The general contractor's liability

by Rafał Szymański

8 November 2021

The general contractor's liability for the compensation of a sub-subcontractor is not a new problem. This issue is still widely debated and continues to be the subject of interesting court rulings.

Colleagues from the Rödl & Partner Litigation and Dispute Resolution practice successfully represented a sub-subcontractor in a dispute with a renowned Poznanian developer before the Court of Appeal in Katowice. The dispute related to the general contractor's liability for the compensation of the sub-subcontractor. Attorneys at law Aneta Siwek and Rafał Szymański acceded to the proceedings after the court of first instance had issued an unfavourable ruling.

The receipt of the compensation for the works performed under the sub-subcontract was critical for the client to be able to continue operations.

What was the case about?

In the appeal proceedings, the dispute referred to the general contractor’s liability and decisive was the answer to the question: can a sub-subcontractor be treated as a subcontractor in construction works?

According to the previous wording of Article 6471. (1) of the Polish Civil Code, it is the construction works agreement between the investor and the contractor (general contractor) which defines the scope of works that the contractor will perform personally or with the help of subcontractors. By contrast, according to the new Article 6471 (1) of the Polish Civil Code  the investor is held liable jointly and severally with the contractor (general contractor) for the payment of the compensation due to the subcontractor for construction works performed by the latter  – unless, within 30 days of receipt by the investor of the notice, the investor submits to the contractor and subcontractor a letter of objection to the performance of such works by the subcontractor. What added a particular flavour to the matter was ambiguity as to which of the versions of the Article should be relied on to assess the existence of the premises confirmingthe general contractor's liability towards sub-subcontractors.

The gist of the legal problem (irrespective of which of the versions of Article 6471 of the Polish Civil Code should apply) was the fact that the investor's strict liability did not arise from the agreement between the contractor and the subcontractor – similar as where the liability of the general contractor towards the sub-subcontractor did not arise from the agreement between the subcontractor and the sub-subcontractor – but only from the law, and the premise was the conclusion of the “main” agreement on construction works.

Summary

The Court of Appeal held that when determining which rules regulate the liability towards subcontractors irrespective of the date of concluding the agreement with the subcontractor it is imperative to follow the rules established so far and practised in accordance with the laws applicable as of the date of concluding the main construction works agreement.

So, if the main construction works agreement, i.e. the agreement between the investor and the general contractor, was concluded before the new article came into force, the rules regulating the liability of the investor and the general contractor should be determined and the consequences of the prior approval for hiring a sub-subcontractor should be assessed according to the provisions applicable not on the date of concluding that agreement but on the date of concluding the agreement with the subcontractor. Thus, it was also reasonable to conclude that the sub-subcontractor was duly approved by the general contractor.