During the construction process of a construction project, due to various reasons, there may often be delays in the project schedule. In order to avoid the contractor claiming compensation for the delay, the project construction unit usually makes a similar provision in the construction contract: if the delay in the project schedule is caused by the employer's reasons, the employer can give the corresponding extension of the project schedule, but the contractor cannot make any claims, that is, an exemption clause for the employer's delay in the project schedule is agreed upon.

The current construction industry is facing many challenges, and there are numerous claims disputes arising from the provision of "exemption clauses for construction period" in construction contract disputes. This article attempts to interpret the relevant issues from the perspective of judicial practice's relevant recognition rules.

1、 The construction contract of the construction project is invalid, and the "exemption clause for delay in construction period" is invalid. The contractor may claim to adjust the project price.

Article 153 of the Civil Code of the People's Republic of China stipulates that civil legal acts that violate mandatory provisions of laws and administrative regulations are invalid. However, except where the mandatory provision does not render the civil legal act invalid. Civil legal acts that violate public order and good customs are invalid.

Article 155 stipulates that invalid or revoked civil legal acts have no legal binding force from the beginning.

Article 567 stipulates that the termination of contractual rights and obligations shall not affect the validity of settlement and liquidation clauses in the contract.

Therefore, the "exemption clause for project delay" is an agreement between the contracting and contracting parties that exempts the employer from liability for the delay caused by the employer's violation of legal or contractual obligations, and its nature should be a breach of contract liability clause. The breach of contract liability clause does not belong to the settlement and clearance clause in the contract. Therefore, if the construction contract of a construction project is deemed invalid due to violation of mandatory provisions of laws and regulations, the "exemption clause for delayed construction period" should also be invalid.

Article 798 of the Civil Code of the People's Republic of China stipulates that before concealed works are concealed, the contractor shall notify the employer to inspect them. If the employer fails to inspect in a timely manner, the contractor may postpone the project date and has the right to demand compensation for losses such as work stoppage or idling.

Article 803 stipulates that if the employer fails to provide raw materials, equipment, site, funds, and technical information in accordance with the agreed time and requirements, the contractor may extend the project date and has the right to demand compensation for losses such as work stoppage or idling.

Article 804 stipulates that if the construction of the project is suspended or delayed due to the fault of the employer, the employer shall take measures to make up for or reduce the losses, compensate the contractor for the losses and actual expenses caused by the suspension of work, work stoppage, reshipment, relocation of machinery and equipment, backlog of materials and components, etc.

Therefore, in the event that the "exemption clause for construction period" is invalid, the contractor may, in accordance with Articles 798, 803, and 804 of the Civil Code of the People's Republic of China regarding the delay in construction period caused by the fault of the employer, demand compensation from the employer for the increased construction costs or losses resulting from the delay in construction period, and adjust the project price.

2、 If the "exemption clause for project delay" is a true expression of the intentions of both parties, and its content does not violate mandatory provisions of laws and administrative regulations, public order and good customs, and does not harm the legitimate rights and interests of others, it should be legal and effective. In principle, the contractor cannot claim adjustment of the project price from the employer.

In the case of the construction contract dispute between China Construction Second Engineering Bureau Co., Ltd. and Shanghai Tian'an Jingu Science and Technology Park Enterprise Development Co., Ltd. (2021) Supreme People's Court Civil Application No. 5098, the main purpose of the Supreme People's Court judgment is that the construction contract should be based on the bidding documents, but the parties to the contract can, based on specific circumstances and through equal consultation, specify and refine the bidding documents in the contract. China Construction Second Engineering Bureau has waived the right of the contractor to claim compensation or compensation from the employer for related expenses and losses caused by the delay of the construction period due to the employer's reasons through the construction contract agreement. It agrees to increase the situation of termination of the contract due to the contractor's breach of contract, which is a disposition of its own civil rights. The above-mentioned breach clause does not constitute a substantive clause that may restrict or exclude other bidders from participating in competition. It is a refinement and improvement of the breach liability agreement between the two parties in the bidding documents, and does not violate the mandatory provisions of laws and administrative regulations. China Construction Second Engineering Bureau's claim that the construction contract involved in the case is invalid on this basis is unfounded and should not be supported by law.

