LALIVE updates

Regulatory changes and force majeure – impact on lump-sum and build-operate contracts
LALIVE
  • Construction
  • Switzerland
  • November 13 2017

Swiss courts and arbitrators have addressed the interface between force majeure clauses and regulatory changes, and how they impact on the contractor's entitlements. Clauses addressing unforeseen circumstances will be construed in line with the parties' actual intentions. If they cannot be established from the text and surrounding circumstances and evidence, the tribunal will construe the clause objectively, regarding how it can be understood in good faith.

No contractor liability for defects visible at final inspection except concealed defects
LALIVE
  • Construction
  • Switzerland
  • October 09 2017

Employers should keep a watchful eye on contractor variations and ensure that they do not modify any important quality or original requirements specified in the contract. Whatever the length of the contract, the employer is duty bound to notify any deviation from the contract on final inspection. However, the courts will not protect a contractor which has fraudulently concealed a defect or prevented the employer from discovering a defect.

Valid change orders can amount to breaches of employer's ancillary obligations
LALIVE
  • Construction
  • Switzerland
  • April 10 2017

Employers typically have the power to vary works, including by making changes to the sequence or timing of their execution. Sometimes, these variations do not entitle the contractor to additional remuneration. However, as confirmed by a recent Federal Supreme Court decision, even a change order that is permitted under a contract could result in a breach of the employer's ancillary obligations and therefore give rise to a right to compensation.

Implicit employer approval of progress reports
LALIVE
  • Construction
  • Switzerland
  • February 13 2017

Many construction contracts provide that the contractor must submit daily, weekly or monthly progress reports, which then serve as a basis for invoices or applications for payment certificates. In some cases, the contract provides that these progress reports must first be approved by the employer. A recent case before the Supreme Court demonstrates that, in certain circumstances, such approval may be implied through the employer's silence.

The consequence of skipping a mandatory pre-arbitral step
LALIVE
  • Construction
  • Switzerland
  • December 05 2016

In mid-2014 the Supreme Court ruled that the requirement in the International Federation of Consulting Engineers Conditions to submit a dispute to a dispute adjudication board was a mandatory precondition for arbitration, but avoided the question of what the consequence for failing to comply should be. In a recent decision that is particularly important for international construction contracts, the court provided welcome guidance on a question that often arises in construction disputes.

Do erroneous tender documents entitle a lump-sum contractor to additional remuneration?
LALIVE
  • Construction
  • Switzerland
  • May 23 2016

A lump-sum contractor may be entitled to additional remuneration if its work is rendered more difficult due to a fault of the employer. But what happens if the contractor is aware of the employer's fault? A lump-sum contract will not protect employers from having to pay additional remuneration to the contractor for costs that the latter has incurred due to a fault of the employer or its representatives.

Limitations on right to terminate entire construction contract for delay to only part of works
LALIVE
  • Construction
  • Switzerland
  • December 21 2015

The Federal Supreme Court has limited an owner's right to terminate a contract in case of delays attributable to the contractor. The owner's interest in terminating the entire contract must be worthier of protection than the contractor's interest in keeping it in place for the works that are on time. Owners should avoid setting unreasonably short time limits to remedy delays and contractors should object immediately to unreasonably short grace periods.

Technical and safety standards – impact on owners' non-contractual liability
LALIVE
  • Construction
  • Switzerland
  • October 12 2015

In a recent decision the Supreme Court clarified the relevance of the Swiss Society of Engineers and Architects' standards for planning and construction in relation to the owner's third-party liability. The court held that an increase of technical norms indicates an increased risk arising from the respective work, against which the owner must take all reasonable and adequate protective measures.

Supreme Court – DAB proceedings precondition for arbitration under FIDIC Conditions
LALIVE
  • Construction
  • Switzerland
  • October 13 2014

The Federal Supreme Court recently analysed whether dispute adjudication board (DAB) proceedings are a precondition that must be met before resorting to arbitration under the International Federation of Consulting Engineers (FIDIC) Conditions of Contract. The court recalled that the introduction of the DAB in the FIDIC conditions was to allow for an efficient resolution of disputes arising during construction works.

Will new Swiss sanctions against Russia affect construction projects?
LALIVE
  • Construction
  • Switzerland
  • September 22 2014

Sanctions imposed by the Swiss government are of particular importance to the international construction industry. Construction contracts governed by Swiss law may be deemed null and void if they are in breach of sanctions, regardless of whether the parties have any link to Switzerland. Construction practitioners should therefore note a new ordinance imposing commercial and financial restrictions against Russian interests in relation to Ukraine.

