Building and renovation work: contracts for work

Does the contract have to be in writing, and how is the price set?

A contract may be made orally, in writing or in any other form, unless the law prescribes a mandatory form (VÕS § 11 lg 1) [2]. In a dispute, however, the scope of work, the price and the deadline are easier to prove if they are written down.

If no fee or amount has been agreed, the usual fee is payable or, failing that, a fee that is reasonable in the circumstances (VÕS § 637 lg 1) [7]. The contractor is presumed not to be entitled to charge for preparing the cost estimate (VÕS § 637 lg 2) [7].

Can the contractor exceed the estimate?

An estimate may be binding or non-binding on the contractor; if nothing has been agreed on this, the estimate is presumed to be binding (VÕS § 639 lg 1) [3]. According to the Supreme Court (Riigikohus), a contractor who claims that the estimate was non-binding must rebut this presumption and prove it (RK 3-2-1-72-15) [8].

If a non-binding estimate is substantially exceeded, the contractor may claim the extra fee if the excess could not have been foreseen. The contractor must notify the customer of the substantial excess without delay; if they fail to do so, they may claim the excess only to the extent that the customer has been unjustly enriched (VÕS § 639 lg 2) [3]. If the customer terminates the contract because the estimate was exceeded, the customer does not have to pay the fee exceeding the estimate (VÕS § 639 lg 3) [3].

With a binding estimate, the parties' agreements are interpreted to establish which works the estimate covered, because only works not covered by the original contract can be treated as additional works (RK 2-15-15662/55) [9].

When is payment due, and how is the work handed over?

The contractor's claim for the fee falls due when the work is completed (VÕS § 637 lg 3) [7]. If acceptance of the work has been agreed or is usual, the fee falls due once the work has been accepted or is deemed accepted; where the work is handed over in parts and priced in parts, each part is paid for on its acceptance (VÕS § 637 lg 4) [7]. The customer does not have to pay before having had the opportunity to inspect the thing, unless the agreed manner of delivery or terms of payment do not allow for this (VÕS § 637 lg 5) [7].

The customer must accept finished work if handover was agreed or is usual given the nature of the work. The work is also deemed accepted if the customer, without good reason, does not accept it within a reasonable period set by the contractor (VÕS § 638) [10].

What if the work is defective?

The work must conform to the contract; where nothing has been agreed on its qualities, it must be fit for the particular purpose the customer needs it for and the contractor knew or should have known of when the contract was made, if the customer could reasonably rely on the contractor's professional skill or knowledge, and otherwise for the purposes for which work of that kind is usually used (VÕS § 641 lg 1 and lg 2 p 2) [11]. The contractor is liable for a non-conformity that existed when the risk passed to the customer, even if it becomes apparent only later (VÕS § 642 lg 1) [12]. Where a consumer has ordered construction within the meaning of the Building Code from a business, a defect that becomes apparent within two years of handover is presumed to have existed at handover, unless this presumption is incompatible with the nature of the work or the defect; an agreement to the consumer's detriment is void (VÕS § 642 lg 2¹) [12]. Under the Building Code (ehitusseadustik, EhS), construction includes „muu ehitisega seonduv tegevus, mille tulemusel ehitis tekib või muutuvad selle füüsikalised omadused“ [13] (translation: other activity relating to a building as a result of which the building comes into being or its physical properties change; EhS § 4 lg 1).

Notice. A defect must be reported within a reasonable time after the customer learned or should have learned of it; for a consumer contract for work, within two months (VÕS § 644 lg 1) [4]. Under the Act, a consumer contract for work is one whose object is the provision of a service in respect of the consumer's movable property (VÕS § 635 lg 4) [1]. Without timely notice the customer cannot rely on the defect; if the failure to notify is reasonably excusable, the customer may still reduce the fee or claim damages, except for lost profit (VÕS § 644 lg 3) [4]. According to the Supreme Court, for hidden defects the reasonable time for notice does not start to run from the inspection of the work (RK 3-2-1-60-15) [14].

Repair. The customer may demand that the contractor repair the work or do new work, unless this would cause the contractor unreasonable costs or unjustified inconvenience (VÕS § 646 lg 1) [5]. Outside consumer contracts for work, the customer loses this right if they do not demand repair together with the notice of the defect or within a reasonable time after giving it, unless the contractor's conduct is contrary to the principle of good faith (VÕS § 646 lg 6 and 7) [5]. If the customer justifiably demands repair and the contractor does not repair the work within a reasonable time, the customer may repair it or have it repaired and claim reimbursement of reasonable expenses (VÕS § 646 lg 5) [5].

