Introduction to construction contracts
In this article, CNC will list the Construction Contracts issued since 2005 so that interested readers can refer to, and realize the development history as well as the positive points and limitations when using Construction Contracts in Vietnam.
In addition, CNC also pointed out and pointed out the progress points of the contract form published by the Federation Internationale Des Ingenieurs-Conseils (FIDIC) to help customers have a deeper perspective on construction contracts applied by many countries around the world.
The list of Construction Contracts issued until 2019 includes:
Form No. 01: Construction Planning Consultancy Contract (issued together with Circular 02/2005/TT-BXD)
Form No. 02: Construction Contract (issued together with Circular 02/2005/TT-BXD)
Form No. 03: EPC/Turnkey Contract (issued together with Circular 02/2005/TT-BXD)
Form No. 04: Construction Design Contract (issued together with Dispatch 2507/BXD-VP)
Form No. 05: Construction Contract (issued together with Dispatch 2508/BXD-VP)
Form No.06 : Construction Contract (issued together with Circular 09/2011-/TT-BXD)
History of the development of Construction Contracts in Vietnam
Vietnam’s law on construction contracts was relatively lackluster and primitive until Decree 16/2005/ND-CP and Circular 02/2005/TT-BXD and Decree 99/2007/ND-CP and Circular 06/2007/TT-BXD were born, the problems of construction contracts were specifically adjusted.
The most critical milestone of this time is that the Ministry of Construction issued two important decisions to guide construction contracts: (i) Decision 2507/QD-BXD: Guidance on consulting contracts; and (ii) Decision 2508/QD-BXD: Construction Contract Guidelines.
Subsequently, in order to formalize the regulation of construction contracts, Decree 48/2010 and Circular 09/2011/TT-BXD also introduce, mention and separately adjust the Construction Contract from the issues of construction project management.
After the 2014 Construction Law was issued, the Government and the Ministry of Construction inherited the previous regulations on construction contracts to issue Decree 37/2015 and most recently Circular 09/2016/TT-BXD detailing construction contracts.
Step Back of Construction Contract Law
There is no denying Vietnam’s efforts to change the law to elevate regulations from decisions to Decrees and Circulars, while separating different issues in operation to regulate separately.
However, it can be seen that the issuance of construction contract forms later has two outstanding features, namely (i) the succession between Decree 48/2010, Circular 09/2011/TT-BXD and Decree 37/2015 and Circular 09/2016/TT-BXD; and (ii) there are setbacks in those decrees and circulars compared to Decision 2507 and Decision 2508, particularly on matters such as:
- The level of detail of the contract is reflected in the page number of the sample contract
- Indicative subcontract
- Contract validity
- Structure of the contract
The Development of FIDIC Contract
After the first edition of the contract was introduced in 1957, FIDIC was constantly updating, changing, adapting and introducing new editions of construction contracts.
If the construction contract applied to traditional construction (Red Book 1987) introduces 72 clauses that partly show the complexity, not really suitable in terms of the content and structure of the FIDIC Contract at that time [1] then when the edition of the FIDIC 1999 contract was issued, The contract structure has been simplified and arranged in a scientific, easy-to-follow and accessible sequence[2].
