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Transparency and safety of turnover as grounds for changes in provisions of agreement on construction works

Transparency, increasing safety in relations between an investor and a subcontractor, prevention from ambiguities connected with notifying the investor about the subcontractor, limitation of investor’s liability on payment of remuneration indicated in a subcontract towards the subcontractor and evening out turnover uncertainty in relations between construction process participants are main assumptions to amendment to Article 6471 of Polish Civil Code.

Since July 1, 2017 there is new legal order connected with rules of investor joint and several liability towards construction works subcontractors. Amendment introduced by the Act on changes of some acts with the aim of claims enforcement facilitation as of April 7, 2017 anticipates new wording of Article 6471 of Polish Civil Code.

Changes are connected among others with possibility of notification which is made by the subcontractor on detailed scope of works directly to the investor. It will replace obligation to provide the investor with project of an agreement with the subcontractor, while an objection to this notification – if any – have to be submitted by the investor within 30 days since the date of its receiving. Both an application and the objection require written form under the pain of nullity. It requires to be underlined that investor’s objection has effect only in the form of exclusion of its joint and several liability with a contractor (general contractor) in the scope of remuneration payment towards the subcontractor, and not in the form of validity of agreement with the subcontractor.

As a consequence of abovementioned solutions the investor will not be responsible joint and several in case the scope of really performed construction works is different than the scope listed in the notification. Moreover, indicated above regulation evens out a problem of so called investor implied consent on leading works by the subcontractor – in case burdening investor with joint and several liability for remuneration payment towards the subcontractor it will not be sufficient the fact of investor’s knowledge of performing construction works by the subcontractor and approval of subcontractor’s workers presence on construction area. The investor is joint and several liable for aforementioned obligations only in case of subcontractor written notification made by the contractor (general contractor) or the subcontractor itself before commencing works by the subcontractor.

Pursuant to amended Article 6471 of Polish Civil Code, notifying subcontractor is not although obligatory in case indication by the investor and the contractor (general contractor) in written agreement under the pain of nullity the scope of construction works which have to be fulfilled by indicated subcontractor.

Next crucial change introduced by this amendment is restriction of joint and several liability of the investor in favour of the subcontractor, maximum to the amount of remuneration due to the contractor (general contractor) for the scope of works indicated by the subcontractor provided that the amount of this remuneration will not exceed the amount of remuneration indicated for these works in an agreement with the contractor (general contractor).

Amendments introduced by the Act on amendments to some acts with the aim of claims enforcement facilitation as of April 7, 2017 should be treated as a rule with approval because they meet problems anticipated in practice and doctrine halfway, especially as far as double remuneration payment avoidance by the investor towards the contractor (general contractor) and the subcontractor in case of non-fulfilment this liability by the contractor (general contractor) towards the subcontractor or possibility of direct – without contractor (general contractor) participation – scope of works indication by the subcontractor to the contractor is concerned.

Amendment to Article 6471 of Polish Civil Code ensures more transparency especially in contacts between the investor and the subcontractor and lowers risk on the side of investor and subcontractor by means of non-fulfilment by the contractor (general contractor) construction works consisting in lack of payment towards the subcontractor for agreed works and simultaneously receiving remuneration from the investor.

Despite positive direction of changes introduced by this Act, they do not even out all problems connected with using in practice provisions connecting joint and several liability of the investor for remuneration payment towards the subcontractor. The most important of them is strengthening already strong position of the investor who – by the means of applying easy instruments such as mentioning lack of written consent of the investor to enter into agreement with the subcontractor or expressing objection as far as chosen by the contractor (general contractor) the subcontractor is concerned – will exclude possibility of enforcement from the subcontractor remuneration according to joint and several liability rules which may lead to abuses of these functions by investor.

Practical problems may arouse also a 30-day deadline to express the objection by the investor which will result in lack of investor’s joint and several liability for remuneration payment towards the subcontractor. Thus, inadmissible for construction process is situation in which the subcontractor will restrain from construction works commencing waiting for the deadline for expressing objection by the investor is finished. Taking into consideration aforementioned circumstances there may occur situation when the subcontractor willing secure ability of claim enforcement from the investor would like to receive from the investor peculiar confirmation on lack of expressing the objection in a 30-day deadline, that means in fact confirmation on waiver by the investor of rights to which he is entitled.

Author: Mateusz Hendzel, lawyer