Real Estate Perspective | How to Determine the Scope of Work and Quality of Construction When a Contractor Withdraws Mid-Construction?

Article 806 of the Civil Code of the People's Republic of China clearly stipulates the rights and obligations following the mid-term termination of a construction project contract: “After the contract is terminated, if the completed construction works meet the quality standards, the employer shall pay the corresponding project price as agreed in the contract; if the completed construction works do not meet the quality standards, they shall be handled in accordance with the provisions of Article 793 of this Law.” In other words, in the event of contract termination—whether due to the contractor’s withdrawal from the site midway—the employer is obligated to pay the contractor a proportion of the contractually agreed-upon price for any completed portion that has passed quality inspection. However, if the completed works fail to meet the quality standards, they shall be handled according to Article 793 (i.e., when the contract is invalid and the works are substandard, the contractor is not entitled to claim payment based on the contractual agreement and must bear the corresponding losses according to their degree of fault). This provision establishes the fundamental principle for settling the price of unfinished projects: compliance with quality standards is a prerequisite for the contractor’s right to claim payment, and the amount payable shall be settled accurately based on the contractually agreed terms.

Judicial Interpretations (I) and (II) of the Construction Project Contract also address the aforementioned situations. Judicial Interpretation (II) provides supplementary provisions on numerous issues arising during the performance of construction project contracts, including the principles for handling contract terminations midway through the project. For example, Judicial Interpretation (II) introduces new provisions regarding circumstances under which the contractor may exercise its statutory right to terminate the contract—for instance, if the employer fails to pay the agreed-upon price as stipulated, thereby preventing the contractor from carrying out the work, the contractor is entitled to terminate the contract. Judicial Interpretation (II) also emphasizes procedures for settlement and appraisal: for instance, it stipulates that if the party bearing the burden of proof in the first-instance proceedings fails to request an appraisal, resulting in unclear facts, such a party may, upon proper justification presented in the second-instance proceedings, have its request for an appraisal granted. These provisions provide a clear regulatory basis for contractors seeking to assert their rights in cases where they withdraw from the project midway: on the one hand, they confirm that, under appropriate conditions, contractors are entitled to terminate the contract and claim payment for the completed work; on the other hand, they require contractors to actively present evidence in litigation and promptly request appraisals—whether for cost estimation or quality assessment—when such appraisals are necessary.

The nature of a contractor’s withdrawal from the site midway depends on whether the reasons and actions involved comply with legal provisions. If the withdrawal is triggered by the employer’s breach of contract—for example, prolonged failure to pay construction fees—forcing the contractor to halt work and leave the site, then the contractor is merely exercising its contractual rights in accordance with the law, rather than committing a breach. In construction contracts, the obligation to perform construction takes precedence over the obligation to make payments. A serious delay in payment by the employer may be regarded as a loss of ability to perform the contract; under such circumstances, the contractor’s decision to withdraw can be interpreted as an exercise of its right to “ Right of defense against non-performance or terminate the contract in accordance with the law. There are already precedents from the Supreme People’s Court supporting this view in judicial practice. For example, in case No. (2021) Supreme People’s Court Min Zhong No. 688, the project owner had failed to pay the project funds for a prolonged period, and the contractor... Nantong Second Construction Company The contractor halted work and withdrew from the site midway through the project. In the first instance, a judicial appraisal determined the cost of the completed works and ordered the employer to pay the corresponding amount. In the second instance, the Supreme People’s Court held that, since the employer had not made any payment whatsoever, the contractor’s withdrawal was aimed at protecting its legitimate rights and interests and should not be considered a breach of contract. Moreover, the first-instance court’s use of the cost appraisal results provided by a qualified institution to settle the project payment was entirely appropriate. This case clarifies that if the contractor withdraws due to the employer’s breach of contract, the contractor shall not bear liability for breach of contract. The quantity and value of the completed works can be settled through appraisal or other means, with the employer being responsible for making the payment.

