Case analysis determination of settlement price under changed cir

1. Case Analysis: Determination of settlement price under changed
circumstances caused by rise in the price of building materials
[Case Briefing]
X Company (the defendant) in Jinan City in Shandong Province
as employer signed a construction contract with Y Construction
Company in April 4, 2008 with respect to the construction of
workshops and office buildings. According to the contract, the
construction shall be conducted at a fixed cost, totaling RMB
19,660,000 Yuan. Later, the Y construction company delivered
the project to Ms. Li (the plaintiff). The two parties agreed to
complete the project together, with a condition that “Party A (Y
construction company) being responsible for the project
management and Party B (Ms. Li) being responsible for project
construction, settlement with the employer, work coordination
and financing. The profit or loss of the project shall be borne by
Party B alone.”
In April 2008, Ms. Li entered the site for construction. Work of
the first few months was conducted smoothly; however, starting
from July 2008, the price of building materials surged up
dramatically. For example, the bid price of the steel bar was
about RMB 3,000 Yuan per ton, till July, the price increased to
as high as RMB 6,800 Yuan per ton. Till the suspension of
construction in December 2008, the actual cost of the project
had reached to about RMB 30,000,000 Yuan. Although the
employer had been allocating fund according to the project
progress, the fund was far from enough. Ms. Li had to use her
own money to cover the deficiency, totaling seven million. The
construction had to be shut down in December 2008, when the
project had been basically completed, with only winding up
projects left, such as roads and greening.
During such period, Ms. Li had negotiated many times with the
employer X and Y Construction Company to request price
adjustment. On July 16, 2008, Y Construction Company issued a
work contract list “to the employer X, listing the prices of some

2. major building materials. At the end of November 2008, the
construction party calculated the actual cost of the project, the
actual cost price of this project is RMB 29,860,000 Yuan”. Y
Construction Company thus requests the employer X to change
the price of building materials specified in the original contract.
Considering the risks caused by abnormal price fluctuations of
building materials, the Jinan Construction Committee issued
[2008] No. 4 Document on April 30, 2008. According to the
Document, with respect to projects that are completed after
January 1, 2008 and contracted at a fixed cost, if both parties
have not agreed upon the range of price risks of major building
materials, such as steels, to be untaken by the contractor, and if
the falling or rising range of prices of major building materials
is within 5%, the price difference shall be borne or benefited by
the contractor. If the falling or rising range of prices exceeds
5%, the price difference (the part in excess of 5%) “shall be
borne or benefited by the employer if the construction contract
does not include provisions concerning the coefficient of risks
to be borne by the contractor.” Ms. Li claimed that the variation
range stipulated by Jinan Construction Committee is just 5%,
however, the price variation range in the second half of last
year was far more than the figure. To carry out construction at a
fixed cost is very risky, Ms. Li said she had considered the risks
at the beginning and proposed to settle the project according to
the market price. The person assigned by Y Construction
Company to the site promised her that the settlement will be
conducted based on the actual cost. But this is just an oral
guarantee. Later the employer X agreed to adjust the price, but
the price has not been adjusted.
Therefore, Ms. Li filed a lawsuit against X Company in Jinan,
claiming for the money she advanced and the profits she
deserves.
[Question]
1. How to differentiate the commercial risk and change of
circumstance (principle of clausula rebus sic stantibus)?

3. 2. Which kinds of remedies does the plaintiff have if the change
of circumstance could be ascertained?
3. If this case happened in your jurisdiction, what would be the
right decision? What are the substantial differences between
your contract law and Chinese contract law in this matter?
[Requirements]
1. Please analyses this case based on the related provisions in
Chinese Contract Law and the Interoperations. (Notice No. 165
[2009] of the Supreme People's Court on Correctly Applying the
Interpretation II of Several Issues concerning the Contract Law
of the People's Republic of China So As to Serve the Primary
Objectives of the Party and the State (available at:
http://en.pkulaw.cn/display.aspx?cgid=125761&lib=law) art.
26)
2. Please give your arguments in detail.
3. The paper should not be less than 4 pages.
The deadline for this final exam is January 10 2019. Please mail
you final paper