Substitute performance as an effective way to complete an investment process

A construction investment is usually a long and complicated process, often accompanied by various obstacles and complications. Sometimes, the problems encountered in the implementation of an investment are so significant that the entity ordering the works must exercise its right to entrust the further performance of the works (consisting in correction, completion or even partial implementation) to another contractor within the framework of so-called substitute performance. However, this applies to substitute performance at the stage of implementation of the subject of the contract.

In order to be able to use the institution of substitute performance, the following conditions must be met after the conclusion of a construction contract:

• the contractor performs the subject of the contract in a defective manner or contrary to the contract,
• the investor must call on the contractor to change the manner of performance and set an appropriate deadline for this purpose,
• the deadline for the contractor to change the manner of performance of the works has expired without effect.

Once the above conditions are met, the investor may entrust the correction or further performance of the work to another person at the expense and risk of the contractor.

The institution of substitute performance, resulting from the provision of Article 636 § 1 of the Civil Code, was used by a Law Firm’s Client, who entrusted the performance of construction works in a residential building to an entity which performed these works in a manner inconsistent with the construction design, construction practice, legal regulations and the provisions of the contract.

Despite written requests to the contractor to remove the defects and properly complete the subject of the contract, the contractor failed to fulfil its obligations, showing complete passivity in this regard. As a result of delays in the performance of the works and numerous defects and shortcomings in the construction works (which were also not remedied), the Client brought in a replacement contractor to the construction site. The actions taken by the Law Firm’s lawyers in the course of the residential investment contributed to the fact that the replacement works led to the correction of all defective works and the completion of the subject of the contract, which currently enables the Client to accept and obtain a permit for use of the facility. The Client has a properly completed facility and, at the same time, has not lost the warranty rights for physical defects and quality guarantees from the previous contractor.

However, it should be borne in mind that it is not always possible to exercise this right, as we mentioned in our previous post: https://wojciechowska.legal/en/substitute-performance-is-not-always-permissible/