Decree No. 48/2010/ND-CP dated May 7, 2010 of the Government on contracts in construction activities
Chapter I GENERAL PROVISIONS
Article 1. Scope of regulation and subjects of application
1. This Decree provides for contracts in construction activities (below referred to as construction contracts) under construction investment projects with 30% or more state capital.
2. This Decree applies to organizations and individuals involved in construction contracts under projects with 30% or more state capital in the Vietnamese territory. Organizations and individuals involved in construction contracts under projects with less than 30% state capital are encouraged to apply the provisions of this Decree.
3. Construction contracts under projects funded with official development assistance (ODA) may comply with relevant treaties to which the Socialist Republic of Vietnam is a contracting party and which contain provisions different from those of this Decree.
Article 2. Interpretation of terms
In this Decree, the terms below are construed as follows:
1. Construction contract means a civil contract established in the form of a written agreement between a principal and a contractor on the establishment, change or termination of the rights, responsibilities and obligations of the contracting parties for the performance of one. some or all of jobs in construction activities.
2. Principal means an investor or a general contractor or a principal contractor.
3. Contractor means a general contractor or principal contractor in case the principal is an investor; a sub-contractor in case the principal is a general contractor or principal contractor. A contractor may be a partnership of contractors.
4. General conditions of a construction contract means a document enclosed with the contract defining basic rights and obligations of and relationships between parties to the contract.
5. Particular conditions of a construction contract means a document enclosed with the contract specifying or supplementing a number of general conditions applicable to the contract.
6. Construction contract annex means a document enclosed with a construction contract detailing, clarifying, amending or supplementing some clauses of the construction contract.
7. Working day referred to herein means calendar day, except Sundays and public holidays prescribed by law.
8. Project standards means technical regulations, economic-technical norms, job performance processes, technical specifications and natural condition indicators elaborated or compiled by investors or their consultants for application to specific construction investment projects. Project standards must conform to regulations and standards promulgated or accredited by the State.
9. FEED design means a design made by a foreign consultant according to international practices after a work construction investment project is approved to serve as a basis for realizing detailed designs for works.
10. Main contract means a construction contract signed between an investor and a principal contractor or general contractor.
11. Sub-contract means a construction contract signed between a principal contractor or general contractor and a sub-contractor.
12. Lump-sum contract, fixed unit-price contract, adjustable unit-price contract, time-based contract and percentage contract referred to herein means the forms of lump-sum contract, unit-price (contract unit price or adjustable unit price) contract, time-based contract and percentage contract specified in the Government's Decree No. 85/2009/ND-CP of October 15, 2009, guiding the implementation of the Bidding Law and selection of contractors under the Construction Law.
Article 3. Types of construction contract
1. By characteristics of work, construction contracts are divided into the following types:
a/ Construction consultancy contract (below referred to as consultancy contract) means a contract for the performance of one, some or all of consultancy jobs in construction activities;
b/ Work construction contract (below referred to as construction contract) means a contract for the construction of works, work items or construction jobs according to work construction designs; work construction general contract means a construction contract for the construction of all works of an investment project.
c/ Technological equipment provision contract (below referred to as equipment provision contract) means a contract for the provision of equipment for installation in construction works according to technological designs; technological equipment provision general contract means a contract for the provision of equipment for all works of an investment project.
d/ Work engineering and construction (EC) contract means a contract for the performance of work or work item engineering and construction jobs; work engineering and construction general contract means a contract for engineering and construction of all works of an investment project.
e/ Engineering and technological equipment provision (EP) contract means a contract for the performance of engineering jobs and provision of equipment for installation in construction works according to technological designs; engineering and technological equipment provision general contract means a contract for engineering and provision of technological equipment for all works of an investment project.
f/ Technological equipment provision and construction (PC) contract means a contract for the provision of technological equipment for and construction of works or work items; technological equipment provision and construction general contract means a contract for the provision of technological equipment for and construction of all works of an investment project.
g/ Engineering-technological equipment provision-construction (EPC) contract means a contract for the performance of all jobs from engineering, provision of technological equipment to construction of works and work items; EPC general contract means a contract for the engineering of, provision of technological equipment to and construction of all works of an investment project.
h/ Turnkey general contract means a construction contract for the performance of all jobs of project formulation, engineering, provision of technological equipment and construction of works of a work construction investment project.
2. By contract prices, construction contracts are divided into the following types:
a/ Lump-sum contract;
b/ Fixed unit-price contract;
c/ Adjustable unit-price contract;
d/ Time-based contract;
e/ Percentage contract.
