BASIS OF DEBT RECOVERY FROM CONSTRUCTION CONTRACTS

Disputes between the employer and the contractor regarding payment obligations under construction contracts are becoming increasingly common. To safeguard their legitimate rights and interests, the parties must thoroughly understand the relevant legal provisions to establish appropriate risk prevention mechanisms, as well as to build a solid legal basis for the effective recovery of construction contract debts.

1. Bill of Quantities in debt recovery from construction contracts

Construction cost estimate is the necessary cost to construct the work, perform the package, the construction is determined on the basis of the calculated volume from the technical design, construction drawing design, construction requirements of work to be done and construction norms and prices. Contents of a construction cost estimate include costs of construction, equipment, project management, construction investment consultation, other costs and contingencies.

On the other hand, in fact, for large projects, especially projects with foreign elements, BOQ (Bill of Quantities) is often used and acts as a construction estimate. The BOQ is a detailed sheet of jobs, volumes and types of material and is a document used for bidding in the industrial construction industry. BOQ is estimated by the engineers based on the construction drawings and technical requirements of the project.

A construction cost estimate or BOQ that wants to be used must be approved and assessed in accordance with construction law. When a dispute over construction fees, materials or other costs related to a construction contract between the investor and the contractor occurs, the construction cost estimate or the BOQ is one of the most important evidence. to determine the parties’ financial obligations.

2. Construction unit price in debt recovery from construction contracts

The construction unit price is determined on the basis of the market price or construction norm and the price of materials, labor, constructional machines, and other necessary cost factors consistent with the market price level in the area.

The system of construction norms and prices announced by competent state agencies is the basis for investors to use and refer to in determining and managing construction investment costs.

In order to correctly determine the price of construction materials, equipment, labor, … to clarify the financial obligations of the parties, the investor or the contractor should pay special attention to the unit price that has been properly calculated whether it is compatible with the system of construction norms and prices announced by the competent state agency.

>> RIGHTS OF DEBT COLLECTOR https://linconlaw.vn/rights-of-debt-collector/

>> A LAWFUL WILL, HOW TO DETERMINE? https://linconlaw.vn/a-lawful-will-how-to-determine/

3. Terms of payment  

The parties must also pay special attention to the payment clauses in construction contracts, ensuring they are consistent with statutory regulations and rigorously adapted to practical circumstances in order to maximize the protection of their legitimate rights and interests.

Pursuant to Clause 1, Article 87 of the Law on Construction 2025, the contents of a construction contract must specifically stipulate the following: (i) payment; (ii) interim payment; (iii) final settlement; and (iv) liquidation of the construction contract. Wherein, the final settlement and liquidation of the contract shall also include cases of unilateral final settlement and unilateral liquidation of the construction contract.

Payments under a construction contract must ensure:

– Conformity with the contract type, contract price, and terms and conditions set forth in the contract;

– Full and timely payment of the value for each payment installment to the contractor, following the deduction of advance payments and retention monies as agreed upon in the construction contract, unless otherwise agreed by the parties;

– The currency used for payment in the construction contract shall be the Vietnamese Dong; the use of foreign currency for payment must comply with legal provisions on foreign exchange control.