On the contrary, if the contractor withdraws from the site midway due to its own reasons, it constitutes a breach of contract by the contractor. In such cases, provisions such as Article 804 of the Civil Code shall apply, enabling the project owner to claim compensation from the contractor for any additional losses incurred as a result of work stoppages or changes in personnel. Nevertheless, even under these circumstances, as long as the completed portion of the project still has usable value and its quality can ultimately be restored to meet the required standards after repairs, the project owner remains obligated to pay the corresponding project sum. The only difference is that the project owner is entitled to deduct from the payment the costs attributable to losses caused by the contractor’s breach of contract. For projects with defects that can be rectified to meet the required standards, the project owner may temporarily withhold the repair costs but cannot refuse to pay the remaining project sum. Thus, although in principle the aim is to prevent the project owner from unjustly benefiting from the contractor’s breach of contract, the fundamental premise—that the payment for the portion of the project meeting quality standards must still be made—remains unchanged; the only difference lies in the fact that the project owner may seek recovery from or set off against the contractor’s liability.

In summary, the qualified completion of the work is a prerequisite for settlement and payment; the payment amount shall be calculated based on the actual completed quantities in accordance with the contract provisions. If the contract is terminated due to the fault of one party, the responsible party shall bear the corresponding adverse consequences and compensation liabilities.

When the contractor withdraws from the site midway and the project is not fully completed, How to objectively determine the quantity and quality of the completed construction work. It is the core of the settlement between the two parties and also the focal point in litigation. In general, the most ideal approach is to obtain confirmation through judicial appraisal—that is, having qualified construction cost appraisal institutions and construction quality appraisal institutions conduct a professional assessment of the completed work volume and quality conditions on site. The appraisal conclusions are typically accepted by the court as the basis for final adjudication. However, in practice, for various reasons—including but not limited to the impact of subsequent construction activities, lack of cooperation from the parties involved, and high appraisal costs— Not all cases can smoothly pass the appraisal to determine the quantity and quality of the work. Therefore, judicial practice has developed various alternative forms of evidence and methods to help courts ascertain the facts. In cases where no expert appraisal is available or an appraisal cannot be conducted, it is important to carefully secure the following types of evidence:

If, at the time of the contractor’s withdrawal from the site, the two parties have already settled and handed over the completed work quantities, and documents such as meeting minutes, quantity lists, and settlement agreements have been prepared, these documents shall serve as the primary basis for settlement. Occasionally, the project owner may entrust a cost consulting firm to issue an audit report, or, in the case of fiscal investment projects, the auditing authority may issue a settlement audit report. If the contract stipulates that such reports shall serve as the basis for settlement and the reports have been completed, the quantities recorded therein can be used as reference. However, it is important to note that the audit report must be confirmed by both parties or its validity must be explicitly agreed upon in the contract; otherwise, the court will generally treat the unilateral audit conclusion merely as reference material.

The substantial amount of documentation generated during the construction process serves as crucial evidence for reconstructing the actual conditions of the project. This documentation includes, but is not limited to: construction logs, supervision logs, supervision instructions, engineering contact forms, engineering change orders, records of acceptance for concealed works, certificates of interim acceptance, and application and review records for progress payment. Such documents can reflect the specific parts and quantities of work completed each day or month. In particular, acceptance forms for sub-items and quantity change orders signed and confirmed by the supervisory unit carry significant evidentiary weight. According to the Guiding Opinions on Trial issued by the Beijing Higher People’s Court, if the parties dispute the quantity of completed works, the disputed quantity shall be determined based on the meeting minutes and handover records signed at the time of withdrawal and handover, as well as supervisory materials and subsequent construction documentation. When physical appraisal is not feasible, these “paper-based evidences” often become the direct basis for the court to ascertain the quantity of work completed.

Construction drawings, design change notices, construction plans, and other documents that help calculate the theoretical quantities of work are crucial. Particularly when on-site measurements are unavailable, the court may, based on the scope of work and technical specifications recorded in the drawings, have qualified professionals calculate the corresponding quantities of work. According to the “Answers to Difficult Questions” issued by the Sichuan Provincial Higher People’s Court, appraisal institutions may, in conjunction with on-site inspections and supported by engineering design drawings, construction drawings, change orders, handover records, and other relevant materials, determine the proportion of completed work volume relative to the contractually agreed total work volume. Therefore, construction drawings and change records provide the technical basis for calculating work quantities.

