- A guarantee of success of an investment is its timely completion, however, it happens that construction works are protracted because of delay or default.
- These terms are not synonymous – delay is independent of the cause whereas default is culpable delay.
- A proper clause in the agreement will secure the investor not only against the human factor but also against delays relating to bad weather conditions.
Construction is one of industries which are especially exposed to missed deadlines in the implementation of works. With that in mind, investors who entrust the performance of their investment to an external firm protect themselves against such problems. A method to obtain compensation for a failure to observe the deadline is inclusion of an appropriate clause in the agreement with the contractor, providing for contractual penalties applicable to such cases. The investor should, however, remember about proper terminology – a delay in the works is one thing and default is another.
Default is a result of contractor’s indolence
It happens that non-observance of a deadline in the implementation of an investment is caused by the contractor’s indolence. Then we have to do with culpable action of one of the parties, that is so called default. Under Art. 471 of the Civil Code, a debtor (meaning the contractor) is obliged to remedy any damage arising from non-performance or improper performance of an obligation unless the non-performance or improper performance is due to circumstances for which the debtor is not liable.
– It is assumed that it is the contractor that incurs liability for non-compliance with the deadline provided in the agreement and, consequently, the ordering party does not have to prove the contractor’s guilt because such guilt is presumed. It is the contractor to demonstrate, in order to avoid liability, that the contractor’s actions did not contribute to the delay and indicate circumstances which led to it – says Jacek Kosiński from the law firm Jacek Kosiński Advocates and Legal Advisers.
Delay caused by bad weather conditions
In the case of delay, the investor may not claim contractual penalties from the contractor for non-observance of the deadline for the investment’s completion if the reason was independent of the latter. Such reasons include, e.g., weather conditions – low temperatures, precipitation or snowfall. However, in the contract with the contractor, the contractor’s liability may be expanded by delays, that is events which caused non-compliance with the deadline but were not consequences of the contractor’s negligence. This is provided in Art. 473 of the Civil Code. Moreover, it follows from Art. 474 that the contractor is liable for the actions and omissions of persons with the assistance of whom he performs the obligation, and of the persons to whom he entrusts the performance of the obligation. This provision applies also when the obligation is performed by the debtor’s statutory representative.
– The contractor may assume liability for non-performance or improper performance of an obligation for reasons for which the contractor is not liable under the statutory regime. However, in such situations it is necessary to specify the circumstances for which the contractor assumes liability. From the investor’s perspective, the best solution is to include in the agreement a clause providing for the contractor’s liability for delays regardless of their reason. This is discussed in the judgment of the Court of Appeal in Katowice of 28 September 2010 in the case number: V ACa 267/2010 – “the claimant may not raise a defence that the delay in the performance of the subject of the agreement was caused by circumstances independent of the contractor since the claim for the contractual penalty is based, in this case, on the very fact of delay regardless of its reason” – adds Jacek Kosiński.
The investor, while preparing the agreement with the contractor must remember about the terminological differences between default and delay. The investor’s interests may be effectively secured in both cases, however, it is necessary to properly word the agreement.