REALWorld Law

Apart from the contract are any other documents commonly entered into by way of security – such as a guarantee from a building contractor's parent or ultimate holding company or a bond from a third-party surety?

The Croatian Obligations Act (Zakon o obveznim odnosima, Official Gazette Nos. 35/05, 41/08, 125/11 and 78/15) regulates contracts for the carrying out of building works (building contracts) as well as contracts for the design of building works, which are in general considered to be service agreements. In addition, the code of practice in construction, which was adopted in 1977, is still applicable as a customary law source and is, in accordance with the general principles of the Croatian Obligations Act, applicable if the contracting parties (where both are commercial entities) do not exclude it or, where private individuals contract, where the parties agree that it will apply. However, due to technical and contractual developments since 1977, this code of practice lost its importance and a new code is being prepared to take into consideration current legislation and practice.

Last modified 22 Mar 2024

Apart from the contract are any other documents commonly entered into by way of security – such as a guarantee from a building contractor's parent or ultimate holding company or a bond from a third-party surety?

In general, for construction as well as for the refurbishment of an existing building, a building permit (and, depending on the size of the construction, a location permit), must be obtained by the investor before a contractor begins the construction works. As regards the licensing of the contractor, a licensed building contractor is not required for a project with less than 400 sqm of gross building area or in the case of works where the value does not exceed EUR 150,000. For larger construction works, the contractor is required to be licensed, in one of seven different categories (A to G), depending on the total value of works. With respect to works on buildings for public use the contractor must be licensed in Category A.

Last modified 22 Mar 2024

Apart from the contract are any other documents commonly entered into by way of security – such as a guarantee from a building contractor's parent or ultimate holding company or a bond from a third-party surety?

Health and safety on construction sites is regulated by the provisions of the Act on Safety at Work (Official Gazette No. 71/14, 118/14 and 154/14) and the Act on Construction (Official Gazette No. 153/13 and 20/17). The Act on Construction also separately regulates the use after completion of the construction.

Last modified 22 Mar 2024

Apart from the contract are any other documents commonly entered into by way of security – such as a guarantee from a building contractor's parent or ultimate holding company or a bond from a third-party surety?

The Regulation on the Evaluation of the Impact of an Intervention on the Environment regulates the manner in which a study of the impact on the environment has to be made as well as the art of evaluation and final assessment of the envisaged intervention. As of 1 April 2010, all new buildings are required to have an energy certificate. Existing (old) buildings which are sold or leased have to be certified from 1 July 2013.

Last modified 22 Mar 2024

Apart from the contract are any other documents commonly entered into by way of security – such as a guarantee from a building contractor's parent or ultimate holding company or a bond from a third-party surety?

It has recently become more common to enter into specific development agreements with public authorities to facilitate, for example, the provision of access roads.

Last modified 22 Mar 2024

Apart from the contract are any other documents commonly entered into by way of security – such as a guarantee from a building contractor's parent or ultimate holding company or a bond from a third-party surety?

There are no mandatory terms or conditions to contracts for the design or carrying out of building works in Croatia; however, the object and the price of the construction must be defined.

Last modified 22 Mar 2024

Apart from the contract are any other documents commonly entered into by way of security – such as a guarantee from a building contractor's parent or ultimate holding company or a bond from a third-party surety?

Methods of payment vary according to the works. The three main types of payment are:

1. Lump sum: A pre-agreed sum that the contractor/sub-contractor will be paid to carry out either a stage of or the whole of the works that are required under the contract (subject to various provisions, including variations for which the contractor may receive additional monies)
2. Measurement: The work is measured and valued according to a schedule or formula
3. Advance payment: An advance payment is made for the costs of the labour and/or materials used

Payment is usually made after the supervising engineer (appointed by the investor) has certified the completed works. The inspection and certification of completed works can be made on a periodic basis (usually monthly) or a milestone basis (at pre-agreed specific milestones or stages).

Last modified 22 Mar 2024

Apart from the contract are any other documents commonly entered into by way of security – such as a guarantee from a building contractor's parent or ultimate holding company or a bond from a third-party surety?

It is possible to agree upon a fixed completion deadline. Usually the contractual parties agree upon a contractual penalty for the delay on a per-day basis.

