1、 Does the affiliated person have the priority right to be compensated for the construction project price

（1） Legal provisions

1. The subject of priority compensation right: According to Article 35 of the Judicial Interpretation on Construction (I), only the contractor who has entered into a construction contract with the employer can become the subject of exercising the priority compensation right of the project price.
   

   
   

2. Special circumstances:  In cases where the employer is aware of the fact of affiliation and has formed a factual contractual relationship with the affiliated party, some courts believe that the affiliated party may have priority in receiving compensation for the construction project price. This is because the contractor actually completed the construction project, and the employer was aware of and accepted the contractor's construction results.

（2） Collision of Different Perspectives in Judicial Practice

Negative viewpoint

In judicial practice, some judges and legal practitioners believe that even if the employer is aware of the fact of affiliation, they should not support the affiliation in claiming the project price from the employer. Their reason is that the invalidity of the affiliation contract is an established fact, and the affiliation behavior seriously disrupts the normal order of the construction market. The law should give a negative evaluation to this illegal behavior. Just because the employer is aware of the affiliation situation, the illegal nature of the affiliation behavior itself cannot be changed, otherwise it will be impossible to effectively curb the spread of affiliation phenomenon. Such as (2023) Supreme Court Civil Application No. 659 and (2021) Supreme Court Civil Application No. 2486.

Positive viewpoint

But another part of the viewpoint tends to be based on the principles of fairness and the protection of the rights and interests of actual construction workers. When the affiliated person can provide sufficient evidence to prove that they have fulfilled their obligations under the construction contract, invested a large amount of manpower, material resources, and financial resources, and the project has finally passed the completion acceptance, then based on their actual efforts and achievements, the affiliated person should be allowed to claim the project price from the employer. This viewpoint holds that if the employer agrees to the construction despite knowing the affiliation, they should bear the corresponding legal consequences to a certain extent, and cannot completely erase the labor value of the affiliation due to the illegality of the affiliation behavior. Such as (2019) Supreme Court Civil Application No. 6085.

2、 The dilemma and breakthrough faced by the affiliated person's claim for priority compensation rights

Article 807 of the Civil Code stipulates that the "contractor" has a priority right to compensation, while Article 35 of Judicial Interpretation (I) on Construction stipulates that the "contractor who enters into a construction contract with the employer" may enjoy a priority right to compensation in accordance with Article 807 of the Civil Code. Therefore, for the affiliated parties, advocating for the priority right to be compensated for the construction project price faces many obstacles.

Firstly, there is no direct legal contractual relationship between the affiliated party and the employer, which is inconsistent with the statutory requirements for the exercise of priority compensation rights. Secondly, the illegality of the act of affiliation itself makes it difficult to directly apply the relevant legal provisions on priority compensation rights. From traditional judicial practice and literal interpretation of legal provisions, the affiliated person does not meet the conditions for exercising the priority right to compensation, because the priority right to compensation aims to protect the contractor in the legal construction contract relationship, and the affiliated behavior undermines this legal contract order.
Although there are many difficulties, in some special cases, there are also opinions that explore whether the affiliated person can be given priority in receiving compensation for construction project costs.

For example, in the case of the construction contract dispute between Tan and a certain new energy limited company in Ganminzai No. 266 (2024), Tan signed a construction contract with a third party and fulfilled all contractual obligations. The High People's Court of Gansu Province, after trial, held that the role and contribution of the affiliated person as the actual construction person and the actual contractor in the project construction are more in line with the legal provisions for contractors. The purpose of establishing the priority right of project price compensation by law is to protect the legitimate rights and interests of the actual construction person and ensure that their investment can receive reasonable returns. Finally, the court ruled to support all of Tan's litigation requests and determined that Tan enjoys the priority right of compensation.

For example, in the case of Jianshi County Court in Hubei Province (2025), Tan borrowed the qualifications of a construction company to sign a contract with a real estate company and actually carried out construction. The court ruling holds that the purpose of the priority right to compensation for construction project prices is to ensure that the materials and labor remuneration advanced by the contractor are paid first, and it is not a condition for the contractor to have construction qualifications. Although the contract is invalid, Tan has advanced material payments and hired workers for construction. If the project is accepted as qualified, he has the right to be compensated first for the construction project.

The affiliated person can fully prove that they are the actual investors and builders of the project, investing a lot of effort from the early preparation to the specific construction. Moreover, the employer, knowing the affiliation, formed a de facto construction contract relationship with the affiliated party. Both parties had close communication and cooperation on issues such as project progress and quality during the construction process, and the project quality was fully qualified. In this situation, starting from the principles of balancing the interests of all parties and fairness, the court, after careful consideration, broke through the traditional judicial thinking and granted the affiliated person a certain priority right to compensation. However, it should be clarified that this situation is still a minority in judicial practice, and there is currently no unified standard for judgment. Courts in different regions may have significant differences in handling similar cases.

3、 Conclusion and Prospect

In summary, there are many controversies and uncertainties in legal provisions and judicial practice regarding whether the affiliated person can claim the project price from the employer and whether they have the priority right to be compensated for the construction project price when the employer knows that the affiliated person is borrowing qualifications.

Authoritative guidance: According to the perspective of the National Training Textbook for Judges, if the contracting party knows that the construction of the project is carried out by the qualified borrowing party when entering into the contract, it can only be logically recognized that the qualified borrowing party belongs to the "contractor" who enters into the construction contract with the contracting party.

Both practitioners in the construction industry and legal professionals should continue to pay attention to the legal developments and judicial decisions in this field. Only in this way can we better safeguard our legitimate rights and interests in practical work and effectively avoid potential legal risks. At the same time, we also hope that relevant departments can further improve laws and regulations, clarify the rights and obligations of all parties in the situation of affiliation, and provide more solid legal protection for the healthy development of the construction project market.