Want to know more about contracts and extraordinary price reviews? Do you need a contracts lawyer to provide legal support throughout the public works process? You're in the right place!

Here you can have all your questions answered and, at Catarina S. Gomes – Lawyers in Braga, you can find the best lawyers for construction contracts.

What is a contract?

A undertaking It is a contract by which one of the parties to it undertakes in relation to the other to carry out a certain work, in exchange for a price or remuneration. A works contract is a service contract between the contractor awarded the contract and the other contractor (subcontractor).

Public works contracts

Public works are a category of infrastructure projects, which are financed and carried out by the government with the aim of serving society. The most common public works are:

• Public buildings such as schools, hospitals or municipal buildings;
• Transport infrastructure such as roads, bridges, airports or railways;
• Public spaces such as squares, parks, or beaches;
• Public services such as sewerage, electricity grids or water supply networks;
• Among others.

The public works contracts are regulated by Public Contracts Code. This code defines public works construction contracts as a contract whose objective is the execution of a public work that falls within the subcategories provided for in the regime for entry and continuation in the construction activity.

In addition to this, public works are the result of any construction, extension, repair, restoration, improvement, reconstruction, modification, conservation, or demolition of immovable assets carried out on behalf of a public contractor.

Public works subcontracts can only be carried out by companies with a licence or certificate as public works contractors.

What is a licence?

The licence is a document provided by governmental institutions that authorises something or someone to perform a specific act, in this case, within the scope of works and constructions.

What should be included in the contract?

A contract for works should take into account:

• Full identification of the granting parties;
• Licence identification;
• Identification of the contract object;
• Contract value;
• Payment methods and timescales;
• Execution period.

Termination of the works contract

Before the possibility of contract termination, there are other options. Firstly, when defects are found in the work, the owner can request their rectification and even demand a new construction. Furthermore, it is possible to demand a reduction in the contract price.

The price reduction is the difference between the amount agreed between the owner and the contractor for the execution of the work and the sum that would have been agreed for the execution of the work with the defects noted and not rectified.

As a last resort, termination of the contract can only be made after the contractor is in default of clearing the defects, unless they refuse to do so or if it is impossible. Furthermore, the contract can also be terminated if the client shows an interest in terminating it.

After the contract has been terminated, it is up to both parties to return everything that has been provided or to reimburse the corresponding amount.

The client, however, is immune from the obligation to pay the contractually agreed price, and may recover payments already made and claim compensation from the contractor, provided that their fault in the breach of contract is proven.

In these cases, it is important to have a lawyer to provide you with legal advisory services.

Find out more about Public Law Lawyers.

 

The role of a lawyer in construction projects is multifaceted and crucial for managing the legal aspects of these complex undertakings. Here's a breakdown of their key responsibilities: **1. Contract Drafting and Review:** * **Creating Contracts:** Lawyers draft comprehensive and legally sound contracts, such as construction agreements, subcontract agreements, supply agreements, and design contracts. They ensure these contracts clearly define the scope of work, timelines, payment terms, responsibilities of each party, dispute resolution mechanisms, and clauses covering unforeseen events, defects, and warranties. * **Reviewing Contracts:** They meticulously review contracts presented by clients or other parties to identify risks, ambiguities, and potential disadvantages. They negotiate terms to protect their client's interests and ensure compliance with relevant laws and regulations. **2. Risk Management and Compliance:** * **Identifying Risks:** Lawyers help clients identify and mitigate legal risks associated with construction projects, including contractual liabilities, regulatory non-compliance, insurance gaps, and potential disputes. * **Ensuring Compliance:** They advise on and ensure compliance with all relevant building codes, zoning laws, environmental regulations, health and safety legislation, and labour laws. **3. Dispute Resolution:** * **Preventing Disputes:** Through clear contract drafting and proactive advice, lawyers aim to prevent disputes from arising in the first place. * **Negotiation and Mediation:** When disputes do occur, they can represent clients in negotiations and mediations to find amicable solutions. * **Litigation:** If resolution through negotiation or mediation is not possible, lawyers will represent clients in arbitration or court proceedings to resolve construction disputes, such as those involving claims for damages, delays, or defects. **4. Advice on Project Execution:** * **Clarifying Contractual Obligations:** They provide ongoing advice to clients regarding their contractual obligations throughout the project lifecycle. * **Managing Changes and Variations:** Lawyers advise on how to handle variations or changes to the original scope of work, ensuring that any amendments are properly documented and legally binding. * **Payment Disputes:** They assist in resolving issues related to progress payments, retention monies, and final accounts. **5. Procurement and Tendering:** * **Advising on Procurement Strategies:** Lawyers can advise on the most appropriate procurement methods for a project. * **Reviewing Tender Documents:** They review tender documents to ensure fairness, clarity, and compliance with procurement regulations. **6. Insurance and Bonding:** * **Advising on Insurance Needs:** Lawyers advise clients on the types of insurance required for a construction project (e.g., professional indemnity, public liability, contractors all risks). * **Reviewing Insurance Policies:** They review insurance policies to ensure adequate coverage and to understand their implications. **7. Insolvency and Financial Issues:** * **Dealing with Contractor Insolvency:** If a contractor or subcontractor becomes insolvent, lawyers can advise on the legal implications and steps to take. * **Securing Payments:** They can assist in recovering outstanding payments. In essence, a construction lawyer acts as a vital legal advisor, protecting a client's interests, mitigating risks, and ensuring that contractual obligations are met throughout the entire duration of a construction project, from initial planning to final completion.

