| THE MINISTRY OF CONSTRUCTION | SOCIALIST REPUBLIC OF VIETNAM Independence - Freedom - Happiness |
| No. 06/2007/TT-BXD | Ha Noi, July 25, 2007 |
CIRCULAR
PROVIDING GUIDANCE ON CONTRACTS IN CONSTRUCTION ACTIVITIES
Pursuant to the Government’s Decree 36/2003/ND-CP of April 4, 2003, defining the functions, tasks, powers and organizational structure of the Ministry of Construction;
Pursuant to the Government’s Decree 99/2007/ND-CP of June 13, 2007, on the management of works construction investment expenses;
The Ministry of Construction provides specific guidance on contracts in construction activities as follows:
Part I
GENERAL PROVISIONS
1. Contracts in construction activities
1.1. A contract in construction activities is a civil contract. A contract in construction activities (below referred to as construction contract for short) is a written agreement between the principal and the contractor on the establishment, change or termination of their rights or obligations for the performance of one, several or all jobs in construction activities. A construction contract is a document legally binding on the contracting parties regarding their rights and obligations; disputes between the contracting parties shall be settled based on the legally effective signed contract; disputes not yet mentioned in the contract shall be settled in accordance with relevant laws.
1.2. The principal is the investor, general contractor or principal contractor.
1.3. The contractor is the general contractor or principal contractor, in case the principal is the investor, or the subcontractor, in case the principal is the general contractor or principal contractor.
2. Scope and subjects of application
2.1. Scope of application
Construction jobs, bidding packages under works construction investment projects funded with state capital, including state budget capital (including official development assistance - ODA), state-guaranteed credit capital, state development investment credit capital, and state investment capital of other sources.
For Build-Operate-Transfer (BOT) construction contracts, Build-Transfer-Operate (BTO) contracts or Build-Transfer (BT) contracts, in the course of investing in the construction of works, project investors shall, depending on their contributed capital amounts, study and apply the guidance in this Circular.
For contracts on execution of ODA-funded projects, if a treaty signed by competent agencies or organizations of the Socialist Republic of Vietnam contains provisions different from those of this Circular, the provisions of that treaty prevail.
2.2. Subjects of application
This Circular applies to principals and contractors that are domestic and foreign organizations and individuals with adequate operation and practice capacity when signing contracts for carrying out construction activities in Vietnam.
Organizations and individuals involved in construction contracts under works construction investment projects funded with capital of other sources are encouraged to apply the provisions of this Circular.
3. Principles of signing a construction contract
3.1. A contract shall be signed on the principles of voluntariness, equality, good will, cooperation, honesty and observance of law and social ethics. All agreements must be expressed in a contract.
3.2. A construction contract shall be signed only after the principal has selected the contractor according to regulations and the contracting parties have finished the contract negotiation process.
3.3. Depending on the complexity of a contract, the contracting parties may apply the provisions of this Circular to contract drafting, negotiation and signing. For a contract involving simple and small-scale jobs or bidding packages, the parties may state all relevant contents in the contract. For contracts involving bidding packages under complex and large-scale projects, the contractual terms may be separated into general and specific conditions.
General conditions of a contract are documents expressing basic rights and obligations of and relations between the contracting parties.
Specific conditions of a contract are documents specifying or supplementing a number of contents of the contract’s general conditions.
3.4. The contract price (contract signing price) must neither exceed the winning bid (in case of bidding) nor the approved cost estimate of the bidding package (in case of contractor designation), except for the volume arising outside the bidding package approved by a competent authority.
3.5. The investor or investor’s representative may sign contracts with one or many principal contractors for performance of jobs. When an investor signs contracts with many principal contractors, the contents of these contracts must ensure the unified and coordinated performance of contractual jobs in order to assure the progress and quality of projects.
3.6. The principal contractor may sign contracts with one or several subcontractors provided that those subcontractors must be approved by the investor and the subcontractors must be consistent with the contract signed by the principal contractor and the investor. The principal contractor is answerable to the investor for the progress and quality of the signed jobs, including those performed by subcontractors.
3.7. In case of partnership contractors, the partners must make a partnership agreement bearing the signatures of all of them; if the partners agree to authorize a contractor who is the head of the partnership to sign a contract directly with the principal, that contractor shall sign the contract with the principal.
3.8. The principal and the contractor may appoint their representatives to negotiate, sign and perform a contract:
- The parties’ representatives to negotiate a contract must have full power to make decisions and bear responsibility for their decisions throughout the course of contract negotiation. Any contents which are subject to approval of competent authorities must be stated in the contract negotiation record.
- The parties’ representatives to sign and perform a contract must have full power to make decisions and bear responsibility for their decisions throughout the course of contract performance. Any contents which are subject to approval of competent authorities must be stated in the contract.
4. Types of construction contract
Depending on the size, nature and conditions of investment projects on the construction of works, kinds of jobs and relations between parties, a construction contract may be of different types with different contents.
4.1. Construction consultancy contract
Construction consultancy contract is a construction contract for the performance of one, several or all consultancy jobs in construction activities, such as formulation of a construction planning; formulation of a works construction investment project; construction survey; construction engineering; selection of contractors; construction supervision; management of investment projects on the construction of works; verification of designs, total cost estimates and cost estimates; and other consultancy activities related to works construction.
Consultancy contract for the performance of all jobs of construction engineering under a project is a general engineering contract.
4.2. Contract on supply of construction supplies and equipment
Contract on supply of construction supplies and equipment is a construction contract for the supply of supplies and equipment included in a technological chain installed to a construction work according to the technological design for an investment project on work construction.
