What is the validity of construction contract in Vietnam?

What is the validity of construction contract in Vietnam? (Internet image)

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

1. What is a construction contract?

According to Clause 1, Article 2 of Decree 37/2015/ND-CP, a 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.

2. What is the validity of construction contract in Vietnam?

Specifically, in Clause 1, Article 6 of Decree 37/2015/ND-CP, a construction contract shall become legally effective when it meets the following conditions:

- Persons who participate in signing a contract must obtain adequate legal capacity;

- Meet the principles for contract signing as prescribed in Article 4 of Decree 37/2015/ND-CP;

Principles for signing construction contract must conform to Clause 2, Article 138 of the Law of Construction No. 50/2014/QH13 and ensure the followings:

+ 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.

+ 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

+ 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.

+ 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.

+ Before concluding an EPC contract, the parties must agree upon the following main contents:

(i) The scope of work expected to be performed under the EPC contract;

(ii) 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;

(iii) 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;

(iv) Requirements concerning construction engineering design and several initial design parameters;

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

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

(vii) Construction-related solutions and primary materials to be used;

(viii) Requirements concerning quality of quality of the construction works, and testing, commissioning, warranty and maintenance thereof;

(ix) 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;

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

(xi) 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;

(xii) Environmental protection and fire safety requirements, and other issues;

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

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

(xv) 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.

- Form of a contract is in writing and signed by representative of the parties to a contract according to the law. In case either of the parties is an organization, such party shall sign its name and affix stamp according to the law.

The effective date of a contract is the date when it has been signed (affixed with stamp if any) or other specific times as agreed in the contract and the employer has received performance bond issued by the contractor (for a contract with provisions on performance bond being specified).

(Clause 2, Article 6 of Decree 37/2015/ND-CP)

3. Regulations on the legality of construction contract in Vietnam

Legality of construction contract in Vietnam is as follows:

- A construction contract that has become effective shall be the highest legal foundation that the employer, contractor and other related parties have the obligations to perform;

- A construction contract that has become effective shall be the highest legal foundation for settling dispute between the parties. Any dispute that is not yet agreed by the parties to the contract shall be settled on the basis of relevant law provisions;

- Regulatory agencies and agencies that perform controlling, allocation, provision of capital, investigation and auditing, and other relevant agencies shall perform their functions and duties as defined without encroachment on rights and interests of the parties in reliance on terms and conditions of the effective construction contract.

(Clause 3, Article 6 of Decree 37/2015/ND-CP)

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