What is a construction contract? What are the types of construction contracts in Vietnam?

What is a construction contract?

Based on the provisions of the Law on Construction 2014, 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 include:

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

- Assurance of adequate funds for payment according to contractual agreement;

- Having completed the selection of contractor and concluded the process of contract negotiation;

- 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.

Language used in construction contracts is Vietnamese. For construction contracts with the participation of foreign parties, the languages used therein are Vietnamese and another language as agreed upon by the parties.

What is a construction contract? What are the types of construction contracts in Vietnam? (Internet image)

What are the types of construction contracts in Vietnam?

Pursuant to Article 3 of Decree 37/2015/ND-CP and Clause 2, Article 1 of Decree 50/2021/ND-CP, construction contracts include the following types:

(1) Depending on nature, types of construction contracts are as follows:

- Construction consultant contract (or contract for consultancy) is a type of contract for performance of part or whole of the consulting task in activities of investment and construction;

- Work construction contract (or construction contract) is a type of contract for the performance of construction of the works, work items or part of construction work by design; General construction contract is a type of contract for the performance of all of the works of an investment project;

- Contract for procurement of materials and equipment that is a contract for procurement materials and equipment to be installed in construction works according to the technological design; general contract for procurement of materials and equipment that is a contract for procurement of materials and equipment for all works of a construction project.

- Engineering and Construction contract (or EC contract) is a type of contract for the engineering and construction of the works, work items; General EC contract is a type of contract for the engineering and construction of all of the works of an investment project;

- Contract for engineering and procurement of materials and equipment (Engineering – Procurement abbreviated as EP in English) that is a contract for engineering and for procurement of materials and equipment to be installed in construction works according to the technological design; general contract for engineering and for procurement of materials and equipment that is a contract for engineering and for procurement of materials and equipment for all works of a construction project.

- Contract for procurement of materials and equipment and construction of works (Procurement - Construction abbreviated as PC in English) that is a contract for procurement of materials and equipment and construction of works and work items; general contract for procurement of materials and equipment and construction of works and work items that is a contract for procurement of materials and equipment and construction of all works of a construction project.

- Contract for engineering - procurement of materials and equipment - construction of works (Engineering - Procurement - Construction abbreviated as EPC in English) that is a contract for implementation of all work ranging from engineering and procurement of materials and equipment to construction of works and work items and test run, commissioning and transfer to the awarding party; EPC general contract that is a contract for engineering - procurement of materials and equipment - construction of all works of a construction project.

An EPC contract is prioritized for a project that is complex, requires high technology and strictly complies with the uniformity and consistency between the phases ranging from the design to supply of equipment phase, execution of construction of works and training in technology transfer. Before making a decision to apply an EPC contract, the investment decision maker shall assess the requirements concerning technology, shortening of the duration of the project, the uniformity between the phases of design and supply of equipment, execution of construction of works and training in operation and transfer of the works with a view to satisfying the project's approved objectives and requirements and ensuring the feasibility of applying the EPC contract type as compared to other contract types.

- Turnkey contract is a type of contract for the performance of all the tasks from project establishment, engineering, procurement and construction of the works of an investment project;

- Contract for supply of human force, working machinery and equipment is a type of contract for the supply of human force, working machinery, equipment and other necessary vehicles for serving the construction of the works, work items, packages or construction work as designed;

- Simple and small-scale construction contract that is a construction contract for the performance of a contract package with a value not exceeding the limit on a small-scale contract package in accordance with regulations of law on bidding. The contents of the contractual work are of a simple technical nature and easy to be conducted.

- Other types of construction contract

(2) Depending on contractual price manner, construction contracts include the following types:

- Lump sum contract;

- Fixed unit price contract;

- Adjustable unit price contract;

- Time-based contract;

- Cost-plus fee contract;

- Other construction contracts.

- Combined price contract that is a construction contract using a combination of the contract prices prescribed above

(3) Depending on relationship of parties involved, construction contracts include the following types:

- Main contract is a type of contract signed between the investor and main contractor or general contractor.

- Sub-contract is a type of contract signed between main contractor or general contractor and sub-contract.

- Fixed rate contract is a type of contract signed between the employer and contractor as an agency or organization.

- Foreign construction contract is a type of contract signed between a foreign contractor and a domestic contractor or investor.

Mai Thanh Loi

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