Recently, the Shanghai Arbitration Commission issued a final award on the dispute over a supporting landscape greening project subcontract between a Beijing landscaping engineering Co., Ltd. and a central state-owned enterprise (SOE) construction group Co., Ltd. The award fully upheld our core claims, ordering the central SOE construction group to pay the landscaping company the outstanding project funds plus corresponding interest, and bear the majority of the appraisal fees and arbitration fees in this case.
Lawyer Zhongsheng(Jason) Zhou from Shengzhi acted as the authorized representative of the applicant, the landscaping company, and participated in the entire case representation. Through four hearings and two rounds of judicial appraisal, he accurately grasped the core adjudication rules of construction project settlement disputes, and finally successfully recovered millions of yuan in unpaid project funds for the client, fully safeguarding the client’s legitimate rights and interests.
I. Case Background: Settlement Dispute Arising from Lump-Sum Downward Price Contract, Millions in Visa Payments Rejected
In September 2016, the landscaping company and the construction group signed a Professional Subcontract for Landscape Greening Project Construction, agreeing that the landscaping company would undertake the landscape greening works of the involved public rental housing community. The contract price adopted a “lump-sum price with a fixed downward ratio” model — the final settlement price shall be the total settlement cost verified by the owner minus a fixed downward ratio. Meanwhile, it was stipulated that the total amount of on-site visas shall not exceed a certain proportion of the final settlement cost.
The project was completed and accepted as qualified in the second half of 2017, and was officially handed over to the property management in mid-2020, with the defects liability period having long expired. However, during settlement, the construction group refused to pay the additional project funds corresponding to more than ten on-site visas on the grounds that “the lump-sum contract price is non-adjustable, the visa forms have signature defects, and the visa amount exceeds the proportional limit”. After unsuccessful negotiations, the landscaping company entrusted our firm to initiate arbitration with the Shanghai Arbitration Commission.
II. Core Disputed Issues
During the trial, the two parties engaged in multiple rounds of debates around three core disputes:
- Settlement rules for extra-contractual visas: Whether the works corresponding to the involved on-site visas are additional content outside the contract scope, whether they are bound by the clause of “non-adjustable lump-sum downward price”, and whether they should be included in the settlement price based on actual works;
- Validity determination of defective visas: Whether some visa forms with formal defects such as copied signatures can serve as the basis for settlement, and whether the construction facts corresponding to the visas actually occurred;
- Calculation standard for the total visa amount limit: How to determine the base of the “final settlement cost” agreed in the contract, and whether the visa payment claimed by the applicant exceeds the proportional limit.
In addition, the construction group raised multiple defenses such as unfulfilled payment conditions, deduction of water and electricity fees and fines, attempting to fully reject the applicant’s arbitration claims.
III. Our Representation Strategy and Trial Breakthroughs
In response to the difficulties of the case, our legal team formulated a strategy of “establishing facts as the foundation, taking the contract as the basis, and making precise breakthroughs”, and constructed a complete argumentation system from three dimensions:
(1) Breaking through the “non-adjustable lump-sum price” defense and defining the nature of additional works
The team comprehensively compared the construction content of the owner’s Settlement Audit Report with the involved visa forms, and proved item by item that works such as obstacle clearance, earthwork haul-out and ground hardening under the visas were not included in the settlement scope between the owner and the construction group, and were extra-contractual projects additionally constructed by the landscaping company.
We argued that the “non-adjustable lump-sum downward price” only applies to works within the contract drawings, and cannot cover additional construction content outside the contract scope; otherwise, it would result in the contractor constructing for free, which obviously violates the principle of fairness. This view was finally recognized by the arbitral tribunal.
(2) Consolidating the factual validity of visas combined with appraisal conclusions
In response to the construction group’s defense of forged visas, the team responded one by one combined with the handwriting appraisal opinions of the judicial appraisal institution:
- Multiple visa forms bear the handwritten signatures of the construction group’s on-site person in charge, which constitutes an official act representing the company’s confirmation of the construction content;
- Some copied signatures are a conventional operation mode of the project department, and cannot be used to deny the objective fact that the works were actually constructed;
- Combined with supporting materials such as construction records and handover documents, it is sufficient to confirm that the works under the visas have been actually completed and shall be included in the settlement.
(3) Accurately calculating the proportional limit to maximize settlement benefits
Regarding the contractual agreement on the proportional limit of the total visa amount, the construction group argued that the limit should be calculated based on the cost within the drawings, concluding that the visas have been fully covered and no additional payment is required.
Combined with the overall settlement system of the contract, our lawyers proposed that the proportional limit should be calculated based on the total settlement cost including already charged visas, and recalculated the supportable additional visa quota. The arbitral tribunal finally adopted our calculation logic and supported the landscaping company’s visa claims within the limit.
Meanwhile, the team clearly proved that the project has long been completed and accepted, the defects liability period has expired, and the payment conditions have been fully fulfilled. Regarding the deduction claims raised by the construction group, we pointed out that they did not file a counterclaim and had no evidence to support them, thus not falling within the scope of this case. This opinion was also adopted by the arbitral tribunal.
IV. Arbitration Award
After trial, the Shanghai Arbitration Commission issued a final award:
- The respondent, the central SOE construction group, shall pay the applicant, the landscaping company, the unpaid project funds and corresponding interest;
- The handwriting appraisal fee, cost appraisal fee and arbitration fee in this case shall be mainly borne by the respondent.
V. Practical Insights from the Case
As a typical construction subcontract settlement dispute, this case has important reference significance for construction enterprises in visa management and settlement rights protection:
- A lump-sum / downward price contract does not necessarily exclude settlement of additional items. If the visa works are additional content outside the contract scope, the constructor still has the right to claim settlement based on actual works even if the contract stipulates that the lump-sum price is non-adjustable. Enterprises shall not give up the right to additional items directly due to the contract wording.
- Visa management requires both formal compliance and factual support. During construction, enterprises shall try to improve the signature and seal procedures of visas and keep the original copies. If there are formal defects in visas, they shall keep factual evidence such as construction logs, on-site photos and communication records to prove the actual occurrence of the works, so as to avoid complete denial during settlement.
- The calculation base of proportional limit clauses shall be clearly defined. When signing the contract, the calculation base and inclusion scope of the “total visa amount limit” shall be clearly agreed to avoid disputes during settlement. When safeguarding rights, enterprises shall claim a reasonable calculation standard combined with the overall settlement rules of the contract.
VI. Firm Conclusion
Shengzhi has long been deeply engaged in the fields of construction engineering and commercial arbitration, and has accumulated rich practical experience in project settlement disputes, project payment recovery, contract validity disputes, construction project claims, etc. The firm is good at handling difficult and complex cases involving multiple rounds of appraisal, multiple parties and overlapping legal relationships.
Moving forward, our firm will continue to provide full-process legal services for construction enterprises with professional legal capabilities and meticulous case handling attitude, helping enterprises resolve project settlement risks and safeguard legitimate property rights and interests.
(Note: Case details have been desensitized for privacy. For specific case information, please contact the firm for further consultation.)