[1] Content of 1987 FIDIC Contract
| No. | PART 1: GENERAL CONDITIONS
Definitions and Interpretation |
| 1.1 | Definitions |
| 1.2 | Headings and Marginal Notes |
| 1.3 | Interpretation |
| 1.4 | Singular and Plural |
| 1.5 | Notices, Consents, Approvals, Certificates, and determinations |
Engineer and Engineer’s Representative |
|
| 2.1 | Engineer’s Duties and Authority |
| 2.2 | Engineer’s Representative |
| 2.3 | Engineer’s Authority to Delegate |
| 2.4 | Appointment of Assistants |
| 2.5 | Instructions in Writing |
| 2.6 | Engineer to Act Impartially |
Assignment and Subcontracting |
|
| 3.1 | Assignment of Contract |
| 4.1 | Subcontracting |
| 4.2 | Assignment of Subcontractors’ Obligations |
Contract Documents |
|
| 5.1 | Language/s and Law |
| 5.2 | Priority of Contract Documents |
| 6.1 | Custody and Supply of Drawings and Documents |
| 6.2 | One Copy of Drawings to be Kept on Site |
| 6.3 | Disruption of Progres |
| 6.4 | Delays and Cost of Delay of Drawings |
| 6.5 | Failure by Contractor to Submit Drawings |
| 7.1 | Supplementary Drawings and Instructions |
| 7.2 | Permanent Works Designed by Contractor |
| 7.3 | Responsibility Unaffected by Approval |
General Obligations |
|
| 8.1 | Contractor’s General Responsibilities |
| 8.2 | Site Operations and Methods of Construction |
| 9.1 | Contract Agreemen |
| 10.1 | Performance Security |
| 10.2 | Period of Validity of Performance Security |
| 10.3 | Claims under Performance Securit |
| 11.1 | Inspection of Site |
| 12.1 | Sufficiency of Tender |
| 12.2 | Not Foreseeable Physical Obstructions or Conditions |
| 13.1 | Work to be in Accordance with Contract |
| 14.1 | Programme to be Submitted |
| 14.2 | Revised Programme |
| 14.3 | Cash Flow Estimate to be Submitted |
| 14.4 | Contractor not Relieved of Duties or Responsibilities |
| 15.1 | Contractor’s Superintendence |
| 16.1 | Contractor’s Employees |
| 16.2 | Engineer at Liberty to Objec |
| 17.1 | Setting-out |
| 18.1 | Boreholes and Exploratory Excavation |
| 19.1 | Safety, Security and Protection of the Environment |
| 19.2 | Employer’s Responsibilities |
| 20.1 | Care of Works |
| 20.2 | Responsibility to Rectify Loss or Damage |
| 20.3 | Loss or Damage Due to Employer’s Risks |
| 20.4 | Employer’s Risks |
| 21.1 | Insurance of Works and Contractor’s Equipment |
| 21.2 | Scope of Cover |
| 21.3 | Responsibility for Amounts not Recovered |
| 21.4 | Exclusions |
| 22.1 | Damage to Persons and Property |
| 22.2 | Exceptions |
| 22.3 | Indemnity by Employer |
| 23.1 | Third Party Insurance (including Employer’s Property) |
| 23.2 | Minimum Amount of Insurance |
| 23.3 | Cross Liabilities |
| 24.1 | Accident or Injury to Workmen |
| 24.2 | Insurance Against Accident to Workmen |
| 25.1 | Evidence and Terms of Insurances |
| 25.2 | Adequacy of Insurances |
| 25.3 | Remedy on Contractor’s Failure to Insure |
| 25.4 | Compliance with Policy Conditions |
| 26.1 | Compliance with Statutes, Regulations |
| 27.1 | Fossils |
| 28.1 | Patent Rights |
| 28.2 | Royalties |
| 29.1 | Interference with Traffic and Adjoining Properties |
| 30.1 | Avoidance of Damage to Roads |
| 30.2 | Transport of Contractor’s Equipment or Temporary Works |
| 30.3 | Transport of Materials or Plant |
| 30.4 | Waterborne Traffic |
| 31.1 | Opportunities for Other Contractors |
| 31.2 | Facilities for Other Contractors |
| 32.1 | Contractor to Keep Site Clear |
| 33.1 | Clearance of Site on Completion |
Labour |
|
| 34.1 | Engagement of Staff and Labour |
| 35.1 | Returns of Labour and Contractor’s Equipment |
Materials, Plant and Workmanship |
|
| 36.1 | Quality of Materials, Plant and Workmanship |
| 36.2 | Cost of Samples |
| 36.3 | Cost of Tests |
