What are the key statutory obligations relevant to construction and engineering projects?

Construction (2nd edition)

Australia Small Flag Australia

Whilst relationships between parties are regulated by contract, there is significant statutory intervention in the areas of:

  • security of payment;
  • imposition of 10 year limitation of liability for 'building actions' in a number of jurisdictions, which overrides normal tortious and contractual limitation periods (see Question 25 below);
  • work, health and safety;
  • environmental obligations;
  • industrial agreements and workplace arrangements;
  • misleading and deceptive conduct;
  • apportionment of liability between 'concurrent wrongdoers' (with non-harmonised entitlement versus prohibitions on contracting out);
  • insurance; and
  • unfair contract terms for small businesses.

Belgium Small Flag Belgium

Both construction and engineering contracts are governed by general contract law as set forth in the Belgian Civil Code, more specifically in its articles 1101 – 1369 (general contract law), and by a specific set of rules applying to contracts for the hire of works or services (articles 1787 and following of the Civil Code).

As a general principle, the content of construction and engineering contracts is to be determined by the parties themselves (principle of contractual freedom; article 1134 of the Civil Code).

However, articles 1792 and 2270 of the Civil Code, which establish the so-called decennial liability, are considered public policy provisions and therefore parties are not entitled to derogate from these rules. This specific liability is incurred by the contractor and/or the architect when defects occur within a period of 10 years from completion and affect the stability of the building.

In addition, there are several mandatory rules to be observed.

A construction contract relating to the construction of a house or the sale of a house to be or being built, shall take into account the provisions of the mandatory Act of 9 July 1971 (and its implementation decree, the Royal decree of 21 Octobre 1971). In addition, some provisions of Book VI – Market practices and consumer protection of the new Commercial Code must also be taken into account.

Public construction contracts however are dealt with in the more specific public procurement regulations. This area of law was recently updated pursuant to EU law (more specifically 3 Directives adopted in 2014 (2014/23/EU; 2014/24/EU and 2014/25/EU)). Therefore, the provisions of the Act of 17 June 2016 on public procurement and various royal decrees adopted, must be taken into account.

Note that engineering contracts between an employer and an architect are not, as such, regulated. Parties are therefore free to determine the content of an engineering contract (except for the decennial liability – see above). The architect as such is bound by several ethical and professional rules, as it is a regulated profession.

China Small Flag China

Key statutory obligations relevant to construction and engineering are set out in Construction Law, Law on the Administration of the Urban Real Estate, Law on Urban and Rural Planning, Law on Bid Invitation and Bidding, Law on Government Procurement etc. Among them, Construction Law stipulates various requirements relating to the construction permit, qualifications, contracting mode, engineering supervision, safety construction management, quality management etc. throughout construction and engineering projects.

Croatia Small Flag Croatia

In Croatia, construction and engineering projects are governed, inter alia, by the Construction Act, the Construction Product Act, the Act on the Chamber of Architects and Chambers of Engineers in Construction and Physical Planning, the Act on Physical Planning and Building Tasks and Activities, the Physical Planning Act, the Civil Obligations Act and Special Construction Practices which regulate building contracts.

Germany Small Flag Germany

German construction and engineering projects are governed by a large number of legislative provisions such as the German Federal Building Code (Baugesetzbuch), the building regulations of the federal states of Germany (Landesbauordnungen), the German Civil Code (Bürgerliches Gesetzbuch - BGB) and the Standard Building Contract Terms (Part B) (Vergabe- und Vertragsordnung für Bauleistungen – VOB/B), to name just a few. This is a highly regulated area of law.

Greece Small Flag Greece

A wide spectrum of obligations is placed on persons/entities engaging in construction and engineering projects. Such obligations most importantly include obligations to obtain certain permits related to the execution of the works, such as environmental, building, installation and operation licences, which, where required, are set as legal prerequisites for the commencement of the works. Further to the above, public projects contractors are subject to mandatory registration with the Greek construction and engineering register. As far as the private projects contractors are concerned, they are not under the obligation to become members of the register but they should do so in order for the technical experience earned from the performance of private projects to qualify as reference experience for public tenders. Apart from the necessary permits, construction and engineering projects need to be executed in compliance with multiple requirements, among which those related to employment, health and safety, corruption and finding of antiquities as in more detail described under Question 3 below. Execution of public works contracts is subject to further obligations laid down in Law 4412/2016 on Public Supply, Services and Works Contracts (Government Gazette Α' 147/08.08.2016), which transposed Directives 2014/24/EC and 2014/25/EC into national law ('Public Procurement Law').

Switzerland Small Flag Switzerland

The relevant obligations to construction and engineering projects result from both private and public law, and may be federal, cantonal and/or communal.

