Owner was liable for insufficient project material and payment for extra work

An owner made an agreement with a contractor regarding insulation and exterior plaster work. When the works started the contractor found out that the insulation had to be done in more than one depth and this was not part of the contractor’s original quote. Moreover, the scope of work was much more extensive than what the contractor had assumed when preparing the quotation. Furthermore, the real area which should be covered with exterior plaster was bigger than what the owner had stated initially. Therefore, the contractor claimed extra payment. The owner did not find that this could be considered as extra work and he refused to pay the contractor.

During the proceedings the contractor explained that he had based his quote on the drawings sent by the owner’s advisor in connection with the tender. Not until after signing of the contract did the contractor receive more detailed project material. In that connection it was not brought to the attention of the contractor that there were deviations in the drawings compared to the previous drawings.

On the contrary, the owner claimed that there were no deviations in the project material and that therefore the contractor could not claim extra payment. Furthermore, the owner claimed to have a separate counterclaim despite of the expiry of the 5-year limitation period.

The Court of Arbitration: Owner liable for project material
The Court of Arbitration found that the contractor could claim payment for extra work. The Court emphasized that it was the owner’s responsibility to inform the contractor about the deviations from the conditions on which the contractor had based his quotation. It was not enough that the owner had sent further drawings and other documents without making the contractor aware that these contained deviations.

In relation to the owner’s claim, the Court of Arbitration was not convinced that there was a concrete risk of development damage. Therefore the owner was not entitled to compensation.

IUNO’s opinion

The decision shows that it is the owner’s responsibility that the project material is correct. Depending on the circumstances, a contractor can claim payment for extra work caused by insufficient facts about the actual conditions for the work. In this case, the Court of Arbitration emphasized that the agreement between the contractor and the owner was based on the quotation from the contractor. For that reason, the owner was responsible for informing the contractor about the deviations and modifications to the drawings which the contractor had based his quotation on.

The scope of work must be clear in connection with the tendering process. In case of deviations it is not sufficient that the owner sends new and specified drawings after the tender. The owner must actively inform the contractor about any changes to the facts on which the contractor’s quotation is based.

[Court of Arbitration, case no. C-12847]