Court Awards CNY 930,002.65 in Construction Contract Dispute
The Eastern China City Intermediate Court ruled on a dispute over unpaid construction work, ordering a sub-contractor to pay the actual constructor CNY 930,002.65. The case involved a complex chain of subcontracts for a road project in Central China City. The court found the underlying labor contract invalid but confirmed the constructor’s right to payment for completed work.
In 2003, the government of Central China City hired Eastern China City Engineering Company to build an 18.4-kilometer road section for CNY 12,880,000. That company then subcontracted the entire project to Mr. Jia’s forestry engineering company. In March 2004, Mr. Jia’s company signed a labor contract with Mr. Wang, an individual without construction qualifications, to perform the work for CNY 7,962,200. Mr. Wang completed construction by September 2004, and the road was opened to traffic. Mr. Wang later sued for unpaid fees of CNY 1,890,902.66, naming Mr. Jia’s company, Mr. Zhang (a project manager), the original contractor, and the local government as defendants.
During the hearing, the court examined the signed contracts, payment records, and an expert appraisal of extra work. Both sides submitted evidence of payments Mr. Wang received from various sources. Mr. Jia’s company claimed Mr. Wang should bear additional costs for materials, transport, and taxes, but the court found these were not verified by joint settlement. Mr. Wang acknowledged certain amounts, and the court accepted those admissions. The court also considered that Mr. Jia’s company had performed 8.26 kilometers of the work itself, which was deducted from Mr. Wang’s contract scope.
The court held that the labor contract was invalid because Mr. Wang lacked the required qualifications and the agreement was essentially an illegal subcontract. However, since the project passed inspection and was used, Mr. Wang was entitled to payment for his actual work. The court calculated Mr. Wang’s total work value at CNY 8,115,121.43, including contract and extra work plus unpaid transport fees. Subtracting all amounts Mr. Wang had already received (CNY 7,185,118.78) and deducting agreed shares of quality fees and taxes, the court found a balance of CNY 930,002.65 owed to Mr. Wang.
According to relevant law, when a construction contract is invalid but the project is completed and accepted, the actual constructor may claim payment based on the contract price. The court applied this principle, noting that Mr. Wang was the real worker on site. Under judicial interpretations, the immediate subcontractor (Mr. Jia’s company) is primarily liable. The upstream contractor and government are responsible only to the extent they still owe money to their direct subcontractor. The court ordered Mr. Jia’s company to pay the amount due, while the other defendants were not required to pay directly because no evidence showed they owed further sums.
This case highlights the risks of subcontracting to unqualified individuals. Even though the contract was void, the actual constructor recovered payment for work performed. Companies should ensure all subcontractors hold proper licenses and sign clear, documented agreements. The decision reinforces that liability flows down the chain, but upstream parties may be shielded if they have already paid their subcontractors. Practical note: parties should keep detailed records of all payments and costs to avoid disputes over deductions.
Disclaimer: This article is for informational purposes only and does not constitute legal advice.