For parts that can be directly measured on-site (such as completed civil engineering structures and physical quantities of installed projects), the court may organize an on-site inspection, during which both parties and technical personnel jointly conduct measurements and take photographs as evidence. In some cases, although no formal judicial appraisal has been commissioned, the court has adopted a non-judicial appraisal approach by entrusting a third-party engineering consulting firm to carry out measurement and evaluation, or has relied on reports prepared by expert assistants to aid in the determination of facts. If the physical entities on-site still remain, intuitive on-site inspections often serve as an important means of determining project quantities and verifying construction quality.

If the project owner, after the contractor has vacated the site, separately entrusts another party to continue construction, the new contractor’s documentation on quantities of work and costs also constitutes indirect evidence. For example, the new contractor’s contract price and quantity takeoff can be compared with the original contract to estimate the proportion of work completed by the original contractor. The project owner’s continued construction often implies recognition of the original construction work; if, during the continued construction, the project owner discovers unfinished items or quality issues in the original work, it will typically document these findings and demand corrective actions. Such records, in turn, can serve as proof of the scope and quality status of the work already completed by the original contractor.

In addition, there is a wealth of other evidence, including engineering photographs, videos, lists of materials and equipment at the factory and during use, attendance records and payroll statements for construction workers, and lists of material purchases and rentals, among others. These fragmented pieces of evidence can serve to corroborate the progress and completion volume of the construction work. For example, the quantity of bulk materials purchased—such as cement and rebar—can be used to estimate the corresponding scope of the project’s work volume. Construction machinery shift The records can serve as corroborating evidence for the duration and scope of the construction work. Such evidence must be mutually corroborated with the aforementioned primary evidence to form a complete chain of evidence.

It is important to note that, regardless of the type of evidence used, the determination of project quality is just as crucial as the measurement of quantities. Whether the quality meets the required standards is typically established through acceptance certificates or appraisal conclusions. If the project has already undergone intermediate structural acceptance, foundation acceptance, or main-body engineering acceptance and has been found to be compliant, these acceptance conclusions provide strong support for the quality of the completed portions. In the absence of final completion acceptance, acceptance of individual sub-items, quality assessments by the supervisory authority, and on-site inspection records can all serve as evidence to demonstrate that the completed work has met the quality standards stipulated in the contract or national regulations. Once it can be proven that the completed portions meet the required quality standards, the contractor’s precondition for claiming payment for the work is fulfilled.

In summary, when judicial appraisal is either unavailable or unnecessary, courts typically rely on a combination of written documentation, on-site inspections, and statements from the parties involved to determine the scope and quality of the project. The contractor should make full use of and carefully preserve the aforementioned evidence, so as to be able to prove in case of dispute the extent of work completed by itself and its compliance with the required standards.

Not all cases are suitable for forensic appraisal. A typical scenario is when, after the original contractor has left the site, the project owner promptly proceeds with subsequent construction, resulting in the original construction work being covered or altered, making it impossible to clearly distinguish the respective work volumes once an appraisal is attempted. Another situation is when one party deliberately delays or fails to cooperate with the appraisal process, causing the appraisal procedure to come to a halt. For such cases, the following approaches can be summarized from judicial practice:

If the project owner directly authorizes another party to continue construction without first conducting acceptance inspection, such conduct itself may be regarded as an implicit acknowledgment that there is no objection to the original construction quality. Similarly, if the actual contractor withdraws from the project midway and the project owner promptly assigns the subsequent work to another party, this should be considered as the project owner’s tacit approval of the quality of the work already completed by the original contractor. Consequently, the quantity of work already finished should be settled based on the actual amount completed. This is because, had there been significant quality issues with the original construction, the project owner would have been obligated—prior to proceeding—to either conduct a formal assessment or demand corrective measures, rather than rashly continuing construction. Continuing construction implies that the project owner has implicitly accepted the original work as being in a condition suitable for handover. Therefore, in cases where the project owner proceeds with further construction without raising any quality objections, the quality of the work already completed by the contractor can be presumed to be satisfactory, and the quantity of work should be calculated according to the actual amount completed, with the project owner paying the corresponding price accordingly.

