According to the Law on Obligations (articles 619 – 648), the contract for work is an informal (does not require specific form to be considered valid, notwithstanding the construction contract, which must be in writing); consensual (it is concluded by consenting wills without any giving); bilateral with payment (its key feature is payment of compensation for services performed).
Also, the Contract for work is an agreement where one party – the party performing the work (entrepreneur, contractor) is obligated to perform certain work, such as creating or repairing an object or to perform physical or intellectual work, etc., and the purchaser is obliged to perform a payment. Therefore, material elements to the contract for work are performing work and compensation. This type of agreement may refer to creating or repairing objects, performing certain manual labor work ranging from most simple activities to work that requires professional skills, or to performing certain intellectual activities in any area whatsoever. Furthermore, for the entire duration of the contract the purchaser may supervise the performance of the work and give instructions when appropriate to the nature of the work and the contractor is obliged to enable such supervision.
Additionally, unless otherwise indicated in the contract or by the nature of the work, the contractor is not obliged to perform the work personally, but the contractor shall still be liable to the purchaser for performing the work, even though the work is not performed personally by the contractor.
1.1. Obligations of the contractor
The contractor is obliged to draw the purchaser’s attention to defects in material that the purchaser has delivered and which it noticed or should have noticed, or otherwise be liable for damage. When the purchaser has requested that the object is produced from the material the defects of which were indicated to him/her by the contractor, the contractor shall be obliged to act according the purchaser’s request, unless it is obvious that the material is not suitable for the work ordered or that the use of the requested material in the production would harm the contractor’s reputation, in which case the contractor may cancel the contract.
Also, the contractor is obliged to warn the purchaser of defects in the order, and of other circumstances that he/she is or should have been aware of, that may be of importance for the ordered work or form performing the order on time, or otherwise be liable for damage.
The prime obligation of the Contractor is to perform the work as agreed and the rules of the corresponding line of business. The contractor is obliged to perform the order within the specified time, and if such time is not specified, within the reasonably needed for such kind of work. The contractor is not liable for default caused by the purchaser’s failure to deliver the material on time, the purchaser’s request to make alterations or by the purchaser’s failure to pay the due advance and in general is not liable default caused by the purchaser’s conduct. When it is obvious in the course of performing the ordered work that the contractor is failing to adhere to the contract conditions and in general is not working properly, so that the work, when completed, will be defective, the purchaser may warn the contractor thereof and set an equitable time limit for the contractor to conform the work to his/hers obligations. If the contractor fails to act according to the purchaser’s request within the time limit, the purchaser may cancel the contract and request compensation for damage.
As to the time limit for performing the work, if it is not included in the contract, the contractor is obliged to perform the work within the time reasonably needed for such kind of work, considering the scope of work and contractor’s technical equipment.
Upon performing the work, the contractor is obliged to deliver the purchaser the produced or repaired object. This obligation does not apply when performing certain intellectual activities, and in such cases the contractor is only obliged to perform such intellectual action. The contractor is released from this obligation, if the object produced or repaired has deteriorated for reasons for which it is not liable.
The purchaser may supervise the performance of the work and give instructions when it is suitable to the type of work, and the contractor is obliged to enable such supervision.
Especially, the purchaser is obliged to inspect the work performed as soon as possible in the regular course of events, and to notify the contractor of the detected defects without any delay. Where the purchaser being invited by the contractor to inspect and accept the performed work fails to act accordingly without justified ground, the work shall be considered as accepted. Upon inspection and acceptance of the work performed, the contractor shall not be liable for defects which could have been noticed by a usual inspection, unless it was aware of such defects, but did not inform the purchaser thereof. Where a defect that could not have been discovered by a usual inspection has subsequently become evident, the purchaser shall still be entitled to claim it, provided that he/she immediately notifies the contractor thereof or at least one month following discovery. After the expiration of two years as of the acceptance of the work performed, the purchaser may no longer be entitled to claim defects.
An purchaser who has notified in due time the contractor of defects in the work performed, is not entitled to exercise its right at court after expiration of one year following such notification. However, even after the time limit has expired, the purchaser may, having notified the contractor of the defects in due time, proceed with his/her own counter-claim for reduction of the fee and compensation of damages by means of objection to the contractor’s claim for payment.
The purchaser who has duly informed the contractor that the work performed is defective, shall be entitled to request that the defect be eliminated and to set a reasonable time limit. The purchaser shall also be entitled to compensation of damages incurred due to the foregoing. Where the elimination of the defect involves excessive expenses, the contractor may refuse to carry it out, but in such a case the purchaser shall be entitled to choose between reducing the fee or cancelling the contract, as well as to compensation of damages incurred.
