Construction: the business contract
By Lex Thielen -1
A. Definition of the enterprise contract
The Civil Code does not embody the concept of a company contract. On the other hand, he speaks of the hiring of work and industry -2 , distinguishing between the hiring of workers consisting in a bond of subordination, the hiring of transport and "that of the architects, contractors and technicians as a result of studies, quotations or markets ".
The real estate business contract is defined as "the agreement by which a person commits himself to another, in consideration of a price and without subordination, to realize, implement, modify or repair , on the site, a building, a work or part of any work " -3 .
In general, the case law considers that there is a contract of enterprise when the manufacturer works, for a fee, under the instructions and directives of the originator, designer of the product. Thus, the latter, the owner, and co-contractor of the manufacturer, retains the power to modify plans or even terminate the contract.
B. Formation of the enterprise contract
1. General
Like any synallagmatic agreement, the enterprise contract requires, for its validity, an exchange of free and enlightened consents expressed by persons capable of contracting, a certain object and a lawful cause.
Services performed in violation of the rules of access to the various trades of the manufacturer may hinder the validity of the contract of enterprise. However, case law is divided on this issue.
The formation of the contract takes place either instantaneously or after a negotiation phase, at the time of acceptance of a previously issued offer.
Like any other contract, the contract of hire is consensual, that is to say, its formation takes place by the mere exchange of the consents of the parties, without it being necessary to resort to the performance of a contract. any formality.
2. Agreement on essential elements
The Civil Code enshrines the rule of general application that, in addition to the conditions of validity set out above, agreements are formed by the agreement of wills on their essential elements which are the object and the price.
In terms of contract hire, however, a special feature must be noted: the absence of agreement on the price at the time of the formation of the contract does not automatically entail its nullity. It is not always possible to determine in advance the scope of work and the materials needed for their implementation.
In Luxembourg, the case-law seems to have gone a long way in deciding that "in the absence of prior fixing of a price, the recipient of the services allows the service provider to fix the price of the services provided, because he trusts that It will make an adequate assessment of the fees according to the value of the services " -4 . This solution is particularly favorable for the contractor in that it introduces a kind of presumption of the justified nature of the amounts claimed. It will therefore be up to the owner who accuses the contractor excessive billing to provide serious arguments in support of his disputes.
3. Agreement on Substantial Elements
The agreement on the essential elements of the enterprise contract is however not always sufficient for the formation of the agreement. It must still and if necessary relate to the so-called "substantial" elements, ie complementary points which have been the subject of discussions between the parties and which are of importance to them.
These elements in terms of contract hire may be the time of execution, the terms of payment, the existence or not of a suspensive condition for obtaining a bank loan or a building permit as well as any other condition that the parties deem necessary to include in the contract.
It is only when the offer is sufficiently precise and firm that its acceptance entails the formation of the contract.
4. The talks
The talks do not in principle bind the parties and their break remains free, provided they are not exercised in a faulty manner. This would be the case, for example, of a sudden break in complex negotiations, which took place in an advanced phase. It is also important to note that the principle of the freedom of rupture of the talks is subject to certain exceptions; in particular, it does not apply when the service concerns the drawing up of a plan, project or any other creative work, like the mission entrusted to an architect.
5. The general conditions
Finally, we must mention the problematic of the general conditions. It is in the Contractor's interest that the Contractor agrees to them expressly. Indeed, it should be recalled that Article 1135-1 of the Civil Code provides that: "The general terms and conditions of a contract pre-established by one of the parties are binding on the other party only if the latter has been able to know them when signing the contract and if it must, depending on the circumstances , to be considered as having accepted them. "
Moreover, the exorbitant clauses of the common law (interests higher than the legal rate, penal clause etc.) only if the parties are in a business relationship and if the general terms and conditions have been expressly accepted or if the attention of the other party has been drawn to the conclusion of the agreement by a sufficiently clear reference and apparently, the only reproduction of the general conditions of sale on the back of the invoices is not sufficient in principle.
C. The obligations of the parties to the enterprise contract
When it comes to obligations arising from the signing of a construction contract, it is of course easy and common to think only of the obligations borne by the professional. Although it is most often his responsibility that will be sought for shortcomings noted, we must not lose sight of the fact that the owner, too, is bound to certain duties vis-à-vis the contractor and that procedures, particularly for defaults, are commonplace in the courts. Finally, the subcontractor will have a particular legal status which will entail the existence of certain obligations in the responsibility of the general contractor or the contracting authority in his regard. Here we will only state the main obligations, without examining them in detail.
1. The obligations of the contractor
The obligations of the contractor extend throughout the duration of the contractual relationship and are multiple:
• obligation of intelligence and advice
• obligation to build a compliant work
• obligation to build a work free of vice
• obligation to respect the agreed price
• obligation to respect the time of execution •
obligation of security.