4.3. Construction contract
Construction contract is a contract on the construction of a work, work item or construction job according to the work construction design.
Construction contract for the performance of all jobs of construction of a work under a project is a general contract for work construction.
Contract for the performance of all jobs of engineering and construction of a work under a project is a general contract for work engineering and construction.
4.4. Engineering, procurement and construction contract (EPC contract)
EPC contract is a construction contract for the performance of all jobs, including engineering, procurement of supplies and equipment, and construction of a work or work item.
4.5. Turnkey contract
Turnkey contract is a construction contract for the package performance of all jobs of project formulation, engineering, procurement of supplies and equipment, and work construction.
5. Management of contract performance
The principal and the contractor shall, within the ambit of their rights and obligations, work out implementation plans and measures compliant with the contents of the signed contract in order to realize the agreements reached in the contract. Contents of management of the contracting parties’ contract performance include management of the quality and progress of jobs; contract volumes and prices; management of labor safety, environmental sanitation, fire and explosion prevention and combat; management of contract change and modification; and other contents stated in the construction contract, for the attainment of the signed contract’s objectives.
The supervision of contract performance complies with Clause 1, Article 59 of the Bidding Law.
Part II
DOSSIERS AND CONTENTS OF A CONSTRUCTION CONTRACT
1. Dossiers of a construction contract
A construction contract dossier comprises a construction contract, attached documents and documents added in the course of contract performance (below referred to as documents attached to a contract).
Documents attached to a contract constitute an integral part of a construction contract. Depending on the size and nature of jobs, documents attached to a contract may be all or some of the following:
1.1. Contract-winning notice or contractor designation document;
1.2. Contractual conditions (general and specific conditions);
1.3. The contractor’s proposal;
1.4. Technical instructions and reference conditions;
1.5. Blueprints;
1.6. Written amendments or supplements, contract negotiation record;
1.7. Contract performance guarantee, advance payment guarantee, and other forms of guarantee, if any;
1.8. Other relevant documents.
Depending on each specific contract, the contracting parties shall reach agreement on the order of priority in the application of contractual documents if those documents contain contradictory provisions.
2. Contents of a construction contract
Depending on the size, characteristics and nature of each specific work, bidding package and job and the type of construction contract, a construction contract may contain all or some of the following principal contents: information on the contract and contracting parties; definitions and explanations; applicable laws and used languages; payment currencies; job volumes; contract price; advances; contract payment; contract price adjustment; job performance schedule and completion deadline; contract performance guarantee; general rights and obligations of the contractor; general rights and obligations of the principal; subcontractor/s (if any) designated by the investor; quality management of construction works; take-over test of completed jobs; work insurance and warranty, environmental protection, labor safety and fire and explosion prevention and combat; electricity, water and security for the construction site; responsibilities for errors; suspension and termination of the contract by the principal and the contractor; risks and responsibilities; force majeure circumstances; bonus; fine for contract breach; settlement of disputes over the contract; contract finalization; and contract liquidation.
2.1. Information on the contract and contracting parties
A contract must fully contain general information on the contract and information on the contracting parties.
2.1.1. General information on a contract covers the serial number of the contract; the name of the bidding package; the name of the project and bases for signing the contract;
2.1.2. Information on the contracting parties covers transaction names of the contracting parties; representatives of the parties; business registration addresses or transaction addresses; tax identification numbers, business registration certificates, account numbers; telephone and fax numbers, and email addresses; paper of authorization (in case the contract is signed under authorization); the time of signing the contract; and other relevant information.
2.2. Definitions and explanations
Some terms must be defined in order to prevent misunderstanding and facilitate the elaboration, negotiation and performance of a contract. Those terms may include: contract; contract agreement; letter of approval; letter of bidding participation; technical characteristic, standards and explanations; blueprint; bid dossier; bid dossier annex; list of anticipated workdays (if any); party and parties; investor; contractor; consultant; investor’s representative; contractor’s representative; subcontractor, etc.
If a term has a different meaning when it is used in an article, a clause or a specific context, this meaning must be explained in such article, clause or context.
2.3. Applicable laws and used languages
2.3.1. Applicable laws: A contract is governed by the legal system of the Socialist Republic of Vietnam. ODA-funded projects comply with Point 2.1, Part I of this Circular.
2.3.2. Language used in a contract is Vietnamese. When a contract involves foreign party(ies), Vietnamese and English shall be used.
2.4. Payment currencies
Payment currencies must be clearly stated in a contract. Different payment currencies may be used under a contract on the principle that payment shall be made in the currency used for bids in compliance with the bid invitation dossier or requirement dossier. Payment may be made by account transfer, in cash, account transfer telegram, etc., which, however, must be specified in the contract.
2.5. Job volumes
A contract must specify the volumes and scopes of jobs to be performed. Job volumes and scopes shall be determined based on the requirement dossier of the investor (the principal) or the bid invitation dossier and the record clearly describing the requirements of the investor (the principal, if any), or relevant records of negotiation between the parties.
2.6. Construction contract price
Contract price is a sum of money which the principal commits to pay to the contractor for the performance of the job volume according to quality, progress and other requirements stated in the contract.
In a contract, the parties shall specify the contract price contents, including taxes, charges and the parties’ responsibilities to pay relevant taxes and charges.
Based on the bid invitation dossier, bidding participation dossier and contract negotiations results, the parties shall determine the contract price. A contract price may take one of the following forms:
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