Monday, 15 August 2011

Civil Law provisions pertaining construction


Highlights

Definition of “Contract for a Piece of Work”

Contractor-Supplied Materials (“CSM”)

CSM governed by warranty of title and against hidden defects

CSM price governed by law on sale contract

Obligation for quality and defects-less work

Definition of “Defect”

Liability for Not-Quality/Defective Work

Liability for Not Rectifying Defective Work

Waiver or Limitation of Liability is VOID if contractor acted fraudulently

In CSM, contractor suffers loss if work destroyed before delivery

But, not if employer delayed receiving it

Owner-Supplied Materials (“OSM”)

In OSM, contractor loses fee if work destroyed before delivery

But, not if employer delayed receiving it

Contractor does not lose fee if OSM is of poor quality, provided employer is notified

If OSM is lost through fortuitous event, contract is extinguished

Acceptance of work waives defects

Acceptance does not waive hidden defects

Acceptance with reservation does not waive defects

Contractor is entitled to compensation for employer’s delay

Contractor entitled to fee proportionate to work done plus reimbursement of expenses if work cannot be completed due to employer’s fault

Designer liable for damages if his building collapses within 15 years due to defect in design or in the ground

Construction also liable for defects in construction, or for using inferior quality materials or violation of contract

Construction supervisor is solidarily liable with contractor

Acceptance is not waiver of defects if building collapses within 15 years

Action for damages should be brought within 10 years from collapse, otherwise the action prescribes

Contractor cannot withdraw from construction contract

Contractor cannot claim for price escalation, save only by virtue of change order

To be entitled to compensation, Change Orders or Extra Works Orders must be in writing, not merely verbal

And, the additional price must have been determined in writing by both employer and contractor

Owner may terminate work AT WILL, BUT must indemnify contractor for expenses, work, usefulness and damages

Contractor is responsible for acts of his men

Contractor liable for deaths or injuries of men and even of third persons suffered during construction

Laborers and suppliers can sue the owner directly for unpaid fees up to the amount owing by owner to contractor

Advance payments to contractor do not prejudice claims of laborers and suppliers

Contractor’s renunciation of fees does not prejudice claims of laborers and suppliers

Article 1729 does not preclude the application of the Labor Code

If work to be accomplished to the satisfaction of owner, any disagreement is subject to expert judgment

If work is subject to approval of third person, his decision is final, except in case of fraud or manifest error
 

Contract for a Piece of Work

ARTICLE 1713. By the contract for a piece of work the contractor binds himself
to execute a piece of work for the employer, in consideration of a certain price or
compensation. The contractor may either employ only his labor or skill, or also
furnish the material.

ARTICLE 1714. If the contractor agrees to produce the work from material
furnished by him, he shall deliver the thing produced to the employer and transfer
dominion over the thing. This contract shall be governed by the following articles as
well as by the pertinent provisions on warranty of title and against hidden defects
and the payment of price in a contract of sale.

ARTICLE 1715. The contract shall execute the work in such a manner that it
has the qualities agreed upon and has no defects which destroy or lessen its value or
fitness for its ordinary or stipulated use. Should the work be not of such quality,
the employer may require that the contractor remove the defect or execute another
work. If the contract fails or refuses to comply with this obligation, the employer
may have the defect removed or another work executed, at the contractor's cost.

ARTICLE 1716. An agreement waiving or limiting the contractor's liability
for any defect in the work is void if the contractor acted fraudulently.

ARTICLE 1717. If the contractor bound himself to furnish the material, he
shall suffer the loss if the work should be destroyed before its delivery, save when
there has been delay in receiving it.

ARTICLE 1718. The contractor who has undertaken to put only his work or
skill, cannot claim any compensation if the work should be destroyed before its
delivery, unless there has been delay in receiving it, or if the destruction was
caused by the poor quality of the material, provided this fact was communicated in due
time to the owner. If the material is lost through a fortuitous event, the contract is
extinguished.