A solicitor specialising in construction contracts has the role of assisting contractors and clients throughout the contracting and execution of construction projects. Therefore, the solicitor's functions include:

• Prepare contracts and oversee the necessary procedures for selecting entities that will carry out the work.;
• Provide legal advice regarding the execution of the contract;
• Managing conflicts of interest in construction contracts;
• Advise both parties in case of contract termination.

Extraordinary price review: what is it?

The extraordinary review of prices in public works contracts aims to adjust the existing contract price to the real cost structure of the works, particularly when there are factors that may alter these costs, such as the global energy crisis of 2022, the COVID-19 pandemic, the war in Ukraine, inflation, among others.

However, not all contracts can undergo extraordinary price revision. For this to happen, eligibility criteria must be met. premisas son:

• A specific material, type of labour or support equipment which represents, or will come to represent during the execution of the works, at least 3% of the contract price;
• The year-on-year rate of change in the cost is equal to or greater than 20%.

The request for an extraordinary price review can be submitted by the contractor and their legal team.

The extraordinary review of prices applies to present and future contracts?

Yes, the extraordinary price review applies to all contracts to be concluded after 21 May 2022, as well as to contracts already in force on that date.

You can consult Decree-Law No. 36/2022 of 20 May here, which provides for an extraordinary price review.

The role of a lawyer in the extraordinary review of prices involves advising clients on the legal framework governing price adjustments, preparing and submitting necessary documentation, negotiating with the other party, and representing the client in arbitration or litigation if an agreement cannot be reached.

A lawyer has the role of providing legal support to contractors whenever there are significant price fluctuations in materials for the execution of the works.

Some of the functions are:

• Legal framework for price review;
• eligibility conditions for applying the extraordinary price review regime;
• elements that should be included in a price review;
• deadline review;
• Review counter-proposals;
• identify price review methods;
• Review of price revision formulas;
• Review of the extension of the contract performance deadline.

At Catarina S. Gomes – Lawyers in Braga, we have an experienced team in Contracts!

Public Works and Contracts Legislation

There are various laws and regulations that you must follow regarding contracts and public works, such as:

• Legal regime for urban development and construction;
• Legal regime applicable to the exercise of construction activities;
• Licensing classes contained in construction company permits;
• Health protection for workers against the risks of asbestos exposure during work;
• Requirements to which a site diary must adhere, to be kept at the execution site;
• Public Contracts Code;
• Price review regime for contracts;
• Exceptional and temporary regime within the scope of price increases impacting public contracts;
• Specification document form relating to public works contracts and concessions;
• Price review type formulas;
• Exceptional regime for release of bail (repealed).

Do you need further clarification regarding contracts and extraordinary price reviews? Get in touch. We have a team ready to help.