| 36.4 | Cost of Tests not Provided for |
| 36.5 | Engineer’s Determination where Tests not Provided for |
| 37.1 | Inspection of Opeations |
| 37.2 | Inspection and Testing |
| 37.3 | Dates for Inspection and Testing |
| 37.4 | Rejection |
| 37.5 | Independent Inspection |
| 38.1 | Examination of Work before Covering up |
| 38.2 | Uncovering and Making Openings |
| 39.1 | Removal of Improper Work, Material or Plant |
| 39.2 | Default of Contractor in Compliance |
Suspension |
|
| 40.1 | Suspension of Work |
| 40.2 | Engineer’s Determination following Suspension |
| 40.3 | Suspension lasting more than 84 Days |
Commencement and Delays |
|
| 41.1 | Commencement of Work |
| 42.1 | Possession of Site and Access Thereto |
| 42.2 | Failure to Give Possession |
| 42.3 | Rights of Way and Facilities |
| 43.1 | Time for Completion |
| 44.1 | Extension of Time for Completion |
| 44.2 | Contractor to Provide Notification and Detailed Particulars |
| 44.3 | Interim Determination of Extension |
| 45.1 | Restriction on Working Hours |
| 46.1 | Rate of Progress |
| 47.1 | Liquidated Damages for Delay |
| 47.2 | Reduction of Liquidated Damages |
| 48.1 | Taking-over Certificate or Parts |
| 48.2 | Taking-over of Sections or Parts |
| 48.3 | Substantial Completion of Parts |
| 48.4 | Surfaces Requiring Reinstatement |
Defects Liability |
|
| 49.1 | Defects Liability Period |
| 49.2 | Completion of Outstanding Work and Remedying Defects |
| 49.3 | Cost of Remedying Defects |
| 49.4 | Contractor’s Failure to Carry Out Instructions |
| 50.1 | Contractor to Search |
Alterations, Additions and Omissions |
|
| 51.1 | Variations |
| 51.2 | Instructions for Variations |
| 52.1 | Valuation of Valuations |
| 52.2 | Power of engineer to Fix Rates |
| 52.3 | Variations Exceeding 15 percent |
| 52.4 | Daywork |
Procedure for Claims |
|
| 53.1 | Notice of Claims |
| 53.2 | Contemporary Records |
| 53.3 | Substantiation of Claims |
| 53.4 | Failure to Comply |
| 53.5 | Payment of Claims |
Contractor’s Equipment, Temporary Works and Materials |
|
| 54.1 | Contractor’s Equipment, Temporary Works and Materials; Exclusive 25Use for the Works |
| 54.2 | Employer not Liable for Damage |
| 54.3 | Customs Clearance |
| 54.4 | Re-export of Contractor’s Equipment |
| 54.5 | Conditions of Hire of Contractor’s Equipment |
| 54.6 | Costs for the Purpose of Clause 63 |
| 54.7 | Incorporation of Clause in Subcontracts |
| 54.8 | Approval of Materials not Implied |
Measurement |
|
| 55.1 | Quantities |
| 56.1 | Work to be Measured |
| 57.1 | Method of Measurement |
| 57.2 | Breakdown of Lump Sum Items |
Provisional Sums |
|
| 58.1 | Definition of “Provisional Sum” |
| 58.2 | Nominated Subcontractors; Objection to Nomination |
| 58.3 | Production of Vouchers |
Nominated Subcontractors |
|
| 59.1 | Definition of “Nominated Subcontractors” |
| 59.2 | Nominated Subcontractors; Objection to Nomination |
| 59.3 | Design Requirements to be Expressly Stated |
| 59.4 | Payments to Nominated Subcontractors |
| 59.5 | Certification of Payments to Nominated Subcontractors |
Certificates and Payment |
|
| 60.1 | Monthly Statements |
| 60.2 | Monthly Payments |
| 60.3 | Payment of Retention Money |
| 90.4 | Correction of Certificates |
| 60.5 | Báo cáo vào lúc hoàn thành |
| 60.6 | Báo cáo quyết toán |
| 60.7 | Giải phóng trách nhiệm |
| 60.8 | Chứng nhận thanh toán sau cùng |
| 60.9 | Chấm dứt trách nhiệm của chủ đầu tư |
| 60.10 | Thời gian thanh toán |
| 61.1 | Chấp thuận bởi chứng nhận hết hạn bảo hành |
| 62.1 | Chứng nhận hết hạn bảo hành |
| 62.2 | Các nghĩa vụ chưa hoàn thành |
Remedies |
|
| 63.1 | Default of Contractor |
| 63.2 | Valuation at Date of Termination |