Additional works performed with owner's knowledge but without formal approval
LALIVE
  • Construction
  • Switzerland
  • April 14 2014

An owner refused to pay for alleged additional work, claiming that it had not been aware of any changes. The contractor sued the owner claiming the amount it quoted for the new work. The Supreme Court accepted that an owner could be ordered to pay a contractor for the value of the work as a whole. The case highlights the clash between contractual requirements of form and good-faith reliance on the other party's conduct.

Impact of embargoes on construction contracts - Swiss sanctions against Iran
LALIVE
  • Construction
  • Switzerland
  • June 17 2013

Switzerland has adopted a number of sanctions against Iran. These sanctions may affect construction contracts if, among other things, one of the parties is blacklisted or the construction contract concerns works falling under the restrictions imposed by the sanctions. Any breach of the sanctions would be considered to be illegal and entail the nullity of the contract.

Amendments extend warranty claim time limit and modify terms and conditions rules
LALIVE
  • Construction
  • Switzerland
  • February 04 2013

The statutory time limit for warranty claims has been extended from one to two years. The two-year time limit is mandatory only for consumer contracts. Contracts between businesses may still provide for shorter limitation periods for warranty claims. In addition, a recent revision of the Unfair Competition Act allows tribunals to invalidate general terms and conditions that are unfair towards consumers.

Time limits for main contractor's warranty claims against subcontractors
LALIVE
  • Construction
  • Switzerland
  • November 05 2012

The Federal Supreme Court recently confirmed that a main contractor can align the contractual time bars for warranty claims against its subcontractors with the time limits applying to warranty claims that the owner has against the main contractor. This decision is relevant for both main contractors and subcontractors involved in large construction projects.

Failure to submit progress reports not fatal to compensation claim
LALIVE
  • Construction
  • Switzerland
  • June 25 2012

The controversial issue in a recent court of appeal case was whether the contractor still had a claim for compensation, despite its failure to submit progress reports and have them signed by the owner. The court ruled that in the absence of the contractually agreed progress reports, the contractor was still entitled to compensation but should establish (the amount of) its claim by other means of evidence.

Right to rescind: delayed and unfulfilled construction contracts
LALIVE
  • Construction
  • Switzerland
  • March 19 2012

The Supreme Court recently confirmed that an owner may rescind a contract for works if the contractor is in default. Before doing so, the owner must put the contractor on notice and grant it a reasonable grace period. In the present case, the contractor failed to reach agreed-upon output requirements and its delivery of the works was late. The court held that no prior notice or grace period was required in these circumstances.

Warranty claims extended for sale of goods: impact on construction contracts
LALIVE
  • Construction
  • Switzerland
  • November 21 2011

It is expected that the upper house of the Swiss Parliament, the Council of States, will approve an amendment to the Code of Obligations which will align Swiss law on warranties with the UN Convention on Contracts for the International Sale of Goods and the EU Sale of Consumer Goods Directive. Since the rules on warranties applicable to the sale of goods under Swiss law also apply to contracts for works, the extension of the time limit will also impact on Swiss construction law.

Owner's liability for ground conditions and duty of care towards contractor
LALIVE
  • Construction
  • Switzerland
  • May 09 2011

The scope of liability between owner and contractor with regard to subsoil conditions that affect the location where works are performed is often a source of dispute. The Supreme Court recently applied the duty of care in a case where a contractor's equipment was damaged by obstacles on the ground. The court's findings may be applied to construction contracts in general.

Remedies for contractor's refusal to repair defective works
LALIVE
  • Construction
  • Switzerland
  • March 07 2011

Contracts for works are regulated by Articles 363 to 379 of the Code of Obligations. The interface between these specific provisions and those applicable to all contracts under the General Part of the code raises thorny issues, as was illustrated by a recent Federal Supreme Court decision in which the court had to deal with the remedies available to the owner in case of the contractor's default.

New case law regarding defect notice requirements
LALIVE
  • Construction
  • Switzerland
  • August 31 2010

In two recent decisions, the Federal Supreme Court has reaffirmed a number of rules regarding defect notices. While neither judgment overturned or modified existing precedent, the principles underlying the court's findings are of paramount importance for contracts governed by Swiss law.

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