From a private law perspective, the main obligations are laid down in articles 363 to 379 of the Swiss Code of Obligations ("CO") concerning the contractor agreement and in articles 394 to 406 CO concerning the mandate agreement. It has though to be specified that the vast majority of these legal provisions are not mandatory and may be amended by contract between the parties. The SIA Norms, which are private regulations issued by the Swiss Society of Engineers and Architects ("SIA") concerning technical and legal standards for planning and construction, are often included in the agreement by the parties as integral part, corresponding to standard market practice.

From a public law perspective, the main obligations are laid down in the following law areas, which provisions may be federal, cantonal and/or communal, depending on the area and on each Canton: environmental laws, zoning/planning laws, construction laws, housing laws, energy laws, and employment laws, health and safety laws.

Switzerland Small Flag Switzerland

The relevant obligations to construction and engineering projects result from both private and public law, and may be federal, cantonal and/or communal.

From a private law perspective, the main obligations are laid down in articles 363 to 379 of the Swiss Code of Obligations ("CO") concerning the contractor agreement and in articles 394 to 406 CO concerning the mandate agreement. It has though to be specified that the vast majority of these legal provisions are not mandatory and may be amended by contract between the parties. The SIA Norms, which are private regulations issued by the Swiss Society of Engineers and Architects ("SIA") concerning technical and legal standards for planning and construction, are often included in the agreement by the parties as integral part, corresponding to standard market practice.

From a public law perspective, the main obligations are laid down in the following law areas, which provisions may be federal, cantonal and/or communal, depending on the area and on each Canton: environmental laws, zoning/planning laws, construction laws, housing laws, energy laws, and employment laws, health and safety laws.

Austria Small Flag Austria

The governing provisions are the provisions of the Austrian Civil Code Allgemeines Bürgerliches Gesetzbuch ([German acronym:] ABGB), the and the Building Codes of the individual Federal Länder (states in Austria).

Cyprus Small Flag Cyprus

The most significant legislation relevant to construction and engineering progress, is the Streets and Buildings Law (Cap. 96) which was introduced in 1946 and regulates the construction of all building and civil engineering works. According to this Law, the construction of buildings and streets is illegal unless a building permit is issued. This Act, however, has the most numerous amendments and modifications of any other law of Cyprus. To this day, the Streets and Buildings Regulation Law (“the Law”), which was first issued in 1959, together with the Town and Country Planning Law 90/72, was first approved in 1972, but enacted as late as 1990 and define the development and building control system of Cyprus. Parties may not contract out of the obligations prescribed in Law.

In addition, the following regulations have been issued:

  • Streets and Building Regulations
  • Streets and Buildings (Energy Efficiency of Buildings) Regulations
  • Streets and Buildings (Electrical and Mechanical Installations) Regulations
  • Streets and Buildings (Energy Efficiency of Buildings) Regulations are issued in order to regulate the requirements and procedures for the issue of building permits with the provision of Directive 2002/91/EC of the European Council for the energy efficiency of buildings.
  • Streets and Buildings (Electrical and Mechanical Installations) Regulations regulate the certification of these type of installations and the qualification of the eligible engineers.

Brazil Small Flag Brazil

Brazilian system is not heavily regulated in contractual terms for private projects. Brazilian Civil code contains some general provisions for less complex construction contracts. In our understanding, such legal provisions shall not be automatically applicable to more complex contracts, such as EPC Turnkey Contracts.

The only contractual statutory obligation under Brazilian Law that will most certainly be applicable to any construction contract of “considerable works” is the one set forth in Article 618 of the Brazilian Civil Code, which establishes a minimum of 5 year’s constructor warranty period for any defects of the works that is related to solidity and safety.

As we will explain ahead, public procurement and public contracts are heavily regulated, in accordance with Brazilian Law.

Other statutory legal obligations will be explained in detail in the following question.

Ireland Small Flag Ireland

The Construction Contracts Act, 2013 which applies to construction contracts (which in turn covers not only construction contractors but also construction consultancy appointments such as architects and engineers, for example), is one of the key pieces of legislation relevant to construction and engineering projects. It sets out requirements in relation to payment arrangements, minimum periods for payments (with an emphasis on protecting sub-contractors), the ineffectiveness of “pay when paid” provisions in a construction contract, suspension for non-payment and, most significantly, a mandatory regime of adjudication in relation to payment disputes. The Building Control Acts 1990 -2014 and regulations made pursuant to those Acts deal with issues such as, for example, building standards, workmanship, conservation of fuel and energy and access for people with disabilities.

The Building Control (Amendment) Regulations 2014 (BCAR) is another key element of the statutory framework relevant to construction and engineering projects. This system is intended to provide a level of assurance that a building is built in accordance with the Building Regulations 1997-2017 (the Building Regulations). There are a number of certificates that may be required in relation to any part or installation in a building, including a Certificate of Compliance on Completion confirming the building works comply with the Building Regulations.