As mentioned earlier, the volume of work completed by the new construction contractor can be used to retroactively estimate the original construction volume. If the subsequent contractor continues construction on the existing foundation, then the total completed construction volume minus the volume of work completed by the subsequent contractor will roughly approximate the volume of work originally performed by the original contractor. In practice, courts can obtain from the subsequent contractor documents such as the construction contract, final project accounts, and quantity takeoffs, which serve as the basis for determining the original contractor’s work volume. For example, in a case heard by the Fujian High People’s Court, the employer had intervened midway by bringing in another contractor without properly handing over the project, making it impossible to clearly distinguish between the respective work volumes. Based on this, the court held that the failure to accurately determine the work volumes was due to the employer’s fault. Consequently, the court adopted the data recorded in the engineering invoices submitted by the employer itself to the tax authorities as the basis for confirming the original contractor’s work volume. This approach reflects the principle of “the party at fault bears its own consequences”: since the employer failed to properly handle the handover and preserve relevant evidence, it should bear the adverse inference. The data voluntarily submitted by the employer to third-party agencies can thus serve as the basis for determining the original contractor’s work volume.

When it is impossible to determine the facts through technical means, courts will place greater reliance on the reasonable allocation of the burden of proof to resolve disputes. Both the Supreme People’s Court and high people’s courts in various regions have emphasized that the burden of proof should be allocated reasonably based on the reasons why the project cannot be appraised. In particular, if the failure to appraise or to determine the quantity of work is caused by the employer’s malicious obstruction, the burden of proof should be reversed and placed on the employer. For example, if the employer has engaged in malicious acts such as forcibly expelling the contractor or compelling the contractor to leave the site, and the employer refuses to recognize the quantities claimed by the contractor, the employer shall bear the burden of proof. If the employer fails to provide any evidence, it will face adverse consequences for failing to meet its burden of proof. This rule is highly critical in practice—for instance, if the employer evicts the contractor but fails to carry out a proper handover and measurement at the site, the court will tend to accept the contractor’s claim regarding the completed quantities of work, unless the employer can present credible counter-evidence. Conversely, if the failure to conduct an appraisal is due to reasons attributable to the contractor, the contractor will bear the adverse consequences. The court may adopt the employer’s quantity estimates or hold that the contractor is not entitled to charge for the unfinished portions.

When evidence is insufficient and the project cannot be properly appraised, courts sometimes make discretionary determinations regarding the scope of work and the contract price based on principles of equity and established facts. For example, they may refer to the total contract price and the extent of performance already completed to estimate a reasonable completion percentage. Such discretionary determinations often take the form of “coefficient-based adjustments”: First, the proportion of the completed work relative to the total work stipulated in the contract is calculated; then, this proportion is multiplied by the total contract price to arrive at the amount payable for the completed work. For instance, an appraisal agency might calculate a coefficient representing the ratio of the cost of completed work to the total contract cost, and then use this coefficient to adjust the payment accordingly. If an appraisal is not feasible, the judge may also independently estimate the completion coefficient based on fragmentary evidence provided by both parties. Although this approach is often seen as a last resort, it can serve as a balanced solution when neither party’s evidence is sufficient to fully substantiate its claims.

In summary, the inability to conduct an identification does not necessarily mean that a case cannot be adjudicated—rather, the court will do its utmost to reconstruct the facts through methods such as presumptions, allocation of the burden of proof, and consideration of circumstantial evidence. Among these, whoever is responsible for the inability to conduct the identification shall bear the adverse inference.

