What documents are required for a construction debt recovery claim and how should they be prepared?

A construction debt recovery lawsuit dossier consists of the documents and evidence prepared by the plaintiff to substantiate that its claim is well-founded and lawful. In construction disputes, this file typically includes the construction contract, volume acceptance documents, payment vouchers, as well as documents evidencing the defendant’s breach of the payment obligation under the agreement. Preparing a complete and logically organized construction debt recovery lawsuit dossier is crucial in the process of dispute resolution in court or arbitration.

The following article analyzes the components of a construction debt recovery lawsuit dossier and provides guidance on how to prepare the lawsuit dossier for submission to the court or commercial arbitration.

1. Key factors to determine before preparing the construction debt recovery lawsuit dossier

Before preparing the construction debt recovery lawsuit dossier, the plaintiff should clearly identify the following factors: the nature of the dispute, the defendant, the dispute resolution authority, and the scope of the claim. Accurately determining these factors is crucial in developing the litigation strategy and preparing the lawsuit dossier in a comprehensive and legally compliant manner.

Identify the nature of the dispute and the Defendant: Construction debt disputes often arise from one party’s failure to perform or improper/incomplete performance of the payment obligation under the construction contract or related contracts. The defendant is typically the project owner, the general contractor, the main contractor, the subcontractor, or the supplier of materials, equipment, or services. Some common dispute scenarios include:

• The project owner’s delayed or non-payment to the contractor under the construction contract.
• The general contractor’s delayed payment to the subcontractor under the subcontract.
• The contractor’s delayed payment to the supplier of materials, equipment, or services.
• Disputes over payment obligations among the contractors in a joint venture.

Identify the Dispute resolution authority: According to current legal regulations, construction-related disputes can be resolved by one of the following two adjudicating authorities:

• The People’s Court: This applies when the parties do not have a valid arbitration agreement or the arbitration agreement is void or unenforceable. The lawsuit dossier must comply with the provisions of the 2015 Civil Procedure Code.
• Commercial Arbitration: This applies when the parties have a valid arbitration agreement. The lawsuit dossier must follow the procedural rules of the selected arbitration center and relevant legal regulations.

Determine the Scope of the Claim: The plaintiff needs to clearly define the scope of the claim, including the principal debt, late payment interest, any contractual penalties, and compensation for damages (if any), in accordance with the law.

2. Construction debt recovery lawsuit dossier organized into 6 groups of evidence

The construction debt recovery lawsuit dossier should be organized and systematized into groups of documents and evidence to ensure the connection between the legal basis, the factual details of the case, and the breach of the payment obligation. Classifying the documents into evidence groups also helps the dispute resolution authority to more easily follow the contract performance process and determine the payment obligations of the parties. Typically, the construction debt recovery lawsuit dossier can be divided into the following 6 groups of documents and evidence:

Group 1: Legal documents of the plaintiff and the defendant

• Business registration certificate, ID/passport of the legal representative of the plaintiff;
• Business registration certificate of the defendant;
• Power of attorney for the representative participating in the litigation, if the participant is not the legal representative of the enterprise.

Group 2: Documents related to the agreement between the parties and the basis for the payment obligation

• Contract between the parties, which may be a construction contract, subcontract, or purchase contract;
• Price quotation, purchase order, agreement on changes to the scope of work (if any);
• Other written agreements between the parties recording the terms of payment, acceptance, handover, warranty of the work, etc.

Group 3: Documents evidencing the performance of the contract

• Acceptance records for stages or completion of the work, project, or component;
• Confirmation of the volume, detailed list of construction work, as-built drawings;
• Site diary, site minutes, quality inspection minutes;
• Documents on construction materials, quality certificates, material delivery minutes related to the disputed content.

Group 4: Documents related to payment and evidence of the debt

• Payment requests for each installment accompanied by the acceptance reports;
• Payment documents such as bank transfer statements, payment orders, receipts;
• Minutes of debt reconciliation or debt confirmation with signature and stamp (if any);
• Minutes of debt review meetings, written documents, emails showing the debtor’s payment plan, payment commitment;
• Emails, written documents showing the debtor’s acknowledgment of the payment obligation or promise to pay.

Group 5: Documents related to the breach of the payment obligation and the handling of the breach prior to initiating legal proceedings

• Demand letter for payment;
• Notice of breach, notice of overdue payment, or notice of intended legal action;
• Minutes of the meeting recording the debtor’s non-cooperation or no response;
• Notice of contract termination or temporary suspension of contract performance.

Group 6: Documents evidencing damages and compensation claims (if any)

• Documents evidencing the debtor’s breach;
• Documents evidencing the cost of repair or damage mitigation;
• Invoices, vouchers showing the incurred expenses, the amount of damages.

3. Lawsuit dossier checklist

The construction debt recovery lawsuit dossier needs to be fully prepared in accordance with the law to be accepted by the competent authority. Additionally, the detailed and systematic preparation of the relevant documents and evidence also contributes to increasing the likelihood of the claim being upheld and shortening the dispute resolution time. The lawsuit dossier checklist includes: 

• A statement of claim containing all required contents in accordance with the Civil Procedure Code 2015 or the procedural rules of the arbitration center (where the dispute is resolved by arbitration);
• Documents evidencing the legal capacity/status of the parties;
• Documents evidencing the debtor’s payment obligation;
• Documents evidencing the debt amount and the payment deadline.

4. Organizing the lawsuit dossier

A well-organized construction debt recovery lawsuit dossier will help clearly present the entire contract performance process, enabling the lawyers and the dispute resolution authority to quickly understand the nature and progression of the case.

