Transaction Cost Analysis On The Governance And Optimization Of Construction Contract Based On The Inclusive Price Principle

Since the reform and opening up, especially after China’s joining the WTO, our country’s international engineering contracting enterprise has achieved great development and has been in a risen state in international engineering project market. Compared with the leading international engineering contracting enterprise, in respect of comprehensive strength, Chinese international project corporation is still in the backward position. If Chinese international project corporation want to strengthen their comprehensive quality, especially the competitiveness in international engineering project operations, enhancing the soft power of the project management is more important than raising the level of technology and other hard strength outside. A large number of practical experience shows that contract management is the core of the whole project management. The UK is building service output power, and is standard contract and legal output power also. The British standard contract widely used in the international range, at the same time, the related theory of contract law was widely accepted and absorption. In the international legal system of project construction, the method has the extremely important influence and position, and its cases not only quoted by the arbitration tribunal again and again, and often quoted to the contract claim and alternative dispute resolution process of international project. Therefore, learning English interpretation principle of construction contract, the inclusive price principle, is beneficial for our enterprises to evade the law and the contract risks greatly in the competition of international project contracting market.The British court shall follow the inclusive price principle to interpreting engineering contract in trying the cases of disputes over contracts on the construction, is also the basic criterion the definition of contractual obligation and risk allocation. The rules and the underlying basis of the numerous authority case, in the19th century, formed the original idea of inclusive price principle.This was christened by I.N. Duncan Wallace as "the inclusive price principle", who are the English authority scholars on construction law, through combing history authority case, combined with its rich engineering legal practice experience. He exposition the principle in detail in ’Hudson’s Building and Engineering Contracts11th’, and put forward management ideas based on the inclusive price principle and Suggestions clauses. In1979, Wallace invited by Singapore Institute of Architects to draw the SIA contract condition (1980), SIA contract Wallace’s practice of construction contract management based on the inclusive price principle.Foreign construction legal scholars, especially the British scholar, studied and interpreted the inclusive price principle deeply and thorough. Through a lot of literature retrieval and reading, I find that Chinese research on the inclusive price principle is very few, the existing literature are interpretation and introduction normally. There is lack of thorough theoretical discussion to the inclusive price principle domestically, and a contract research based on the inclusive price principle for construction project management is blank, which gives an inspiration and provides an entry point for me.The main research methods adopted in this paper included the document analysis the summarizing method and comparative analysis method. First of all, through a lot of literature reading related to the inclusive price principle and transaction cost theory, I went into the intension of the theories deeply to lay a solid foundation for the follow-up research. Then, summarizes the contract management ideas and Suggestion terms based on the inclusive price principles.Finally, I carried out a study to compare the different influence of transaction cost under the JCT contract and the contract based on the inclusive price principle.TIn the first chapter, significance, the domestic and foreign research situation, the research methods, research contents and research thinking are introduced. In the second chapter, the transaction cost theory connotation is combed, and I do analyses on the project transaction attribute, the transaction cost composition, the effect of construction contract on transaction cost emphatically. In the third chapter, I elaborate on the inclusive price principle. In the fourth chapter, the main ideas for contract management based on the inclusive price principle are combed, and the suggestion clauses are collected. In the fifth chapter, I make a comparative study on the transaction cost between contract conditions based on the inclusive price principle and JCT contract conditions as a representative of the traditional contract conditions. In the last chapter, conclusion of the theme is summarized and reaffirmed.This article’s conclusion is that the contract conditions based on the inclusive price principle is useful to control speculation behavior of contract both sides, and have an have a greater effect on reducing transaction costs. This conclusion is based on the hypothesis that people is considered with opportunistic behavior-tendency, limited rationality, which was demonstrated. The innovation point in this paper is to use the transaction cost theory to study the economic efficiency of the contract conditions based on the inclusive price principle intensively. And the deficiency of this paper is lack of suggestion clause, cooperated with the inclusive price principle, with incentive effect.