Lessons from Construction Contract Disputes Related to Equipment in Vietnam
During the execution of construction contracts, disputes arising from changes in equipment, technical specifications, or origin of materials are not uncommon. These seemingly minor changes can lead to significant legal consequences if the parties do not have clear agreements and timely solutions. This article shares legal perspectives on this issue and offers practical advice to help businesses proactively manage risks.
Legal liability when equipment is changed in a construction contract
Contractors are obligated to strictly comply with the agreed terms on equipment types, specifications, and origin stated in the contract. However, in practice, contractors may propose changes due to cost, progress, or practical suitability. The key point is: not all changes are legally acceptable.
Who is responsible for equipment changes?
According to Article 113 and Article 138 of the Construction Law, contractors are responsible for the quality and accuracy of equipment and materials. Any unauthorized changes without written consent from the investor will result in full legal and financial liability for the contractor.
Furthermore, clause 11.2 in many standard construction contracts clearly states: if the equipment or materials deviate from the contract, the contractor must bear all related costs. This implies that the contractor may be liable for appraisal fees if equipment valuation needs to be re-conducted due to changes, depending on fault and agreements between the parties.
What should be done when equipment changes occur?
The most important step is to draft a written agreement clearly stating: reasons for the change, replacement equipment, impact on progress and quality, and how to handle the additional costs (especially appraisal costs). This document must be signed by both the investor and the contractor to avoid future disputes.
Without a written consensus, all arising costs are at risk of being deemed unilaterally decided and may not be enforceable.
What should businesses keep in mind to avoid disputes over appraisal costs?
Many businesses find themselves in awkward situations where they've paid appraisal costs but cannot claim reimbursement due to a lack of legal grounds. Consider the following:
Clearly establish legal basis for cost allocation
The Commercial Law and Civil Code provide specific regulations on contractual obligations and the right to claim damages. If appraisal costs arise from the contractor’s fault (e.g., providing the wrong equipment), the investor can demand reimbursement based on liability principles.
However, to succeed in court, one must prove:
The equipment was changed by the contractor;
Both parties agreed on the appraisal process;
There is evidence of payment;
The contractor was notified and requested to pay, but did not comply.
Strictly observe the statute of limitations
A common mistake is allowing the dispute to drag beyond the statute of limitations (2 years under Article 319 of the Commercial Law). Even with solid evidence, the court may dismiss the claim if it's time-barred.
Therefore, upon detecting a breach (non-payment, failure to fulfill commitments...), businesses should act promptly by issuing written requests and preparing litigation files if no resolution is reached.
Respect the appraisal selection process
If there's a change in the appraisal company (e.g., from company A to company B), the investor must obtain renewed consensus from the contractor, preferably in writing. Unilateral changes without notice can weaken the legal basis for any cost claims.
Don't rely solely on goodwill
In contract relations, all agreements—no matter how well-intentioned—must be documented. Courts only recognize clear, specific evidence and cannot resolve cases based on verbal or implicit agreements.
Legal advice for construction contract disputes
Construction disputes are complex and often technical. Businesses should:
Review contracts carefully before signing, especially clauses about equipment changes and liabilities;
Record all communications in writing or signed meeting minutes;
Keep all related documents and receipts;
Consult with legal counsel at the first sign of contractual breaches.
Facing construction contract disputes or legal risks in project execution?
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