The content and extent of these obligations are assessed in relation to two main criteria: the will of the parties, whose respect is verified through the obligation of conformity, and the rules of the art, the violation of which is generally sanctioned by means of defects in construction.
The duality of will control / rules of the art concerns not only the performance of services, but also the materials provided by the manufacturer.
As to the nature of the manufacturer's commitment, case law is today unanimous and formal in deciding that its obligations towards the owner are all results, and not only means.
2. The obligations of the owner
The obligations of the owner are mainly:
• allow the execution of the work
• ensure reception
• pay the agreed price
• pay directly to the approved subcontractor.
D. The end of the business contract
1. Common causes of the termination of the contract
Like any other contract, the business contract can be terminated by its complete execution, or by its cancellation or resolution during execution.
As such, the company contract has no particularity in relation to common law.
2. Unilateral termination of the contract
Nevertheless, the company contract is unique in that Article 1794 of the Civil Code provides for the possibility of unilateral termination of the fixed-price contract.
Indeed, this article offers the owner the possibility of unilaterally terminating the contract, although the work has already begun, by compensating the contractor for all his expenses, all his work, and all that he he could have won in this business.
As this right of cancellation is exorbitant under ordinary law, the rule enacted by Article 1794 is strictly interpreted and is applicable only in the specific field of the fixed price contracts themselves.
It is a quasi-discretionary right, independent of any idea of fault, that the owner may choose to exercise or not.
In principle, the contract is cancellable at any time, so both before the start of work and during work, even if they are already well advanced, when they are not completely completed. The right of cancellation may be exercised without the master having to indicate the reason for the termination.
Once the owner has terminated the contract, the contractor must leave the site within a reasonable period of time, otherwise he will be ordered to pay an occupancy allowance. He may, for his part, claim compensation for the damage suffered as a result of the termination, being entitled to be compensated for all his expenses, all his works, and all that he could have gained in this undertaking. He may also, if necessary, obtain additional damages in compensation for his non-pecuniary damage related to the abrupt termination of the contract and the need for legal action to obtain compensation.
E. The distinction of the contract of enterprise of the other contracts
The business contract must be distinguished from a number of other real estate contracts.
1. The business contract and the sale
A first approach makes believe that this distinction is easy while the business contract relates to a job to be done and the sale of a thing to deliver. But the border between the two contracts diminishes when it comes to transferring an object whose manufacture is to be realized in the future.
In this case, the qualification in the contract of enterprise prevails when the contractor provides his work and that, either the raw material is supplied by the owner, or the work itself relates to a supplied product. by the owner.
The case law also considers an economic criterion when it takes into account the importance of the share of the work to be provided in relation to the subject, the weight of the labor force in construction operations being predominant. Thus, it was decided in particular that "the agreement under which a co-contractor provides the material in addition to his work constitutes a sale if the value of the material is greater than that of the work and a business contract in the event that inverse " -5 . In general, it qualifies ambiguous situations as sales.
Two criteria of distinction are retained by the jurisprudence in the matter:
• the greater or lesser number of contracting parties to the first-time buyer, and
• the more or less active or passive role played by the latter, and especially the power to make changes to the plans.
2. The business contract and the sale of building to be built
The common point between these two contracts lies in the obligation for the builder to build a building.
The distinction comes from the question of whether the customer / purchaser can or can not make changes to the plans, respectively assume somehow control of the work - in this case it is a business contract - or if it merely takes delivery after its completion.
The distinction is important, especially because of the different formalities to be observed in both kinds of contracts.
3. The enterprise contract and the mandate
The criterion of distinction between the company contract and the mandate lies in the power of representation: the agent is responsible for carrying out a legal transaction in the name and on behalf of his principal and therefore representing him. The contractor, meanwhile, performs material and intellectual acts for the benefit of the owner, without representing him.
It is generally assumed that architects, contractors and other technicians are bound to the owner by a business contract, unless the latter mandates them to perform legal acts in his name and on his behalf.
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1- Lex Thielen is a lawyer at the Court and author of the books "The professions of real estate in Luxembourg law, Editions Larcier, 2010," The lease, Editions Promoculture / Larcier 2013, "All about real estate, Editions Promoculture / Larcier (1st edition 2015, 2nd edition November 2016) and "Immobilienrecht in Luxemburg, einfach erklärt" (Editions Promoculture / Larcier 2016). Lex Thielen has just published its new book "Construction Law in Luxembourg (Editions Promoculture / Larcier February 2018).
2- Article 1779 of the Civil Code.
3- Luxembourg, February 18, 2004, role no. 84212.
4- Luxembourg, 20 January 2006, role no 94760.