Mexico Small Flag Mexico

The legal basis of the construction or engineering projects depend on the nature of the contract.

If the juridical relationship is a public one (understanding by public contracts those that are entered into with the public administrations) the legislation that would govern such contract will be the Public Works and Related Services Law, and the Public and Private Partnerships (PPPs). Since Mexico is a Federation with 32 states, almost each State (and Mexico as a Federation) have their own regulations. Therefore, Government Contracts are regulated by the Federal Constitution or the Constitution od each State, the respective Public Works Law and their regulations, as well as the applicable Public Private Partnerships law.

On the other hand, private contract are regulated by the Commercial Codes (that applies in all the Country since is a Federal subject), as well as by the Civil Code. As in the public contracts, it is worth to mention that every State has its own Civil Code and the applicable legislation will depend on what was agreed by the parties and/or the place where the contract is entered into.

United Kingdom Small Flag United Kingdom

The most significant legislation is the Housing Grants, Construction and Regeneration Act 1996 (“HGCRA”), also known as “the Construction Act”. The Act prescribes an interim payment mechanism (see answer to question 14) and provides a right to refer any contractual dispute to adjudication (to be determined in 28 to 42 days) for most UK construction projects (with certain exceptions). It also provides that a party that has not been paid may suspend work until it is paid. The intention of these measures was to increase cash flow in the construction industry. Parties may not contract out of these obligations.

The Supply of Goods and Services Act 1982 and the Consumer Rights Act 2015 contain obligations on parties providing goods and services that goods must be fit for purpose and services must be carried out with reasonable skill and care. Since construction services combine goods and services, a contractor is thought to owe an obligation to construct a building that is fit for purpose. However, a consultant providing professional services only, must provide these with reasonable skill and care. Parties may vary these obligations by contract.

Specific to residential premises, the Defective Premises Act 1972 provides that all work must be carried out in a workmanlike manner to ensure that all dwellings are fit for habitation.

Spain Small Flag Spain

The necessary project for the construction, extension, modification, reform or rehabilitation of buildings must comply with the applicable technical regulations, which is mainly constituted by the Technical Building Code, approved by Royal Decree 314/2006, of March 12th.

For the construction of a building of any kind, be it administrative, health, religious, residential, teaching or cultural, the project can only be executed by an Architect.

For the construction of an aeronautical building; agricultural; used for production of energy; the production of hydraulic energy; mining; telecommunications (referred to telecommunications engineering); land, sea, river and air transport; forestal; industrial; naval; the engineering of sanitation and hygiene, and accessory to the engineering works and its exploitation, the project can be carried out by an engineer, technical engineer or architect, according to the current legal regulations for each profession, according to their respective specialties and specific competences.

If the purpose of the project is to build an infrastructure such as a road, a railway line, a power line, etc., the technical framework established by the State for each of these infrastructures must be met.

Turkey Small Flag Turkey

Contracts subject matters of which include aspects of construction and/or engineering are customarily regarded as “contracts of work” under the Code of Obligations (“CO”). Hence, parties’ key statutory obligations derive from the sections 470 – 486 of the CO. Normally, parties considerably vary the statutory obligations and introduce a number of secondary obligations in their contract which are not stipulated in the CO. However, the default scheme under the law is as follows:

If the contract is regarded as a “contract of work” the contractor’s statutory obligations include (i) carrying out the works with due care and fidelity, (ii) procuring the equipment required for the works, (iii) carrying out the works personally or having others to carry out the works under its superintendence, and (iv) commencing the works on time and performing them at the required pace. Although not explicitly stipulated under the CO, another important obligation of the contractors is the duty to inform their clients in case an event detrimental for the completion or integrity of the works, occurs (this may even be an instruction from the client). From the clients’ perspective, the only statutory obligation is the payment of the contract price while there is also a customary obligation to deliver the site on which the works shall be performed.

South Africa Small Flag South Africa

South Africa does not have a centralised body of legislation which governs construction and engineering projects. Instead, a number of statutes, regulations and guidelines collectively govern, inter alia, procurement, health and safety, the environment, planning, engineering and building on projects.

Key statutes which set out specific obligations include:

(i) The Construction Industry Development Board (“CIDB”) Act 38 of 2000, which provides that contractors may not undertake any construction works for public sector entities unless they are registered with the CIDB and hold a valid CIDB registration certificate;

(ii) The Housing Consumers Protection Measures Act 95 of 1998, which prescribes that no home builder shall construct a residential property unless they are registered with the National Home Builders Registration Council (“NHBRC”);

(iii) The Occupational Health and Safety Act 85 of 1993 (“OH&S Act”), and the Construction Regulations promulgated in 2014 under the OH&S Act (“Construction Regulations”), both of which obligate employers and contractors to take measures to ensure the health and safety of all persons on site;

(iv) The Public Finance Management Act 1 of 1999 (“PFMA”) and the Municipal Finance Management Act 56 of 2003 (“MFMA”), which regulate public sector procurement at both provincial and local level.