On the other hand, where the work performed is useless because of a defect or where it is performed contrary to the conditions expressed in the contract, the purchaser may, without previously requesting elimination of the defect, cancel the contract and request compensation of damages incurred. Where the work performed has a defect that does not make the creation useless or where the work is not performed contrary to the conditions expressed in the contract, the purchaser shall allow the contractor to eliminate the defect. The purchaser may give the contractor a reasonable time limit to eliminate the defect. If the contractor fails to eliminate the defect within such time limit, the purchaser may, at his/her own choice, eliminate the defect at the contractor’s expense or reduce the fee for the work performed (such reduction shall be in proportion to the value of the work performed without a defect at the time of entering into contract and the value that the defective work would have at that time) or cancel the contract. Furthermore, in cases of minor defects, the purchaser cannot exercise its right to cancel the contract, but in any case is entitled to compensation of damages.
1.2. Obligations of the purchaser
The purchaser is obliged to accept the work performed in accordance with the conditions of the contract and the rules of the relevant line of business as well as to pay the fee to the contractor. If the purchaser, being invited by the contractor does not accept the work within the time limit, then the purchaser is in default. The acceptance of the work is done in a manner, place and time as stipulated in the contract, considering the purpose and nature of work.
The fee is determined by a contract, unless it is determined by a binding tariff or some other mandatory act. Where a fee is not agreed, it shall be specified by the court considering the time necessary for such work and the usual fee for such kind of work. The purchaser shall not be obliged to pay the fee before inspecting and approving the work performed, unless otherwise agreed. The same applies where it is contracted that the work be performed and delivered in parts. Establishing the fee in this type of agreements is discretionary. Certain amendments in the fee agreed cannot be requested unless in certain instances of fulfilling conditions for canceling the contract or changes of the contract due to changed circumstances. Also, the change in fee may occur in case of necessity for performing new work that were not considered when concluding the contract.
Where the fee is agreed on based on an estimate by the contractor and supported by an explicit guarantee regarding its accuracy, the contractor shall not request fee increase even if it has put more effort in the work or the performance of the work required expenses higher than originally estimated. This does not exclude the application of the rules relating to cancellation and alteration of the contract due to changed circumstances. Where the fee is agreed on based on an estimate by the contractor without an explicit guarantee regarding its accuracy, and where in the course of work it turns out that it is inevitable that the estimate will be exceeded, the contractor is obliged to inform the purchaser immediately, or otherwise lose all claims concerning the increased expenses. In order to secure the payment of claims for fees for performed work and compensation for materials used, as well as of other claims arising from the contract for work, the contractor shall have a lien on the goods it has produced or repaired, and on other goods delivered by the purchaser in connection to the work, while the contractor keeps them or ceases to keep them in his/her possession.
1.3. Risk bearing
Where the contractor supplies the material for the production of the goods and the goods are damaged or deteriorate for any reason whatsoever prior to being delivered to the purchaser, the contractor shall bear the risk and shall not be entitled to reimbursement of the material supplied, or a fee for his/her work. If the purchaser has inspected and approved the work performed, the goods shall be considered delivered to him/her and the contractor was only keeping such goods. If the purchaser is in default due to rejecting the goods offered, the risk of accidental deterioration or damage to the goods shall be transferred to him/her.
The risk of accidental deterioration of goods or damage shall be borne by the purchaser, if the purchaser provided the material for production. In such a case, the contractor shall be entitled to a fee for the work provided the goods have deteriorated or have been damaged after the purchaser’s default or if the purchaser failed to accept the invitation to inspect the goods. As an exception to the abovementioned, regarding risk bearing, shall be considered a situation where it is agreed that the purchaser shall inspect and accept delivery of individual parts in the course of the production, and in such situation the contractor shall be entitled to a fee for producing the parts inspected and approved by the purchaser, even if the subsequently deteriorate while in the contractor’s possession without its fault.
1.4. Cancelling the contract by the purchaser
Until the work ordered is completed, the purchaser may cancel the contract at any point at his will, but in such a case the purchaser shall be obliged to pay the contractor the contracted fee, reduced by the amount of costs that the contractor has not incurred but which would have been obliged to incur had the contract not been canceled, as well as the earnings that the contractor has realized by other work or that the contractor has intentionally failed to realize.
Where the time limit is an essential element to the contract and the contractor’s delay in commencing or completing the work indicates without doubt that the work will not be completed within the time limit, the purchaser may cancel the contract and request compensation of damages. The purchaser shall also have such right where the time limit is not an essential element of the contract if due to such default, the purchaser would obviously have no interest in performing the contract.
If you need any further information and advice regarding the published, please feel free to contact us here.
Source of the published regulations: www.slvesnik.com.mk