Settlement within the construction investment in the subcontractor – investor relationship

Experience / 17.03.2023

The Firm’s team successfully supported a company in the manufacturing industry in the process of completion and settlement of an investment involving the construction of warehouse space. The support included, among other things, the settlement of subcontractors of construction works in the implemented investment. One such case found its finale in the courtroom. The amount claimed in the case was supposed to be compensation for additional work performed by the subcontractor (beyond the scope of the subcontract originally approved by the investor).

The general contractor of construction works, while executing the investment, to a large extent used the services of subcontractors, and only to a small extent executed the works on its own, for which it generally obtained the investor’s consent. One of the subcontractors, during the execution of the landscaping works, notified the general contractor of the need to perform additional works related to, among other things, the need to strengthen the ground. The subcontractor indicated that the general contractor verbally instructed him to perform the aforementioned works, while the signing of an annex to the construction contract was to take place later, and ultimately did not take place at all. After performing the additional works, the subcontractor applied to the general contractor for payment of remuneration, but the general contractor refused to pay. As a result, the subcontractor took the claim to court, suing both the general contractor and the Client. The subcontractor claimed the basis for the Client’s liability in the provisions governing joint and several liability of the investor for payment of the remuneration due to the subcontractor, or in the provisions on unjust enrichment.

The Regional Court in Rzeszow fully shared the argumentation of the Law Firm’s attorneys regarding the lack of grounds for attributing joint and several liability to the investor for payment of the subcontractor’s remuneration for the construction work under Article 647¹ of the Civil Code, due to the lack of prior notification of additional work to the investor. The court also accepted the arguments of the Law Firm’s lawyers regarding the claims based on the provisions on unjust enrichment, who argued that the claim posed a modification of the original demand, which is not allowed in commercial proceedings. From the above judgment of the District Court, the plaintiff appealed to the Court of Appeals in Rzeszow. In turn, the latter upheld the judgment of the court of first instance, fully supporting the position presented in the course of the proceedings by the lawyers of the Law Firm.

Thanks to the extensive experience of the Law Firm’s team in investment law, the Client avoided the risk of double payment of remuneration for the same construction work (to the general contractor and to the subcontractor).