In practice, the dossier is typically organized in chronological order of the events, including:

• The time of contract signing;
• The process of performing the work under the contract;
• Acceptance of the work performed;
• Payment requests;
• The time of the payment default;
• Pre-litigation dispute resolution between the parties.

The plaintiff can organize the dossier into three main groups of documents: i) Legal documents of the plaintiff and the defendant; ii) Documents relating to the execution and performance of the contract, acceptance of the work performed, and the construction site; iii) Documents relating to the debt, payment, and correspondence between the parties.

5. Situations of incomplete construction debt recovery lawsuit dossier and handling approaches

The construction debt recovery lawsuit dossier may lack some important documents. In such cases, the plaintiff needs to proactively supplement or use alternative evidence to substantiate the lawsuit claim. Here are some common situations and corresponding handling approaches.

Lack of acceptance records

If the lawsuit dossier lacks the work acceptance records or the acceptance minutes are not signed by all relevant parties, the plaintiff can use alternative evidence such as messages, emails, written documents showing the actual condition of the work, site photos, or site diary with confirmation by the supervision consultant, the main contractor, or the project owner.

Communications mainly conducted through messages or oral agreements

If the exchanges between the parties are mainly conducted through messages or oral agreements, the plaintiff can strengthen the evidence by preparing debt reconciliation minutes or sending a written confirmation of the agreed content.

Work arising outside the scope of the contract

If additional work arises outside the contract scope but has not been formalized in a contract amendment, the plaintiff needs to collect evidence showing the change in the scope of work, prepare a list of the additional volume, and establish that the defendant was aware of, agreed to, or utilized and benefited from that work.

6. Mistakes reducing the evidentiary value of the construction debt recovery lawsuit dossier

In practice, the lawsuit dossier may be assessed as lacking rigor or having limited evidentiary value due to some common reasons:

• Inability to determine the final debt amount and the time when the payment obligation became overdue
• The acceptance documents are signed by an unauthorized person or not signed by all parties, or the acceptance content is not consistent with the contractual scope of work;
• The payment documents and debt reconciliation documents do not correspond to each payment stage;
• The lawsuit claims are not clearly distinguished into the disputed contents and the amounts payable by the defendant;
• Lack of documents showing the request for payment prior to initiating legal proceedings.

The above shortcomings can reduce the evidentiary value of the construction debt recovery lawsuit dossier, leading to the court or arbitration requesting supplementary evidence, prolonging the dispute resolution time, or affecting the actual debt recovery.

7. Documents the enterprise should prepare before handing over to the lawyer

The enterprise’s proactive preparation and systematization of the dossier before handing it over to the lawyer will help shorten the review time and mitigate the risk of missing important documents and evidence during the lawsuit preparation. The enterprise should prepare the following internal documents in advance:

• Contract, accounts receivable summary showing the detailed payment amounts for each installment and the outstanding amount;
• Summary of accepted work volume and the disputed volume; 
• Documents and evidence organized according to the purpose of evidencing each disputed issue;
• Draft demand letter for payment and debt reconciliation minutes.

8. Frequently asked questions

Question 1: Can the plaintiff file a construction debt recovery lawsuit without acceptance documents?

Yes, it is possible. In the absence of the work acceptance records in the lawsuit dossier, the plaintiff can use alternative evidence to prove the work performance, such as the site diary, site photos, emails, messages, or meeting minutes reflecting the progress of the work.

Question 2: Does the plaintiff need to submit the documents in original or certified copies?

When filing the lawsuit, the plaintiff can submit certified copies. The originals will be presented for verification when requested by the court or the dispute resolution authority. 

Question 3: Is the debt confirmation document mandatory for filing the lawsuit?

Debt confirmation is not a mandatory requirement for filing the lawsuit. However, this is important evidence showing the defendant’s acknowledgment of the debt and payment obligation. In the absence of debt confirmation, the plaintiff needs to prove the outstanding amount through other evidence such as the contract, acceptance documents, or payment documents.

Question 4: How should the principal, interest, penalty, and compensation be separated?

Each claim should be calculated separately and have a corresponding legal basis: The principal is determined based on the contract and the accepted work performed; Late payment interest is determined according to the agreement between the parties or the provisions of the law; Contractual penalties are determined based on the penalty clause in the contract; Compensation for damages must be proven by documents showing the actual damages and the causal relationship with the breach.

Question 5: When should the plaintiff file the lawsuit to avoid reducing the ability to recover the debt?

The enterprise should initiate the lawsuit immediately after the final payment extension deadline expires or when there are signs that the party with the payment obligation is dissipating assets, becoming insolvent, or preparing for dissolution. 

According to Article 429 of the 2015 Civil Code, the statute of limitations for filing a lawsuit to request the court to resolve a contract dispute is 3 years, starting from the date the person with the right to request knows or must know that their rights and legitimate interests have been infringed. Therefore, prolonging the time before filing the lawsuit may risk the lawsuit being time-barred, and also reduce the actual ability to recover the debt.

The construction debt recovery lawsuit dossier should be organized into clear groups of documents and evidence to prove the payment obligation and the disputed debt amount. In case the dossier lacks work acceptance records, involves work outside the contractual scope, or the transactions are mainly conducted through messages or oral agreements, the enterprise needs to promptly review and supplement the evidence with the support of a lawyer to ensure the ability to recover the debt in practice.

This article is intended to provide reference information for enterprises and individuals in preparing the construction debt recovery lawsuit dossier. For detailed advice or support in resolving construction disputes, clients may contact TNTP for assistance.