At the same time, in the case where the "exemption clause for project delay" has legal binding force, even if the prices of personnel, materials, and machinery increase significantly during this period, or cause other significant losses to the contractor, the contractor has no right to request the employer to increase costs or compensate for losses, that is, the project price should not be adjusted.

In the case of construction contract dispute between Sichuan Fourth Construction Co., Ltd. and Huifengxiang Commercial Holdings Co., Ltd. (2020) Supreme People's Court Civil Final No. 1145, the Supreme People's Court held that Article 5.6.1 of the construction contract in question stipulated: "If the construction period is delayed due to the following reasons on the key route of the construction project (according to the key route in the construction network diagram submitted by Party B and confirmed by Party A and the supervisor), and confirmed by Party A, the construction period will be correspondingly extended; but Party A will no longer bear any costs including Party B's idle work and suspension fees (which have already been taken into account by Party B in the increased measures fee): (b) if the project is delayed, suspended, delayed, or suspended due to Party A's actions.

In this case, on April 8, 2014 and May 6, 2014, the Fourth Construction Company sent two "Work Contact Forms" to HSBC Xiang Company, stating that the project involved in the case was suspended or delayed due to HSBC Xiang Company's reasons. HSBC Xiang Company and the supervising engineer signed or stamped the "Work Contact Form" and the attached "List of Costs for Personnel and Machinery Relocation Materials Rental". After reviewing the "Project Delay Approval Form" submitted by the Fourth Construction Company, HSBC Xiang Company agreed to extend the construction period by 77 days. The two parties did not reach a new agreement on the issue of suspension or delay losses. According to the above agreement, if the construction period was delayed due to HSBC Xiang Company's reasons, HSBC Xiang Company would extend the construction period accordingly. However, We will no longer bear the losses caused by the suspension and work stoppage of the Fourth Construction Company. Therefore, the Fourth Construction Company advocates that HSBC Xiang Company bear the losses caused by the suspension and work stoppage The appeal request for the loss of idle work and the resulting loan interest and bank overdraft interest during the same period cannot be established.

3、 The contract is valid, but if the prices of personnel, materials, and machinery increase significantly during the delay in the construction period, or cause other significant losses to the contractor, resulting in a serious imbalance of interests between the parties, some courts believe that the contractor may adjust the project price at their discretion based on the principle of fairness.

Due to the agreement between both parties in the general contract that the contracting party shall not compensate for the expenses incurred due to the suspension of work caused by the contracting party's reasons, but during the period of project delay, the prices of personnel, materials, and machinery have significantly increased, or other significant losses have been caused to the contractor, this agreement is clearly unfair to the contractor. In this regard, it is necessary to comprehensively consider whether the project price should be adjusted based on the legal binding effect of the exemption clause for project delay in accordance with the effectiveness of the construction contract, taking into account the actual situation of the imbalance of interests of the parties involved.

In practice, typical cases such as the construction contract dispute case between Xu Jikun and the Wuxi Key Water Conservancy Project Construction Management Office (2017) Su Min Zhong No. 463, Jiangsu High Court believes that on December 6, 2007, Xuzhou Water Conservancy Company made a written commitment to the management office that "no relevant claims will be made due to the delay of the owner's preliminary work (land acquisition and demolition) (under the legal premise stipulated by the state)". This commitment is the true intention of Xuzhou Water Conservancy Company, does not violate legal provisions, and is legal and effective. The first instance found that the commitment violated the principle of fairness and was inappropriate, and this court will correct it in accordance with the law. Xu Jikun, as the actual construction personnel who borrowed the qualifications of Xuzhou Water Conservancy Company, should be bound by this commitment. However, due to demolition reasons, the actual start date of the project involved is more than 8 months away from the signing date of the agreement, and the actual construction period is as long as five years. The actual start date and actual construction period are not within the reasonable range that Xuzhou Water Resources Company could foresee when promising to extend. Moreover, the fact that Xu Jikun suffered losses due to the delay in the construction period and the extension of the actual construction period objectively exists. Therefore, it is unfair not to compensate the actual construction personnel.

