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Increase in the cost-estimate remuneration in construction works contract
In the event that the construction
works contract provides for an agreed cost estimate remuneration, the amount
thereof is established based on the scope of works which are to be performed
under the contract. In practice, one can often witness disputes between
investors and contractors, once the contractors demand additional payment for the
performed works. In order to be able to effectively claim the additional
remuneration, the contractors carrying out the contract based on the cost
estimate must keep in mind a few rules.
At the beginning it needs to be
underlined that the construction works contract is a contract of effect, and
not a contract of due care. Thus, the contractor does not exactly assume the
liability of carrying out all works included in the bill of quantities and the
cost estimate, but the liability to carry out the object of the construction
works contract, that is, to achieve a specific result.
The aim of the contract is specified
in the technical documentation which constitutes an element of the agreement.
Said documentation, the design in particular, is the basis for establishing
whether given works are included in the contract or not. Depending on the type
of undertaking, a number of other documents is attached to the contract, which
documents are drawn up on the basis of the design documentation, e.g. technical
specification for works accomplishment and acceptance, bill of quantities, cost
In the event that the investor
demands the contractor to carry out works which seem to go beyond the original
scope of works set forth in the contract, the liability of the contractor to
carry out these works depends on whether, according to the design, said works
are indispensable to achieve the effect intended in the contract. If yes, then
the contractor is obliged to carry out these works as they are covered by the
object of the contract.
However, it is a different matter
whether in such situation the contractor will be entitled to demand additional
remuneration for the works carried out. This problem is settled in Article 630
of the Polish Civil Code which, although pertains to the contract of specific
work, applies to construction works contract as well.
According to this provision, in the
event that it becomes necessary to carry out works which were not envisaged in
the specification of the planned works constituting the basis for calculating
the cost-estimate-based remuneration, the contractor may demand that the agreed
remuneration be increased only in the event that:
1) the list of the planned works was
drawn up by the investor
2) the list of the planned works was
drawn up by the contractor, but despite having used due care, he could not have
foreseen the need for the additional works.
The contractor, however, will not
obtain additional remuneration in any of the aforementioned cases if he fails
to make sure to obtain consent from the ordering party to carry out the
It arises from the above that, in
the event that the list of the planned works, constituting the basis for
calculating the cost-estimate-based remuneration and defining the total
remuneration amount, is drawn up by the investor (also in the event when the
investor uses forms drawn up by a third party), the fact of omitting any item
in the construction works costing will allow the contractor to demand
additional payment for works which are not featured in the list of works. On
the other hand, in the event that it is the contractor who was responsible for
drawing up the list of works, it will be possible to obtain an increase in the remuneration
only if, despite having exercised due diligence required from a professional,
the contractor was not able to foresee the necessity of carrying out such
It must be pointed out that the
aforementioned provision protects the investor, because it minimizes the risk
of exceeding the expected costs. It serves to counteract the practice of
submitting lower cost estimates (tenders) by the contractors, who may often
want to increase the remuneration in the course of works.
Therefore, in the event that it is
the contractor who is the author of the list of works, the condition for an
increase in the remuneration is that the contractor demonstrates that, even
when having exercised due diligence, he was not able to anticipate the
necessity to carry out any other works than those included in the cost
estimate, or works in a wider scope. Otherwise, the contractual remuneration is
final. What is more, in this case the contractor cannot either make a claim
against the investor for unjust enrichment referring to the fact that
additional works have been carried out.
Therefore, in the event of a
dispute, it is always necessary to consider whether the contractor drawing up
the cost estimate has acted in a diligent manner, in compliance with the rules
of a given type of relationship, which would make the objection of faulty or
negligent action unjustified. Should these requirements be met (which in the
event of a court case is usually assessed by an expert witness), the contractor
is not obliged to cover the additional costs himself and shall be entitled to an
appropriately increased remuneration. If, however, the cost estimate was drawn
up in breach of the rules of diligence required in a relationship of a given
type, despite the necessity to carry out additional works, the contractor is only
entitled to the cost-estimate-based remuneration calculated on the basis of the
list of planned works.
Before the contractor decides to pursue an additional
payment from the investor, he should analyse in detail the contract made. The
rules, which the parties had agreed as regards determining the remuneration,
will be here of crucial significance. The parties may deem that the
remuneration amount stipulated in the contract is only of a prognostic
character (does not constitute the maximum amount), and the actual amount of
remuneration is to be established on the basis of the post-completion
cost-estimates. In this case, the restrictions connected with demanding an
increased cost-based remuneration shall not apply to the works not included in
the tender cost-estimate, but included in the post-completion cost-estimate. As
such solution is potentially risky for the investor, he should make sure that
the rules for settlement of performed works are precisely specified and that
the payment for such works is explicitly dependent upon investor’s consent for