Regardless of the pricing method stipulated in the contract, as long as the project remains unfinished, the settlement should be based on the actual quantity and quality of work completed. According to the minutes of the trial meeting issued by the Shandong High People's Court, if the contract provides for a fixed unit price settlement, the settlement amount shall be calculated by multiplying the actual completed quantity of work by the agreed unit price. If the contract is a lump-sum contract that has not been fully performed, the total contract price shall be settled by proportionally adjusting the total contract price according to the ratio of the completed work volume to the total contractually agreed work volume. In other words, “settle according to what has been completed,” thereby preventing either party from gaining unexpected benefits or suffering unfair losses due to the project’s incompleteness. For example, in Case No. (2021) Supreme People's Court Min Shen No. 5258, the Supreme People's Court upheld the lower court’s practice of using a “three-step adjustment method” to settle payments for unfinished projects: first, calculate the total contract price based on the fixed unit price; second, determine the proportion of the completed portion; and third, multiply this proportion by the total contract price to arrive at the settlement amount for the completed work. The Supreme People's Court held that this approach essentially still calculates the project payment based on the fixed unit price stipulated in the contract, thus conforming to the spirit of the contractual agreement. Therefore, courts tend to uphold the pricing principles agreed upon in the contract and, through methods such as adjustment factors, ensure that the settlement result is consistent with the proportion of the total contract price, rather than simply recalculating based on government-determined unit prices, which could undermine the parties’ mutual agreement. Unless the contract price itself is manifestly unfair or the parties have otherwise agreed, settling according to the actual completed work and adjusting proportionally remains the prevailing rule.

In such cases, the contractor—as the party requesting payment for the project—typically bears the initial burden of proof regarding the scope of work already completed. The contractor should provide evidence to demonstrate at which stages construction has progressed and how much work has been completed—for instance, by submitting quantity takeoffs, construction logs, or inspection confirmation forms issued by the supervising engineer. If the contractor presents sufficiently robust evidence but the employer still raises objections, the burden of proof will shift to some extent. As mentioned earlier, when the employer maliciously refuses to cooperate with the handover process or forcibly expels the contractor, making it difficult to determine the actual scope of work, the employer assumes the burden of proving the portions it disputes. For example, in one case, the employer compelled the construction team to leave the site but refused to acknowledge the quantities of work reported by the contractor. The court ruled that the employer must bear the burden of proof for the disputed portions. Since the employer failed to produce any contradictory evidence, it ultimately faced adverse consequences, and the court adopted the contractor’s claimed quantities of work. Conversely, if the contractor unilaterally withdraws from the site without preserving any records or data related to the work performed, its claims will likely be rejected due to insufficient evidence. Thus, judicial practice holds that: “He who asserts must prove; he who is at fault shall bear responsibility.” If the employer believes that the contractor has underperformed or delivered substandard work, it should present counter-evidence or file a counterclaim; otherwise, it must assume the obligation to make payment.

Whether the quality is up to standard directly affects the payment of project funds. In general, if the employer raises the defense of substandard project quality to justify delaying payment of project funds, it is the employer’s responsibility to provide evidence proving the quality issues. If the employer fails to provide such evidence or does not promptly assert the existence of quality problems, courts will typically determine that the completed work meets the required quality standards. Particularly in cases where the employer continues to use the project or proceeds with further construction, the employer’s claim that the original construction quality was defective becomes less persuasive. Usually, if the employer neither raises objections to the project quality nor contests its acceptance after contract termination, but instead puts the project into use or allows others to continue construction, this is deemed as an implicit acceptance of the quality. Consequently, later attempts by the employer to refuse payment based on quality issues are often not upheld. Of course, the contractor itself should also provide certain evidence to demonstrate that the construction quality meets the standards, such as documentation from stage acceptance inspections, quality assessments by the supervising engineer, and on-site photographs. Once more reliable evidence—such as a report from a legally recognized testing agency—clearly establishes that the completed work is substandard and adversely affects its usability, the court may support the employer’s request to withhold or reduce payment for the corresponding portion of the project and order the contractor to rectify and repair the defects. Overall, in cases involving mid-project withdrawal, “quality issues” cannot serve as an unfounded excuse for the employer to refuse payment. Courts tend to first ensure payment for the completed work that has already met quality standards, and then, depending on the severity of the quality defects, decide whether to deduct payment or award compensation.

