Latest instructions on payment or temporary payment of construction contract in Vietnam

Latest instructions on payment or temporary payment of construction contract in Vietnam (Internet image)

Regarding this issue, LawNet would like to answer as follows:

The Minister of Construction of Vietnam promulgates Circular 02/2023/TT-BXD dated 03/03/2023, which guides a number of contents on construction contracts.

The payment and temporary payment of construction contracts are implemented as follows as of April 20, 2023:

1. Latest instructions on payment or temporary payment of construction contract in Vietnam

Specifically, in Clauses 1, 2, 3 and 4, Article 3 of Circular 02/2023/TT-BXD stipulating the payment and temporary payment of construction contracts is as follows:

- The payment for construction contracts shall comply with the provisions of Article 19 of Decree 37/2015/ND-CP.

- For the production of components and semi-finished products of great value, construction materials that must be stored seasonally are advanced to comply with the provisions of Clause 7 of Article 18 of Decree 37/2015/ND-CP, the advance dossier must list the type, unit price, and total value of each type of material, component, and semi-finished product.

When making payment, the value of the completed volume tested for acceptance must be deducted correspondingly to the value advanced according to the contract content.

- The temporary payment according to the provisions of Clause 4, Article 19 of Decree 37/2015/ND-CP based on the specific conditions of each temporary payment to decide the temporary payment value and security measures for the temporary payment, ensuring efficiency and avoiding capital loss.

Some specific cases are as follows:

+ For the contract under the adjusted unit price, when the payment period is not available, the unit price in the contract shall be used to make a temporary payment.

+ For products, jobs, and works that are in the process of construction and have not been completed according to the requirements of the contract, the completion level shall be based on each specific case and the details of the unit price of that product, job, or task in the contract for temporary payment.

- For products, jobs, and works that have not been completed due to causes, including contract termination; or one of the contracting parties does not accept the product, the parties must clearly define the responsibilities and obligations of each relevant entity before making the payment.

2. What is included in the payment application of construction contract?

According to Clause 5, Article 3 of Circular 02/2023/TT-BXD, construction contract payment documents include:

- Minutes of mass acceptance or confirmation of volume (if not yet qualified for acceptance);

- Spreadsheet of arising payment value (increase or decrease);

- The calculation of the temporary payment value and the request for a temporary payment.

3. What is construction contract?

Specifically, in Clause 1, Article 2 of Decree 37/2015/ND-CP, construction contract is a civil contract negotiated in writing between the employer and contractor for execution of a part or whole of the construction investment activity.

In there:

- The employer means the investor or its representative, general contractor or main contractor.

- Contractor means general contractor or main contractor if its employer is the investor; sub-contractor if its employer is general contractor or main contractor. The contractor can be a joint venture among contractors.

(Clause 2 and 3, Article 2 of Decree 37/2015/ND-CP)

4. Principles for execution of construction contract in Vietnam

According to Article 5 of Decree 37/2015/ND-CP, When executing the construction contract, the parties must meet the principles for execution of construction contract as prescribed in Clause 3, Article 138 of the Law on Construction 2014:

- The contractual parties shall properly implement their commitments in the contract regarding the scope of work, quality requirements, quantity, category, schedule, methods and other agreements;

- Honesty, cooperation and lawfulness;

- No infringement upon the interests of the State and community and lawful interests of other organizations and individuals.

More details can be found in Circular 02/2023/TT-BXD effective from April 20, 2023.

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