The calculation of contractual penalties and submission of a set-off declaration by the client does not always prevent the contractor from claiming remuneration

In a ruling issued in September this year, the Regional Court in Rzeszów agreed with the argumentation presented by the Law Firm’s attorneys and advocates in a court dispute against the State Treasury – Director of the General Directorate for National Roads and Motorways (GDDKiA), regarding payment for the Client’s services related to the preparation of design documentation for the construction of a bypass along the national road DK9.

GDDKiA had refused to pay the Law Firm’s Client, arguing that due to another contract – concerning the preparation of a program concept with full geological research for the construction of the S19 expressway, in which the Client was a consortium member and leader – penalties were imposed for delays in its execution. GDDKiA then set off the amount it claimed from the Client’s remuneration against the penalty amount. GDDKiA asserted that the claim sought by the Client in court had been satisfied and extinguished as a result of the set-off statement, thereby justifying the plea of set-off in the legal proceedings.

The Law Firm’s lawyers presented an extensive argumentation, including:

• Challenging the admissibility and effectiveness of the set-off allegation raised by GDDKiA, based on the grounds set out in Article 203¹ of the Civil Procedure Code.
• They questioned the fact that the GDDKiA was entitled to contractual penalty claims and formulated arguments aimed at proving that the consortium with the participation of the Law Firm’s Client was not in default in the performance of the contract, in connection with which contractual penalties were charged, including that relating to the incorrect interpretation by GDDKiA of the provisions of this contract.
• As a precautionary measure, they raised the statute of limitations as a defense to some of the claims pursued by the GDDKiA.

The Court of First Instance agreed with the Law Firm’s argumentation, ruling that the formal conditions for GDDKiA’s allegation of set-off had not been met, thereby upholding the previously issued payment order. Consequently, the Court did not assess the validity of the penalties imposed by GDDKiA, though it expressed the view that the set-off allegation raised by the Law Firm’s lawyers concerning approximately 25% of the claimed amount was also justified.

This case demonstrates that the imposition of a penalty by the ordering party and the subsequent submission of a set-off statement against the contractor’s remuneration does not always prevent the contractor from effectively claiming the amounts owed to them.

The judgment is not final.