Article 4. Principles of signing construction contracts
1. A construction contract shall be signed on the principles of free will, equality, good will, cooperation, lawfulness and in accordance with social ethics.
2. A construction contract shall be signed after the principal completes the selection of contractor(s) under regulations and involved parties finish contract negotiations.
3. The contract signing price must not exceed the bid-winning price (in case of bidding) or the approved bid package cost estimate (in case of contractor appointment). In case of addition of a work volume or an equipment quantity outside the volume or quantity indicated in the bidding dossier (dossier of requirements) which results in a contract signing price higher than the bid-winning price (proposed price) but neither changes investment objectives nor cause an excess of the approved total investment capital, the investor may decide on the contract signing price. In case such an addition results in a change in investment objectives or an excess of the approved total investment capital, the investor shall report such to the person with investment-deciding competence for decision.
4. For contracts for the performance of simple and small jobs or bid packages, all contractual contents may be written in a single contract document. For contracts for the performance of complex and large jobs or bid packages, contractual contents may be divided into general conditions and particular conditions of the contract.
5. In case a project investor signs contracts with multiple contractors for the performance of different bid packages, these contracts must be consistent and uniform in terms of schedule and quality, ensuring overall investment efficiency of the project.
6. In case the contractor is a partnership of contractors, partners shall reach a partnership agreement and the contract must contain signatures of all partners.
7. The principal and contractor shall appoint their representatives to negotiate and sign a construction contract. The parties' representatives have full power to decide on contract-related matters and shall take responsibility for their decisions.
Article 5. Principles of performing construction contracts
1. Parties to a construction contract shall strictly comply with the contract's provisions on scope of jobs, requirements on quality, quantity, category, deadline and mode, and other agreements in the contract.
2. A construction contract shall be performed in an honest and lawful manner, ensuring cooperation and mutual trust.
3. Parties to a construction contract may not infringe upon state and public interests and lawful rights and interests of other persons.
Article 6. Validity and legality of construction contracts
1. A construction contract is valid when fully meeting the following conditions:
a/ The contracting parties have the full civil act capacity;
b/ The contract signing principles specified in Clauses 1.2,3.6 and 7, Article 4 of this Decree are adhered to;
c/ The contract is made in writing and signed by authorized representatives at law of the contracting parties. In case a contracting party is an institution, this party shall give a signature and append a seal;
d/ The contractor has adequate operation and practice capability as required by law.
2. The date when a construction contract becomes valid is the date of its signing (with a seal, if any) and after the principal receives a contract performance security from the contractor (for contracts requiring contract performance security) or another date agreed upon by the parties in the contract.
3. Legality of construction contracts:
a/ A valid construction contract is a legal ground binding on the principal, contractor and involved parties;
b/ A valid construction contract serves as a ground for settling disputes between parties. Disputes arising outside a construction contract shall be settled in accordance with relevant provisions of law;
c/ State administrations, agencies controlling, allocating or lending capital and inspecting, examining or auditing loans, and other relevant agencies shall base themselves on valid construction contracts to perform their respective functions and tasks under regulations and may not infringe upon lawful rights and interests of contracting parties.
Article 7. Management of performance of construction contracts
1. Within the ambit of their rights and obligations, contracting parties shall work out contract performance plans and measures in accordance with the signed contract in order to realize their agreements in the contract.
2. Depending on each type of construction contract, the management of performance of a construction contract may cover:
a/ Management of contract performance progress;
b/ Management of quality;
c/ Management of work volume and contract price;
d/ Management of labor safety, environmental protection and fire and explosion prevention and fighting;
e/ Management of contract adjustments and other contents of the contract.
Chapter II SPECIFIC PROVISIONS
Section 1. INFORMATION ON CONSTRUCTION CONTRACTS
Article 8. Information on construction contracts
Information on a construction contract must be written in the contract, including:
1. Type of contract, contract number, name of bid package, name of project, construction location, and grounds for contract signing.
2. Transaction names of contracting parties and their representatives, their business registration addresses or transaction addresses, tax identification numbers, business registration certificates, account numbers, telephone and fax numbers, e-mail addresses, time and place of contract signing, and other relevant information.
3. In case the contractor is a partnership of contractors, sufficient information on partners must be written under Clause 2 of this Article, indicating the head of the partnership.
Article 9. Grounds for signing construction contracts
1. Grounds for signing a construction contract include requirements on jobs to be performed agreed upon by contracting parties, results of contractor selection, results of contract negotiation and finalization. and relevant provisions of law.
