Examination of the work contract

Jul, 13 2021

Contents:

When entering into a refit contract, it is important to make sure that each clause of the agreement does not contradict the law, and the rights of the parties are not infringed. The examination of the contract will help in this.

Deciphering the basic concepts

A refit contract is a special type of obligation that has special characteristics and has special regulatory rules. The parties to the contract have specific rights and obligations. The contractor is obliged to manufacture or modify the provided item. He has the right to demand remuneration for his services. The customer is obliged to provide an item for processing or a task on the basis of which a new object will be created. Afterwards, the customer is obliged to pay for the quality performance of the work.

The result can be achieved both with the use of materials from the contractor and the customer. But usually, in practice, the contractor works with his own materials.

Based on the legal definition, we can distinguish the essence of the obligation. The transaction provides for the paid performance of certain actions that lead to the achievement of a specific result that the party requires.

The legislation and the content of the transaction may establish additional obligations. Subjects to the contract may also make their own additions. An essential criterion (i.e., a condition without which it is impossible to reach a consensus) is the deadline for the implementation of obligations.

For a more complete disclosure of the concept, it is necessary to explain such a mandatory element of the transaction as the subject matter. The subject matter is acquired by the customer in future. The subject matter may include the following:

  • manufacture of a thing;
  • recycling;
  • another function.

Consideration of details

Each type of legal relationship has exceptional characteristics. From a legal standpoint, the type of contract in question is characterized as: 

  • Bilaterally binding (i.e. the rights and obligations arise for both parties – both the person providing the service and the customer);
  • Consensual (it is necessary to reach an agreement on the item to conclude a contract);
  • Paid (remuneration is transferred for the work done).

Special attention should be paid to the mandatory conditions when concluding a transaction (the subject matter and the terms of contract’s implementation should be clearly defined).

The price that is paid under the contract is not considered as the major condition. If it is not specified in the text, it is determined taking into account the type of activity and the cost that is charged under comparable circumstances for similar actions. Moreover, the cost includes not only remuneration, but also costs incurred by the contractor in the course of performing the work.

It is allowed to calculate the cost on the basis of the prepared estimate. With this method, the contractor must act in accordance with the conditions of the prepared estimate.

Determining the order of calculations

The activity carried out by the contractor is paid after the delivery of the result or object (provided that the work is properly performed, and the deadlines are met). This is the standard rule. Civil law rules give some independence when considering the provisions of the agreement, so the transfer of funds can be carried out in the following cases:

  • When accepting intermediate stages;
  • On the terms of advance payment.

The customer can evade payment, even if the goal is achieved and the item is ready for transfer. The contractor’s right to retain the item (as well as materials, equipment belonging to the customer) until payment is a guarantee of performance.

Difficulties may arise when determining the price by making an estimate. During the production process, the manufacturer may come to the conclusion that additional work needs to be carried out. Such decisions must be justified. The second participant must be notified about the impossibility of implementing the set goal in such a situation. If the price, taking into account the recalculation, is not approved and the transaction is terminated, the payment is made in the completed part (actual costs).

If the costs are lower than the amount specified in the estimate, the amount initially established by the agreement is paid. The exception is the case when, due to savings, the item does not meet the declared quality.

What to do if the obligations are violated

In case of breach of the contract and violation of the assigned obligations, adverse consequences occur for the participant who committed such violations. The standard methods of delineating responsibility are as follows:

  • The party that provided its own property for the fulfillment of the conditions is responsible for the accidental loss/damage of such property. 
  • The contractor is responsible for accidental loss/damage to the result.

The result of the work may not meet the quality requirements. In practice, there are cases when a thing cannot be used for its intended purpose precisely because of the poor quality of the work performed. This happens when the contractor violates the provisions that are defined by the contract. Then the law takes the side of the recipient and grants the right to choose one of the following actions:

  • Improvement of shortcomings at the expense of the contractor;
  • Cost reduction;
  • Compensation of own expenses that were incurred in connection with the elimination of deficiencies at the expense of the customer himself.

Such powers are conferred by the Civil Code of the Russian Federation.  However, the contractor is entitled to start working “from scratch” – to make or recycle a thing at his own expense. The losses incurred by the customer, in this case, must be compensated by the contractor. In such situations, the created value is returned back to the contractor.

A significant violation of the provisions of the transaction on the part of the contractor entails the termination of the agreement. The customer has the full right to compensation for damages. Such consequences are applied in the event of inaction of the contractor when the other party makes the relevant requirements.

Types of refit contracts

The examination of the contract is also required to determine the transaction being concluded. This is of fundamental importance since special rules apply to different types. The fact is that the law establishes general rules that apply regardless of the type, and there are special ones.

There are the following types of contracts: 

  • Construction.
  • Household.
  • Contract for the execution of design and survey work.
  • Contract for the performance of works for state/municipal needs.

The contractor, in accordance with the customer’s task, is obliged to build a specific object/perform construction work of a different nature. The customer must arrange suitable conditions for the implementation of the project, accept the results and pay the set price.

Transactions of this type have become widespread in the field of construction, reconstruction, capital repairs of real estate objects.  When the examination of the contract is carried out, it is possible to consider where general and special rules are to be applied.

The law directly obliges the contractor to strictly observe the following actions:

  • comply with the technical documentation that determines the scope and nature of the actions carried out; 
  • rely on an estimate that determines the cost of work (for a construction contract, the preparation of an estimate is mandatory, whereas in a “normal” contract, the preparation of an estimate is allowed at the request of the party).

The construction work should not violate the safety requirements. In addition, there is an obligation to comply with environmental protection requirements.

Next – a few words about the household contract. The result of the provision of services should satisfy household needs.

According to the agreement on survey work, the contractor is engaged in the development of technical and engineering documentation. The customer, accordingly, gives the task, accepts and pays for the results.

A state/municipal contract is concluded for the performance of construction, design and engineering works. It is noteworthy that this type of transactions is regulated by the rules governing the provisions of the construction contract and the general rules (if the contract for state or municipal needs does not have its own special rules).

Choosing an expert organization

Such services are most often provided to special subjects, and not to “ordinary” citizens. Due to the specifics of their activities, special requirements and conditions have been put forward for the content, which must be observed by the parties. Therefore, the analysis of the agreement plays an important role.

The specialist who checks the conditions does a tremendous job. For example, the specialist may perform the following actions:

  • analyze the contract; 
  • check for compliance with a variety of regulatory legal acts that are in force in the Russian Federation, which excludes the possibility of obtaining an unjustified benefit from one of the parties;
  • identify possible risks;
  • eliminate shortcomings;
  • clarify controversial issues;
  • bring the contract in compliance with the legislation.

This list gives only a superficial idea of the scope of the lawyer’s function but confirms the significance of this stage. Such a study provides a guarantee of legality as well as minimizes the risk of adverse consequences, which can include:

  • litigation;
  • financial costs;
  • loss of the counterparty’s trust;
  • deterioration of the reputation in the market;
  • invalidation of the terms, etc.

A high-quality analysis will save you from many problems in future. It is important to entrust the examination to a lawyer who specializes in such issues.

Conclusion

The expert’s opinion on the content of the contract is necessary for the correct qualification, a clear definition of the rights and obligations of the parties, prevention of adverse consequences and peace of mind of the participants in the transaction. If the results of the evaluation of the contract are unsatisfactory, the customer can challenge the conducted expertise under the contract of legal services.

Author of the article
Examination of the work contract
Valentina Khlavich
Managing Partner
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