The construction contract is actually a service contract in which the contractor undertakes to build a specific building on a specific site within a specified period of time following a specific project, or to carry out any construction work on an existing object. The client undertakes to pay a certain price. The price can be agreed as a unit price or flat rate. The building contract, according to the Croatian law, has to be concluded in written form. Each construction contract must therefore include the object and the price.
The following article outlines the basic rights and obligations that the contracting parties have under this contract.
The collection of the entire project and technical documents is the duty of the client before the start of construction. After completion of the work, the client is obliged to take over the building, to check it, and, if he detects any defects, to notify the contractor within 6 months. Of course, its main duty is to pay the price of the works that have been carried out according to the contract; but under certain conditions he may refuse to pay the price.
If there are any defects, the client, who has notified the contractor in good time, may do the following: ask the contractor to remedy the defect or remedy the defect himself on behalf of the contractor, reduce the price or dissolve the contract. In addition to these possibilities, the client also has the right to claim damages.
The main obligation of the contractor is to build the building after the project, professionally and within the contract period. The contractor is liable for general defects, the solidity of the building, material defects and defects in the installed equipment.
As far as the other obligations of the contractor to the investor are concerned, he must allow permanent supervision of the construction work and control over the quality and quantity of the material as well as the construction site. Likewise, if a contractual penalty has been agreed, he must pay it in the case of a delay or if he does not carry out the contractual works during the contract period or its extension.
The contractor must comply with technical regulations and blueprints and can only deviate from this with the consent of the client. He can perform only urgent work to ensure the stability of the object or to avoid damage without first obtaining consent.
With regard to liability for construction defects, a distinction is made between visible and hidden construction defects. If the client wishes to exploit his right in respect of defects in execution, it is important that he notifies the contractor within the legal deadline.
Visible defects (which he can see in a normal inspection) must be notified by the client to the contractor immediately, otherwise he loses the right to invoke them. After the inspection and acceptance of the work carried out, the contractor is no longer liable for the defects that could be identified during normal inspection, unless he was aware of this and did not show the defects to the client.
For the notification of hidden construction defects, the client has a period of 1 month from their discovery, and he loses the right to invoke these defects 2 years after acceptance of the work done.
The rights of the client to the contractor due to construction defects are also passed on to all subsequent purchasers of the building, but for these later purchasers no new deadline for notification and action runs, for them the deadline of the predecessor applies.
A particular category are defects in the solidity of the building – strength, stability and safety. The contractor is liable for these defects if they show up within 10 years after delivery and acceptance of the construction work and they can not be excluded or limited by the contract.
The term turnkey means a construction contract whereby the contractor undertakes to build the building in a way that e.g. the house can be handed over for use after the completed work. The Croatian law stipulates that all design work can also be included in this contract. If several contractors conclude such a contract, they are jointly liable for their work. The price is fixed and includes all construction work, including unforeseen work. Even if a fixed price is defined, the client and the contractor can agree that the client pays the installments according to the construction regulations. In any such determination, each phase must be examined and approved by the competent building inspectorate.
A legal review is also recommended for these contracts because often not all construction services are fully and clearly defined in the contract. In order to avoid ambiguity and to determine the exact obligations of the contractor, it is not sufficient if the contract contains only one „turnkey“ clause. All works and other rights and obligations must always be well defined.