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Judicial Rules: Where there is no evidence to prove that the bid inviter and the bidder conducted negotiations on substantive terms such as bid price, bidding proposal and other relevant contents prior to the bidding, which ultimately affects the bid-winning result, the bid-winning contract shall be valid. The separate construction project contract concluded by the bid inviter and the winning bidder, which is inconsistent with the bid-winning contract on substantive terms including project scope, construction period, project quality, project price and other relevant contents, shall be void. The bid-winning contract shall prevail in respect of the contractual rights and obligations of both parties.

[Reference Cases]

Case Name: Dispute over Construction Contract for Construction Projects between Chuzhou Jiayu Real Estate Co., Ltd. and Jiangsu Tiansheng Construction Co., Ltd.

Case No. (2018) Civil Final No. 1250 of the Supreme People's Court

【Case Brief】

In March 2015, Jiayu Company, as the tenderee, and its entrusted bidding agency Renhe Company issued the *Bidding Documents for Works of Buildings 1#-8#, Building 10# and Commercial Buildings of Phase I of Jiayu · Wanhao Mingyuan Project, Chuzhou*, which clearly specified the bidding scope and relevant requirements. Tiansheng Company participated in the bidding and submitted the *Project Quotation* to Jiayu Company, with a total quoted price of RMB 192,939,084. It is stated in the "General Notes" of the Project Quotation as follows: "1. This quotation is prepared in accordance with relevant provisions of the Instructions to Bidders and contract documents of this project as well as site investigation results. 2. All quotations cover all costs including labor cost, material cost, machinery cost, management fee and profit. 3. Some items that cannot be calculated are estimated based on actual site investigation. 4. All quotations include estimated prices, and shall be fixed lump-sum prices where no alteration occurs."

On April 10, 2015, Jiayu Company and Renhe Company issued a Notification of Award to Tiansheng Company, with the winning bid price totaling RMB 192,939,084.

On April 11, 2015, Jiayu Company and Tiansheng Company entered into a *Construction Contract for Construction Projects*, the content of which was consistent with the bidding documents and the letter of acceptance. On the same day, the two parties executed another *Construction Contract for Construction Projects* numbered JY20150411-137 (hereinafter referred to as the "Record-filed Contract"), which was filed with the Archives of Chuzhou Municipal Construction Committee. Compared with the aforesaid *Construction Contract for Construction Projects*, the scope of construction works under this contract excludes Residential Buildings No. 2, No. 4 and No. 6 as well as the underground garage, and the contract price is RMB 36,426,200. Meanwhile, the two parties also signed a *Supplementary Agreement to the Construction Contract*, which stipulates as follows: "The *Construction Contract for Construction Projects* concluded by Party A (Jiayu Company) and Party B (Tiansheng Company) in April 2015 shall be the sole valid and enforceable contract between the two parties. All business relations and payment settlement between the two parties shall be carried out in accordance with the terms and conditions of this contract. The *Construction Contract for Construction Projects* numbered JY20150411-246 signed by the two parties is only used for handling construction application and record-filing formalities, and shall not be used for any other purposes beyond construction application and record-filing. ……"

After the execution of the *Construction Contract for Construction Projects*, Tiansheng Company immediately mobilized manpower and materials to enter the construction site for construction. All works passed the completion acceptance organized by Jiayu Company on August 30, 2016. Afterwards, the contractor filed a lawsuit with the court to claim the outstanding construction payment.

[Reasons for Judgment]

The Supreme People's Court holds that the two parties concerned have concluded multiple *Construction Contracts for Construction Projects* in relation to the construction of the project involved in the case, among which the *Construction Contracts for Construction Projects* numbered JY20150411-137 and JY20150411-246 are both contracts intended for filing. The contract numbered JY20150411-137 has been submitted to the competent administrative authority for filing. The *Supplementary Agreement to the Construction Contract for Construction Projects* signed by the two parties also stipulates that: "The *Construction Contract for Construction Projects* concluded by Party A (Jiayu Company) and Party B (Tiansheng Company) in April 2015 is the only valid contract enforceable between the two parties. All business relations and fee settlement between the two parties shall be carried out in accordance with the clauses of this contract. The *Construction Contract for Construction Projects* numbered JY20150411-246 signed by the two parties is only used for handling the formalities of construction application and filing, and shall not be used for any other purposes other than construction application and filing. …" In this case, the contract actually performed by the two parties is the *Construction Contract for Construction Projects* signed on April 11, 2015 with an agreed contract price of RMB 191,552,736.