【 Special Reminder 】 This article believes that in judicial practice, in order to prevent the abuse and generalization of the principle of fairness, and to avoid excessive interference of judicial power in the distribution of interests and risks by parties, people's courts often adopt a cautious attitude and strictly use the principle of fairness to adjust project prices.

4、 The contract is valid, and judicial practice holds a highly cautious attitude towards the contractor's claim to adjust the project price based on "change of circumstances".

Article 533 of the Civil Code of the People's Republic of China stipulates that after the formation of a contract, if there is a significant change in the basic conditions of the contract that the parties could not foresee at the time of contract formation and does not constitute a commercial risk, and continuing to perform the contract is clearly unfair to one party, the party adversely affected may renegotiate with the other party; If no agreement can be reached through negotiation within a reasonable period of time, the parties may request the people's court or arbitration institution to modify or terminate the contract. The people's court or arbitration institution shall, based on the actual situation of the case, modify or terminate the contract in accordance with the principle of fairness.

Therefore, when there is a significant increase in material prices during the performance of an engineering contract, which is unforeseeable by the parties at the time of contract formation and exceeds the normal commercial risk range, the change in circumstances is usually the basis for the construction unit's possible consideration of the request to adjust the project price. But the problem is that the application conditions for changes in circumstances in judicial practice are relatively strict. The prerequisite for the application of the principle of change of circumstances is that there have been significant and significant changes in the external objective environment. However, the principle of change of circumstances cannot be applied simply because such changes have occurred. The application of the principle of change of circumstances also requires specific causal factors, that is, the change must not be attributed to the parties to the contract, neither caused by their actions nor transferred by their will. If the performance of the contract cannot be attributed to one party, that party shall bear corresponding breach of contract liability in accordance with the law.

This article argues that, in general, the causal factors for the application of the principle of change of circumstances in construction contracts are adjustments to national policies, such as the significant fluctuations in building material prices caused by the regulation of certain raw materials by the state. Secondly, the application conditions of the principle of change of circumstances also imply specific subjective considerations, which require both parties to the contract to have failed to foresee possible subsequent changes in circumstances when entering into the contract. If the parties were able or should have been able to foresee the change at the time of the contract, it shall be deemed that they voluntarily assume the corresponding risks and shall be bound by the terms of the contract. They shall not have the right to claim any changes or termination of the contract in the future. For the standard of "foreseeability", it should be comprehensively considered based on the general ability of the general public to foresee, and combined with the specific background and industry knowledge of the parties involved. For example, in a construction contract, it may be difficult for ordinary people to foresee a significant change in the price of a certain building material in the future, but practitioners in the construction industry can generally foresee it with their professional knowledge and experience. Therefore, it should be judged that the situation has changed to foreseeable. Furthermore, the most important point of applying the principle of change of circumstances is that if the contract continues to be performed, it will cause significant adverse consequences to one party, and this consequence clearly violates the principle of fairness, which will lead to a serious imbalance of interests between the parties to the contract. Specifically, the obvious unfair consequences in the elements of consequences must be directly derived from substantial changes in the external objective environment, rather than indirect consequences or chain reactions caused by changes in circumstances, and the parties bearing the obvious unfair consequences must be the parties agreed upon in the contract, rather than third parties outside the contractual relationship.

In judicial practice construction contract disputes, it is difficult for parties to obtain judicial support for their claims to terminate or change the contract on the grounds of changes in circumstances. The main reason is that courts usually classify changes in external objective facts as commercial risks. Due to the current legislation not accurately distinguishing between changes in circumstances and concepts such as commercial risk and force majeure, judicial authorities usually adopt a highly cautious attitude when applying the principle of changes in circumstances. Therefore, even if there are significant adverse changes in external objective facts, the contractor has to bear higher risks and continue to fulfill the provisions of the original contract, rather than obtaining relief for changes or termination of the contract content based on changes in circumstances. At the same time, if the construction contract involved in the case is a fixed total price or unit price fixed contract, both parties have reached a clear agreement at the beginning of the contract that the price cannot be adjusted. In this case, claiming a change of circumstances is usually difficult to obtain the support of judicial authorities due to its conflict with the original agreement of the contract.