From the first of January, the New Civil Code (NCC) will eliminate the dual regulation of contracts for work, which was hitherto unique in the context of European legislation. A single set of legal regulations will newly apply to contracts for work, whether these are based on commercial or non-commercial relationships. Under the New Civil Code, contracts for work have seen several changes, the most fundamental of which is perhaps the ability to create work with an intangible result (see Section 2631 – 2635 NCC).
Definition of work
Work, pursuant to Section 2587, is commonly defined as:
1. the creation of a certain thing/object that does not fall under a purchase agreement,
2. maintenance, repair or modification of a thing/object, or
3. activity with a different result (including intangible).
It can be inferred from the above that under the NCC, work is understood as work that primarily differs from work conducted by an employee on the basis of an employment contract in that a contractor conducts work under a contract for work independently, according to its own schedule, using its own resources and at its own risk and is not subject to the client’s continual supervision or management.
New options for negotiating price
The rule to date was that the price of the work had to be agreed in the contract, or at least the method of its determination, unless the parties expressed a willingness to conclude a contract without such specification. Although under Section 2586 (2) this method of determining price remains unchanged, the parties also have a new option to determine the price by estimate, and if a price is not determined, the usual price for the same or comparable work will apply.
Execution of work (Section 2604 et seq.)
The execution of work was hitherto understood to mean its due completion and delivery to the client. Case law infers that duly completed work is work executed without defects, therefore flawless.
In contrast, Section 2604 NCC provides a new interpretation of the execution of work, which is defined as the completion and delivery of work, where completion is understood to mean a demonstration of the ability of the work to serve its designated purpose. If the work is demonstrated to be able to serve its purpose, the client must accept the work or falls into default. The completed work can be accepted with or without reservations.
The client will no longer be able to refuse to accept work
If the work is completed, the client must take receipt of (accept) the work. In the case of a thing/object, if the client does not take receipt of the thing/object without delay, the contractor will notify the client and provide an additional period of at least 1 month for the client to take receipt of the work. If the client does not take receipt of the work even after the expiry of this period, the contractor can sell the work on the client’s account. In exceptional cases, it can sell the work without this additional period (e.g. in the case of work subject to quick deterioration).
Construction as the subject of work
The NCC separately regulates certain specifics of work conducted as construction work. These specifics include, for example, inspections of construction work or liability for defects.
For example, the client does not have the right to refuse to accept construction on the grounds of isolated minor defects, which in themselves, or in conjunction with others, do not functionally or aesthetically prevent or substantially limit the use of the building (Section 2628 NCC). It will be possible to claim hidden defects for a period of five years after the acceptance of construction. The same applies for hidden defects in project documentation and similar obligations (Section 2629 (1) NCC). The contractor is relieved of liability for a defect in construction, if it can prove that the defect is the result of an error in project documentation supplied by a party chosen by the client (Section 2630 (2) NCC).
Conclusion:
Contracts for work will see a number of fundamental changes once the NCC comes into force. A key advantage will be the ability to conclude contracts for work for activities with intangible results, which was hitherto a major obstacle. Legislators’ efforts to regulate construction as a specific work that requires separate regulation can be considered positively. A crucial change in practice will be the new regulations governing the completion of work, where the client will no longer be able to refuse to take receipt of the work for what were often insignificant defects, provided the contractor can demonstrate the ability of the work to serve its designated purpose. Clients will therefore be newly forced to take receipt of work and resolve any dissatisfaction on the grounds of liability for defects, which they will also have to claim duly without delay.
For more information, please contact our office’s partner, Mgr. Jiří Kučera, e-mail: jkucera@kuceralegal.cz ; tel.: +420604242241