| 63.3 | Payment after Termination |
| 63.4 | Assignment of Benefit of Agreement |
| 64.1 | Urgent Remedial Work |
Special Risks |
|
| 65.1 | No Liability for Special Risks |
| 65.2 | Special Risks |
| 65.3 | Damage to Works by Special Risks |
| 65.4 | Projectile, Missile |
| 65.5 | Increased Costs arising from Special Risks |
| 65.6 | Outbreak of War |
| 65.7 | Removal of Contractor’s Equipment on Termination |
| 65.8 | Payment if Contract Terminated |
Release from Performance |
|
| 66.1 | Payment in Event of Release from Performance |
Settlement of Disputes |
|
| 67.1 | Engineer’s Decision |
| 67.2 | Amicable Settlement |
| 67.3 | Arbitration |
| 67.4 | Failure to Comply with Engineer’s Decision |
Notices |
|
| 68.1 | Notice to Contractor |
| 68.2 | Notice to Employer and Engineer |
| 68.3 | Change of Address |
Default of Employer |
|
| 69.1 | Default of Employer |
| 69.2 | Removal of Contractor’s Equipment |
| 69.3 | Payment on Termination |
| 69.4 | Contractor’s Entitlement to Suspend Work |
| 69.5 | Resumption of Work |
Changes in Cost and Legislation |
|
| 70.1 | Increase or Decrease of Cost |
| 70.2 | Subsequent Legislation |
Currency and Rates of Exchange |
|
| 71.1 | Currency Restrictions |
| 72.1 | Rayes of Exchange |
| 72.2 | Currency Propettions |
| 72.3 | Currencies of Payment for Provisional Sums |
[2] Content of 1999 FIDIC Contract
[/vc_column_text][vc_column_text]| Article | FIDIC | ||
| Red Book | Yellow Book | Silver Book | |
| 1 | General Provisions | ||
| 2 | The Employer | ||
| 3 | The Engineer | The Employer’s Administration | |
| 4 | The Contractor | ||
| 5 | Nominated Subcontractors | Design | |
| 6 | Staff and Labour | ||
| 7 | Plant, Materials and Workmanship | ||
| 8 | Commencement, Delays and Suspension | ||
| 9 | Tests on completion | ||
| 10 | Employer’s taking over | ||
| 11 | Defects Liability | ||
| 12 | Measurement and Evaluation | Test after Completion | |
| 13 | Variations and Adjustments | ||
| 14 | Contract price and Payment | ||
| 15 | Termination by Employer | ||
| 16 | Suspension and Termination by Contractor | ||
| 17 | Risk and Responsibility | ||
| 18 | Insurance | ||
| 19 | Force majeure | ||
| 20 | Claims, Distupes and Arbitration | ||
Note: Yellow Book and Silver Book blank entries are the same as Red Book
Standard Structure of 1999 FIDIC Contract
Accordingly, the Standard Structure of 1999 FIDIC Contract includes the following groups:
Group 1: General provisions, including 1 clause
Group 2: Subject regulations, including 4 articles, are arranged in order from the Employer, the Engineer, to the designated Contractors and Nominated Subcontractors.
Group 3: Regulations on preparation for commencement, construction and completion, including 6 articles, are arranged in scientific order, from people to materials and equipment, to Commencement, Completion and Liability.
Group 4: The cost of the contract provisions, including 3 things arranged in scientific order, from measurement and variations to contract price and payment.
Group 5: Regulations on the right to suspend and terminate, including 2 articles arranged in the order of Employers and Contractors.
Group 6: Other provisions, including 3 articles arranged in order of risk, risk division and insurance.
Group 7: Regulations on complaints and dispute settlement, including 1 article.
The client can consider the structure, arrangement as well as the order of the terms under the FIDIC contract to be able to come up with the appropriate structure for a construction contract, avoiding repetition, duplication or lack of important elements of a contract, especially high-value contracts.
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