ARTICLE 1719. Acceptance of the work by the employer relieves the contractor
of liability for any defect in the work, unless:

(1) The defect is hidden and the employer is not, by his special
knowledge, expected to recognize the same; or

(2) The employer expressly reserves his rights against the contractor by
reason of the defect.

ARTICLE 1720. The price or compensation shall be paid at the time and place
of delivery of the work, unless there is a stipulation to the contrary. If the work is
to be delivered partially, the price or compensation for each part having been fixed,
the sum shall be paid at the time and place of delivery, in the absence of
stipulation.

ARTICLE 1721. If, in the execution of the work, an act of the employer is
required, and he incurs in delay or fails to perform the act, the contractor is
entitled to a reasonable compensation.

The amount of the compensation is computed, on the one hand, by the duration of
the delay and the amount of the compensation stipulated, and on the other hand, by
what the contractor has saved in expenses by reason of the delay or is able to earn by
a different employment of his time and industry.

ARTICLE 1722. If the work cannot be completed on account of a defect in the
material furnished by the employer, or because of orders from the employer, without
any fault on the part of the contractor, the latter has a right to an equitable part
of the compensation proportionally to the work done, and reimbursement for proper
expenses made.

ARTICLE 1723. The engineer or architect who drew up the plans and
specifications for a building is liable for damages if within fifteen years from the
completion of the structure, the same should collapse by reason of a defect in those
plans and specifications, or due to the defects in the ground. The contractor is
likewise responsible for the damages if the edifice falls, within the same period, on
account of defects in the construction or the use of materials of inferior quality
furnished by him, or due to any violation of the terms of the contract. If the
engineer or architect supervises the construction, he shall be solidarily liable with
the contractor. Acceptance of the building, after completion, does not imply waiver
of any of the cause of action by reason of any defect mentioned in the preceding
paragraph.

The action must be brought within ten years following the collapse of the
building.

ARTICLE 1724. The contractor who undertakes to build a structure or any
other work for a stipulated price, in conformity with plans and specifications agreed
upon with the land-owner, can neither withdraw from the contract nor demand an
increase in the price on account of the higher cost of labor or materials, save when
there has been a change in the plans and specifications, provided:

(1) Such change has been authorized by the proprietor in writing; and

(2) The additional price to be paid to the contractor has been determined
in writing by both parties.

ARTICLE 1725. The owner may withdraw at will from the construction of the
work, although it may have been commenced, indemnifying the contractor for all the
latter's expenses, work, and the usefulness which the owner may obtain therefrom, and
damages.

ARTICLE 1726. When a piece of work has been entrusted to a person by reason
of his personal qualifications, the contract is rescinded upon his death.

In this case the proprietor shall pay the heirs of the contractor in proportion
to the price agreed upon, the value of the part of the work done, and of the materials
prepared, provided the latter yield him some benefit. The same rule shall apply if
the contractor cannot finish the work due to circumstances beyond his control.

ARTICLE 1727. The contractor is responsible for the work done by persons
employed by him.

ARTICLE 1728. The contractor is liable for all the claims of laborers and
others employed by him, and of third persons for death or physical injuries during the
construction.

ARTICLE 1729. Those who put their labor upon or furnish materials for a
piece of work undertaken by the contractor have an action against the owner up to the
amount owing from the latter to the contractor at the time the claim is made. However,
the following shall not prejudice the laborers, employees and furnishers of materials:

(1) Payments made by the owner to the contractor before they are due;

(2) Renunciation by the contractor of any amount due him from the owner.

This article is subject to the provisions of special laws.

ARTICLE 1730. If it is agreed that the work shall be accomplished to the
satisfaction of the proprietor, it is understood that in case of disagreement the
question shall be subject to expert judgment.

If the work is subject to the approval of a third person, his decision shall be
final, except in case of fraud or manifest error.

ARTICLE 1731. He who has executed work upon a movable has a right to retain
it by way of pledge until he is paid.
 

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