Discussion on Several Issues of Implied Settlement- Zhiheng Law Firm

Introduction/Introduction

Article 21 of the Interpretation of the Supreme People's Court on Issues concerning the Application of Law in the Trial of Cases of Disputes over Construction Contracts for Construction Projects (1) stipulates that the parties have agreed that if the code packet of the released version does not reply within the agreed time limit after receiving the completion settlement documents, it shall be deemed to have approved the completion settlement documents and shall be handled in accordance with the agreement. If the contractor requests to settle the project price according to the completion settlement documents, the people's court shall support it.

Based on the above provisions (hereinafter referred to as the provisions of this article), this paper briefly discusses the relevant issues of implied settlement from three perspectives: the understanding that the parties agree not to reply as an approval of the completion settlement documents, whether the contractor can use the departmental regulations as the basis for applying the implied settlement rules and the issues that should be paid attention to in practice.

Failure to reply within the agreed time limit is deemed to have recognized the completion settlement document, the purpose of which is to prevent the code packet of the released version from delaying the settlement and harming the legitimate rights and interests of the contractor. The provisions of this article can be understood from the perspective of implied or effective conditions for civil juristic acts: 1. From the perspective of implication, Article 140 of the Civil Code stipulates that the actor may express or imply the intention to express that the code packet of the released version does not reply to the completion settlement document submitted by the contractor within the agreed time limit, which is regarded as the default completion settlement document submitted by the contractor, and the contractor may request settlement according to the completion settlement document submitted.

Second, from the perspective of a civil juristic act with effective conditions, Article 158 of the Civil Code stipulates that a civil juristic act may be accompanied by effective conditions, which will take effect when the conditions are fulfilled. The parties may agree that if the code packet of the released version does not reply to the completion settlement document submitted by the contractor within the agreed time limit, the contractor may settle according to the completion settlement document submitted by the contractor. The late reply of the code packet of the released version is the effective condition for the contractor to settle according to the completion settlement document submitted by the contractor.

Article 14 of the Interim Measures for the Settlement of Construction Project Prices and Article 18 of the Administrative Measures for the Construction Code packet of the released version and Contract Valuation also have relevant provisions, but the above provisions are departmental regulations and belong to administrative provisions, not mandatory provisions. Contractors cannot directly request settlement according to the completion settlement documents submitted by them according to departmental regulations. The deeper reasons are analyzed below.

Regarding the understanding of the parties' agreement not to reply as approval of the completion settlement documents

The parties have agreed that if the code packet of the released version does not reply within the agreed time limit after receiving the completion settlement documents, it will be regarded as recognizing the completion settlement documents, and it will be handled in accordance with the agreement. There are two points to note in the "agreement" between the parties: First, there must be an agreement that the code packet of the released version does not reply to the completion settlement documents submitted by the contractor within the agreed time limit and is regarded as recognizing the completion settlement documents submitted by the contractor.

If there is no agreement or the agreement is not clear, the provisions of this article cannot be applied. For example, it is only agreed that the code packet of the released version shall reply or conduct an audit within the specified time limit, but there is no agreement that no reply shall be regarded as approval, so the provisions of this article cannot be applied. For example, it is only agreed that the code packet of the released version shall reply in time, but there is no specific time limit for the reply, and the provisions of this article cannot be applied of course.

The parties' agreement must be in the special contract terms or other supplementary agreements, and the general contract terms of the Construction Contract (Model Text) cannot be directly quoted.

The Reply of the Supreme People's Court on How to Understand and Apply Article 20 of the Interpretation of the Supreme People's Court on the Application of Law in the Trial of Cases of Disputes over Construction Contracts for Construction Projects points out that the general clauses in the format text of the construction contract cannot be simply deduced. If the parties with the code packet of the released version do not reply within a certain period of time after receiving the completion settlement documents, it will be regarded as the unanimous intention of approving the completion settlement documents submitted by the contractor. The completion settlement documents submitted by the contractor cannot be used as the basis for the settlement of the project payment, that is, the parties shall make clear agreements in the terms of the special contract or other supplementary agreements, and the general contract clauses cannot be directly quoted.

Of course, if it is expressly agreed in the special contract clauses or other supplementary agreements that the application of the general contract clauses regarding the late reply shall be regarded as approved.

