Austrian Law Blog:

Why is claim management important in the construction sector?

Pursuit of warranty claims and claims for damages in a construction project not only requires knowledge of the contractual legal framework. In practice, efficient project implementation will first of all depend on the quality of the project organisation. Such already starts with release of the tender documentation which should provide for an as clear as possible description of the scope of works and the envisaged content of the contract. It should not come as a surprise that an excessive contractual shift of risks to the contractor (to the limit of reasonableness) mostly combined with a lump-sum price agreement will from the beginning trigger the requirement of a professional claim management with qualified legal advice. Variations of works during the construction phase may from the point of view of the parties be seen either as a legitimate ground to claim for performance, warranty and/or damages or – from the view of the contractor – also as a legitimate ground to claim for additional costs and/or extension of time for completion of the project (e.g. in case of errors in the tender documentation, variation orders, project delays, etc.). 

It is not only the contractor who is responsible to carry out the works free from any defects and delays, but it is also the responsibility of the employer to secure a professional project management in order to avoid the occurrence of defects and delay in a timely manner. It does not surprise that the Austrian Court of Audit once correctly stated that an inadequate perception of the employer’s tasks will have negative effects on the pursuit of subsequent damage claims (e.g. due to inadequate documentation, no prompt reaction to variations of works). Especially in early project phases, a “good project climate” is often preferred by the contracting parties sometimes effectively leaving aside the terms of the contract. However, an all too “cooperative and partnership-based” project management should not lead to a situation where the terms of the contract are ignored from the beginning until the legal advisor will have to check the dispute resolution clause of the contract first.

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