Property law: Responsibility of investor vs. contractor and subcontractor - part II

The investor's consent

It is important to determine how the investor's consent should be acquired (insofar as the investor's mere knowledge of the subcontractor's work or the investor's participation in on-site negotiations in the subcontractor's presence does not signify the consent required under Article 647 par. 2 PCC).

In relation to this issue, the Supreme Court's judgements are inconsistent. In earlier judgements, the Supreme Court issued a ruling that the effectiveness of the investor's consent for concluding a subcontract between contractor and subcontractor, which falls within the subject of a building contract, requires that the contract with the subcontractor, the draft or appropriate documentation, be presented to the investor (Supreme Court ruling of June 28, 2006, III CZP 36/06, OSNC 2007/4/52). Therefore, no joint and several liability by the investor arises under the regulation in question if, when requesting the investor's consent, the contract or draft thereof, or part of the documentation, were not presented to the investor (Supreme Court ruling of November 15, 2006, V CSK 256/06, LEX No. 276247).

Another important issue is the form of the investor's consent. Because the law specifies that a contract between a contractor and subcontractor must be in writing upon pain of being invalid (Article 6471 par. 4 PCC), the investor's consent should be provided in the same form (Article 63 par. 2 PCC respectively - compare the Supreme Court ruling of June, 28 2006, III CZP 36/06). The deadline for the expression of consent in writing is 14 days from the moment when the contractor's request was submitted. Only after this deadline can the construction of assumed consent be applied, based on an assumption that consent has been granted. This assumption may be challenged, for example, if it is proven that the contract, draft or the appropriate part of the documentation, was not presented to the investor.

However, the Supreme Court's most recent judgement held that the investor's consent may be expressed in any way without the need to present to the investor with the subcontract, draft or the appropriate part of the documentation (Supreme Court ruling dated June, 20 2007, II CSK 108/07, Biul. SN 2007/11/14).

Deadlines and proving consent

In practice, it is very difficult to prove that the investor was provided with proper documents, and therefore their absence constitutes consent. The burden of proof in this circumstance rests upon the contractor or subcontractor. However, the investor's mere participation in on-site meetings in the presence of the subcontractor does not signify the consent upon which the investor's joint and several liability is conditional.

Another issue is the deadline by which the investor's consent should be provided. Although Article 647 of the PCC does not specify a deadline by which the contract or draft, as well as the documentation, should be presented, these documents should nevertheless be submitted by the time the subcontractor has completed his work. Submission of the documents at a later date is clearly in breach of the purpose of the regulation because the aim is to acquaint oneself with the documents before the obligation to pay remuneration arises (Court of Appeal in Poznań ruling dated February 8, 2007, I ACa 940/06, LEX No. 298393).

Payment of remuneration to the contractor does not cancel the investor's liability on the basis of the regulation in question. However, one may wonder how liability between the investor and the contractor should be shaped. The investor's joint and several liabilities continue until the claim of the creditor, in this case the subcontractor, has been completely satisfied.

Avoiding trouble

For the above reasons, it would be advisable to introduce provisions into contracts on construction work, describing the scope of the work which may be entrusted to a subcontractor. Regulations governing the manner in which the investor should approve contracts with subcontractors, as well as the manner of safeguarding the investor's interests by monitoring the payments made by a contractor in favour of subcontractors, should also be included.

Agnieszka Koniewicz is an Associate with Linklaters law firm, e-mail: agnieszka.koniewicz@linklaters.com