According to Article 18 of the Construction Industry Law, "the concerned parties of a construction work contract must conclude a fair contract based on agreement from equivalent standpoints and must observe the contract in good faith." This is established as an obligatory effort of both contracting parties.

However, in the actual situation of conclusion of construction work contracts, there still is no specified regular contract form, and even though work begins and is determined based on an order and agreement documents, there are many cases when additional construction work is started without the consent of both concerned parties as pertains to the money to be paid for the work and work contents. In Japan, disputes due to these practices can easily arise.

It is important to request that both contracting parties set up a regular contract after mutual agreement by both parties for the construction work.

 

●oncerning the contracting standards for construction work contracts

 

In addition, contracting organizations and contractors must pay attention to the following items.

 

To contracting organizations

1. Select reliable contractors, including selection and supervision of subcontractors. Also, take precautions concerning inspection of the ground and foundation work. If possible, an architectural office should be commissioned for construction work management.

2. Set up proper financing plans. Contracts should not be signed (sealed) until the contract has been well read and agreed with. No impossible construction work dates should be set; consideration should be given to how much time is required for the work.

3. Agreements for, but not limited to, additional construction work should be put into written form and should state the date of the agreement with the contractor.

4. Do not leave the work solely to the contractor; inspect the site with your own eyes.

 

To contractors

1. Think about long term relationships with contracting organizations and plan for smooth communication.

2. Write a proper contract and explain it properly to the other party.

3. Always put agreements, not only for additional work, into written form stating the date of the agreement with the other party.

4. As a master contractor, understand that selection and supervision of subcontractors is the responsibility of the master contractor and make sure to fulfill this responsibility. (Complete subcontracting, inappropriately low contract volumes, and the purchase of inappropriate materials are violations of the law.)

5. Subcontractors must ensure their own security and produce technically and legally decent work.

 

(Reference) Construction Industry Law

 

(Purpose)

Article 1

This Law aims to raise the quality of persons operating construction businesses, to secure accurate execution of construction work through proper construction work contracting, to protect contracting bodies, and to advance sound development of the construction industry, thereby promoting the welfare of the public.

 

(Regulations for Construction Work Contracting)

Article 18

The concerned parties of a construction work contract must conclude fair contracts based on agreement from equivalent standpoints and must execute the contract in good faith.

 

(Terms of a Construction Work Contract)

Article 19

The concerned parties of a construction work contract must state the following items in written form when concluding a contract in accordance with the items of the preceding points, attach their names and seals, and deliver copies to each other.

1 - Contents of the construction work

2 - Total contract volume

3 - Date of start and completion of the construction work

4 - Date and method of payment when deciding on a total or partial advance payment or payment on completion

5 - Determination of changes in the duration of construction work, changes in contract volume, or changes in the method of calculation of financial damages caused by a request from one of the concerned parties to change the design or extend the start of the construction work or stop the construction work completely or partially.

6 - Determination of changes in duration of construction work and method of calculation of financial damages caused by natural disasters or other uncontrollable forces.

7 - Changes in contract volume or terms due to changes or fluctuations in prices [referring to prices as regulated by Article 2 of the Price Control Law (enforced Law Nr. 108, 1946)]

7-2 - Determination of the financial burden of compensation for damages caused to third parties due to execution of construction work

7-3 - Determination of the contents and methods of the contracting organization's provision of materials or loans of construction machinery and other machinery to be used for construction work

8 - Times and methods of inspections to verify full or partial completion of the ordered work and the time of turnover

9 - Times and methods of payment of the contracted money after completion of the construction work

10 - Delayed interest, penalties for contract breach, and other payments for damages due to delayed fulfillment or other non-performed duties of either party

11 - Methods of resolving contract disputes

2 When there are changes in items of the contract terms corresponding to the ones listed above, the concerned contract parties must state the changed terms in written form, affix their name and seal, and deliver copies to the other.