Contract on the execution of construction works

Contract on the execution of construction works

Considering the high value of the subject matter of the contract, the participation of a large number of persons and the scope and complexity of the work itself, in practice a construction contract is an extremely complex legal transaction. Therefore, to gain a better understanding how the law views the aforementioned legal transaction, read below in this article.

Contract on the execution of construction works - legal nature

The matter of construction contracts is regulated by the Civil Obligations Act (official gazette “Narodne novine” nos. 35/2005, 41/2008, 78/2015, 29/2018), the Construction Act (official gazette “Narodne novine” nos. 153/2013, 20/2017, 39/2019, 125/2019), the Act on Physical Planning and Construction Tasks and Activities (official gazette “Narodne novine” nos. 78/2015, 118/2018, 110/2019) and the Construction Products Act (official gazette “Narodne novine” nos. 76/2013, 130/2017, 39/2019, 118/2020).
First of all, we will mention that the Civil Obligation Act defines a construction contract. According to the aforementioned contract, the contractor undertakes to build a certain building on a certain land plot or carry out some other construction work on such land or on an existing building, and the client undertakes to pay them a certain price for this work. Therefore, when a construction contract is concluded, one party is the contractor and the other is the client. The construction contract must be concluded in writing, and this also applies to all subsequent amendments and changes to the contract. Also, the contractor must obtain a written consent from the client for any deviations from the project or the contracted works.
On the other hand, the Construction Act regulates the design, construction, use and maintenance of buildings and the implementation of administrative and other related procedures in order to ensure the protection and arrangement of space in accordance with the regulations governing spatial planning and to ensure that the fundamental requirements for the buildings and other conditions prescribed for buildings by this Act and regulations adopted on the basis of this Act and special regulations are met.

Essential components of a construction contract

From the previously stated definition of a construction contract from the Civil Obligations Act, we can note that the essential components of a construction contract are as follows:

• Structures – the Civil Obligations Act stipulates that structures are all buildings, dams, bridges, tunnels, water supply systems, sewer systems, roads, railroads and wells;
• Land – the Act on Property and Other Real Rights (official gazette “Narodne novine” nos. 91/1996, 68/1998, 137/1999, 22/2000, 73/2000, 114/2001, 79/2006, 141/2006, 146/2008, 38/2009, 153/2009, 90/2010, 143/2012, 152/2014) and the Land Registry Act (official gazette “Narodne novine” no. 63/2019) give different definitions for the land. For the purposes of the construction contract, the land in the contract does not necessarily have to be marked with land registry or cadastral markings, and can instead be described in such a way that it can be determined which land it is;
• Project – the Civil Obligations Act does not define a project, but the existence of a project is related only to the construction of a building;
• Deadline – the Civil Obligations Act stipulates that in cases when the contractor’s deadline is not determined by the contract, the contractor must complete the work within a reasonable period of time required  forsuch tasks. A reasonable deadline depends on the complexity of work, the amount of work etc;
• Price – the Civil Obligations Act regulates how the price is determined in the contract, that there is a possibility of price variation, termination of the contract due to increased price and client’s right to reduce the agreed price.

Subjects of construction contracts, and their rights and obligations

We have already stated that at least two parties are needed to conclude a contract on the execution of construction works, namely the client and the contractor. However, the Civil Obligations Act also mentions the design engineer, and the person who performs supervision, whereas the Construction Act mentions and defines other participants in the construction work.
The client can be both a legal and a natural person who, by contract, ordered the construction of a certain building or the execution of some other construction works. The Civil Obligations Act stipulates that all the rights of the client against the contractor for building defects are applied in the provisions of the work contract.
A contractor is also a legal or natural person who has contracted to build a building or some other construction work for the client. The contractor does not have to perform all the work independently or personally, unless the contract stipulated otherwise.