Construction takes time. But what is the cost of a delayed completion?

The moving boxes are ready. The kitchen has been ordered. You’ve already given notice on your previous rental, and you can’t wait to move into your new home. Then comes the call from the contractor that no one wants to receive: the completion date has been pushed back.

At first glance, a delay of a few weeks might seem manageable. That is, until the extra costs start to pile up: double housing costs, storage fees, lost revenue, or a loan that’s about to expire. Then the question quickly arises: who’s going to foot the bill?

Completion Date

When entering into a purchase and construction contract, attention is often focused on the contract price, the quality of workmanship, and the completion date. The provisions regarding the consequences of late completion, on the other hand, are often skimmed over. This is noteworthy, because it is precisely those provisions that often turn out to be the most important in hindsight.

First and foremost, it is important to determine what completion date the parties actually agreed upon. This is because not all agreements specify a completion date. Often, no specific calendar date is agreed upon; instead, the parties agree to complete the work within a certain number of “workable days.” These are typically weekdays that are not official holidays. They refer to workdays on which work can actually be performed, taking into account factors such as weather conditions. The disadvantage of such a provision is that it can make the completion date difficult to determine, and this often leads to disputes. We also regularly see that the parties only agree on when the completed work will be inspected by the client. However, this says nothing about the date on which the work as a whole will be delivered.

To avoid such discussions, it is advisable to set a strict deadline for completion. If no strict deadline for completion has been agreed upon, it may still be evident from the parties’ intent, under certain circumstances, that a strict deadline applies.

The agreement as the starting point

Many contracts contain a penalty clause relating to delays or breach of contract. We typically see this in two different forms. First, there is the variant in which the contractor owes a fixed amount for each day, week, or month by which the agreed-upon completion date is exceeded. The advantage of such an arrangement is clear: the parties know in advance what to expect and do not have to debate the extent of the damages suffered afterward. In some cases, additional damages may even be claimed in addition to the penalty.

The second type we frequently encounter is a general penalty clause of 10% of the purchase price and contract price if a party fails to fulfill its obligations under the agreement. In practice, this clause is sometimes mistakenly associated with late delivery. However, a penalty for breach of contract serves a different purpose than a specifically agreed-upon delay penalty. Whether a client can rely on such a clause depends on the text of the agreement and the circumstances of the case. Exceeding the completion deadline therefore does not automatically entitle the client to a contractual penalty of 10%. The former relates to late delivery, while the latter relates to non-performance or defective performance. This is precisely why it is important to clearly distinguish between a penalty for delay and a penalty for breach of contract.

Precisely because of these nuances, it is advisable to look beyond the contract price and the completion date before signing. The question is not only when the project will be completed, but above all, what the parties have agreed upon if that deadline is not met.

And what if the agreement doesn't specify anything?

Not every contract includes provisions addressing the consequences of a late delivery. This raises the question of whether the client is then left empty-handed. The answer is no, but the law does not always provide the answer one might hope for.

Many clients assume that a contractor is automatically liable once the completion date has passed. Legally, the situation is more nuanced. First, it must be determined whether a strict deadline applies. If a specific completion date has been expressly agreed upon as a deadline, default may in some cases occur by operation of law without the contractor having to be given notice of default.

The Supreme Court has emphasized that not every agreed-upon date is automatically a deadline. It often turns out that a schedule or completion date is included primarily as a target date. In such cases, a single instance of missing the deadline is usually not sufficient to hold the contractor immediately liable.

If no deadline is specified, the client must, in principle, first give the contractor written notice of default. In doing so, the client must grant a reasonable period of time for the contractor to complete the work. Only if the contractor fails to deliver within that period does he become in default. From that moment on, the client may be entitled to compensation or even termination of the contract.

Force majeure is not a standard defense

When a project is delayed, the contractor is quick to point to supply issues, labor shortages, or adverse weather conditions. While these factors may play a role, invoking force majeure does not automatically succeed. The key question remains: what agreements did the parties make, and was the cause of the delay truly beyond the contractor’s control? Not every setback on the construction site qualifies as force majeure.

Prevention is better than litigation

Construction projects rarely go exactly according to plan. That’s the reality. That is precisely why it’s advisable to consider the legal consequences of a potential delay in advance. A firm completion date and a delay penalty can prevent a lot of disputes. And if the contract is silent on both of these matters, the law provides a safety net. Because that safety net is less straightforward than one might think, it is all the more important to establish clear agreements in advance. Ultimately, it is not the delay but the contract that determines who foots the bill.

Are you involved in a construction dispute? Please contact us or schedule an initial consultation by calling +5999 5121325.