How to prevent the risk of advance construction in the construction contract

Not to mention the risks of quality and safety in the construction process, in fact, the biggest risk is the capital risk, and the construction unit has no money is the biggest risk.

<>1. Risk of financing for capital advances;

2. The risk of arrears of materials and equipment;

3. The risk caused by the employer's deliberate default on the project price;

4. Due to the construction unit.

risks arising from poor management;

5. Due to labor costs.

risks arising from disputes;

6. Risks brought about by market changes;

7. The risks brought about by the transfer of construction projects by the construction unit;

8. The contractor is unable to continue the risk of default brought by the foundation workers due to excessive advances.

9. The risk of taking irregularities due to financial difficulties caused by the advance construction;

10. Risks caused by other problems caused by advances.

AdvancesThere are two main risks in construction:

On the one hand, since it is an advance construction, the project money will have to wait until the construction to a certain progress or after the completion of the complete start to get it, and during the construction period, it is likely that there will be various variables, resulting in the inability to get the project money in time, if these advances are raised, it will even lead to the risk of huge debts.

On the other hand, if the long-term advance of funds, once there is a problem of difficulty in recovering funds, it may be forced to stop work, and since it is agreed to advance construction, the suspension of work due to its own financial problems cannot be attributed to Party A.

Party B also needs to bear the liability for breach of contract such as overdue construction period.

Although the official administrative regulations.

It is strictly forbidden to advance the construction of the first investment project, but the advance construction in the market is a legal act of feasting. However, this does not mean that it is reasonable and healthy, and if the construction of advance funds is widespread, it may lead to excessive expansion of the scale of investment, resulting in a false prosperity, and at the same time, the construction of advance funds is more likely to produce economic entanglements.

Clause. First, it is necessary to conduct a strict credit investigation on the credit of the construction unit.

If it is the first time to cooperate with the construction unit, it should be more careful, and if necessary, ask lawyers and accountants to do due diligence, including the authenticity of the development project and the registration of the construction unit, especially the amount of registered capital, which is the basis for the ability to assume external responsibility; Investigate the quality of project funds and the situation in place, pay attention to the past business performance, performance ability and social reputation and other aspects of the comprehensive investigation.

Clause. 2. Strive to stipulate in the terms of the contract that the construction unit will guarantee the payment of the project money.

It can be in various forms (including mortgages, pledges or guarantees), and if there is a guarantee, it is extremely beneficial to the construction enterprise to advance funds. Although this clause is still relatively difficult to obtain under the current conditions, it is not impossible, and once it is obtained, the business risk of the enterprise will be greatly reduced. At present, Beijing has local legislation and regulations to make clear provisions on this, and once the system has been clarified, construction enterprises can actively work to fix this content in the contract terms.

Clause. 3. Deepen the intermediate settlement and do not relax the completion settlement.

The settlement cycle of construction projects is very long, and disputes over project costs often lead to non-implementation of arrears and claims, leaving construction enterprises without basis for litigation. Therefore, in accordance with international practice, it is particularly important to strengthen the intermediate settlement of project progress payment, which can put the contractor in a more fair position and make the materials in the construction process easier to preserve. Emphasizing the intermediate settlement of project progress payment does not mean that the completion settlement can be relaxed.

The risk of arrears of the completed project is very large, and the completion settlement must be handled in a timely manner in accordance with the contract after the completion of the project. As a construction enterprise, it is first necessary to collect and sort out the original vouchers, keep the visas, pay close attention to the settlement of the physical supply of the construction party and the verification of the paid project payment, and create conditions for the completion of the settlement; Once the completion arrears occur, the clean-up reminder should be implemented to the individual, supplemented by rewards and punishments for the assessment of the responsible person.

Clause. Fourth, take special measures for special real estate projects.

Clause. 5. The priority right to be compensated for the project payment is the legal right of the construction enterprise.

1. What is the proportion of the project quality margin?

The proportion of the construction quality deposit is 3%. The total reserve ratio of the deposit shall not be higher than 3% of the total settlement of the project price. The project warranty fund refers to the funds that the construction unit and the construction enterprise agree in the project construction contract to reserve from the project payment payable in order to implement the maintenance responsibility of the project during the defect liability period, so as to ensure that the construction enterprise repairs the defects of the project that has passed the completion acceptance during the defect liability period.

The project warranty money shall be directly withheld by the construction unit from the project measurement appropriation of the construction enterprise according to the total settlement amount of the project price multiplied by the proportion agreed in the contract, and the interest shall not be calculated. The construction enterprise shall, within the defect liability period after the completion and acceptance of the project, conscientiously perform the responsibilities agreed in the contract, and apply to the construction unit for the return of the project warranty in a timely manner after the expiration of the defect liability period. The construction unit shall refund the project warranty to the construction enterprise in a timely manner.

