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Increase of the lump sum remuneration in case of exclusion of Sub-Clause 13.8
What makes the
ordering party sure that for the work carried out it will only pay the agreed
remuneration, and the contractor will not obtain, even in the court, any
increase in such remuneration? Having analyzed the current judgments of some of
the common courts in cases regarding FIDIC-based contracts, one may draw the
conclusion that it is sufficient only to adopt a lump sum price in the
agreement and to remove Sub-Clause 13.8 form the Conditions of Contract. The
question is whether such operation should deprive the contractor of the protection
against a drastic change in the prices.
Due to the adoption of
a lump sum price in a construction works agreement, the contractor, who is
familiar with the scope of work assigned to him, will receive the agreed
remuneration. However, the Polish Civil Code provides for a loophole to the
benefit of the contractor – he may demand that the terms of the agreement are adjusted
to the changed circumstances in the event that it has not been possible for the
contractor to foresee such change. Depending on whether we are dealing with an
unpredictable change of prices, or with any other circumstances which would
threaten the contractor with a significant loss, the court may amend the terms
of the agreement accordingly (art. 3571, art. 632 § 2 of the
contracts, in particular the ones that are being performed for many months,
often provide for individual regulations in respect of the adjustment of the
amount of the remuneration to the economic reality, which regulations are
referred to as the price adjustment clauses. Here, the parties to the agreement
are only bound with the freedom of contract principle, according to which it is
forbidden to freely implement contractual solutions only in the event that the
content or purpose of the contract is inconsistent with its nature (i.e. the
nature of the legal relationship), the law or the principles of community life (art.
3531 of the PCC).
The FIDIC Conditions
of Contract (to include the most frequently applied ones: the Red Book and the
Yellow Book) include market adjustment clauses as well – Sub-Clause 13.7 and Sub-Clause
13.8. While the former pertains to the corrections on the remuneration
resulting from changes in the legislation, Sub-Clause 13.8 provides for a
mechanism of calculating adjustments of remuneration in accordance with "the
table of adjustment data”, which should be attached as an Appendix to Tender.
If the parties are
able to foresee the adjustment of contractor’s remuneration in the agreement,
they may also exclude it. Without trying to delve into disputes on whether it
is admissible to exclude the adjustment (or, in more general terms: the right
to demand that the agreement is changed) in cases set out in the aforementioned
provisions of the Polish Civil Code, one needs to adopt the rule that if the
parties to the agreement agree that the contractor will be deprived of the
right to claim an increase in the remuneration, they need to have it expressly
stipulated in the contract. Otherwise, the provisions of the Code shall apply.
It is well known that
the ordering parties, in particular the ones who dispose of public resources, strive
to shift most of the risks onto the contractor. This tendency is evidenced by
the modification of the FIDIC Conditions of Contract, which modification
consists in the exclusion, stipulated in the Particular Conditions, of the
application of Sub-Clause 13.8. With the lack of contractual regulations, the
contractors, in the event of the occurrence of some extraordinary circumstances
(as, for example, a drastic increase in the prices of the building material),
will reach for protection resulting from the above cited code-based regulations.
They are of the, legitimate, in my view, opinion that the sole removal of Sub-Clause
13.8 does not yet mean the exclusion of the possibility to increase the
remuneration on the basis of the mentioned provisions of the Civil Code.
Meanwhile, some of
the courts would assume a different interpretation. In the substantiations for judgments,
we will often read that due to the removal of Sub-Clause 13.8 from the Conditions
of Contract (i.e. a modification of the standard agreement which is adopted by
both parties as a basis for the conclusion of the contract), the contractor
becomes at the same time deprived of the possibility to obtain compensation in
the event of the occurrence of circumstances which he could not have foreseen. What
is surprising is the fact that the courts claim at the same time that in this
manner, the parties are also excluding the application of the code-based
What is the basis for
such claim? Unfortunately, the substantiations for judgments are of little usability.
In many cases it is completely impossible to establish on what grounds the
court would assume that the parties were willing to deprive the contractor not
only of the possibility to adjust the remuneration based on Sub-Clause 13.8 (to
which the contractor agreed by signing the Conditions of Contract amended by Particular
Conditions, under which the application of the subclause has been excluded), but
also of the possibility to change the agreement in the event of any
extraordinary circumstances. It must be added that the scope of application of
Sub-Clause 13.8 and art. 3571 and art. 362 § 2 of the PCC is
different, and so are the effects of their application.
With the courts continuing
to adopt such interpretation, one may only hope that soon it will be verified
by the Supreme Court with effect in favor of the contractors. Otherwise, the
courts will continue to interpret the provisions of the contracts against the
will of the parties and the contractors will remain disillusioned as to whether
they can retain any equality as regards incurring risk by the parties to the
It is also worth
adding that the attitude of the public ordering parties is also changing in
this regard. At present, Sub-Clause 13.8 is frequently retained in the Particular
Conditions, yet with some slight modifications consisting in, inter alia, the
introduction of the maximum adjustment amount. However, one will still not
attach any importance to the relation between Sub-Clause 13.8 and the
provisions of the Civil Code, which enable the contractor to demand an
introduction of amendments to the agreement in case of achange in the