United States Small Flag United States

Statutory and legislative obligations applicable to construction and engineering projects vary by state. Most local jurisdictions have zoning and building code obligations with which each project must comply. In addition, every project must comply with federal and state Occupational Health and Safety Administration (OSHA) requirements, which are described in more detail below. Federal law mandates performance and payment bonds on all federal project. Most states have similar bonding requirements for state projects. As discussed below, there are also several substantial employment statutes that govern employment on construction projects.

There are numerous other statutory obligations related to construction work in the United States, many of which are discussed below. Engineers, in particular, need to be aware of state-specific statutes governing the practice of engineering in each state.

France Small Flag France

French law provides for complex sets of rules and mandatory obligations to be complied with by the parties to construction and engineering projects, for all their different phases (from the initial design to the completion of the works).

The key aspects include inter alia, the obligations to comply with:

  • the town planning rules, which regulate the types of construction that can be built and state the type of planning authorizations (building permits, etc.) to be obtained prior to the start of the works;
  • for public projects, the specific rules for public contracts and works (tender rules for the procurement of the contracts, types of contract that can be executed, etc.), which can differ substantially from the rules applicable to private projects. Such public contracts can also fall under the jurisdiction of the administrative courts, which constitute a separate Court order with a specific case law system. This area is also subject to specific European Union regulations, notably with respect to tender procedures;
  • strict regulations relating to health and safety, the protection of the environment and the fight against illegal work, which bind all parties, including the project owner;
  • technical rules and regulations, to be complied with by the consultants and the contractors for the design and the performance of the construction works;
  • mandatory legal provisions aiming to protect contractors and subcontractors, relating to payment guarantees, payment terms, retention provisions and subcontracting;
  • mandatory contractors’ guarantees (including the so-called “decennial guarantee” - garantie décennale - mechanism) which aim to cover construction defects for a period of up to ten years from the date of acceptance of the construction works. These guarantees are doubled by the obligation, for the different parties to the construction project, to subscribe mandatory construction insurance coverage.

Sweden Small Flag Sweden

Sweden has a long tradition of self-regulation regarding construction contracts and has no specific law concerning the contractual terms and conditions between employers and contractors within a construction contract outside consumer relations. The Construction Contracts Committee, BKK, has been given the responsibility to conceive and administer a number of agreed documents, customised to suit the need of regulation for any forms of construction contracts.

As there is no specific legislation for construction and engineering projects, the key statutory obligations, which can be derived from general principles of law, are mainly found in general acts such as the Contracts Act (1915:218) and the Tort Liability Act (1972:207).

When it comes to construction contracts with consumers, the Consumer Services Act (1985:716) is applicable.

Denmark Small Flag Denmark

There is no specific Danish legislation for construction contracts. General principles of contract and tort apply.

A set of national general conditions of contract (“AB Standards”) are widely accepted and used in the Danish construction industry. A new set of such AB standards (with the suffix “18”) was published on June 21st, 2018. The older standards (AB 92, ABT 93 and ABR 89) are still being used, but as more projects based on the older standards are completed, the new standards are expected to be adopted by the industry. Fundamental principles remain unchanged in the new AB standards, but there are important changes to a number of areas, e.g. dispute resolution.

Public authorities and other public-sector employers are obligated to use the AB Standards and must comply with the public procurement legislation.

When planning and executing a construction project, there are also several legal requirements set out in various acts and government orders that apply. For example, the Building Act and government order on building regulations (in Danish: Bygningsreglementet) set out specific requirements for constructions, including technical requirements on lighting, acoustics, indoor climate, etc.

South Korea Small Flag South Korea

  • Various statutes regulate different aspects of construction and engineering projects, and the industry in general.
  • The Framework Act on the Construction Industry, the Construction Technology Promotion Act and the Certified Architects Act, together with certain other statutes, set standards that various participants in the construction industry – such as employers, contractors, construction managers and architectural design firms – must meet in order to engage in the industry. Other acts that fix standards for specific sectors of the construction industry include the Electric Construction Industry Act, the Fire-Fighting System Installation Business Act, and the Information and Communications Construction Business Act.
  • The Building Act sets the requirements that must be met for the construction of buildings. Its provisions are supplemented by local and municipal regulations providing detailed building codes.
  • The Fair Transactions in Subcontracting Act (together with the aforementioned Framework Act on the Construction Industry) regulates subcontractor relationships in construction projects.
  • General principles of contract are provided in the Civil Act, while matters such as incorporation, partnerships and corporate governance are addressed in the Commercial Act.

Updated: June 3, 2019