In a construction contract, the receipt, warranty, penalty clause, and arbitration must be drafted in connection with the technical obligations and the schedule of work. General terms or incorrect legislative references can create disputes even when the parties intended to prevent delays and defects.

The quality of the works, the reception and the guarantee

The contract of construction establishes the due work, price, deadlines, and the method of verifying the execution. Law no. 10/1995 imposes obligations regarding the quality in construction for the participants in design, verification, supply, execution, and technical control, according to the role of each. Responsibility does not automatically transfer entirely to the main contractor for any problem caused by another participant; the concrete legal and contractual obligations, each party’s contribution, and the link between the act and the defect are analyzed.

The regulation approved by HG No. 273/1994 provides, as a rule, for two stages: the reception upon completion of the works and the final reception, organized after the expiration of the warranty period. The receipt record must record the state of the works, any objections and the required repairs. The receipt is an important reference for ascertaining the works and calculating deadlines, but it does not in itself remove liability for hidden defects or the obligations provided by law.

Article 30 of Law No. 10/1995 regulates liability for hidden defects arising within 10 years from the receipt of the work and, after this period, for structural defects resulting from non-compliance with the design and execution standards applicable at the time of completion. This legal rule must be distinguished from the contractual warranty, the obligation to remedy defects, and the limitation periods, which are examined separately depending on the contract, the nature of the defect, and the moment of its discovery.

How to draft the penal clause

According to Articles 1.538-1.543 of the Civil Code, by the penal clause the parties stipulate a payment due in case of non-execution of the main obligation. The creditor may demand the agreed penalty without proving the existence of a prejudice. The clause must clearly indicate the guaranteed obligation and the situation that triggers the payment.

In construction contracts, the clause can refer, for example, to the exceeding of a contractual deadline, the failure to complete a stage or the non-compliance of a work. The useful drafting specifies:

  • the obligation and the exact term, including the moment from which the delay begins;
  • the method of calculating the penalty, the unit of time, the calculation basis and, if the parties decide, a ceiling;
  • how the deadlines modified by additional acts, the suspensions and delays attributable to the other party are treated;
  • the procedure for notifying, determining and recording the delay or defect;
  • if the penalty concerns delay, the final failure to perform or a distinct obligation of a different nature.

The rule regarding the accumulation of penalties depends on the type of offense. The Civil Code allows, under Article 1.539, the request for the enforcement of the principal obligation together with the penalty when it was stipulated for late payment or for enforcement in a specific place. For other situations, the creditor cannot automatically request the enforcement in kind as well, and the penalty. Acceptance of a receipt or agreement on an extension does not in any case extinguish the penalties: the clause, the signed documents, the reservations made, and the conduct of the parties matter.

The court may reduce the penalty only under the conditions provided for in Article 1.541 of the Civil Code: when the principal obligation has been partially fulfilled and the enforcement benefited the creditor, or when the penalty is manifestly excessive compared to the foreseeable damage upon the conclusion of the contract. Any contractual limitation contrary to the legal regime is subject to the rule of the same article.

The arbitration clause: what it must provide for

The parties may agree that disputes arising from the contract shall be resolved through arbitration. The arbitration agreement shall be concluded in writing; for disputes concerning the transfer of ownership or the creation of another real right over immovable property, the law requires the authentic notarial form. A compromise clause must indicate the manner of appointing the arbitrators; when the parties choose institutionalized arbitration, it is sufficient to refer to the institution or its procedural rules, pursuant to Articles 548-550 of the Code of Civil Procedure.

Before signing, it is useful to clarify the disputes covered, the institution or the ad-hoc nature of the arbitration, the appointment of the arbitrators, the place and language of the proceedings and the applicable rules. A valid arbitration agreement excludes the jurisdiction of the judicial court for the dispute it covers. The arbitration decision may only be challenged through the means and grounds provided by law; arbitration does not guarantee a faster or cheaper procedure by itself.

Useful documents when a dispute arises

  • the contract and additional documents, including the execution schedule and the penalty and arbitration clauses;
  • the site work minutes, notifications, change orders and correspondence regarding deadlines;
  • the receipt records, the technical book and the documents regarding the guarantee and repairs;
  • technical reports, expert opinions, photographs and documents showing when the defect appeared or was detected;
  • the calculation of the penalty, with the period, the calculation basis and the events that changed the term.

Legal sources

This material is for informational purposes only. In a specific contract, the effects of the clauses depend on the signed text, the execution documents, and the applicable rules at the time of its conclusion.