MCIArb MConst Law (KCL)

In the construction industry in the People’s Republic of China (“China”), the question whether a construction contract1 is valid or not relates to issues of construction quality, project price and payment of the price, liquidated damages (LDs), overdue damage compensation, dispute resolution and a series of other legal issues, which concern both the employer’s and the contractor’s rights and interests, directly and indirectly. Therefore, the vitiation of construction contracts needs to be paid much more attention by the contract parties, lawyers, lawmakers and tribunals. In China, however, the problems arise out of a legal environment that contains ambiguous laws, extensive supervision and administration of the construction market from the governments and local authorities, which has somewhat led to chaos and deviation in the understanding of effectiveness of construction contracts. It is thus the view of the author that it is necessary to analyse, together with the existing legislative and judicial discussions, the miscellaneous circumstances leading to the vitiation of a construction contract. Further, it is also necessary to consider how parties should deal with the issues subsequent to vitiation so that the parties to a construction contract may anticipate, prevent and solve construction disputes after such an analysis.

It is well-known that party autonomy is a basic principle in contract law; that is to say, once consensus is reached by the parties to the contract, then the contract is binding and enforceable between the parties2. Similarly, the law should also respect the autonomy of the parties as much as possible.