Attorney-at-law Siret Siilbek’s article about delay of customer in the construction sector

Attorney-at-law Siret Siilbek wrote in April’s legal blog posting about the frequent delay by customer in construction disputes.

According to Siret, it is a frequent problem in construction disputes, that the customer blames the contractor for a delay in deadlines and the contractor in turn blames the customer that the latter has not handed over the work site, presented the project documentation or guidance on time. The delay by customer can cause the contractor to not meet his contractual deadlines.

The customer obligation to assist the contractor is one of the most fundamental obligations of the customer. Often it is not possible to reach the deadlines and perform quality work without the assistance of the customer.

Siret explains below what type of claims can be associated with the delay by customer. Section 652(1) of the Law of Obligations Act provides that if, in order for work to be performed, a customer must perform an act which may among other things consist of the supply of material, provision of instructions or assistance in any other manner in the performance of the work and the customer delays the performance thereof, the contractor has the right to demand compensation for the damage created to the contractor by the delay. Despite the preceding the submission of the claim for compensation is often not easy: mostly the damages involves the cost of labour force and the proving as well as calculating of damages can prove to be difficult. Some elements of direct loss, like the rent of equipment and devices, are more easily proved. For this reason it is better to foresee contractual penalty in the contract for the event of delay by customer. Then the contractor does not have to prove damages and can simply submit the claim for penalty payment.

Additionally the previously mentioned provision requires that the duration of the delay, the amount of remuneration, the savings made by the contractor due to the delay and anything which the contractor obtained or could reasonably have obtained by using the labour force thereof for different purposes shall be taken into account upon determination of the amount of compensation. Any savings which the contractor obtained or could have obtained by the delay by the customer shall be deducted from the damage.

If the delay by the costumer is also a material breach of the contract, then the contractor may cancel the contract and demand payment of the part of the works and the reimbursement of the costs not included in the fee. Prior to cancelling the contract it is necessary that the contractor provides an additional time period for performance for the customer to remedy the breach of obligations. In many circumstances it is not possible to rely on material breach without that.

If the customer is to blame for the delay (i.e. the delay is not dependent on third persons – like a delay by the local government to issue the construction permit), the contractor pursuant to Section 652(3) of the Law of Obligations Act has the right to demand payment of the total agreed remuneration. In that case the demand is not limited with the fee for works that have been completed already. The compensation shall include the loss of income. Again the savings obtained by the contractor which he obtained due to cancelling the contract- like using the labour force on another work site- shall be deducted from the damages.

You may read the post in Estonian at: http://www.addenda.ee/vandeadvokaat-siret-siilbek-tellija-viivitus

For all questions relating to the blog entry, please turn to Siret either via e-mail siret@alternalaw.ee or phone 680 6850.

Law Firm ALTERNA