In handling disputes of this type, courts take into account the following value considerations: On the one hand, they must protect the contractor’s legitimate right to remuneration; on the other hand, they cannot allow the project owner to pay excessive sums or enable the contractor to reap undue profits simply because the work remains unfinished. Courts should respect the risk allocation and pricing mechanisms agreed upon in the contract and refrain from arbitrarily applying fixed-rate adjustments merely because the work is incomplete—otherwise, such actions would run counter to the parties’ freedom of contract. At the same time, courts must also take into account incentives for both the project owner and the contractor to fulfill their post-completion obligations: If the project owner fails to promptly assert acceptance or request an appraisal, it will be presumed that the owner has tacitly approved the quality of the work; conversely, if the contractor proactively preserves evidence and timely requests an appraisal, its claims will more likely be upheld. Judicial rulings in such cases embody the principle of balance: They afford greater protection to the party that has acted in good faith and complied with the contract, while imposing stricter evidentiary burdens and holding the breaching and dishonest party accountable for adverse consequences. For example, if the project owner unjustifiably refuses to make payment, causing the contractor to halt work, the court will not only rule that the contractor has not breached the contract but will also uphold the contractor’s claim for losses incurred due to the停工 (work stoppage). Conversely, if the contractor unilaterally withdraws from the site, leaving the project unfinished and posing quality risks, the court will support the project owner’s deduction of the cost required to complete the remaining work and hold the contractor liable for breach of contract.

During the construction process, the project owner, Chaoyang Zhongmao Company, paid only a deposit of 6 million yuan to the contractor, Nantong Second Construction Company, and failed to pay a single penny of the project balance. As a result, after completing part of the main structural work and masonry tasks, Nantong Second Construction Company halted construction and withdrew from the site. Nantong Second Construction Company filed a lawsuit seeking payment for the completed work along with interest. In the first-instance trial, an expert appraisal was commissioned to determine the value of the completed work, and following the trial, the court ruled that the project owner should pay the corresponding amount. On appeal, the Supreme People's Court held that the contract was lawful and valid, and the project owner’s prolonged failure to make payments constituted a fundamental breach of contract. The contractor’s decision to halt construction and withdraw from the site was an exercise of its contractual rights and did not constitute a breach. Moreover, given that the quality acceptance reports for individual sub-items issued by the supervisory unit certified that the工程质量 was qualified, and the evidence provided by the project owner was insufficient to prove any quality defects, the court upheld the first-instance appraisal report’s determination of the project amount. Ultimately, the court affirmed the first-instance ruling regarding the payment for the completed work. Key points of this case: If the project owner breaches the contract first, causing the contractor to withdraw from the site, the contractor is entitled to receive payment for the completed and qualified work. Meanwhile, the conclusions of judicial appraisals serve as crucial evidence for determining the quantity of work completed.

The contracting party, Boai Company, requested the original contractor, Jianwei Company, to withdraw midway through the construction project and subsequently brought in a third-party contractor without properly handing over the work areas to Jianwei Company. As a result, it became impossible afterward to distinguish clearly the respective amounts of work completed by each company. Consequently, the original contractor, Jianwei Company, filed a lawsuit demanding payment for the work it had already completed. In both the first and second trials, since it was impossible to determine the exact scope of work performed by each party on-site, the court held that the fault lay with the contracting party’s hasty change of contractor and unclear handover procedures. As a workaround, the court accepted the engineering invoice data previously submitted by the contracting party to the tax authorities to confirm Jianwei Company’s scope of work and ordered the contracting party to settle the payment accordingly based on this confirmed amount. At the same time, the court pointed out that if Boai Company believes there are any duplicate payments made to the third-party contractor, it may seek reimbursement separately from the third party. Key points of this case: When the contracting party changes contractors midway without clearly delineating the scope of work, the contracting party bears the adverse consequences of failing to provide sufficient evidence. The court may rely on materials voluntarily submitted by the contracting party to official agencies to determine and settle the contractor’s scope of work. This case highlights the court’s tendency to protect the contractor’s right to remuneration: when the contracting party’s actions make it objectively difficult to precisely quantify the work, the court will, to the extent possible, adopt presumptive methods favorable to the contractor in determining the scope of work.

