A judicial interpretation on disputes over construction projects contracts was released by the Supreme People's Court (SPC) on Jan 3 and will be in effect on Feb 1.

The document establishes regulations on various issues such as the validity of construction contracts, settlement of construction project payments, engineering appraisals, priority in construction project payments and the protection of builders' rights.

According to the interpretation, the principle of "compensating for the actual loss" must be followed when dealing with cases of losses caused by invalid construction project contracts.

When the actual loss cannot be ascertained, aspects like quality standards, construction period and payment time mentioned in the contract should be referenced to determine the loss amount.

In cases of a construction work contract signed by a contractor and by a party borrowing certificate of qualification from a third party, the document, on the basis of Section 66 of the Construction Law, stipulates that the contractor has the right to ask both the borrower and the lender to compensate for losses including disqualification of the construction project and project delay.

As for premises where a contractor exercises his or her priority of claims for the project price, the interpretation says guaranteeing construction quality should be the first priority.

In addition, to better protect the actual builders' rights, any non-validity of the construction contract will not affect the workers priority of claims for payment.

The new regulations also state that deserved contractor profit is included in the contract and is payable, which will decrease litigation for further payment and promote sustainable and sound development of the construction industry.