The Construction Contract for Construction Projects (i.e. the "Bid-winning Contract") actually performed by both parties is the genuine expression of the parties' true intent. It was concluded through statutory bidding and tendering procedures, is lawful and valid, and shall serve as the basis for ascertaining the price of the project involved in the case. The evidence submitted by Jiayu Company fails to prove that it had entered into a construction contract for the project involved in the case with Tiansheng Company prior to the bidding and tendering procedures. Its appellate claim that Tiansheng Company's bid-winning act on April 10, 2015 is invalid and all contracts signed before and after the bid winning are void shall not be upheld by this Court.

[Case Analysis]

1. Pursuant to Article 43 of the *Law of the People's Republic of China on Tendering and Bidding*, prior to the determination of the winning bidder, the tenderee shall not negotiate with bidders on substantial contents such as bid price, bid proposal and the like. The evidence submitted by Jiayu Company, the appellant in this case, fails to prove that it had entered into a construction contract with Tiansheng Company for the project involved before the tendering and bidding process was launched. Therefore, the court ruled that the winning bid contract is valid.

2. Pursuant to Paragraph 1 of Article 2 of the current Interpretation of the Supreme People's Court on Issues Concerning the Application of Law in the Trial of Disputes over Construction Contracts for Construction Projects (I): "Where the substantive contents such as project scope, construction period, project quality, project price, etc. agreed in the construction contract for construction projects separately concluded by the tenderee and the winning bidder are inconsistent with those in the bid-winning contract, and a party requests that the rights and obligations be determined in accordance with the bid-winning contract, the people's court shall uphold such request." In the present case, the bid-winning contract signed by both parties through legitimate tendering and bidding procedures is legally valid. Therefore, the recorded contract concluded by both parties after the signing of the bid-winning contract, which deviates from the substantive contents of the bid-winning contract, shall be null and void. The employer and the contractor shall determine their respective rights and obligations in accordance with the bid-winning contract.

【Legal Basis】

Article 43 of the Law on Tendering and Bidding: Prior to the determination of the winning bidder, the tenderer shall not negotiate with bidders on substantive contents such as bid prices, bidding schemes and the like.

Article 2 of Interpretation (I) of the Supreme People's Court on Issues Concerning the Application of Law in the Trial of Disputes over Construction Contracts for Construction Projects: Where the substantive contents such as the scope of works, construction period, construction quality and project price agreed in the separate construction contract for construction projects concluded between the tenderer and the winning bidder are inconsistent with those specified in the bid-winning contract, the people's court shall uphold the claim of a party requesting that the rights and obligations be determined in accordance with the bid-winning contract.

Where a tenderee and a successful bidder conclude a separate contract in addition to the bid-winning contract for such matters as purchasing the constructed real estate at a price significantly higher than the market price, constructing supporting housing facilities free of charge, offering profit concessions, and donating property to the construction entity, so as to reduce the project price in a disguised form, if a party requests to confirm the said contract as invalid on the ground that it deviates from the substantive content of the bid-winning contract, the people's court shall uphold such request.

Article 22 of *Interpretation (I) of the Supreme People's Court on Issues concerning the Application of Law in the Trial of Cases Involving Disputes over Construction Contracts for Construction Projects*: Where the construction contract for a construction project concluded between the parties is inconsistent with the project scope, construction period, quality of works and project price as set forth in the bid invitation documents, bid documents and bid award notice, and one party requests that the bid invitation documents, bid documents and bid award notice be used as the basis for project price settlement, the people's court shall uphold such request.