The main law governing and regulating contracts for the design and carrying out of building works is the Civil Code of the PRC. The Civil Code and the interpretations of it by the Supreme People's Court set out rules relating to all aspects of contract law, including setting out the following fundamental principles of contract:
Last modified 13 Mar 2025
The key permits that must be obtained as part of the construction process are as follows:
A Construction Land Use Planning Permit issued by the local planning authority
A Construction Project Planning Permit issued by the local planning authority
A Construction Permit issued by the local construction authority
A Construction Completion Certificate
Last modified 13 Mar 2025
The main rules relating to health and safety on construction sites are the Construction Law, the Safe Production Law and the Regulations on the Administration of Work Safety of Construction Projects. In addition, health and safety laws are implemented on a provincial level, and vary from province to province. Generally, these laws are not detailed and do not relate the use of a development after construction is completed.
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The main rules relating to environmental assessment and sustainability are the Environmental Protection Law and the Regulations on Environmental Protection Administration of Construction Projects. In addition, environmental regulations at a local level as well.
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Land grant contracts will usually include general requirements that the grantee will enter into arrangements with local authorities and utility suppliers in relation to new supporting infrastructure.
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Terms and conditions are imposed by Civil Code, which sets out different regimes for contracts for works and construction project contracts.
Articles 770 to 787 set out specific provisions governing the obligations of contractors and customers under contracts for works (being contracts by which a contractor agrees to complete work according to a customer's requirements and delivers the work product and the customer agrees to pay for it) .
Articles 788 to 808 set out specific provisions governing the obligations of employers and customers under construction project contracts (being contracts by which a contractor agrees to construct a project and the employer agrees to pay the relevant price).
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The two most commonly used standard form construction agreements are FIDIC's Conditions of Contract for Construction (the New Red Book) and China's Standard Form of Construction Contract. The selection of the contract often depends on the nationality of the parties. Generally, local contractors prefer to use China's Standard Form of Construction Contract as it is more concise. However foreign developers are generally more familiar with FIDIC's Red Book.
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The main parties involved in a construction project are:
This is the party procuring the work (typically, a land owner or land developer). In relation to construction project contracts, this entity is usually referred to as the 'employer'. In relation to contracts for works, this party is commonly referred to as the 'customer'.
A main building contractor is engaged by the employer to carry out and complete the works. This contractor will usually, in turn, engage sub-contractors to carry out and complete separate parts of the works. Contractors may also take responsibility for the design of all or part of the works they are to execute depending on the procurement method and/or contract used.
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Articles 772, 773, 780 and 784 of the Civil Code provide that under contracts for works (generally smaller projects), the contractor has an obligation to complete the main portion of the work, be responsible for the ancillary portion of the work, deliver the work product and take due care.
For construction project contracts (larger projects), article 800 of the Civil Code sets out a liability on the part of the surveyor and designer for any defects in design. Articles 801 and 802 provide that the contractor is liable for any defects in construction and for any personal injury or property damage.
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Public private partnerships (PPPs) are very common for real estate developments and are encouraged by the government.
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Yes, fixed price contracts can be used as Construction Project Contracts.
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Construction contracts typically require the contractor to take out public liability insurance.
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It is common for a performance guarantee to be given by a bank.
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There is no standard payment structure for contractors or design consultants. Some agreements provide for payments to be made in stages (including the obtaining of key permits). Other agreements provide for payments to be made on the basis of hourly rates.
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Yes, it is common to specify a completion date. Construction agreements normally set out a mechanism for dealing with delays, including specifying liquidated damages as compensation.
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The way in which variations are dealt with varies from agreement to agreement. Construction agreements generally provide that any variations require employer approval. Variations are generally assessed on the basis of either agreed rates or government specified rates.
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Completion of building works is achieved where a completion certificate is issued. The completion certificate is signed and stamped by each of the contractors involved in the building works and by each of the inspecting government authorities.
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Construction contracts typically provide for a limitation period of three years following the date that the breach of contract is discovered (or should have been discovered).
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The person who procures or carries out building works may have contractual and tortious liability to the end user suffering loss. There are no restrictions on excluding such liability, however, in practice, counterparties would not agree to such an exclusion.
Last modified 13 Mar 2025
Architects, designers, building contractors and sub-contractors will not owe any contractual liabilities to end users suffering loss, but may have tortious liability. There are no restrictions on excluding such liability, however, in practice, counterparties would not agree to such an exclusion.
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Purchasers, tenants and lending banks do not have contractual privity against the original designers and contractors involved in the design and construction of the project and so have no contractual rights against them.
Under the law of the People's Republic of China, tortious liability in this case would only be by virtue of product liability rather than a liability based in a general duty of care. Accordingly, while purchasers may sue the original designers and contractors on the grounds that a defect in the building that was attributable to them caused physical damage or economic loss, tenants and lending banks would not be able to sue in tort.
Last modified 13 Mar 2025
No specialist courts exist for construction disputes.
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It is common for construction disputes to be referred to arbitration as, generally, standard form construction contracts include a clause requiring this.
In comparison to the courts, arbitration has the advantage of allowing for the appointment of a technically qualified arbitrator who has personal knowledge of the construction matters at the heart of the dispute.
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ADR procedures are not common in the PRC and are not required by law.
Last modified 13 Mar 2025
What official permissions, licences or consents are required by a building or engineering contractor before it can start work?
The key permits that must be obtained as part of the construction process are as follows:
A Construction Land Use Planning Permit issued by the local planning authority
A Construction Project Planning Permit issued by the local planning authority
A Construction Permit issued by the local construction authority
A Construction Completion Certificate
Last modified 13 Mar 2025