Non-approval of time and financial claims by the contracting authority and withdrawal from the contract by the contractor

The lawyers of our Law Firm successfully concluded a dispute before the First Instance Court in which the contractor claimed over PLN 5 million from our client, who was a public contracting authority

The claims pursued by the contractor arose from a contract concluded under a public procurement procedure, covering the design and construction of design documentation with obtaining a decision on permission for the performance of a road investment (ZRID Decision) with immediate enforceability and construction works, as part of a project involving the construction of a provincial road in the Podkarpackie Province.

The task was carried out on the basis of the so-called Yellow FIDIC contract conditions, and the value of the contract concluded by the contracting authority with the contractor exceeded PLN 20 million.

During the performance of the contract, the contractor submitted a number of time and financial claims to the contracting authority, arguing that there were obstacles to the performance of construction works beyond the contractor’s control (including lack of access to the work site, different ground conditions than those resulting from the documentation provided by the contracting authority at the tender stage under the Functional- Utility Program (PFU).

The contracting authority’s non-approval of the claims in question led to a situation in which the contractor submitted a statement of withdrawal from the contract to the contracting authority, indicating that this was due to the contracting authority’s fault. In the contracting authority’s opinion, this statement was ineffective, but in the circumstances, due to the contractor’s significant delay and its failure to perform the contract (leaving the construction site), the contracting authority also submitted a statement of withdrawal from the contract and imposed a contractual penalty on the contractor for this reason.

As part of the court dispute, the contractor demanded payment of the part of the basic remuneration under the contract which, in its opinion, had not been settled, remuneration for additional work performed, remuneration for security work and materials left on the construction site, a contractual penalty for withdrawal from the contract due to the fault of the contracting authority, and indirect costs related to the submitted contract performance period (KOB and KOZ).

The contracting authority argued that some of the claims were unfounded, while the others had been satisfied in connection with the contracting authority’s statement of set-off, under which the contractor’s claims were set off against the contracting authority’s mutual claims for contractual penalties calculated by the contracting authority.

In this case, the advocates and attorneys of the Law Firm supported the contracting authority not only in court proceedings, in which the court of first instance fully agreed with our arguments and dismissed the claim, but also during the performance of the contract.

At that time, our activities included, among others

• legal analysis of the documentation concerning the contract being performed and the facts that arose during its performance related to the contractor’s delay and the contractor’s claims for time and financial compensation, as well as claims for additional work;
• providing opinions, preparing and providing ongoing advice during the preparation of the parties’ statements, including responses to the contractor’s requests and statements regarding claims, responses to the contractor’s statement regarding withdrawal from the contract, requests and statements addressed by the contracting authority to the contractor, statements regarding withdrawal from the contract by the contracting authority;
• legal support in proceedings concerning the contractor’s request for a payment guarantee;
• legal support at the stage of settling the contract concluded with the contractor, including the settlement of the contractor’s remuneration and contractual penalties.

The case clearly shows how important it is to take appropriate action and develop the right strategy at the contract implementation stage when disputes arise. In this case, the right legal approach, taken at the right time and consistently implemented, was confirmed by the judgment of the court of first instance.