2. For EPC contracts, in addition to the grounds mentioned in Clause 1 of this Article, contract signing grounds include also approved work construction investment projects and FEED designs (in case designs are made by foreign consultants).
Article 10. Construction contract dossiers
1. A construction contract dossier comprises a written construction contract and its accompanying documents.
2. A contract must contain the following principal details: jobs and work volumes to be performed; quality and technical requirements; performance duration and schedule: takeover and handover conditions: contract price, advance, payment and settlement and payment method: warranty duration (for construction contracts involving works for which warranty is required); rights and obligations of contracting parties: liability for contract breaches; language used in the contract; and other agreements depending on each type of contract.
3. Documents accompanying a construction contract constitute an integral part of the contract. Depending on the scale, nature and scope of jobs and specific type of construction contract, documents accompanying a construction contract may include:
a/ Notice of contract winning or contractor appointment document or written approval of contractor appointment;
b/ Particular conditions and terms of reference;
c/ General conditions;
d/ Bidding dossier or dossier of requirements of the principal:
e/ Design drawings and technical instructions;
f/ Bid dossier or dossier of proposal of the contractor;
g/ Contract negotiation minutes, and written amendments and supplements thereto;
h/ Contract annexes;
i/ Other relevant documents.
4. The contracting parties shall reach agreement on priority order for the application of documents accompanying the contract to settling contradictory issues (if any).
Article 11. Applicable law and language used in construction contracts
1. Construction contracts are regulated by the legal system of the Socialist Republic of Vietnam.
2. Language used in construction contracts is Vietnamese, except the cases specified in Clause 3 of this Article.
3. Languages to be used in a construction contract involving a foreign party are Vietnamese and English. For a bilingual construction contract, the contracting parties shall agree on a language to be used in the course of contract transaction and the priority order for the use of the languages in settling disputes over the contract (if any).
Section 2. JOBS AND WORK VOLUMES, QUALITY REQUIREMENTS AND PERFORMANCE SCHEDULE
Article 12. Jobs and work volumes of construction contracts
1. Jobs and work volumes of a construction contract are those clearly agreed upon by the principal and contractor in the contract upon its signing. Jobs and work volumes shall be determined based on the bidding dossier or dossier of requirements, bid dossier or dossier of proposal, negotiation minutes and relevant legal documents. Depending on each type of construction contract, jobs to be performed shall be determined as follows:
a/ For construction consultancy contracts, these jobs include planning; formulation of a work construction investment project; engineering; survey; construction supervision; verification of designs and cost estimates; and other consultancy jobs;
b/ For construction contracts, these jobs include provision of construction materials, manpower, construction machinery and equipment and work construction activities;
c/ For equipment provision contracts, these jobs include provision of equipment; provision of instructions for installation, use. test operation, operation, training and technology transfer (if any);
d/ For EPC contracts, these jobs include engineering, provision of materials and equipment and construction of works;
e/ For turnkey contracts, main jobs include formulation of an investment project; engineering; provision of equipment and construction of works; operation training and instruction, maintenance and repair; technology transfer; and test operation.
2. Adjustment of the work volume of a contract must comply with Article 35 of this Decree.
Article 13. Requirements on quality, takeover test and handover of products of construction contracts
1. Requirements on quality of products of a construction contract:
a/ Quality of products of a construction contract must comply with and satisfy the quality requirements set out by the law. Regulations and standards or project standards (international, Vietnamese or branch) applied to products of works shall be agreed upon by the parties in the contract;
b/ Imported equipment and goods not mentioned at Point a of this Clause are also subject to regulations on origin.
2. Takeover test and handover of products of completed jobs:
a/ Agreements on procedures for takeover test and handover between contracting parties must comply with regulations on quality management of construction works;
b/ Jobs subject to takeover test and handover; bases for takeover test and handover; the process and time of takeover test and handover of products of completed works: persons to participate in takeover test and handover; forms of takeover test and handover; regulations on signatories, minutes and documents on takeover test and handover shall be agreed by the parties in the contract;
c/ Contracting parties may only conduct takeover test and handover of products satisfying quality requirements referred to in Clause 1 of this Article:
d/ For works requested to be tested for takeover before construction of other works, the contractor shall notify them in advance to the principal for takeover test;
e/ Faulty products (which fail to satisfy the contract's requirements) must be repaired. Those which are irreparable must be discarded. The party at fault shall bear all expenses for repair, re-inspection and other expenses related to the correction of defects as well as assurance of the contract performance schedule.
