The Legal Foundation of Commercial Construction
Commercial construction relationships in Georgia rest on the contract-for-work model regulated by the Civil Code. Under this contract, the contractor undertakes to perform the work provided for by the contract, while the customer is obliged to pay the contractor the agreed remuneration. Article 629 sets out precisely this basic model, and it forms the legal basis of construction contracts in every case where a customer needs a completed result — a built, renovated or reconstructed facility. The rule applies regardless of project scale, from office buildings to warehouses and industrial facilities.
Where the work involves the manufacture of a product and the contractor produces it using material purchased at its own expense, the contractor transfers to the customer ownership of the finished product, and if a generic thing has been manufactured, the rules on sale apply. The question of the cost estimate must also be borne in mind: under Article 629, the preparation of a cost estimate related to the contract for work is not reimbursed unless otherwise agreed by the parties. This rule must be factored into budgeting so that preparatory expenses are allocated in advance rather than becoming a later dispute.
Materials, Quality and Accountability
If the contractor performs the work using its own material, it is liable for poor-quality material — the risk of material quality rests on the party that supplied it. Conversely, the contractor is also responsible for the improper use of the customer's material. Article 646 obliges the contractor to submit to the customer an account of the use of the material and to return the remaining material. In practice, records of material consumption are not a courtesy but a statutory duty, and their absence may weigh against the contractor in a dispute.
The contractor's responsibility extends further to the customer's property. Under Article 650, the contractor is liable for the loss or damage of the customer's property, including in cases of negligence. On a construction site this covers the customer's equipment, goods and existing structures, so organising safe works and protecting the customer's property are direct legal obligations of the contractor.
The Duty to Warn and the Right to Refuse the Contract
Article 647 obliges the contractor to warn the customer in due time that the material received from the customer is of poor quality and unfit; that, if the customer's instruction is followed, the result of the work will not be durable or fit for use; or that other circumstances independent of the contractor threaten the durability and serviceability of the work. This duty is a central instrument for distributing risk: the consequences of a decision taken after proper notification fall on the customer.
If the customer, despite the contractor's timely warning, does not within the appropriate period replace the unusable or poor-quality material, does not change the instruction concerning the manner of performing the work, and does not eliminate the other circumstance capable of causing harm, the contractor is entitled to refuse the contract and to claim compensation for the damage caused thereby. A timely, specific and properly documented warning often becomes decisive evidence later.
Legal Flawlessness and Payment for Completed Work
When a commercial facility is handed over, legal flawlessness is no less important than technical quality. Under Article 640, a product is considered legally flawless if third parties cannot exercise any rights against the customer. This guarantees that the customer receives a result free of third-party claims — particularly significant in commercial construction, where such rights can obstruct financing, registration or later disposal of the property.
The rule for payment is defined by Article 648: the customer must pay the contractor the remuneration after the completion of the work, unless the contract provides for payment by instalments. The parties remain free to agree on advance or staged payments, but absent such an agreement the default rule — payment after completion — applies. The payment schedule should therefore be documented unambiguously in the contract.
Frequently Asked Questions
Who answers for the quality of the material?
If the contractor performs the work with its own material, it is liable for poor-quality material. It is equally responsible for the improper use of the customer's material, and it must return the remaining material to the customer together with an account of its use.
When may the contractor refuse the contract?
Where the customer, despite a timely warning, does not replace poor-quality material within the set period, does not change its instruction or does not eliminate a circumstance dangerous to the work, the contractor may refuse the contract and claim compensation for the damage.
When does the obligation to pay arise?
After the completion of the work, unless the contract provides for payment by instalments. Any different schedule is a matter for the parties' agreement and must be reflected in the contract.
What is a legally flawless product?
A product in respect of which third parties cannot exercise any rights against the customer. Obtaining such a result is essential for the further use and disposal of a commercial facility.
Is the contractor liable for damage to the customer's property?
Yes. The contractor answers for the loss or damage of the customer's property, including in cases of negligence, so the protection of the customer's property present on the site is the contractor's obligation.
How We Help on Legal.ge
The lawyers of Legal.ge bring years of experience in commercial construction law to every mandate. We will analyse your construction contract, assess the risks connected with materials, the duty to warn and remuneration, structure the procedures of handover and payment, and protect your interests if a dispute arises. Contact us on Legal.ge — we will help keep your project legally protected at every stage, from the first estimate to final acceptance.