The contract for a certain project stipulated a fixed lump-sum price of 1,580 yuan per square meter. The contractor, Ruihe Company, had commenced construction but had not yet completed the project when the client, Xinde Company, unilaterally terminated the contract, prompting Ruihe to withdraw. Xinde then awarded the remaining work to another contractor. The central issue in the dispute was how to calculate the payment for the unfinished portion of the project. In the original trial, the court commissioned an appraisal and adopted the "proportional method" for calculation: First, it determined the total contract value by multiplying the fixed unit price by the area shown on the drawings; then, it used the appraisal results to calculate the proportion of the work already completed by Ruihe relative to the entire project; finally, it multiplied this proportion by the total contract price to arrive at the amount payable for the work already completed by Ruihe. Xinde Company disagreed with this approach, arguing that the court should not have relied on standard rates for pricing. However, the Supreme People's Court, in its retrial, held that the original trial had indeed based its decision on the fixed unit price, albeit through a proportional calculation to determine the amount due—rather than simply applying standard rates. Thus, Xinde’s claim represented a misinterpretation of the judgment. The retrial ruling dismissed the appeal. Key points of this case: In contracts with fixed total prices or unit prices where the project remains unfinished, the payment for the work should be calculated proportionally based on the contractually agreed price. The courts have upheld this mainstream practice and do not endorse deviating from the contractual agreement by recalculating solely according to standard rates. This approach safeguards the contractor’s interest in being paid according to the contract’s unit price while also ensuring fairness for the client, who is required to pay only a proportionate amount for the unfinished work.

Jinjiang Company undertook a school building project but withdrew midway due to a funding dispute. Subsequently, the contracting party, Jinghua School, entrusted another party to continue construction until the project was completed. Jinjiang Company filed a lawsuit seeking payment for the work already completed before the停工 (halt). Jinghua School countered that the quality of the completed work did not meet the standards and that it had already engaged another contractor to carry out repairs. During the second-instance trial, the court found that after Jinjiang Company withdrew, Jinghua School did not raise any quality objections regarding the completed work; instead, it directly continued construction and ultimately passed the final acceptance inspection successfully. Based on this finding, the court ruled that since the contracting party had handed over the project to a third party for continuation, it should be deemed as having no objection to the quality of the originally completed portion, and thus the original contractor’s completed work should be settled. The contracting party’s claim of quality issues lacked sufficient basis and could not serve as a justification for refusing payment. Ultimately, the court upheld most of Jinjiang Company’s claims for payment. Key takeaway from this case: In situations where the contracting party forcibly removes the original contractor and allows another party to continue construction, if there is no evidence to prove defects in the originally completed work, the work should be considered to have met quality standards, and the contracting party may not use this as a reason to refuse payment. This case is consistent with the Supreme People’s Court’s stance and effectively safeguards the legitimate rights and interests of contractors who have been forced out of the project.

As illustrated by the cases above, in disputes over quantities of work and quality arising from a contractor’s withdrawal midway through construction, the courts’ reasoning consistently revolves around ensuring that the contractor receives payment for its qualified work. At the same time, the courts allocate the burden of proof and adjust compensation for losses based on the specific circumstances of each case. For contractors, these cases offer valuable insights: Under the risk of potential withdrawal, it is crucial to diligently preserve evidence related to quantities of work and quality—including promptly completing handover procedures, retaining supervisory approvals, and safeguarding photographic and video records. Moreover, when the employer breaches the contract, contractors must exercise their rights to terminate or suspend the contract in accordance with the law and retain evidence of such notices to avoid being found in breach themselves. In litigation, contractors should proactively request appraisals of costs and quality to support their claims with expert opinions. On the other hand, employers should recognize that arbitrarily forcing a contractor to leave the site may put them at a disadvantage in subsequent legal proceedings. The proper approach to mitigating dispute risks lies in promptly and reasonably conducting handovers and quality inspections of the project.