The Analysis On Applying The Right Of Preferred Payments For The Construction Project

In order to solve the problem of arrears of construction project,protect the legitimate rights and interests of contractors and construction workers and promote the healthy development of the construction industry,Article 286 of Contract Law of the People's Republic of China formally established the system of priority compensation for construction projects.In construction project contract cases,contractors' claim for the priority of compensation for construction projects has increased,and thereby related disputes in the process of exercising rights have followed.Article 286 alone of the Contract Law cannot meet the needs of judicial practice.To this end,the Supreme People's Court and many local courts have issued a number of regulations.Scholars and judges also contribute their own wisdom,in order to better play the role of Article 286 of the Contract Law.However,in practice,the situation of different judgments of the similar case still exists.Recently,the Supreme People's Court has issued the latest regulations on the relevant issues in the exercise of the priority of the construction project.On December 29,2018,the Interpretation of the Supreme People's Court on the Application of Legal Issues in the Trial of Construction Project Construction Contract Disputes(II)(Law [2018] No.20)(hereinafter referred to as "Construction Project Interpretation II")was officially promulgated.Among them,there are seven provisions that stipulate the priority of compensation for construction projects.This provides a reliable basis for resolving disputes over the priority of compensation forconstruction projects.However,there are still some omissions in the judicial interpretation of some doubts faced in the exercise of the priority of the construction project,which areFirst,the problem is the subject who exercises the priority right of compensation for construction projects.Article 17 of the "Construction Project Interpretation II"stipulates: "The developer who has entered into the construction contract with the contractor shall,in accordance with the provisions of Article 286 of the Contract Law,request the price of the construction project to be liquidated or the auctioned,the people's court should support it.” This article affirms the subjective status of the contractor who has a direct contractual relationship with the contractor.However,whether the designer,the surveyor,the constructor at the time of the invalid contract,and the actual constructor can be the subject of the exercise of the right,no detailed explanation is given.The second problem is the scope of claims on the priority of the construction project payment security.Article 21 of the "Construction Project Interpretation II"stipulates: “The scope of the contractor's construction project payment priority shall be determined in accordance with the provisions of the relevant administrative department of the State Council on the scope of construction project price.If the contractor claims the interest of delaying paying the construction project prices and liquidated damages for the construction project price,the people's court shall not support it." This article redefines the scope of security for creditor's rights for the construction project's preferential repayment.However,the issue of priority for project quality deposits and project advance has not been properly resolved.Thirdly,the developer and the contractor agreed to waive or limit the priority of the construction project price.Article 23 of the "Construction Project Interpretation II" stipulates: " If the agreement of the developer and the contractor to waive or limit the priority of the construction project price damages interests of the construction workers and the contractor claims that the contractor does not enjoy the construction project price according to this agreement,people's court shall not support it." This article affirms in principle the effectiveness of the developer and the contractor towaive or limit the priority of the construction project.However,the standard for evaluating the effectiveness here is “damaging the interests of construction workers”.How should this standard be judged? Is it practical?The fourth problem is the issue of the reminder when the contractor exercises the priority of the construction project price.The "Construction Project Interpretation II" does not stipulate whether reminder is the statutory conditions for the exercise of the rights of the contractor and the length of the "reasonable period" after the reminder are made.In response to the above problems,the paper attempts to propose the following solutions through research methods such as literature research,empirical analysis and legal interpretation:On the subject of the exercise of the priority of the construction project,the article believes that the subcontractor and the actual construction person can be the subject of rights.When the two filed a subrogation lawsuit against the contractor and claimed the project price,they had broken through the “warehouse rules” and obtained preferential treatment for the project price.The constructor of the invalid contract can also be the subject of rights,because it builds a qualified real estate project by their its own labor and financial resources,which is the basis for the benefit of the contractor and other creditors.Giving priority to the compensation for the construction of such entities is also in line with the original intention of protecting the survival rights of migrant workers.Prospectors and designers should not be the subject of rights.They are different from the contractor of the construction contract,and can exercise the lien of the contractor according to the Contract Law.If they were given the priority rights to the project price,they would be over-protected.Under the EPCM mode(Engineering Procurement Construction Management),the general contractor should not be the subject of the exercise because it is not responsible for the construction activities of the project.On the issue of the scope of claims for the priority of the construction project,the article believes that the project quality deposit is not included in the creditor's right of the construction project price priority.Whether the project advancement issecured shall be determined according to its purpose.When the project is used for actual construction activities,the funding agreement is actually a construction contract.The contractor will be compensated for the advance payment,which will help protect the survival rights of migrant workers and promote the healthy development of the construction industry.When the project is used for inter-enterprise lending or project financing,it is a general creditors' right in nature and does not have priority compensation.On the issue that the developer and the contractor agreed to waive or limit the priority of the construction project price,the article argues that the “Construction Project Interpretation II” determines the effectiveness of such behavior based on whether it “damages the interests of construction workers” which only shows declaring meaning.The article firstly shows the controversy about the effectiveness of the “agreement to abandon” behavior,and then interprets Article 23 of the“Construction Project Interpretation II” to analyze the form,form and invalidity of the“contract”.It is very difficult to judge the "damage of construction workers' interests" in Article 23 of "Construction Project Interpretation II" and lacks specific time standards and effect standards.It may also increase the moral hazard faced by the contractor,which will be more detrimental to the protection of the rights of construction workers.In determining the effect of abandoning or restricting the prioritization of the construction project price,the provisions of the General Principles of the Civil Law and the Contract Law can be referred,without prejudice to the interests of construction workers.On the issue of the reminder when the construction price priority repayment right is exercised,it is necessary to judge whether parties has agreed when determining whether or not it is a necessary condition for the exercise of the right.If there is no agreement between the two parties,the reminder should not be used as the statutory condition for the exercise of the right.If the parties made an agreement,the contractor must make a notice of payment to the contractor to pay the due price of the project before exercising the priority of the construction project.In addition,it is not necessary to make a reasonable evaluation of the length of the reminder period.