The use of construction work contracts in Portugal has increased significantly over the last decade, and with it the number of disputes between contractors and building owners.
For this reason, the legal framework of the contract and contractual termination is of particular importance. Under the terms of Article 1207 of the Civil Code, “A construction work contract is a contract whereby one of the parties undertakes in relation to the other to carry out a certain construction work for a price“. In other words, this type of contract aims to realise a certain result: the one ordered by the owner of the building to the contractor in exchange for the respective price.
However, it is not uncommon for the result of the work not to correspond to what was agreed by the parties, thus giving rise to a situation of “non-conformity” with the contractual terms and conditions defined between the parties.
The obligation to carry out the work “in conformity” with what was agreed arises not only from the legal regime for construction work contracts in the Civil Code, but also from the legal institute of consumer rights in the purchase and sale of goods (article 3, no. 1, paragraph b) of Decree-Law no. 84/2021, of 18 October).
It is therefore necessary to distinguish whether the non-conformity of the work results from the existence of defects in the construction work, a situation which will give rise to the application of the institute of defects in the work contained in articles 1220 et seq. of the Civil Code, or whether, on the contrary, this non-conformity results from the definitive abandonment of the construction work by the contractor, in which case the legal regime of non-fulfilment contained in article 798 et seq. of the Civil Code will apply.
Under the terms of the law, if the building owner finds that there are defects in the work ordered, he can refuse delivery and demand that the defects be eliminated, or that a new construction work be built if the defects cannot be eliminated. However, the aforementioned complaint of defects must comply with legally established criteria, namely that it must be duly substantiated and communicated to the contractor within 30 (thirty) days of its discovery, under the provisions of articles 1218, no. 4, and 1220, both of the Civil Code.
If the contractor does not remedy the defects reported within a reasonable period set by the owner, the question arises as to what the latter can do? The latter can demand a reduction in the price, under the terms of Article 1222 of the Civil Code or terminate the contract for loss of interest in the works as a result of the debtor’s delay in repairing the defects within the reasonable period set for him (see Article 808(1) of the Civil Code).
A different situation arises in the case of the definitive abandonment of the work, in which case what is verified is not the existence of defects or defects in the work, but only the non-realisation of the work or its partial realisation in disagreement with what had been agreed between the parties. In these cases, the legal regime to be applied corresponds to that of breach of contract and not to any other regime, such as the legal regime of defective fulfilment. As endorsed by the Porto Court of Appeal, in its judgement of 13.05.2021 (Case no. 1697/17.8T8MTS.P2), “definitive non-fulfilment can be revealed by various means, including: a) The loss of interest of the creditor in the fulfilment, as a result of the debtor’s delay, or its non-fulfilment within the reasonable period set by the debtor (cfr. Article 808(1) of the Civil Code); b) The expiry of the time limit set in the contract as absolute or non-extendable, which is equivalent to that loss of interest; or c) The debtor’s peremptory refusal to fulfil, communicated to the creditor, which does not justify the need for a new summons or the setting of an additional time limit. In addition to these situations expressly contemplated in the law, there is another that doctrine and case law equate with definitive non-fulfilment, and which translates into the debtor’s express or tacit declaration of unwillingness to comply“.
In this way, the owner of the work can terminate the contract and demand restitution of the amounts unduly paid under the terms of articles 433 and 289, no. 1, of the Civil Code, as well as bringing an action to be compensated for the damage caused, under the terms of articles 562 et seq. of the Civil Code.