Reflection and Improvement of the Principle of Treating Invalid Construction Contracts as Valid in the View of Civil Law

Abstract

After the construction project is completed, if the contract is judged as invalid by the court at this time, it will involves the application of Article 157 of the Civil Code of People’s Republic of China: For example, how to return the completed construction, how to compensate for the discount if it cannot be returned, and what standard should be adopted for the discount compensation. In order to solve the above problems, the Supreme People's Court issued the "Interpretation on the Application of Law to the Trial of Construction Contract Disputes" (hereinafter referred to as "Interpretation"), which mentions that the above problems should be regulated in judicial practice through the invalid construction contract "treated as valid". However, the principle encounters many difficulties both in theory and practice. For example, how to avoid its counterproductive effect of encouraging the signing of invalid contracts to destroy the market order, whether to use the contractual standard or the engineering quota standard in the project settlement, and how to interpret the scope of "effective" to better protect the rights and interests of the parties. This paper mainly discusses the background of the development of construction industry from 2005 to 2020, the definition of the principle of invalid building construction contract, the applicable situation, the limitations in theory and practice, and the final reflections and countermeasures.