The project construction agreement
The project construction agreement is an agreement between the investor and the contractor during the project implementation and will serve as a legal basis for the parties to resolve problems if any disputes arise.
The project construction agreement is governed by the general provisions of the civil law on civil agreements and specialised legal documents in the construction field. Because of the nature of a civil transaction according to the agreement of the parties, the project construction agreement shall take effect once it meets the conditions for a civil transaction to be effective. Besides, the execution of the construction project is often large-scale, is conducted over a long period of time and involve many different entities (sub-contractors, other consultants, etc.). Therefore, the drafting of a project construction agreement needs to be carefully studied based on the current legal bases to ensure the rights of the parties.
The project construction agreement template
For the project construction agreement template, please refer to the construction work agreement template attached the Circular No. 09/2016/TT-BXD dated 10 March 2016 of the Ministry of Construction on guiding the construction work agreement for more detailed information.
Notable terms when drafting a project construction agreement template
Normally, when signing a project construction agreement, the investor will advance an amount (depending on the agreement) so that the contractor can perform the work. This is completely appropriate and to protect the contractor’s right. However, in fact, there are many cases where the contractor who receives the advance amount then run away and not perform the work as agreed. Therefore, the addition of an advance guarantee is extremely necessary to protect the interests of the investor. Accordingly, before the investor advances the agreement to the contractor, the contractor must submit to the investor a contract advance guarantee with a value equivalent to the value of the advance payment. The value of the agreement advance guarantee will be deducted in proportion to the reduced value of the advance through each payment (as agreed by the parties).
Content and workload
The project construction agreement, especially large-scale projects, will bind the rights and obligations of not only the investor and the contractor, but also subcontractors, consultants, etc. Therefore, the project construction agreement must clearly define the scope of work that each party must perform to avoid the confusion between the parties’ obligations affecting the completion schedule of the work.
Time and progress of agreement performance
In addition to the final handover time, the project construction agreement should divide the completion time of each item so that the investor can easily monitor, capture, and evaluate the contractor’s construction quality. Only signing a total period for the entire project for the parties to hand over and take over the work will be very dangerous and impossible to overcome if errors occur during the implementation process without being detected in time and lasts until completion.
Agreement price is the total value of the project construction agreement. Depending on the type of the agreement is a lump-sum agreement or fixed-price agreement or adjustable price agreement, the payment for the agreement will be paid accordingly. The payment will be done based on the actual completed workload approved with the standards and quality of the work as a basis for the investor to pay for the contractor.
In addition, as the implementation of the project construction agreement will last for a long time, the price of raw materials to be used for the work will be changed. Therefore, the parties need to clearly specify the items according to the fixed unit price or the adjusted unit price (according to the time of agreement or each time of acceptance respectively) to avoid conflicts later.
In addition to the above terms, when entering into the project construction agreement, the parties need to pay attention to the terms of Insurance and Warranty, Risks and Force Majeure, Penalties for breach of agreement, etc. to ensure the interests of the parties.
Above is the general content of the project construction agreement template. If you have difficulty in finding a Law Firm to advise and support in legal aspect related to drafting the project construction agreement, please contact us. Phuoc & Partners is a professional consulting firm established in Vietnam and currently has nearly 100 members working in three offices in Ho Chi Minh City, Hanoi and Danang. Phuoc & Partners is also rated as one of the leading consulting firms specializing in business law in Vietnam that has leading practice areas in the legal market such as Labour and Employment, Taxation, Mergers and acquisition, and Litigation. We are confident in providing customers with optimal and effective service.