Building contract is actually a service contract whereby a contactor agrees to deliver building work according to the specific project within a certain deadline and a client agrees to pay a certain price in exchange.
Each contract needs to include both subject and price. The subject of a building contract is a construction of certain building on the certain land or performance of other building works. Hereby houses, buildings, bridges, water- gates, tunnels, roads, sewage systems etc. are considered buildings. Common trade works where e.g., no change in the apartment structure was carried out, geological-exploration drilling or some isolation works etc. are not considered a subject of a building contract in practice.
The price of the work can be determined either based on the unit of measurement for the contracted work (unit price) or as a total amount for the entire construction (total contracted price).
Client’s rights and obligations
Provision of the entire project and technical documentation is the duty of the client before the beginning of construction. After completing the works, the client is obliged to take over the building, examine it and inform the contractor within 6 months in case of noticing defects. Of course, his main obligation is to pay the price for delivered building works according to the contract. However, under certain conditions he will be able to withhold that payment. In case of existence of some defects, the client who has properly and in due time informed the contractor that delivered works have a certain defect, has the following at the disposal: ask the contractor to remedy the defect or to remedy the defects by himself for the account of the contractor or to reduce the price or to terminate the contract. In addition to one of those possibilities, the client has a right to a compensation of damages that eventually have arisen.
Contractor’s obligations
The main contractor’s obligation is to construct a building according to the specific project, professionally and in due time. Thereby the contractor is liable for general defects, for the solidity of the building, for material and equipment defects.
A designer will be liable for the defects that are consequences of the project failure, while the supervision is responsible for the defects caused by client’s instructions, but neither contractor can be exempted from liability.
As to his other obligations, a contractor has to enable permanent client’s supervision of works and the control over quality and quantity of spent material as well as to protect the site. Also, if there is a penalty clause in the contract the contractor shall pay the penalty in case of a delay with delivery or non-performance of works.
A contractor needs to abide by technical regulation and project documentation, whereby a deflection is allowed only with the client’s approval. Only emergency works for the purposes of stability of the object or damage prevention can be carried out without previous approval. He usually performs works by himself, and if he consign them to a third person, he shall be liable for the choice of subcontractor.
Regarding liability for construction defects, there are apparent and hidden defects. If a client wants to use his rights on the grounds of defects, it is important that he notices the contractor within statutory period.
The client has to notice the contractor on the apparent defects (conspicuous through the usual inspection) immediately, because on the contrary he loses the right to refer to them. Namely, after inspection and the acceptance of works, the contractor isn’t liable any more for defects which could have been seen by the usual inspection, except if he was familiar with them and hasn’t shown them to the client. It is important here to highlight that this notice should be directed to the contractor, not to some third person (e.g. subcontractor).
For the notice on hidden defects of so called minor works (as for example facade, woodwork, heating) a client has a deadline of 1 month since the detection, and he looses the right to refer to those defects 2 years after acceptance of works.
All the client’s rights toward the contractor due to construction defects are devolved to all later acquirers of the building. However, there isn’t a new deadline for a notice or a lawsuit running to those later acquirers, but the deadline of the predecessor is included. Defects regarding solidity of the building – stability and safety are the special category. The contractor is liable for such defects which would be shown within the period of 10 years since the hand over and receiving of works. Such defects cannot of course be excluded or limited in the contract.
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