In the Polish economy construction is an important sector of the economy. It's okay. 7.4% Polish GDP[1]. The wide - understood construction takes several one thousand smaller and larger operators. It is important that they can carry out their tasks properly, and this will only be possible if the works contract defines the rights and obligations of all parties to the construction process.
We are looking at several elements that are important in this area.
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Work contract – preliminary issues
The essence of the works contract is defined in Article 647 Civil code[2]. one from the basic provisions of the above-mentioned agreement is the remuneration which may be determined in a flat-rate or cost-based manner. It is also possible to deal with a mixed model, i.e.
a flat-rate remuneration for part of the work, for the remainder of the cost-rate.
Market practice indicates that part of the works (refurbishments, construction of houses, construction works) is carried out without a written contract for the works and thus without precise determination of the obligations of the parties and remuneration for the works performed.
Flat-rate and cost estimates
In works contracts, we usually deal with flat-rate or cost-based remuneration. In principle, the flat-rate remuneration is unchanged, which means that if the parties have agreed to a certain amount, they cannot modify it – a professional entity, or a construction entrepreneur, should duly determine the amount of remuneration that will be sufficient to carry out the task entrusted to carry out the construction investment.
The cost estimate differs from the flat rate in that it is determined on the basis of the estimates presented by the contractor and in agreement with the investor. The characteristic of this type of remuneration is that it is the resultant, i.e. depending on, among other things, labour effort, the quantity of materials.
The flat wage proved too low – what can we do?
The principle is that the flat-rate remuneration is not subject to change, since the parties have agreed to a certain remuneration for the contracts. There are exceptions in the Polish legal order to increase the remuneration of the contractor for works. However, these are entirely exceptional situations, which must be duly proven, e.g. price lists, cost estimates, messages from construction materials suppliers, communications from state authorities.
The war in Ukraine may be regarded as an exceptional market situation and the associated increase in the prices of construction materials, costs of construction, among others, labor.
The cost estimate proved insufficient – what can we do?
The cost-benefit remuneration, which depends, inter alia, on the workload of the materials used, will be due when the scope of the work provided for in the contract has been performed in accordance with the prices and rates adopted in the estimate.
In a situation where the scope of the work had to be increased and the author of the work plan is an investor, the remuneration may be increased. However, in a situation where the contractor is the author of the above-mentioned list, an increase in remuneration is possible, but only after obtaining the investor's consent.
It is important to describe in a written agreement the scope of the tasks to be performed and additional work to be done in the form of an annex. In any other case, the contractor may be exposed to the fact that he will not be paid for the work done.
Summary
The remuneration for the construction contract is one from the basic and main provisions on the construction contract. It is most often determined on a flat-rate or cost-based basis, less frequently mixed, i.e. combining the two salaries.
It should be borne in mind that, in market practice, there are situations where the works contract has not been written down, the exact scope of the work and the obligations of the parties to the contract, including remuneration and the payment deadline, are not specified.
In view of the above, it is important to sign the agreement in writing and to include a provision on the amount of flat-rate remuneration or on how to calculate the remuneration (cost estimate).
If the agreed remuneration is too low, it is possible to increase it. In the Polish legal order there are regulations to increase remuneration in exceptional situations, regardless of whether the construction investment is carried out in public procurement or in the private sector.
However, each case requires individual analysis. Our law firm will assist you in both preparing an appropriate construction contract and providing professional support at every stage of the investment.
[1] https://raportroczny.budimex.pl/2021/
[2] Article 647-658 Civil code
Written by Michał Pankiewicz
The author is a graduate of KUL in the direction of Law. From 2022 related to Russell Bedford. His interests include civil law, in particular commercial company law and compensation law. Privately passionate about geopolitics.