Damage Compensation Case

[Case Introduction]

Ma entrusted the construction of a building at his home to Chen, an individual contractor without construction qualifications. During the construction process, Liu, who was employed by Chen, was accidentally injured by a collapsing wall. Liu sued Chen and Ma, seeking compensation from both.

[Case Analysis]

There are two viewpoints regarding the liability of Chen and Ma in this case.

One viewpoint holds that according to Article 10 of the Supreme People's Court's "Interpretation on Several Issues Concerning the Application of Law in Personal Injury Compensation Cases" (hereinafter referred to as the "Personal Injury Interpretation"), if the contractor causes damage to a third party or to themselves during the performance of their work, the client does not bear liability for compensation. However, if the client has been negligent in the commissioning, instruction, or selection, they should bear corresponding compensation liability. Ma, as the client, made a mistake in selecting the unqualified Chen as the contractor and should bear partial compensation liability, but there is no joint liability between Ma and Chen.

Another opinion argues that according to Article 11 of the "Personal Injury Interpretation", if an employee suffers personal injury during employment due to a safety production accident, the employer should bear compensation liability. If an employee suffers personal injury due to a safety production accident while engaged in employment activities, the client and subcontractor, knowing or should have known that the employer accepting the contracting or subcontracting business lacks the corresponding qualifications or safety production conditions, should bear joint compensation liability with the employer. Ma, as the client, should have known that construction requires corresponding qualifications. By contracting the project to the unqualified Chen, and due to the lack of safety measures resulting in Liu's injury, Ma and Chen should jointly compensate Liu for the related losses.

According to Article 10 of the "Personal Injury Interpretation", the condition for the client to bear liability is that the client has been negligent in the commissioning, instruction, or selection, and the contractor bears corresponding liability for damage caused to a third party or themselves during the performance of the contracting work. The issues to consider here are: First, the scope of application. The scope defined by this article is contracting contracts. The academic community in China has always believed that the scope of application of contracting contracts applies to relationships between citizens, between citizens and legal persons, and between legal persons. Since the contracting relationship arising from the completion of construction contracts involving engineering surveying, design, and construction is significantly different from traditional contracting contracts, the "Contract Law of the People's Republic of China" separately stipulates contracting contracts and construction contracts, but this does not deny the basic attributes of contracting contracts that construction contracts possess. Therefore, the contracting work process stipulated here should include the construction process and apply to situations causing damage in construction.

Secondly, the object of damage. According to the provisions, it is a third party outside the contractor or the contractor themselves. For the contractor, the provision does not explicitly state that it is only a natural person; it should include natural persons, legal persons, and other organizations, all of which can be contractors. Regarding the contractor's employees, do they belong to the contractor or to a third party outside the contractor? If the contractor is a natural person, the employee is naturally a third party outside the contractor. If the contractor is a non-natural organization, how should the position of the employee be determined? In relation to the client, all activities completed by the contractor's employees in the course of performing the contracting work are acts representing the contractor, and their injuries should be recognized as injuries to the contractor themselves. As for how the contractor and their employees bear responsibility, it should be adjusted by corresponding legal norms. Thus, it can be seen that whether the employee is acting as the contractor themselves or as a third party outside the contractor, they are all entitled to claim compensation under Article 10 of the "Personal Injury Interpretation". Regarding the way the client bears responsibility according to this article, the book "Understanding and Application of the Supreme People's Court's Judicial Interpretation on Personal Injury Compensation" edited by Huang Song clearly states that the client's liability is determined based on the degree of fault between the client and the contractor, which can result in three scenarios: the client bearing full substitute compensation liability, jointly bearing joint compensation liability with the contractor, or not bearing liability.

Article 11, paragraph 2 of the "Personal Injury Interpretation" states that if an employee suffers personal injury during employment due to a safety production accident, the client and subcontractor, knowing or should have known that the employer accepting the contracting or subcontracting business lacks the corresponding qualifications or safety production conditions, should bear joint compensation liability with the employer. However, there are no regulations on what constitutes a "safety production accident" and how to define it, making it difficult to accurately apply this provision in judicial practice. Additionally, there is no clear definition of the scope of contracting and subcontracting activities. Article 86 of the "Production Safety Law of the People's Republic of China" states: "If a production and operation unit contracts or leases production and operation projects, places, or equipment to units or individuals that do not have safety production conditions or corresponding qualifications, it shall be ordered...; if it leads to potential safety accidents causing damage to others, it shall bear joint compensation liability with the contracting party or lessee." Article 29 of the "Construction Law of the People's Republic of China" states: "...The general contractor of the construction project is responsible to the construction unit according to the general contracting contract; the subcontractor is responsible to the general contractor according to the subcontracting contract. The general contractor and subcontractor shall bear joint liability to the construction unit for the subcontracted project..." Thus, it can be seen that the scope of contracting and subcontracting activities is not limited to the construction field as we usually understand it.

