. The construction contract in question is lawful and valid, and the construction and installation company shall fulfill its warranty obligations as stipulated in the contract.
Jian’an Company shall bear the costs for rectifying the quality defects, totaling over RMB 7.35 million, while Construction Investment Company shall pay Jian’an Company an amount of over RMB 36.53 million as the project payment. After offsetting these amounts, Construction Investment Company is required to remit the remaining project payment. Therefore, the court rules that Construction Investment Company shall pay Construction and Installation Company over RMB 29.18 million in project payments, together with the corresponding interest.
The focal point of the dispute
If quality defects in concealed works are discovered after the completion acceptance of a construction project, is the contractor liable for warranty?
Relevant legal provisions
Article 582 of the Civil Code: Where performance fails to conform to the agreement, the party shall bear liability for breach of contract in accordance with the parties’ agreement.
Article 802. If, due to the fault of the contractor, personal injury or property damage is caused to a construction project within its reasonable period of use, the contractor shall bear liability for damages.
(II) Article 40 of the Regulations on Quality Management of Construction Projects stipulates that, under normal conditions of use, the minimum warranty period for construction projects shall be:… (II) For roof waterproofing works, as well as for water-tightness of bathrooms, rooms, and exterior walls, the minimum warranty period is five years;…
Lawyer's analysis
(I) After the concealed works have passed the completion acceptance and within the warranty period, if any quality defects are discovered, the contractor shall fulfill its warranty obligations.
As a typical concealed work, waterproofing projects often exhibit quality defects with a “latent period.” These defects are difficult to detect fully during construction and upon completion acceptance, but they may gradually become apparent during subsequent use, particularly after exposure to environmental factors such as the rainy season or fluctuations in groundwater levels. In this situation, can the employer still hold the contractor liable for quality defects in concealed works? In this case, the court provided a clear affirmative answer.
In this case, where the existing evidence demonstrates that the concealed works of the construction project have quality defects, the court has determined that the contractor shall fulfill its warranty obligations as stipulated in the contract. This judicial decision rectifies the one-sided view held by some that “acceptance upon inspection automatically absolves one of quality liability,” and it is of positive significance in strengthening contractors’ awareness of quality control in concealed works such as waterproofing, foundations, and pipelines.
(II) The offsetting treatment of project payments and repair costs has practical reference value.
In this case, a construction and installation company claims outstanding project payments totaling over RMB 36.53 million, while a construction investment company has filed a counterclaim seeking compensation of over RMB 7.35 million for the costs of rectifying quality defects. The court adopted a “separate determination followed by final offset” approach, ruling that the employer shall pay the remaining project payment of over RMB 29.18 million after deducting the repair costs.
The advantage of this approach lies in the following: on the one hand, it recognizes the contractor’s right to claim payment for the completed works while ensuring that the employer’s quality assurance rights are protected, thereby promoting a balance of interests between the parties; on the other hand, it avoids the need for each party to perform its obligations or exercise the right of set-off after the judgment is rendered, thus facilitating enforcement.
At the same time, this case also serves as a warning to contractors: once quality defects in concealed works are discovered, the cost of remediation is often significantly higher than the cost of quality control during the construction phase. Strengthening process quality management and standardizing construction procedures is the fundamental approach for contractors to mitigate risks to project quality and safety and reduce economic losses.
Due to space constraints, this article provides an in-depth analysis of the first three cases. The analysis of the remaining cases will continue in the next installment. Please follow the WeChat official account of Zhiheng Foshan Law Firm so you don’t miss the next update!
lawyer
Introduction
Attorney Liao Shuting
Partner, Zhiheng (Foshan) Law Firm
Member of the Zhicheng Foshan Party Branch Committee
Member of the National Committee on Foreign-related Legal Affairs, Guangdong
Member of the Financial and Capital Markets Legal Affairs Department, Zhiheng Foshan
Mediator of the Mediation Committee of the Guangdong Province Association for the Renovation of Old Factories, Old Villages, and Old Towns
Guangdong Provincial Association of Insolvency Administrators: Member of the Rules and Discipline Committee, Member of the Women Members’ Working Committee,
Member of the Real Estate Restructuring Professional Committee, Member of the Cross-Border Insolvency Professional Committee
Arbitrator of the Shanwei Arbitration Commission
Members of the newly formed Foreign-related Commercial Legal Services Volunteer Group of Foshan City
Minister of the Foreign-Related Legal Services Department, Zen District Lawyers Working Committee, Foshan Lawyers Association
Attorney Liao Shuting is a member of the Communist Party of China and graduated from Zhongnan University of Economics and Law, where she earned dual bachelor’s degrees in law and economics. Admitted to practice since 2016, he specializes in disputes involving land co-development, construction projects, real estate sales and leases, financial lending, corporate equity, and private lending. With extensive litigation experience, he has been recognized on multiple occasions as a model or outstanding case at the provincial level.
For many years, we have provided legal services to numerous large construction and real estate enterprises, banks, state-owned enterprises, and import–export companies in the Guangzhou–Foshan region. We have handled a significant number of bankruptcy liquidation, reorganization, and settlement cases, including serving as the lead counsel in three first‑instance bankruptcy cases at the provincial level in Guangdong Province, and have managed a large volume of litigation and arbitration arising from bankruptcy proceedings.
Currently focused on international legal services, we provide comprehensive, one-stop professional legal services to enterprises in areas such as compliance for foreign investments and cross-border dispute resolution.
She boasts extensive professional experience and a solid legal foundation, providing clients with high-quality legal services in a professional, efficient, and responsible manner, and enjoys an excellent reputation within the industry.
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