Study On The Effectiveness Of The Priority Of Compensation Of Project Price When The Construction Contract Is Invalid

With the continuous increase of the scale of fixed assets investment in China,the problem of arrears in project payment is gradually exposed.The Contract Law of the People’s Republic of China and the Civil Code of the People’s Republic of China stipulate that the priority right of compensation of project price which is designed to solve this problem.The system has not fully played its due role because of many controversial issues."Whether the invalidity of the construction contract affects the effectiveness of the priority right of compensation of the project price" is the most controversial issue.In judicial practice,there is confusion in the application of law because of the different understanding of judges.By sorting out different theories in the academic world and different viewpoints in judicial practice,this paper analyzes the causes of disputes,puts forward correct viewpoints,and provides path choices for unified judicial thinking.There are three main theories in the academic circles on whether the contractor enjoys the priority of compensation of the project price when the construction contract is invalid: the affirmative theory holds that the contractor still enjoys the priority of compensation of the project price when the construction contract is invalid,but generally speaking,it still needs to meet the preconditions of qualified project quality.The negative theory holds that when the construction contract is invalid,the Contractor does not enjoy the priority of compensation of the project price,even if the project quality is qualified.The compromise theory determines whether the contractor enjoys the priority of compensation of the project price or not depends on the Contractor’s responsibility for the invalidity of the construction contract.This paper tends to say yes,but believes that the main reason is that the substantive element of the priority of compensation of the project price is that the contractor enjoys the creditor’s right of project payment due,rather than depending on the effectiveness of the construction contract.There is no consensus in judicial practice whether the contractor enjoys the priority of compensation of project price when the construction contract is invalid.From the guidance of the court,some courts support the positive theory,some courts support the negative theory,and some courts have experienced a change from the negative theory to the positive theory.Judging from court cases,the judgment standards of courts in different places and at different levels are not uniform,mainly for two reasons: one is the difference in judgment caused by different understanding of the nature of discount compensation;the other is the confusion between the contractor and the actual builder.This paper holds that the nature of discount compensation still belongs to the project price.The discussion of the effect of construction contract on the effect of priority compensation of project price should be limited to the context of the contractor who has a direct contractual relationship with the employer.This paper holds that the priority of compensation of project price belongs to the legal mortgage in the real right of legal security,which has the general characteristics of real right for security.Its subordinate attribute determines its attachment to the principal creditor’s right of project payment.The priority of compensation of project price is established when the project price is not paid off.However when the contract is established,the creditor’s right of project price does not exist,which logically negates the connection between this right and the validity of the construction contract.Once the construction contract shall be invalid,the contractor have the right to the project price as long as the project quality is qualified.The contractor has no right to claim the project price from the employer if the project quality is qualified.This paper opposes the practice of discussing whether the contractor or the actual constructor has the priority of compensation of the project price without distinguishing the types of construction contracts.According to whether there is a direct legal relationship between the contractor and the employer,the construction contract can be divided into two types.To discuss the impact of the effectiveness of the construction contract on the priority of compensation of the project price,we should clarify a major premise: only the contractor who has a direct contractual relationship with the employer has the right to exercise the priority of compensation of the project price.This kind of contractor specifically includes two kinds,one is the contractor that the law allows to establish the construction contract relationship with the employer,the other is the dependent person that the law does not allow but actually establishes the construction contract relationship with the employer.Other than that,the actual builder who has no direct contractual relationship with the employer may subrogate the priority of compensation of the project price belonging to the contractor.