Article 14. Duration and schedule of performance of construction contracts
1. The duration of performance of a contract is counted from the effective date of the contract to the date when the contracting parties fulfill contractual obligations and must conform to the project implementation schedule.
2. The contractor shall work out a detailed schedule of contract performance, then propose it to the principal for approval for use as a basis for contract performance.
3. The contract performance schedule must indicate dates of completion and handover of major jobs and products.
4. For big construction contracts with a long duration of performance, the construction schedule shall be worked out for each stage.
5. For equipment provision contracts, the equipment provision schedule must indicate dates of equipment handover, stating equipment quantities and categories for each handover.
6. For EPC contracts and turnkey contracts, in addition to the construction schedule for each stage, a schedule for each type of work (project formulation, engineering, equipment provision and construction) shall also be made.
7. Acceleration of the contract performance progress is encouraged provided the quality of the contract's products is assured. In case the progress acceleration brings about higher efficiency for the project, the contractor will be rewarded as agreed upon in the contract.
8. Adjustment of the contract performance schedule must comply with Article 38 of this Decree.
Section 3. CONTRACT PRICES, ADVANCE, PAYMENT, SETTLEMENT AND LIQUIDATION OF CONSTRUCTION CONTRACTS
Article 15. Prices of construction contracts
1. The price of a construction contract means a sum of money which the principal pledges to pay to the contractor for the performance of job(s) according to requirements on volume, quality, schedule and payment conditions and other requirements as agreed upon in the contract.
2. A contract price must clearly indicate expenses, taxes and charges (if any); an adjusted contract price must conform to the type of contract, contract price and be agreed upon by the parties in the contract.
3. There are following kinds of contract prices:
a/ The lump-sum contract price, which is kept unchanged throughout the course of contract performance, for the volume of jobs within the scope of the signed contract, except the case of additional volume provided at Point a, Clause 1, Article 35 of this Decree;
b/ Fixed unit-price contract price, which is determined on the basis of a fixed unit price for contractual jobs multiplied by the corresponding work volume. A fixed unit price means a price which is kept unchanged throughout the course of contract performance;
c/ Adjustable unit-price contract price, which is determined on the basis of a fixed unit price for contractual jobs which has been adjusted based on market price fluctuation, multiplied by the corresponding work volume. Price adjustment based on market price fluctuation shall be made by the method prescribed in Clauses 3 and 4. Article 36 of this Decree;
d/ Time-based contract price, which is determined on the basis of remuneration for experts and expenses other than remuneration for experts and the working duration (volume) calculated in month, week, day or hour.
- Remuneration for experts includes expert expenses determined on the basis of salaries of experts and related expenses as agreed upon by the contracting parties in the contract multiplied by the actual working duration (calculated in month, week, day or hour).
- Expenses other than remuneration for experts include travel and survey expenses, working office rent and other reasonable expenses.
e/ Percentage contract price, which is calculated in a percentage of the value of a work or work volume. When the contractor completes all contractual obligations, the principal shall pay to the contractor a sum of money equal to a certain percentage indicated in the contract multiplied by the value of work or work volume.
4. For a construction contract covering many jobs subject to different types of contract price, a combination of contract prices specified in Clause 3 of this Article may be applied.
5. Contract prices shall be determined as follows:
a/ In case of bidding, the contract price shall be based on the bid-winning price and results of contract negotiation between the parties;
b/ In case of contractor appointment, the contract price shall be based on the approved cost estimate and bid package price, proposed price and results of contract negotiation between the parties.
Article 16. Security for construction contract performance and guarantee for contract advance payment
1. Contract performance security means the application of any of the measures of deposit payment, collateral and submission of a letter of guarantee by the contractor to secure the performance of its obligations in the course of contract performance.
2. Contract performance security must be paid to the principal before the contract takes effect, accepted by the principal and exist until the warranty obligation is performed, except construction consultancy contracts and self-performed construction contracts.
3. In case the contractor is a partnership of contractors, each partner shall pay its contract performance security to the principal at a level equal to the contract value portion performed by that partner. If the partners agree that the head contractor of the partnership pays the contract performance security to the principal, the head contractor of the partnership shall do so and each partner shall pay its contract performance security to the head contractor in proportion to the contract value portion it performs, unless otherwise agreed by the contracting parties.
4. The contract performance security value shall be indicated in bidding dossiers or dossiers of requirements and must not exceed 10% of the contract price. When necessary to prevent a high risk, the contract performance security value may be higher but must not exceed 30% of the contract price and shall be approved by the investment decider.
