In the practice of economic turnover, construction contractors often receive summonses and/or lawsuits from ordering parties demanding reimbursement of the costs of substitute performance commissioned to third parties following the contractor’s ineffective removal of defects.
The legal issue of the admissibility of the use of substitute performance by the ordering party in the situation of ineffective removal of defects by the contractor has been the subject of a Supreme Court decision.
In one of the facts analysed by the Supreme Court, there was a defect in the plaintiffs’ residential house, built by the defendant contractor, consisting in the lack of adequate hot water pressure, caused by the installation of incorrect diameter pipes and the incorrect selection of a heating boiler. The contractor replaced the boiler and partially replaced the pipes to comply with the design, but this did not effectively rectify the defect. In this state of affairs, the plaintiffs, relying on Article 480 § 1 of the Civil Code, requested that the court authorise them to carry out the repair at the contractor’s expense.
In the case in question, the Supreme Court stated that if the contractor failed to effectively rectify the defects of the work within the prescribed time limit, the ordering party could not request the court to authorise them to rectify the defects at the contractor’s expense (Article 480 § 1 of the Civil Code).
The Supreme Court noted that Article 480 § 1 of the Civil Code refers to a debtor’s delay in performing an obligation, regardless of what the source of the obligation is (contract, statute, court decision), while non-performance of an obligation occurs when there is nothing in the debtor’s conduct that corresponds to the performance of the obligation. On the other hand, undue performance of an obligation takes place when the debtor’s behaviour was aimed at the fulfilment of the service, however, the result achieved by the debtor differs in certain respects from what the correctly performed service was supposed to consist in.
In turn, according to Article 476 of the Civil Code, the debtor is in default when he fails to fulfil the service on time, and if the time limit is not specified, when he fails to fulfil the service immediately after being summoned by the creditor. Thus, as long as the debtor remains in default, there is a non-performance of the obligation. The provision of Article 480 § 1 of the Civil Code therefore relates to non-performance of an obligation and not to improper performance of an obligation.
A contractor who, in performance of an obligation to remove the defects of the work, proceeded to repair the defects, but did not effectively remove the defects within the set time limit, has performed the obligation improperly. In such a case, Article 480 § 1 of the Civil Code is not applicable, as this provision does not refer to improper performance of an obligation.
It should be borne in mind that the issue of entitlements on account of warranty for defects in the case of a construction works contract is, in principle, the same as in the case of a works contract, as pursuant to Article 656 § 1 of the Civil Code, the provisions on a works contract apply accordingly to warranty for defects in an object performed under a construction works contract.
It should also be emphasised that the limitation to the ordering party’s warranty rights listed in Article 637 of the Civil Code is binding on the parties to a work/construction contract concluded before the repeal of the provision of Article 637 of the Civil Code, i.e. before 25 December 2014, and only if the parties to the contract do not agree otherwise (Article 558 § 1, first sentence, in connection with Article 638 of the Civil Code).
Accordingly, where the parties have agreed that in the event of defects in the work/construction, the ordering party shall be entitled, even without court authorisation, to rectify the defects at the contractor’s expense, it should be further stipulated that substitute performance may not be used by the ordering party in the event of failure to rectify the defects.