A construction contract is defined by the Code of Obligations (OZ) as a subtype of a construction contract, namely as the duty of the contractor to build a certain building on a certain land or to carry out some other construction work on an already existing building according to a certain plan within an agreed period, and the client undertakes to pay him a certain price for this.
OZ provides that the construction contract must be concluded in writing.
Among the components of a construction contract - specification of contractor and client, plan, land, use of construction materials, timetables and deadlines, scope of work, guarantees, penalties and price agreement - especially the latter plays a particularly important role in the post-war period.
For example, let's take the construction contract with which the construction company "G" and the client "N" agreed that G will build a house for N until the 4th construction phase (construction without completed construction works) for EUR 100,000.00. G already included the material in the price. They signed the contract in the relatively stable pre-coronavirus January 2020, they set March 31, 2021 as the final date for the agreed construction up to the 4th phase, and in the contract they agreed on unchanged prices.
During construction, the world changed. With the mass ban on the operation of activities and anti-corona measures, which, in addition to wearing masks and distancing, mainly meant printing money and waiting for work, interest in various constructions grew by leaps and bounds. As a working being, man is hard at rest.
Thus, many people took advantage of the absence from work for long-planned extensions, balconies and other facilities, the construction of which they could not devote themselves to before. The banks were happy to come to their "help" with "favorable loans".
The result of the greatly increased demand was initially a moderate increase in prices, which, in the middle of the year, started to skyrocket in the middle of the year, due to the associated disruptions of material supply chains, mainly due to corona restrictions and the preferential supply of materials in the producing countries. The price of styrofoam increased by almost 300 % for G by March 2022 compared to January 2020. No one should have expected such an increase. Nor did anyone expect that the wholesalers would simply run out of material and that work would stop for up to half a year or even more. G is in the process of completing work for N and will be at least 1 year and 1 month late.
The law envisages many solutions, but none of them are inherently logical and favorable. Thus, in the case of a construction contract that contains a clause on price stability, builder G has the right to charge a higher price only if it exceeds the price at the time of signing the contract by more than 10 %, and even then only by a difference of more than 10 % and in the period when he hasn't been late yet. In the specific case of a 300 % increase in the price of styrofoam, according to the law, of this, G could bear the burden of around 200 %, and N around 100 %.
In this case, valid building regulations offer the builder the possibility of more evenly distributing the burden of the price increase, but regardless of his own fault, taking into account the current legislation, it is difficult to avoid the burden, regardless of the fact that the circumstances occurred due to objective circumstances over which he had no influence .
Both the builder G and the client N are in a disadvantageous position in this particular case. Due to the increase in prices, the client could otherwise withdraw from the contract and pay the builder the appropriate part of the agreed price for the work completed up to that point and necessary costs, but in practice this often turns out to be an unfavorable solution.
Expropriation is therefore unfavorable both for the builder, who can take a large part of the earnings, and for the client, who is in an uncertain situation. In the event of a dispute, the outcome is uncertain due to outdated legislation that does not follow economic categories and a demanding procedure of proof.
As construction contracts are generally negotiated and concluded for a longer period of time, a fundamental solution is being sought at the national level, both due to price increases and construction interruptions as a result of material shortages.
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TM, 2022