5. The contractor may not receive back the contract performance security if it refuses to perform the contract after the contract takes effect and in a case of breach as specified in the contract.
6. The principal shall refund the contract performance security to the contractor as soon as the latter shifts to perform the warranty obligation and the principal receives the warranty security.
7. Guarantee for contract payment advance (in case the contracting parties agree on such guarantee):
a/ Before the principal makes a contract advance payment to the contractor, the contractor shall pay to the principal a guarantee for the contract advance payment of a value equal to the advance amount. In case the contractor is a partnership of contractors, each partner shall pay to the principal a guarantee for contract advance payment of a value equal to the advance amount paid to it;
b/ The value of the guarantee for contract payment advance shall be subtracted equal to the value of reduced advance amount upon each payment as agreed upon by the contracting parties.
Article 17. Construction contract advance payment
1. Construction contract advance payment means a sum of money advanced by the principal to the contractor for the performance of jobs under the contract.
2. Contract advance payment shall be made immediately after a construction contract takes effect and the principal receives the advance payment guarantee (if any).
3. The advance level, time of advance payment and retrieval of advances must be agreed upon by the parties in the contract.
4. The minimum advance level is prescribed as follows:
a/ For consultancy contracts, it is 25% of the contract price;
b/ For work construction contracts, it is:
10% of the contract price, for contracts valued at over VND 50 billion;
15% of the contract price, for contracts valued at between VND 10 billion and 50 billion;
20% of the contract price, for contracts valued at below VND 10 billion.
c/ For equipment provision contracts, EPC contracts, turnkey contracts and other types of construction contracts, it is 10% of the contract price.
5. The maximum advance level is 50% of the contract price. In special cases, the maximum advance level shall be permitted by the investment decider.
6. Advance amounts shall be retrieved right at the first contract payment. The advance amount to be retrieved upon each payment shall be agreed upon by the contracting parties and indicated in the contract. The retrieval shall be completed when the paid value reaches 80% of the contract price.
The investor shall coordinate with the contractor in calculating an appropriate advance level and managing the use of advanced capital for proper purposes and objects and with efficiency. It is prohibited to leave advanced capital unused or use advanced capital for improper purposes. The investor shall retrieve advanced capital left unused or used for improper purposes.
7. In case of manufacturing components and semi-finished products of large value for which
Article 18. Payment for construction contracts
1. Payment for a construction contract must accord with the type of the contract, contract price and contractual terms.
2. Contracting parties shall agree in the contract on payment installments, periods, points of time, time limit, dossier and conditions.
3. The principal shall pay fully (100%) the value of each payment installment to the contractor after deducting the advance and work warranty amount as agreed upon in the contract, unless otherwise agreed by the parties.
4. For lump-sum contracts: Payment shall be made in a percentage of the contract price or prices of works, work items or job" volumes corresponding to payment periods agreed upon by the parties in the contract and requires no detailed certification of completed volumes.
5. For fixed unit-price and adjustable unit-price contracts: Payment shall be made on the basis of actually completed volumes (including also increased or reduced volume, if any) which have been tested for takeover and unit prices in the contract or unit prices adjusted based on market price fluctuation as agreed upon in the contract.
6. For time-based contracts, payment is prescribed as follows:
a/ Expenses for experts shall be determined on the basis of salaries of experts and related expenses as agreed upon by the parties in the contract multiplied by the verified actual working period (calculated in month, week, day or hour).
b/ Expenses other than remunerations for experts shall be paid by the method specified in the contract.
7. For percentage contracts, payment shall be made according to a percentage of the contract price. Percentages of payment installments shall be agreed upon by the parties in the contract. When the contractor fulfills all contractual obligations, the principal shall pay to that contracts a sum of money equal to the percentage the value of the completed work or job volume as indicated in the contract.
8. For contracts applying combined contract prices specified in Clause 4. Article 15 of this Decree, payment shall be made according to these contract prices.
9. Payment for additional volumes (outside the contract) without any unit prices indicated in the contract shall be made according to contract addenda agreed upon by the parties before the performance of these volumes and comply with relevant laws.
10. Payment time limit
The payment time limit shall be agreed upon by the parties but must not exceed 14 working days after the principal receives a complete and valid payment dossier as agreed upon in the contract and specified as follows:
a/ Within seven (7) working days after receiving a complete and valid payment request dossier of the contractor, the investor shall complete procedures and forward the payment request to the capital-allocating or -lending agency;
b/ Within seven (7) working days after receiving a complete and valid payment dossier of the investor, the capital-allocating
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