Decision No. 499/BXD-GD on the issuance of the Warranty Regulation for Construction Works

Pursuant to …;

Regarding the issuance of the Warranty Regulation for Construction Projects

_________________________

THE MINISTER OF CONSTRUCTION

- Based on Decree No. 15/CP dated March 4, 1994 of the Government stipulating the functions, tasks, and organizational structure of the Ministry of Construction;

- BASED ON GOVERNMENT DECREE NO. 42/CP OF JULY 16, 1996, ISSUING THE REGULATIONS ON INVESTMENT MANAGEMENT AND CONSTRUCTION;

- Pursuant to the proposal of the Director of the National Quality Control Agency for Construction Projects;

Pursuant to …;

Article 1. The Warranty Regulation for Construction Projects is hereby issued together with this Decision, replacing the Warranty Regulation for Construction Projects issued together with Decision No. 535/BXD-GĐ dated December 14, 1994 of the Ministry of Construction.

Article 2. This Decision shall be uniformly implemented throughout the country and shall take effect from the date of signature.

Article 3. Ministries, agencies equivalent to ministries, agencies under the Government, People's Committees of provinces and centrally governed cities shall be responsible for organizing the implementation of this Decision.

MINISTRY OF CONSTRUCTION

Ngo Xuan Loc

(Signed)

REGULATIONS

WARRANTY FOR CONSTRUCTION PROJECTS
(Issued together with Decision No. 499/BXD-GĐ dated September 18, 1996 of the Minister of Construction)

Chapter 1:

GENERAL PROVISIONS

Article 1. Purpose of warranty:

The warranty for construction projects aims to protect the interests of the project owner while determining the responsibility of construction enterprises regarding the quality of the project before the project owner and the law. Construction enterprises have the obligation to repair defects caused by themselves within the warranty period.

Article 2. Scope of application:

All construction projects must be subject to warranty by construction enterprises within the time limit specified in this Regulation. The amount of warranty and the warranty period shall be recorded in the contract for the handover of construction projects between the project owner and the construction enterprises undertaking the construction projects (hereinafter referred to collectively as construction enterprises).

This Regulation governs the warranty for construction projects with domestic investment capital that have been completed, handed over, and put into operation and use to achieve the set objectives.

This Regulation does not apply to the warranty of surveying and design products. Surveying and design enterprises must bear responsibility before the project owner and the law for the quality of their products and work results.

Warranty for types of materials and equipment as industrial products shall be carried out according to the regulations of the Ministry of Science and Technology and Environment.

Warranty for construction projects with foreign investment capital shall be regulated separately.

Article 3. Warranty period:

The warranty period for construction starts from the day when the construction enterprise completes construction activities and hands over the project to the project owner (or user) until the end of the period specified below:

- Twenty-four months for projects belonging to Group A projects; - Eighteen months for projects belonging to Group B projects; - Twelve months for projects belonging to Group C projects.

Ministries managing specialized construction sectors (transportation, water resources, mines, power transmission lines and substations, postal services, agriculture and forestry) shall specify the warranty periods for each type of specialized construction project under their management, but they shall not be lower than the warranty periods prescribed in this Regulation.

Article 4: Amount of warranty:

The amount of warranty for construction projects is calculated as a percentage (%) of the liquidated value of the contract for the handover of construction projects. This amount is used to repair defects of the project during the warranty period caused by the construction enterprise.

The amount of warranty for construction projects is calculated as follows:

- 0.5% of the liquidated value of the construction contract for projects belonging to Group A projects;

- 1.5% of the liquidated value of the construction contract for projects belonging to Group B projects;

- 3% of the liquidated value of the construction contract for projects belonging to Group C projects.

When the project is completed, the project owner accepts and puts the project into operation and use, the construction enterprise deposits the amount of warranty for construction projects as prescribed above into the bank where it has opened an account for transactions during the construction project. The deposited amount earns interest according to the current regulations of the bank. In case the construction enterprise has a bank guarantee, the construction enterprise only submits to the project owner the bank guarantee document regarding the amount of warranty for construction projects as prescribed.

The project owner may use this amount of warranty (either in cash or through the bank guarantee document) throughout the warranty period for the purpose of warranty for construction projects.

Article 5: Repayment of warranty:

At the end of the warranty period for construction projects, if there are no defects caused by the construction enterprise, the project owner must confirm so that the bank can repay the full amount of the warranty for the project plus interest according to the deposit period at the bank, or return the bank guarantee document. If the project owner fails to confirm repayment of the warranty for construction projects to the construction enterprise by the end of the warranty period, the project owner will be liable for breach of the contract for the handover of construction projects and must pay interest on the overdue warranty amount according to the bank's regulations.

Article 6. Exclusion of warranty liability for construction projects:

The construction enterprise is not required to fulfill the warranty liability for construction projects when defects in construction projects during the warranty period are not caused by the enterprise.

In cases where, during the warranty period for construction projects, parts or sections of the project are demolished by state authorities due to violations of construction laws by the project owner, the construction enterprise is not liable for warranty even though there may be technical errors in the construction.

