The Comparative Study on the Price Adjustment Regulations and the Principle of Change of Circumstances in Public Construction
Date Issued
2016
Date
2016
Author(s)
Tu, Hsin-Hung
Abstract
In the practice of public construction, due to the concern of cash flow and potential risks that may occur, the contractors would commonly refuse to purchase all the materials needed at the very beginning of the construction. The purchases will rather be conducted in accordance with its progress. Therefore, the parties of the public construction contract, will bear the risk of price fluctuation of the materials during the construction. Such risk is bound to be tremendous. As the large amounts of money involved in a construction, the increase of expenses caused by the price fluctuation of construction materials, which may range from millions to billions, will have significant impact on both the contractor and the owner-builder. Therefore, whether or not the price fluctuation can be a justifiable ground for the parties to make a payment adjustment, becomes a common dispute in the field of public construction. Normally, the parties would settle such dispute in mediation or arbitration. Failing that, the party which is unsatisfied with the given result would file a lawsuit pleading for adjustment of the payment on the ground of change of circumstances, which is stipulated in Article 227-2 of the Taiwan Civil Code. Additionally, to respond to the then drastic price fluctuation of construction materials, the Public Construction Commission, Executive Yuan issued a series of Principles of Payment Adjustment on the Price of Materials successively. On the one hand, the Principles affirmed the contractor’s right to request the owner-builder to adjust the payment when the price of construction materials rises. On the other hand, it also affirmed the owner-builder’s right to reduce the payment when the price falls. Such principles are aiming at fairly distributing the risk of price fluctuation to the parties. However, the disputes of payment adjustment on the price fluctuation of construction materials appear undiminished even after the issuing of the said Principles. The main reason is under which situation could Article 227-2 of Taiwan Civil Code and the Principle of Payment Adjustment on the Price of Materials be adopted remain unclear. Besides, the contradiction between the law and the Principles remain unsolved, either. Aiming at clarifying the ambiguities, this thesis categorizes the common ambiguities of Article 227-2 of Taiwan Civil Code and the Principle of Payment Adjustment on the Price of Materials respectively, then provides possible solutions. Furthermore, dealing with the contradiction between the law and the Principles, this thesis analyzes and induces the court opinions from the relevant judgments, and attempts to describe the meaning of a commonly raised standard - “the Range Reasonably Foreseeable”. The position of this thesis is that, the provisions of payment adjustment on the price of materials stipulated in the current Model Contract for Engineering Procurement should be included in all the public construction contracts.
Subjects
Doctrine of Change of Circumstances
Construction Cost Index
Construction Cost
Principles of Payment Adjustment on the Price of Materials
Model Contract for Engineering Procurement
The Range Reasonably Foreseeable
Type
thesis
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