Other remedies. If repair is impossible or fails, or the contractor unjustifiably refuses it or does not carry it out within a reasonable time after being notified of the defect, the contract is deemed fundamentally breached and the customer may, without setting an additional period, among other things withdraw from the contract (VÕS § 647 lg 1 and 3) [15]. A customer who accepts defective performance may reduce the price by a declaration to the contractor (VÕS § 112 lg 1 and 2) [16], but not if the contractor has brought the work into conformity with the contract or done new work, or if the customer unjustifiably refused the contractor's offer to do so (VÕS § 648) [17].

How long do you have to make a claim?

The limitation period for a claim arising from a transaction is three years; for a claim under a contract for work arising from a defect in a building it is five years, and in the case of intentional breach ten years (TsÜS § 146 lg 1, 2 and 4) [6]. TsÜS is the General Part of the Civil Code Act (tsiviilseadustiku üldosa seadus). The limitation period for a claim arising from a defect starts when the work is completed or, if the customer must accept the work, when it is accepted or deemed accepted (VÕS § 651 lg 1) [18]. For a defect that has been remedied, the limitation period starts again from the remedy (VÕS § 651 lg 2) [18]. The Supreme Court has held that a building design contract is also a contract for work to which the five-year limitation period applies (RK 2-16-14644/50) [19].

What the law says

• „Sellise kokkuleppe puudumisel eeldatakse, et eelarve on siduv.“ [3] (translation: in the absence of such an agreement, the estimate is presumed to be binding; VÕS § 639 lg 1) – unless a non-binding estimate was agreed, the contractor cannot later charge more for the works the estimate covers.
• „Tellija ei pea töö eest tasuma enne, kui tal on olnud võimalus asi üle vaadata“ [7] (translation: the customer does not have to pay for the work before having had the opportunity to inspect the thing; VÕS § 637 lg 5) – the chance to inspect comes before the final payment.
• „Töövõtja kannab töö puuduse kõrvaldamise või uue töö tegemisega seotud kulud, eelkõige veo-, töö-, reisi- ja materjalikulud.“ [5] (translation: the contractor bears the costs of remedying a defect or doing new work, in particular transport, labour, travel and material costs; VÕS § 646 lg 4) – repairing a defect costs the customer nothing.
• „Ehitise puuduse tõttu töövõtulepingust tuleneva nõude aegumistähtaeg on viis aastat.“ [6] (translation: the limitation period for a claim under a contract for work arising from a defect in a building is five years; TsÜS § 146 lg 2) – building defects have a longer period than the general three years.

What to do

1. Write down the scope of work, the price or estimate, whether it is binding, and the deadline (VÕS § 11 lg 1; VÕS § 639 lg 1) [2] [3].
2. If the contractor reports that the estimate will be substantially exceeded, decide whether to continue or terminate the contract (VÕS § 639 lg 2 and 3) [3].
3. Inspect the work on handover and do not pay the final invoice until you have been able to do so (VÕS § 637 lg 5) [7].
4. Report the defect within a reasonable time, describe it and demand repair in the same notice (VÕS § 644 lg 1; VÕS § 646 lg 6) [4] [5]. Keep the notice and photos.
5. If no repair follows within a reasonable time, have the work repaired at the contractor's expense (VÕS § 646 lg 5) [5], reduce the price (VÕS § 112 lg 2) [16] or withdraw from the contract (VÕS § 647 lg 3) [15].
6. Keep track of the limitation period (TsÜS § 146 lg 2; VÕS § 651 lg 1) [6] [18].

Frequently asked questions

Can I terminate the contract before the work is finished?

Yes, the customer may terminate a contract for work at any time. The contractor is then entitled to the agreed fee less what they saved, or acquired or could reasonably have acquired by using their labour otherwise (VÕS § 655 lg 1) [20]. This does not apply if you terminated the contract because the contractor breached it (VÕS § 655 lg 2) [20].

Can the contractor charge for a quote?

The contractor is presumed not to be entitled to charge for preparing the cost estimate (VÕS § 637 lg 2) [7]; the parties may agree otherwise.

Is the contractor liable if the defect came from materials I bought?

The contractor is not liable for a non-conformity resulting from the customer's instructions or from defects in materials the customer supplied, if the contractor checked the instructions and materials sufficiently (VÕS § 641 lg 3) [11].

What happens if I do not accept the finished work?

If the customer, without good reason, does not accept finished work within a reasonable period set by the contractor, the work is deemed accepted (VÕS § 638) [10].