Lawyer Monthly - May 2022

ould you please give a brief overview of what distinguishes construction agreements from other types of commercial contracts? Construction contracts create mutually binding legal relationships between parties and reflect technical and commercial aspects of the project. When compared with other commercial contracts, an obvious difference is that construction contracts are often voluminous, being formed by several separate documents. A typical construction contract will include a contract agreement on key terms, specific and general conditions of contract covering substantive clauses, technical documentation, schedules, programmes, etc. Notably, construction projects are singularly focused in subject, highly technical, and of high value. Construction works are usually carried out in the open air, meaning exposure to environmental impacts and physical conditions and difficulties, with a construction period that may span several years. As a result, parties involved in construction projects may face a wider range of risks during the course of the project than those in other commercial transactions. In this respect, a major concern of construction contracts is to allocate those risks in a fair and equitable manner through various operation mechanisms dealing with allocation – measures to be taken to manage such risk exposure and corresponding remedies. Further, whilst contract law applies to construction contracts and other commercial contracts, as projects – especially infrastructure projects – relate to the public’s interests, there may exist mandatory laws relating to the construction sector on certain matters such as environmental protection, health and safety, labour, planning and permitting, technical criteria on certain fragment works, and others. Standard form contracts are widely used in the construction industry. These standardised contracts are used to reduce transaction costs and establish best industry practices and customs. The most common standard forms of contract used internationally are FIDIC forms. Quite often, parties tend to adapt these standard forms according to the needs of the project with bespoke amendments. How can the addition of an international element complicate a Chinese construction agreement? International construction projects are often large-scale, high-value and with various parties from different countries involved. The international element obviously enlarges the spectrum of project risks and also brings challenges both in law and engineering when devising contractual frameworks. That is why an international construction contract is always complex with greater details. Clauses in an international construction contract not only deal with allocation of risk but have to be carefully assessed under governing law and local law where the project is located. Quite often a common term used in local law would be beyond legal expectation in a national sense. HandlingConstruction Law inChina and Internationally China’s highly competitive construction sector is regulated by layers of local and governing laws, which can cause conflict in international construction projects if left unaddressed. Jean Zhu, partner at Merits & Tree Law Offices, outlines these contract and infrastructure law challenges and how they can be dealt with at a project’s outset, delving into the construction climate of China itself as it begins a shift towards reducing its carbon emissions. C EXPERT INSIGHT 48 WWW.LAWYER-MONTHLY.COM | MAY 2022 Quite often a common term used in local law would be beyond legal expectation in a national sense.

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