Last modified 22 Mar 2024

Apart from the contract are any other documents commonly entered into by way of security – such as a guarantee from a building contractor's parent or ultimate holding company or a bond from a third-party surety?

Contractual mechanisms for dealing with variations to the works vary depending on why the variation is requested:

• Employer-led changes: Under most standard form contracts, the employer has the right to request variations to the works, for which the contractor is entitled to additional time and money. The contractor is also entitled to raise reasonable objections to material changes
• Contractor-driven changes: Where variations are necessary due to the contractor's error, delay or default, the contractor is not usually entitled to additional time or money under the contract. He is also liable for any delays caused to the project by these variations and where the variation means that the work has not been carried out in accordance with the contract

In case of 'turnkey contracts', the agreed price includes all unforeseeable and surplus works, but the deficiency of works does not have an impact on the agreed price, unless the change of the scope of works has either been agreed by the contractual parties or has been caused by the client.

Last modified 22 Mar 2024

Apart from the contract are any other documents commonly entered into by way of security – such as a guarantee from a building contractor's parent or ultimate holding company or a bond from a third-party surety?

Although the completion of works is not defined by law, construction of a building is considered to be completed if the building is ready for use. In accordance with the Act on Construction (Official Gazette Nos. 153/13 and 20/17), a building may be used only upon the issue of a Usage Permit, which is issued by the competent zoning and construction authority upon the performance of a technical inspection.

Last modified 22 Mar 2024

Apart from the contract are any other documents commonly entered into by way of security – such as a guarantee from a building contractor's parent or ultimate holding company or a bond from a third-party surety?

The general limitation period is five years, whereas the limitation period for commercial contracts is three years.

Last modified 22 Mar 2024

Apart from the contract are any other documents commonly entered into by way of security – such as a guarantee from a building contractor's parent or ultimate holding company or a bond from a third-party surety?

Any person carrying out construction works is liable to the investor as well as to any further person who acquires the building for any defect in the substantial parts of the building which appears within ten years from the completion of the construction and for any defect in other parts of the building which appears within two years from the completion of the construction. The same liability applies to the designer if the defect results from a defect in the project and to the supervisor if the defect results from a mistake in the supervision. This liability may not be excluded.

Last modified 22 Mar 2024

Apart from the contract are any other documents commonly entered into by way of security – such as a guarantee from a building contractor's parent or ultimate holding company or a bond from a third-party surety?

Any person carrying out construction works is liable to the investor as well as to any further person who acquires the building for any defect in the substantial parts of the building which appears within ten years from the completion of the construction and for any defect in other parts of the building which appears within two years from the completion of the construction. The same liability applies to the designer if the defect results from a defect in the project and to the supervisor if the defect results from a mistake in the supervision. This liability may not be excluded.

Last modified 22 Mar 2024

Apart from the contract are any other documents commonly entered into by way of security – such as a guarantee from a building contractor's parent or ultimate holding company or a bond from a third-party surety?

Any person carrying out construction works is liable to the investor as well as to any further person who acquires the building for any defect in the substantial parts of the building which appears within ten years from the completion of the construction and for any defect in other parts of the building which appears within two years from the completion of the construction. The same liability applies to the designer if the defect results from a defect in the project and to the supervisor if the defect results from a mistake in the supervision. This liability may not be excluded.

Last modified 22 Mar 2024

Apart from the contract are any other documents commonly entered into by way of security – such as a guarantee from a building contractor's parent or ultimate holding company or a bond from a third-party surety?

Commercial courts are competent for construction disputes between tradesmen (ie companies within their scope of business), whereas municipal courts are competent for other construction disputes. There are no further specific courts for construction disputes.

Last modified 22 Mar 2024

Apart from the contract are any other documents commonly entered into by way of security – such as a guarantee from a building contractor's parent or ultimate holding company or a bond from a third-party surety?

It is common to agree on the competence of arbitration for construction contracts at it is far more time efficient and expert (provided an expert arbitrator has been appointed) than the regular courts.

Last modified 22 Mar 2024

Apart from the contract are any other documents commonly entered into by way of security – such as a guarantee from a building contractor's parent or ultimate holding company or a bond from a third-party surety?

Although it is not required by law (and must not be accepted by the parties as a prerequisite to regular proceedings), mediation has been introduced in almost all commercial courts in Croatia as an alternative dispute resolution procedure.

Last modified 22 Mar 2024