The principles of signing construction contracts in Vietnam

What is a construction contract?

Based on the provisions 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.

The principles of signing construction contracts in Vietnam (Internet image)

The principles of signing construction contracts in Vietnam

The principles of signing construction contracts in Vietnam include:

(1) Voluntariness, equality, cooperation, non-violation of law and social ethics;

(2) Assurance of adequate funds for payment according to contractual agreement;

(3) Having completed the selection of contractor and concluded the process of contract negotiation;

(4) If the contractor is a partnership of contractors, there must be a partnership agreement. The partners shall sign and append their seals (if any) to the construction contract, unless otherwise agreed by the parties.

(5) At the time of signing, the contractor must meet conditions for practice qualification and performance qualification as prescribed in the Law on Construction. As for partnership contractor, division of work quantity in the partnership agreement must be based on performance qualification of each member of the partnership. As for foreign main contractor, an undertaking to hire domestic sub-contractor to perform the tasks under the contract must be included when such sub-contractor is capable of meeting requirements of the bid package.

(6) The investor or its representative is permitted to sign a contract with one or more main contractors for the performance of tasks. In case the investor signs contracts with multiple main contractors, the content of these contracts must ensure uniformity and comprehensiveness during the performance of the tasks under the contract to meet schedule, quality and efficiency of the investment project

(7) General contractor or main contractor is permitted to sign contracts with one or multiple sub-contractors but such sub-contractors must be accepted by the investor. All these sub-contractors must be in uniformity and agreement with the main contractor signed with the investor. General contractor or main contractor must be responsible to the investor for schedule, quality of the undertaken tasks including the tasks performed by sub-contractors.

(8) Contractual price is not permitted to exceed the bid price or result of negotiation on construction contract except the quantity generated outside scope of the bid package permitted by competent persons.

(9) Before concluding an EPC contract, the parties must agree upon the following main contents:

- The scope of work expected to be performed under the EPC contract;

- The construction location, the direction and route of the construction works, their type and grade; the scale and capacity of and plan for the products to be selected, and the capacity for exploitation and use of the works;

- Information concerning documents, data and figures on natural conditions, engineering geology, hydro-geology and hydrology of the area where the works are expected to be built;

- Requirements concerning construction engineering design and several initial design parameters;

- Plans for technology, engineering, equipment and commerce; origin of equipment and products; solutions for connecting technology to current technical systems (if any);

- Plan to connect technical infrastructure both inside and outside of the works; fire safety solutions within the scope of the EPC contract package;

- Construction-related solutions and primary materials to be used;

- Requirements concerning quality of quality of the construction works, and testing, commissioning, warranty and maintenance thereof;

- Solutions to architecture, construction site, cross sections and vertical sections of the works, dimensions and main structure of the construction works within the scope of the EPC contract package;

- Lists and levels of application of technical regulations and standards to be used during design, supply of equipment and execution of construction of works;

- Technical instructions on supplies, equipment and technical services; processes for operating part or whole of the works within the scope of the EPC contract package;

- Environmental protection and fire safety requirements, and other issues;

- Requirements relating to procedures for approval; the number of documents and deadlines for submission thereof to the awarding party;

- Schedule and milestones for implementing and completing the essential work, work items and the entire works to be put into operation and use;

- Responsibilities delegated to the awarding party and receiving party for electricity and water supply, information and communications, internal roads and other services available on site, and for processing of interfaces between contract packages in the same construction project.

Pursuant to: Clause 2, Article 138 of the Construction Law 2014, Article 4 of Decree 37/2015/ND-CP and Clause 3, Article 1 of Decree 50/2021/ND-CP

Mai Thanh Loi

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