REALWorld Law


Allocation of risk

What risks in a construction or engineering contract are normally borne by the contractor? To what extent is force majeure relevant in such contracts?



Ukrainian legislation provides that the contractor is usually liable for accidental destruction or damage to the facilities which are in the process of construction and materials or equipment of the developer or any third parties located on the construction site. However, the allocation of those risks between developer, contractor and sub-contractor could be separately agreed between the parties.

The contractor usually bears the risk of injury to its employees which takes place on the construction site and, in some cases, injuries to third parties (if such injuries took place on the construction site due to the contractor's fault).

The contractor also bears contractual risks connected with breaches of the terms of the construction/engineering contract, such as delays in performance of the construction works or incomplete performance of works.

Usually a construction and engineering contract will include a force majeure clause envisaging circumstances/events deemed to be force majeure. Normally it is stipulated that if a force-majeure event continues to exist for a period of time agreed by the parties (eg three months), the parties are entitled to terminate the construction contract.