Definition And Legal Consequences Of Illegal Subcontracting On Construction Projects

According to the process design of the construction project, the constructionproject is divided into three parts, including contract, the contractor andsubcontractors. As to the legal nature of subcontracting, there is mainly threepoints, the fulfillment replaced by the third party, debt in lieu of performance andthe performance of the coexistence of debt which can precisely explain the legalnature of subcontracting. The construction contract is distributed in the differentsegments of the construction project, and plays an important role in themanagement of construction projects. It is divided into three parts, constructionproject bidding, contracting and subcontracting, which has different meaningsand manifestations. In particular, the legal nature of illegal subcontracting isnamely the coexistence of debt obligations.By combing the provisions of existing laws, judicial interpretations andcases, the standard of illegal subcontracting includes the followingaspects:(1)whether actors comply with the appropriate qualifications or make areal recognition;(2)whether the object of conduct (the construction project) has tobe subcontracting;(3)whether subcontracting certain conditions are met, such assub-contract filing and others;(4) whether the behavior of actors comply with thelaw, such as the project should be tender and so on. Further, the paper refines thedifferent types of illegal subcontracting, such as subcontractor withoutcorresponding qualifications, the construction projects without subcontracting,the subcontracting without the record, construction project parcelled out toseveral contractors, subcontracting again etc. Then the paper explores thelegislative purpose of illegal subcontracting that is to protect the interests of theparties, to ensure the quality of the project and maintain construction engineeringmarket order and uses economic theory of information asymmetry andexternalities, the value of the transaction cost theory and fair and efficiency valueof law to determine its legitimacy considerations. By the way, the purpose islegitimate and reasonable in many multiple dimensions.Finally, the paper specifically addresses the legal consequences of illegalsubcontracting, including administrative and civil legal consequences. Theadministrative legal consequences include the qualification reduced or evencancellation, the certificate shall be ordered to suspend business for rectification, confiscate the illegal income and fines etc. The legislation provides for a fine ofstandards and the amount of provisions inconsistent. The civil legalconsequences include the validity of the contract and the ineffective handling ofthe consequences. In the situation, illegal subcontracts should be dealt with inaccordance with the provisions of Article58of the Contract Law, where thequality of construction projects is charged by contractor and the People’s Courtconfiscated illegal subcontracting parties has been made ill-gotten gains. Theinvalid contract losses should be judged by independence and relevance with thescope of cost and the quality of the project. Based on whether the project iscompleted and qualified, the construction settlement of the invalid contract willtake a different way. The actual construction can charge sub-contracting peoplein violation of the law and contractor who is responsible for the project price.Theactual construction after passing the completion of the project, will continue toenjoy the priority of construction project price and the actual constructionengaged in the external commercial matters activities should be strictly identifiedon basis of the provisions of the agency and practical engineering.