Research On "back-to-back" Clauses In Construction Engineering Subcontracts

In the construction industry,there is a widespread phenomenon that the owner delays payment and refuses to pay for the project.In this case,in order to reduce the pressure and risk of their payments in advance,general contractors often agree on "pay-when-paid" clauses in subcontracts that transfer the risk of delay,non-payment and bankruptcy from the owner to the subcontractor.In other words,the general contractor will pay the subcontractor for the project only after the owner pays the general contractor for the corresponding project.However,because the legal nature of the "pay-when-paid" clause has not been clarified in the relevant legal norms in China and there is no clear understanding of the inherent risks in the industry,the litigation of " pay-when-paid " clauses occurs frequently in practice.Therefore,the author hopes to help the construction industry to have a correct understanding of the "pay-when-paid" clause and prevent its risks through the analysis and research of the content,legal effect and legal nature of the "paywhen-paid" clause.For the legal nature of the "pay-when-paid" clause,because the "pay-when-paid" clause is not specified in the laws and regulations and there are many forms of expression of "pay-when-paid" clauses in practice,it should not be rigidly identified as conditional or deadline clauses.In order to determine the nature of the "pay-when-paid" clause,it is necessary to analyze whether the attached facts are the future uncertain facts or the future certain facts according to the specific expression form of the "pay-when-paid" clause.As for the legal effect of the "pay-when-paid" clause,it complies with Article 143 of the Civil Code and meets the following conditions: If the actor has the corresponding civil capacity,the expression of his intention is true and does not violate the mandatory provisions of laws and administrative regulations,and does not violate public order and good custom,it shall be determined to be valid.If the subcontract is invalid,whether the "pay-when-paid" clause can be applied.The Supreme People's Court's Interpretation on the Applicable Law in the Disputes over Construction Contracts for Construction Projects will take effect on January 1,2021.According to article 6,the "pay-when-paid" clause is unapplicable if the contract is invalid.However,in order to prevent the general contractor from abusing the "back-to-back" clause and harming the public interest,it is necessary to regulate the "back-to-back" clause through legislation,reasonably distribute the rights and obligations of both parties and the burden of proof,so as to balance the interests of both parties.