The Contractor doesn’t pay – how to obtain unpaid remuneration from the investor?

The modern construction market is not free from problems related to timely payments. Unpaid remuneration is a frequent issue, particularly for subcontractors and sub-subcontractors. The lack of payment by the general contractor or contractor, however, does not always prevent them from receiving the compensation they are due.

Article 647¹ §1 of the Polish Civil Code establishes the so-called guarantee liability of the investor for the payment of remuneration to the subcontractor. Pursuant to Article 647¹ §5 of the Civil Code, this also applies accordingly to the joint and several liability of the investor, contractor, and subcontractor who has entered into an agreement with a sub-subcontractor, for payment of remuneration to the sub-subcontractor.

However, for the joint and several liability of the investor to arise in relation to the payment of remuneration due to the subcontractor for construction works performed, certain conditions must be met.

A subcontractor will be legally entitled to claim payment from the investor in two cases:

• if the construction contract between the investor and the contractor—concluded in writing under penalty of nullity—explicitly names the specific subcontractor and defines in detail the scope of work to be performed by them, or
• if the contractor or subcontractor, prior to the commencement of works by the subcontractor, provides the investor with written notice detailing the scope of work to be performed by the subcontractor, and the investor does not raise an objection within 30 days.

 

It is important to emphasize that:

• the notice and any objection must be made in writing under pain of nullity;
• the notice must at least specify the detailed subject of the construction works and the subcontractor who will perform them – this is a condition for the notice to be valid;
• the notice must be submitted before the subcontractor begins performing the works covered by it, as otherwise, joint and several liability will not cover remuneration for works performed prior to the notice – this is especially important given the investor’s right to object, which the subcontractor must also take into account;
• the notice may be submitted by either the contractor or the subcontractor, but regardless of who submits it, all the above requirements must be met;
• the deadline for filing an objection is final, i.e. an objection filed after the deadline is ineffective and will not lead to exemption from joint and several liability.

 

The joint and several liability referred to in Article 647¹ §1 and §5 of the Civil Code covers only the remuneration due to the subcontractor. It does not extend to other claims, such as damages or interest resulting from delays in payment by the contractor. The investor may only be liable for interest if they themselves delay payment – i.e., after receiving an effective payment demand from the subcontractor.

Additionally, it should be noted that the upper limit of the investor’s joint and several liability toward the subcontractor is determined by the amount of remuneration due from the investor to the general contractor for the same construction works (Article 647¹ §3 of the Civil Code).

Given the strict requirements for the investor’s joint and several liability to arise, every subcontractor intending to begin construction work should ensure that all formalities are duly completed. Failure to act in this regard may lead to a situation where, despite having completed the work, the subcontractor will not be able to rely on the legal instruments ensuring payment from the investor if the contractor fails to pay.