The Concept of the Contract for Work and the Parties’ Obligations
Disputes about the scope of work in construction practice are resolved under the norms of the contract for work of the Civil Code of Georgia. Under Article 629, under a contract for work the contractor undertakes to perform the work provided for by the contract, while the client is obliged to pay the contractor the agreed remuneration. This definition underlies every dispute concerning what volume of work was agreed, what was included in the remuneration, and who bears the responsibility for cost overruns.
The same article establishes two important rules. First: where the work involves the manufacture of an article and the contractor manufactures it from materials acquired by himself, he transfers to the client ownership of the manufactured article, and where a generic thing has been manufactured, the rules on sale apply. Second: the drawing up of a cost estimate connected with the work is not compensated unless otherwise provided by agreement. The practical conclusion is this: if the client wishes to steer the changes in the scope of work through documentation, the obligation to compensate the estimate must be expressly provided for in the contract; otherwise the cost of preparing it remains the contractor’s risk.
The Rules on Agreeing the Remuneration
Article 630 answers the question of what happens when the parties do not expressly fix the amount of the remuneration. Under the law, the remuneration is deemed agreed even implicitly, where according to the circumstances the work is to be expected only for remuneration — that is, where the performance of such work without payment is inconceivable, the contract operates for remuneration even without a fixed sum.
Where the amount of the remuneration has not been agreed, the tariff rate is deemed agreed where a tariff exists; where no tariffs exist — the customary remuneration. The practical significance for a dispute is clear: when a contractor demands additional payment for works that did not figure in the original agreement, the court first establishes whether the amount was agreed, then whether a tariff exists, and only after that applies the legal standard of customary remuneration. Documenting every episode of a change in scope in written form is therefore always a better strategy than relying on the default rules of the law.
The Consequences of Exceeding an Approximate Estimate
Article 631 regulates one of the most frequent disputed situations — what happens when the actual costs significantly exceed the approximate estimate. The rule is strict for the contractor: where the contractor significantly exceeds the estimate, he may demand only the agreed remuneration, except in cases where the excess could not have been foreseen in advance. Under the general rule, the risk of the overrun thus rests on the contractor.
For the application of the exception the law also lays down a procedural duty: the contractor must immediately notify the client of an increase in the approximate estimate such as could not have been foreseen at the conclusion of the contract. If the client terminates the contract because of the increase in the estimate, he is obliged to compensate the work performed according to the approximate estimate. This means that a timely and substantiated notice protects the contractor’s interests in both scenarios: where the client refuses the increase and terminates the contract, the remuneration for the performed part will still be determined by the estimate.