On whether the contractor can use departmental regulations as the basis for applying implied settlement rules

The first paragraph of Article 16 of the Interim Measures for the Settlement of Construction Engineering Prices stipulates that after the code packet of the released version receives the completion settlement report and complete settlement information, it shall be deemed recognized if it does not put forward any opinions on the settlement report and information within the time limit stipulated in these Measures or agreed upon in the contract. Article 18 of the Measures for the Administration of Construction Engineering Construction Code Packet of the released version and Contract Valuation stipulates that if there is no reply within the time limit, it shall be handled in accordance with the contract. If the contract does not stipulate, the completion settlement document shall be deemed to have been recognized.

The author believes that the contractor cannot request settlement according to the completion settlement documents solely based on the above provisions, for the following reasons: First, the above provisions are only departmental regulations, are administrative regulations, and are not mandatory provisions. If the parties do not expressly agree to refer to them, they cannot be directly applied.

2. The judicial interpretation of this article has clearly stipulated that in the case of the parties' agreement, the settlement shall be carried out in accordance with the completion settlement documents. The implication is that in the case of the parties' lack of agreement, the contractor's request to settle the project price in accordance with the completion settlement documents shall not be supported. 3. The Reply Letter to Article 20 of the Supreme People's Court on How to Understand and Apply < Interpretation of the Supreme People's Court on the Application of Law in the Trial of Cases of Construction Contract Disputes > has clearly pointed out that the general contract terms cannot be used as the basis for the contractor's request to settle in accordance with the completion settlement documents. It should be clearly agreed separately.

The above-mentioned departmental regulations are general provisions and are not the agreement of the parties. The contractor's requirement to settle in accordance with the completion settlement documents in accordance with the provisions of the general departmental regulations violates the provisions of the above reply. Of course, unless the parties expressly agree to refer to the above-mentioned departmental regulations in the terms of the special contract or supplementary agreement.

IV. Completion settlement documents are generally made unilaterally by the contractor, and there is a possibility of misstating the project price for its interests. Moreover, reviewing completion settlement documents requires professional knowledge, and even needs to be entrusted to a project cost consulting enterprise. If there is no agreement, the code packet of the released version shall be regarded as the completion settlement document of the recognized contractor if the code packet of the released version does not reply within the time limit specified in the above-mentioned departmental regulations. It will inevitably cause unfairness to the code packet of the released version and damage the legitimate rights and interests of the released version.

In summary, the contractor cannot directly request the settlement of the project price in accordance with the completion settlement documents in accordance with the provisions of the above-mentioned departmental regulations, and there should be a clear agreement on the settlement in accordance with the completion settlement documents.

When applying the provisions of this article, the following points should be noted

The contractor shall bear the burden of proof of having submitted the completion settlement documents to the code packet of the released version, otherwise the provisions of this article shall not apply. If the code packet of the released version claims to have replied to the contractor, it shall also provide evidence, otherwise it shall bear the adverse consequences of not being able to provide evidence. Second, the reply of the code packet of the released version may be an opinion on the project price, or on the quality of the project, or on the payment terms, etc., as long as it is an opinion on the review of the completion settlement documents submitted by the contractor, the application of this article may be excluded.

Third, if the construction contract is invalid, the code packet of the released version of the late reply as approved agreement is also invalid, the settlement of the project price shall be handled in accordance with the provisions of Article 793 of the Civil Code, that is, the acceptance qualified, can refer to the contract on the project price agreed discount compensation contractor, can not be extended to the application of this article.

Disclaimer: The views in this article are for exchange and discussion only, not as a basis for handling cases. Please criticize and correct the deficiencies in this article.

About the Author

Shi Wenhui Lawyer

Deputy Director of Zhiheng Haikou Management Committee

Zhiheng Haikou Equity Senior Partner

Director of Zhiheng Haikou Construction Engineering Department

Commercial mediator of Hainan Free Trade Port

Hainan Lawyers Association Construction Engineering and Real Estate

Deputy Director of Professional Committee

Contact number: 18689665886

Unit Address: Binhai Avenue, Longhua District, Haikou City

17th Floor, Block B, Baifang Plaza, No. 105

ZHIHENG

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Deputy Director of the Management Committee of Guangdong Zhiheng (Haikou) Law FirmShi WenhuiWritten by a lawyer"Integration of Construction Law Provisions and Case Application"It has been officially published, and the book is published and distributed by the Law Press. The book has a total of 580,000 words. It was officially published in the first edition in February 2023 and printed for the first time in February 2023.

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