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.
The Client’s Obligation to Compensate Damage
Article 633 protects the contractor’s interests where the subject of the dispute is the client’s act or omission. The contractor may demand compensation of damage if the client does not accept the work performed. The client is obliged to compensate the damage also where he fails to perform an action necessary for the performance of the work — for example, does not hand over the construction site, does not participate in coordination, or does not supply the necessary information.
The amount of compensation is determined by reconciling two criteria: on the one hand, according to the duration of the delay and the amount of the remuneration; on the other hand, according to what the contractor would have received by using his labour otherwise, had the client not delayed. In practice this means that in preparing the claim the contractor must show both the time factor and the lost benefit of the alternative use — it is on the comparison of these two that the court builds the amount of compensation.
Termination and the Remuneration for Work Performed
Article 636 grants the client a broad right: he may renounce the contract at any time before the completion of the work. This means the client is not obliged to justify the reason for withdrawal — the right of refusal is unconditional. But the right is accompanied by a compensatory duty: the client must compensate the contractor for the work performed and the damage caused by the termination of the contract.
In the context of a scope-of-work dispute this norm often becomes the key to the resolution: where the client terminates the contract at a partially completed stage, the question arises what part counts as performed and what it is worth. For the contractor the decisive factor here is the documentary fixation of the works performed — acts, journals, photographic material and the corresponding correspondence — since it is precisely these evidence that substantiate the claim for remuneration and the amount of damage.
Frequently Asked Questions
What happens if the amount of remuneration is not indicated in the contract?
Under Article 630, where a tariff exists the tariff rate is deemed agreed, and where no tariffs exist — the customary remuneration; remuneration is deemed agreed even implicitly.
Can the contractor demand coverage of a cost overrun?
Under Article 631, in the case of a significant excess of the estimate the contractor may demand only the agreed remuneration, unless the excess could not have been foreseen in advance; he must immediately notify the client of the increase.
When does the client compensate the contractor’s damage?
Under Article 633, where the client does not accept the work performed or fails to perform an action necessary for the work, he must compensate the damage according to the duration of the delay, the remuneration and the lost alternative.
Can the client terminate the contract at any time?
Yes. Under Article 636 the client may renounce the contract at any time before completion, but must compensate the contractor for the work performed and the damage caused.
How We Help on Legal.ge
On Legal.ge we assist at every stage of a scope-of-work dispute: we assess the difference between the work provided for by the contract and the work actually performed, prepare the claim or the action, plan the collection of evidence, and defend your interests in negotiations and in court. Contact our team at the early phase of the dispute.