Legal analysis: 1. Conduct credit investigation on the employer, and conduct credit investigation on the legality of the project advance project, whether there is a mortgage, and the nature of the project land.

2. Let the employer provide a guarantee for the payment of the project price, such as the contract issuing party to provide a guarantee for the land use right or other real estate as a guarantee, or provide a payment guarantee.

3. When signing a construction contract, whether the interest on the advance is paid and how to calculate it should be clarified in the terms of the contract. Otherwise, it will be difficult for one's legitimate rights and interests in litigation to be properly protected. At the same time, it is recommended that the agreed interest rate be appropriately higher than the bank loan interest in the same period.

4. Strengthen construction management and strictly perform the contract. The contractor shall pay attention to the reasonable definition of the time limit for the payment of the advance. If the contract stipulates that the advance money will be returned according to the image progress, the contractor shall make the corresponding acceptance record when the payment conditions are met, which shall be used as the proof of payment requested.

5. Reasonably disperse the risk of advance to subcontractors and material suppliers.

Legal basis: Interpretation of the Supreme People's Court on Issues Concerning the Application of Law in the Trial of Cases Involving Disputes over Construction Contracts (I).

Article 6 If the construction contract of a construction project is invalid and one party requests the other party to compensate for the loss, it shall bear the burden of proof on the fault of the other party, the size of the loss, and the causal relationship between the fault and the loss.

Where the size of the loss cannot be determined, and one party requests that the size of the loss be determined with reference to the quality standards, construction period, time of payment of the project price, etc., as agreed in the contract, the people's court may make a judgment based on factors such as the degree of fault of both parties, the causal relationship between the fault and the loss, and other factors.

Core content: For construction enterprises, if they want to get the project and get profits, they must advance funds in most cases, otherwise they will not be able to get the business, or the profit margin is very low. Then, there are many risks in the advance of construction enterprises, and the following is the legal issue of how to control or reduce the risk of advance.

The key to the construction enterprise to control the risk of advance funds lies in the safety of the advance funds and prevents the advances from becoming arrears, so the construction enterprises must strengthen contract control and visa management.

First, choose a reliable partner. For projects with large amounts of advance funds, the construction enterprise should first conduct a strict review of the credit status of the partner, that is, Party A of the contract, including the authenticity of the project and the registration of Party A, the origin and availability of the project funds, the past performance, the ability to perform the contract and the social reputation and other aspects. During the operation of the project, it is best to hire a professional lawyer as the legal counsel of the project to understand the above situation.

Specifically, the investigation of the advance project includes the following aspects:

1. The legitimacy of the project, 2. The use of the project, 3. The nature of the land used by the project.

4. Whether the project land is mortgaged, 5. The development prospect of the project, 6. Party A's inspection.

Clause. Second, carefully grasp the amount of advances. The construction enterprise should carefully calculate the amount of advance funds and do what it can.

If the contract does not stipulate the amount of advances, but agrees to advance to the first few layers or the percentage of the agreed advance bids, etc., in this case, the construction enterprise should carefully calculate the amount of advances, fully improve market risks, and prevent a significant increase in the amount of advances caused by material price increases.

Third, strict contract signing management to avoid disputes over non-graduation. In the process of performing the contract, it is necessary to strictly follow the exercise of the visa right agreed in the contract and standardize the operation process. During the construction of the project, everyone is prevented from running and running, and each one signs a contract with the outside world (such as the purchase and rental of personnel, materials, and machines, etc.).

Fourth, we should strive to obtain a guarantee for the payment of the project funds from the construction unit. Although under the current conditions, it is generally difficult to fight, but as long as it can be obtained, the advance of the construction unit is very secure. For example, the construction unit provides security with land use rights, or uses other real estate as security.

Fifth, be good at exercising the priority right to be compensated for the project price. The construction enterprise shall submit the construction settlement materials in a timely manner, do a good job of signing, collect evidence, and claim the priority right of compensation within the statutory time limit.

When the court hears a dispute over the advance, it generally treats the advance clause as valid, and if there is interest stipulated in the advance clause, the bank loan interest shall be borne according to the fact that the advance has been formed. Therefore, although the construction enterprise is carrying out the construction with funds or advancing funds, the monthly progress quantity and payment should be declared according to the regular construction volume of the regular book. It shall be reviewed and confirmed by the supervision and construction unit, and shall be used as the basis for the amount of advance funds and the definition of interest litigation in the event of disputes.