Articles
Vietnam - New Rules for Construction Contracts

10 - 08 - 2010
By Ho Phuong Luan*

The Vietnamese Government recently issued Decree No. 48/2010/ND-CP dated 7 May 2010 (Decree 48) setting forth new rules on contracts involving construction activities (Construction Contracts).

Decree 48 applies to those involved in Construction Contracts within Vietnam that require an investment of  30% or more state owned capital, with an Exception to those Contracts using official development assistance  or where international treaties conflict with Decree 48.  Construction Contracts using less than 30% state owned capital are not obligated, but encouraged to follow Decree 48.  

Under Decree 48, Construction Contracts are classified according to the working substances or the contract value of the Construction Contracts. Construction Contracts classified by working substances include (i) construction consulting contracts, (ii) construction execution contracts, (iii) equipment and technology supply contracts, (iv) construction designing and execution contracts, (v) designing and equipment and technology supply contracts, (vi) equipment and technology supply and construction execution contracts, (vii) designing - equipment and technology supply and construction execution contracts, and (viii) turnkey contracts. Construction Contracts classified by contract value include (i) package contracts, (ii) fixed unit price contract, (iii) adjusted unit price contract, (iv) time based contract, and (v) [completion] percentage based contract.

 Decree 48 also establishes seven governing principles when executing Construction Contracts:

(i)         Construction Contracts shall be entered into on the principles of voluntariness, equality, good will, cooperation, and observance of law and social ethics;

(ii)         Construction Contracts shall be entered into only after the principal has selected the contractor and the contracting parties have finished the contract negotiation process;

(iii)        The contract value cannot exceed the winning bid (in a case of bidding) or the approved cost estimate of the bidding package (in a case of contractor designation);

(iv)        Construction Contracts involving simple and small-scale jobs or bidding packages may set forth all relevant contents within the contract. Construction Contracts involving complex and large-scale bidding packages should separate the contractual terms into general and particular conditions;

(v)        If the investor signs contracts with many contractors for the performance of various bidding packages in one project, the contents of these contracts must  be consistent and coordinated during the performance of each contract so as to ensure the general investment effectiveness of the project;

(vi)        For partnership contractors, the partners must make a partnership agreement.  This partnership agreement requires the signatures of all the partners who enter into the Construction Contract with the principal; and

(vii)       The principal and the contractor must appoint their representatives to negotiate and enter into Construction Contracts;

Decision 48 takes effect from 1 July 2010 and replaces the regulations on Construction Contracts as stipulated in Decree No. 99/2007/ND-CP dated 13 June 2007.

(*) Please contact the author at luan.ho@indochinecounsel.com or our partners if you wish to have more information or specific advice for the topic of this article.

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