Compared to Article 10 of the "Personal Injury Interpretation", the premise for the client or subcontractor to bear joint liability with the employer under Article 11 is limited to knowing or should have known that the employer lacks qualifications or safety production conditions, requiring a higher degree of fault than that stipulated in Article 10. However, regarding the scope of activities that need to bear responsibility, it includes but is not limited to construction projects and other contracting contracts. It can be determined that there are overlaps between the provisions of Articles 10 and 11 (a clear example is the accidents caused by knowingly contracting or subcontracting to an employer without qualifications), but the two are not contradictory. According to Article 10, the client may bear compensation liability with the contractor in a proportional manner, jointly bear compensation liability, or not bear liability. It should be noted that the liability borne by the client as stipulated in Article 10 is not limited to proportional liability. In judicial practice, it is usually understood as compensation liability borne according to the degree of fault of the client. When the circumstances stipulated in Article 11 are met, that is, the situation where the client bears joint liability as stipulated in Article 10, Article 11 merely provides special and specific provisions that should be prioritized for application. Reflecting on the aforementioned case, Ma knew or should have known that Chen did not have construction qualifications and contracted the construction of the building to Chen. Chen's employee Liu was injured during employment due to a safety accident, which meets the circumstances stipulated in Article 11, paragraph 2 of the "Personal Injury Interpretation". Ma and Chen should bear joint compensation liability for Liu's damages.

[Case Result]

Ma knew or should have known that Chen did not have construction qualifications and contracted the construction of the building to Chen. Chen's employee Liu was injured during employment due to a safety accident, which meets the circumstances stipulated in Article 11, paragraph 2 of the "Personal Injury Interpretation". Ma and Chen should bear joint compensation liability for Liu's damages.

[Relevant Regulations]

According to Article 10 of the "Personal Injury Interpretation", the condition for the client to bear liability is that the client has been negligent in the commissioning, instruction, or selection, and the contractor bears corresponding liability for damage caused to a third party or themselves during the performance of the contracting work. The issues to consider here are: First, the scope of application. The scope defined by this article is contracting contracts. The academic community in China has always believed that the scope of application of contracting contracts applies to relationships between citizens, between citizens and legal persons, and between legal persons. Since the contracting relationship arising from the completion of construction contracts involving engineering surveying, design, and construction is significantly different from traditional contracting contracts, the "Contract Law of the People's Republic of China" separately stipulates contracting contracts and construction contracts, but this does not deny the basic attributes of contracting contracts that construction contracts possess. Therefore, the contracting work process stipulated here should include the construction process and apply to situations causing damage in construction.

Secondly, the object of damage. According to the provisions, it is a third party outside the contractor or the contractor themselves. For the contractor, the provision does not explicitly state that it is only a natural person; it should include natural persons, legal persons, and other organizations, all of which can be contractors. Regarding the contractor's employees, do they belong to the contractor or to a third party outside the contractor? If the contractor is a natural person, the employee is naturally a third party outside the contractor. If the contractor is a non-natural organization, how should the position of the employee be determined? In relation to the client, all activities completed by the contractor's employees in the course of performing the contracting work are acts representing the contractor, and their injuries should be recognized as injuries to the contractor themselves. As for how the contractor and their employees bear responsibility, it should be adjusted by corresponding legal norms. Thus, it can be seen that whether the employee is acting as the contractor themselves or as a third party outside the contractor, they are all entitled to claim compensation under Article 10 of the "Personal Injury Interpretation". Regarding the way the client bears responsibility according to this article, the book "Understanding and Application of the Supreme People's Court's Judicial Interpretation on Personal Injury Compensation" edited by Huang Song clearly states that the client's liability is determined based on the degree of fault between the client and the contractor, which can result in three scenarios: the client bearing full substitute compensation liability, jointly bearing joint compensation liability with the contractor, or not bearing liability.

Article 11, paragraph 2 of the "Personal Injury Interpretation" states that if an employee suffers personal injury during employment due to a safety production accident, the client and subcontractor, knowing or should have known that the employer accepting the contracting or subcontracting business lacks the corresponding qualifications or safety production conditions, should bear joint compensation liability with the employer. However, there are no regulations on what constitutes a "safety production accident" and how to define it, making it difficult to accurately apply this provision in judicial practice. Additionally, there is no clear definition of the scope of contracting and subcontracting activities. Article 86 of the "Production Safety Law of the People's Republic of China" states: "If a production and operation unit contracts or leases production and operation projects, places, or equipment to units or individuals that do not have safety production conditions or corresponding qualifications, it shall be ordered...; if it leads to potential safety accidents causing damage to others, it shall bear joint compensation liability with the contracting party or lessee." Article 29 of the "Construction Law of the People's Republic of China" states: "...The general contractor of the construction project is responsible to the construction unit according to the general contracting contract; the subcontractor is responsible to the general contractor according to the subcontracting contract. The general contractor and subcontractor shall bear joint liability to the construction unit for the subcontracted project..." Thus, it can be seen that the scope of contracting and subcontracting activities is not limited to the construction field as we usually understand it.

Compared to Article 10 of the "Interpretation of Human Damage", the premise for the joint liability of the contractor or subcontractor with the employer as stipulated in Article 11 is limited to the knowledge or should have known that the employer lacks qualifications or safety production conditions, and the degree of fault required is higher than that specified in Article 10, with the fault being obvious. However, the scope of activities that need to bear responsibility includes, but is not limited to, construction projects and other contracting contracts. It can be determined that there are overlaps between the provisions of Article 10 and Article 11 (a particularly obvious one is the accidents caused by knowingly contracting or subcontracting to an employer who lacks qualifications), but the two are not contradictory. According to Article 10, the client may bear compensation liability with the contractor in proportion, bear joint compensation liability, or not bear any liability. It should be noted that the liability borne by the client as stipulated in Article 10 is not limited to proportional liability. In judicial practice, it is usually understood as the compensation liability borne according to the degree of fault of the client. When the circumstances specified in Article 11 are met, that is, the situation where the client bears joint liability as stipulated in Article 10, it is just that Article 11 provides special and specific provisions that should be prioritized.