The Law on Obligations is the main source of legislation which regulates contracts for the design or carrying out of building works. Provisions of the Law on Obligations regulate all contractual obligations in this country.
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Building and/or engineering contractors must be licensed to carry on those activities. The licences and permits necessary before the work can start, must be obtained by the developer and include approvals from the local municipal authorities, such as an urban permit and a construction permit.
Last modified 13 Mar 2025
The Rulebook on Construction Sites, Mandatory Documentation and Participants at Construction Sites lays down the minimum requirements for sites. For instance, the client/employer is obliged to designate the site clearly, temporary construction at the site must comply with fire protection rules and procedures and the client/employer must provide a safe environment for workers and visitors there. Air pollution at the site must be managed as well as noise levels. The client/employer must at all times maintain records containing exact details of work carried out on the site, the quantity and quality of the work done and data which might affect the work.
The Law on Spatial Planning and Use of Land regulates health and safety measures for use of the development once construction is completed.
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The Law on Urban Development Land and the Law on Environmental Protection contain provisions which deal with environmental issues affecting building works.
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Investors or developers are usually required to secure the necessary infrastructure to support new developments.
Under the law of the Republika Srpska urban construction land can be either prepared or unprepared. Prepared urban construction land is equipped by the municipal authorities with the necessary infrastructure such as roads, electricity, water, sewers, etc.
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The Law on Obligations provides that terms and conditions dealing with the following issues must be included in construction contracts:
Other provisions of the Law on Obligations relating to all contracts are also implied. All other specific contractual terms are to be agreed between the parties and must be expressly incorporated into the contract.
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In practice, there are no standard form contracts for use within the construction and engineering sectors that are drafted by a single industry body or association. Construction contracts are drafted in accordance with provisions of the Law on Obligations.
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These types of contract are governed by the Law on Obligations and are concluded between the client (ie the developer) on one side, and the general contractor, on the other side. The general contractor is responsible to the developer.
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The risk of any defects occurring in the works and the risk as to the quality of the construction are borne by the contractor. These risks are provided for in the Law on Obligations which regulates these types of contracts generally and provides for the risks borne by the contractor. Other provisions can be agreed between the parties. Force majeure is relevant to the extent provided for by the law.
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The Law on Public Procurement in the Federation of Bosnia and Herzegovina provides that government bodies can be contracting parties in procurement procedures, hence, there is no particular set of rules which applies to government bodies that are different from rules applicable to private or public legal entities. The concept of the public private partnership (PPP) is still a relative novelty in this country and few PPP projects exist. However, efforts are being made in order to promote the significance and relevance of PPP projects in the country’s development.
The issue of PPPs in the Republic Srpska and Brčko District is regulated by the Law on Public-Private Partnerships in Republic Srpska from 2009 and the Law on Public-Private Partnerships in Brčko District from the same year, which is an indicator of the encouragement the government gives to these partnerships.
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Yes.
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The law does not provide for mandatory insurance to be put in place. A typical construction contract will contain provisions such as: a requirement for insurance of fixed assets, insurance of the workforce, liability insurance etc.
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Corporate guarantees as such are not enforceable in the courts of BiH, hence in practice they do not provide adequate security. Security is often provided in form of a bank guarantee.
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There is no strictly defined mode of payment. The parties to the contract are free to decide and agree on such issues. Payments are most commonly made on completion of agreed stages of development.
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Yes, parties can agree on fixed date and provisions which would apply in such cases. Delay would be dealt by either 1) termination of the agreement or 2) an extension of the term which would trigger the application of contractual penalty provisions.
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Any changes to the specification for engineering or construction work should normally be concluded in writing in the form of an appendix to the original agreement. These changes must be approved by relevant administrative bodies through a re-issue of the relevant urban permit and construction permit, before any such changes can be actually be implemented.
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'Completion' of the building as such is not defined by law. The law does not stipulate what has to be achieved before 'completion' of the building work can be certified; however, it is considered that the work is completed once a Use Permit is obtained from the local administrative authority. There is no official body which can certify that completion of building works has been achieved in accordance with the contract, other than the parties to the contract. Official administrative authorities provide a Use Permit which certifies that the general standards in construction have been complied with and that the building as such is safe to be used.
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In accordance with the Law on Obligations, claims for breach of contract can be made only within five years from the date of completion of the works, while claims related to the construction of the building can be made up to 10 years from that date.
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In accordance with the Law on Obligations, a developer is liable for shortcomings related to the soundness of a building if those shortcomings are proved within 10 years from the date of completion of work. The developer is also liable for the site conditions beneath the building unless a specialised body certified that the land was safe for use. This liability cannot be waived by contract. A developer is not freed from liability even where the damage was a result of the purchaser’s specific requests, unless the purchaser was notified of possible risks and instructed the developer to proceed.
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Liability rests with parties which actually contract with the relevant end user. These contracts are normally between the developer and the end user and in such cases, liability rests with the developer. No such liability can be excluded. Third parties, such as architects, other designers, and contractors have no liability to end users.
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Rights and obligations are enforceable between contracting parties. Tenants and banks, as third parties, would not have claim against an original consultant or contractor, unless this is specifically provided for in the contractual relationship between the original purchaser and constructor or consultant. This is, however, not common practice.
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There is no a specific court that deals with construction disputes only. This depends on the nature of the construction in dispute. The courts of first instance are the municipal or basic courts. The court of first instance can reach a judgment which can be appealed in a higher court.
Once the higher court decides on an appeal, the judgment becomes final and legally binding and cannot be appealed further. However, these judgments can still be the subject of a special procedure in exceptional circumstances known as 'revision'. This application is filed with the supreme court and if successful, can reverse the decisions of the lower courts.
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Some cases are referred to arbitration; however, most disputes are resolved through judicial procedures. Litigation through national courts is less costly. Both, the court’s and arbitration decisions are final and binding.
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It is not common but it is possible for construction disputes to be referred to ADR in this country.
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What official permissions, licences or consents are required by a building or engineering contractor before it can start work?
Building and/or engineering contractors must be licensed to carry on those activities. The licences and permits necessary before the work can start, must be obtained by the developer and include approvals from the local municipal authorities, such as an urban permit and a construction permit.
Last modified 13 Mar 2025