Article 7. Cases of exceeding the warranty amount:

In cases where repairs of defects in construction projects during the warranty period caused by the construction enterprise exceed the warranty amount prescribed in Article 4 of this Regulation, the project owner has the right to bring the matter to competent state authorities for resolution according to the law.

Chapter 2:

RIGHTS AND OBLIGATIONS OF THE PARTIES HANDING OVER AND RECEIVING CONSTRUCTION CONTRACTS AND PROCEDURES FOR IMPLEMENTATION OF WARRANTY

Article 8: Rights and obligations for implementing warranty for construction projects:

1- Rights and obligations of the project owner:

a) Requesting the construction enterprise to implement warranty for construction projects as stipulated in the contract for the handover of construction projects.

b) Require construction enterprises undertaking the installation and construction contract to comply with the Construction Quality Management Charter issued by the Ministry of Construction.

c) Comply with the operating and usage instructions for the works provided by surveying, designing, and construction enterprises.

d) In cases where there is significant damage to parts of the work within the warranty period, the investor is permitted to take appropriate measures within their capacity to limit further damage to the work and immediately notify the surveying, designing, and construction enterprises to send technical staff to examine and record the remedial measures in a report.

e) Shall not arbitrarily hire another enterprise to repair defects in the work still under warranty that the construction enterprise is responsible for without the consent of the construction enterprise. Except when the construction enterprise responsible for the warranty fails to fulfill its commitments regarding the budget and schedule for repairing defects caused by itself, the investor has the right to use the warranty money to hire another construction enterprise to repair the defects in the work, while simultaneously notifying the construction enterprise responsible for the warranty in writing.

g) In cases where the investor changes, the new lawful successor shall inherit the warranty obligations of the previous investor.

2. Rights and Obligations of Construction Enterprises:

a) Require investors to comply with the Construction Quality Management Charter issued by the Ministry of Construction.

b) Have the right to refuse to repair defects in the work not caused by themselves and lodge complaints with the State Organization for Construction Quality Appraisal to resolve disputes.

c) Have the obligation to repair defects in the work caused by themselves during the warranty period.

d) Cooperate with the investor to implement measures to limit defects in the work during operation and use within the warranty period.

Article 9. Procedures and Sequence for Implementing Warranty for Installation and Construction Works:

1. When the work is completed and accepted for use by the investor, the construction enterprise must submit to the investor a warranty commitment letter confirmed by the Bank having deposited the warranty amount as stipulated or a bank guarantee certificate for the warranty amount. During the warranty period, if defects occur due to the construction enterprise, the construction enterprise must repair them according to the deadline specified by the investor. All costs shall be borne by the construction enterprise. However, if it is determined that the defect was caused by the investor, the investor shall bear the repair costs.

2. The investor shall notify the construction enterprise and the Bank where the warranty amount is deposited or the guarantor bank in writing upon discovering defects in the work during the warranty period.

3. After receiving the investor's notification, the construction enterprise must dispatch technical staff to the site immediately to jointly agree with the investor on conducting an inspection of the current condition, determining the cause and responsibility of the construction enterprise, or agreeing to hire a consulting agency to determine the cause of the defect.

4. The budget and schedule for repairing defects in the work shall be agreed upon between the investor and the construction enterprise. The investor shall process with the Bank to use the warranty amount to pay for the repair of defects in the work according to the agreed repair budget.

5. After completing the repair of defects in the work, the investor and the construction enterprise must inspect the repaired portion.

6. The process of implementing warranty for installation and construction works must be documented, including:

- A copy of the contract for the installation and construction works between the investor and the construction enterprise undertaking the works.

- A confirmation from the Bank regarding the full payment of the construction work warranty amount by the construction enterprise, deposited with the Bank, or a bank guarantee.

- A conclusion on the quality appraisal of defects in the work during the warranty period by the State Organization for Construction Quality Appraisal (if applicable).

- An acceptance report of the repaired defects in the work by the investor and the construction enterprise.

The documentation shall be prepared in three copies and stored at the construction enterprise, the investor, and the Bank managing the warranty amount or guarantee.

Article 10. Dispute Resolution:

In cases of disputes over the determination of the cause of defects in the work, the competent state authority to handle such disputes is:

- For works belonging to Group A projects, the Ministry of Construction shall resolve the dispute;

- For works belonging to Group B and C projects, the Department of Construction shall resolve the dispute.

Article 11. Responsibilities of Construction Enterprises Upon Expiration of the Warranty Period for Works:

If defects arise due to significant technical violations in the installation and construction that severely reduce the quality of the work or cause serious damage or collapse of parts of the work after the expiration of the warranty period, the construction enterprise shall still be held legally responsible as stipulated in Point 2 of Article 33 and Point 2 of Article 57 of the Investment and Construction Management Charter issued together with Decree No. 42/CP dated July 16, 1996 of the Government.

Chapter 3:

IMPLEMENTING PROVISIONS

Article 12. Implementation Provisions:

1. This Regulation replaces the Work Warranty Regulation issued together with Decision No. 535/BXD-GD dated December 14, 1994 of the Minister of Construction.

2. This Regulation takes effect from the date of issuance.