Construction Contract in Practice: Delays, Defects and Price Increases

The contractor is late with the works, the works are not performed as agreed, additional payment is requested, and certain situations are not clearly defined in the contract. These are the most common issues clients face in construction, whether it concerns an apartment renovation, the construction of a family house, multi-residential buildings, or commercial complexes. In practice, such situations most often arise under a construction contract, especially when clients without prior construction experience enter a project relying on the assumption that potential problems will be resolved “as they arise”.

However, the assumption that problems will be resolved “as they arise” is one of the biggest and most costly mistakes that can be made in construction.

The purpose of a construction contract is to regulate the relationship between the client and the contractor in order to avoid such situations or, at the very least, to clearly regulate them in advance. In practice, however, it often becomes apparent that the contract does not address key issues: what happens in the event of delays, defective works, whether the contract may be terminated and under what conditions, and whether the client is entitled to damages.

The reason is usually not a lack of legal knowledge, but the fact that contracts often fail to anticipate the real-life circumstances that regularly occur during construction. Only once a dispute arises does it become clear what the contract failed to regulate. While this is particularly common among clients without prior construction experience, similar issues are frequently encountered even in contracts between experienced construction professionals.

Contractor delay under a construction contract – the client’s rights and options

Delays in the performance of construction works are among the most common causes of disputes related to construction contracts. This does not necessarily mean that deadlines are not agreed, but rather that they are often insufficiently defined or linked to circumstances open to interpretation.

In addition, contracts frequently do not provide clear consequences for contractor delay, such as contractual penalties or other financial sanctions. Even where a penalty clause exists, the absence of an appropriate security instrument often renders it ineffective in practice.

It is important to emphasise that not every delay automatically constitutes a breach of contract. The legal consequences depend on the contract terms and the reasons for the delay.

If the delay is caused by circumstances beyond the contractor’s control, such as adverse weather conditions or unforeseen technical difficulties, it must be assessed whether such circumstances are addressed in the contract and how they affect the extension of deadlines. Conversely, delays resulting from poor organisation, lack of workforce, or overcommitment are generally attributable to the contractor.

Once a delay occurs, the client’s response is crucial. As a rule, it is advisable to send a written notice granting an appropriate additional time period, thereby formally documenting the breach and preserving the client’s legal position.

If the contractor fails to perform even within the additional time granted, the client may consider terminating the contract, engaging another contractor, and claiming damages, depending on the specific circumstances.

Hasty decisions, such as unilaterally stopping the works without prior written notice, may significantly complicate the client’s legal position. For this reason, careful action and timely legal advice are essential.

Defective works and contractor liability under a construction contract

Where defects are identified in the completed works—for example, where they do not comply with the agreed technical specifications, design documentation, or professional standards—the client has several legal remedies available. The scope of these rights depends, among other factors, on whether the defects were identified upon handover or appeared later during the warranty period.

The client’s primary right is to require the contractor to remedy the defects within a reasonable time, at the contractor’s expense. If the contractor fails to do so, the client may arrange remediation by a third party at the contractor’s cost.

If remedying the defect is impossible, would involve disproportionate costs, or if the contractor refuses to remedy it, the client may seek a proportionate reduction of the contract price. In cases of material defects rendering the building unusable or breaching essential contractual terms, the client may terminate the contract without first requesting remediation.

Regardless of the remedy chosen, the client retains the right to claim damages suffered as a result of the defects.

Financial security instruments, such as retention amounts or bank guarantees for defect rectification, often play a crucial role in ensuring effective recovery of remediation costs.

To effectively exercise these rights, compliance with statutory and contractual time limits is essential. Visible defects must be reported upon handover, while hidden defects must be reported without delay and no later than one month after discovery. Unless agreed otherwise, the warranty period for workmanship is two years, while liability for structural integrity and safety lasts ten years.

It should be noted that unilateral remediation of defects without prior notification and without granting the contractor a reasonable time may result in a loss of certain rights.

Additional works and price increases under a construction contract

During the performance of works, contractors often request additional payment, arguing that certain works were not included in the original scope. Such requests frequently give rise to disputes.

A common question in practice is whether the contractor is entitled to additional works and a price increase under a construction contract.

It is essential to distinguish situations involving deviations from the agreed project from those in which a price adjustment is permitted only under strictly prescribed conditions.

Where urgent and necessary works are required to prevent danger or damage, the contractor may be entitled to fair compensation, provided the client is notified without delay. Conversely, where the contractor unilaterally deviates from the agreed project, entitlement to additional payment generally depends on whether the client’s prior consent was obtained.

Price adjustments due to changes in material or cost elements are allowed only in exceptional cases and provided the contractor has duly and timely performed contractual obligations. A contractor already in delay cannot rely on subsequent cost increases.

All of the above demonstrates that additional works and price increases are an area in which precise contractual drafting is essential. Vague contract provisions and reliance on informal arrangements expose both clients and contractors to legal uncertainty.

A construction contract is not a mere formality, but a key risk-management tool. Most disputes arise not from ignorance of the law, but from unclear or incomplete contractual arrangements and attempts to address issues only after they have already escalated.

If you are in the process of entering into a construction contract or are already facing issues during construction works, timely professional legal advice is strongly recommended.

For further information or legal assistance regarding construction contracts, you may contact us with confidence.