Termination of the construction contract. Grounds and procedure for termination in pre-trial and judicial proceedings.

A construction contract is a legal agreement between a customer and a contractor for the performance of any type of work related to the repair, restoration of existing buildings, as well as the construction of new ones. 

Situations when the parties want to terminate the contract before it ends are by no means uncommon. This leads to a whole list of reasons, among which one can distinguish:

• If, as part of the work, the customer understands that the contractor will not have time to deliver the project by the deadline stated in the contract. 
• If the contractor has completed the work, and the customer has transferred the payment ahead of schedule. In this case, the contract may be closed in advance. 
• If the quality of the result obtained does not meet the customer’s requirements. 
• If the contractor has completed only part of the work. 
• If the execution of the contract agreement is impossible due to various other reasons.  

As a rule, the method of termination of the contract between the two companies depends on the original reason. The Civil Code of the Russian Federation provides for three reasons for this:

• by agreement of the parties; 
• unilaterally;
• in court.

In this article, we will take a detailed look at each of the above reasons. 

Termination of the construction contract by agreement of the parties

Paragraph 1 of Article 452 of the Civil Code of the Russian Federation provides for the signing of an additional agreement on the termination of the original contract in case of mutual and voluntary desire of the two counterparties. 

In the prepared supplementary agreement, the parties must specify the grounds for canceling the existing contract. As such grounds , you can enter:

• The occurrence of unforeseen obstacles that complicate or make it impossible to fulfill the agreement. These may include a technical inability to make a payment, a defect found in the purchased materials or equipment. 
• The non-relevance of the fulfillment of the terms of the agreement due to the loss of economic benefits of one of the parties. 
• Termination of the activities of the customer or contractor due to bankruptcy or other reasons. 
• Understanding that the execution of the contract will not lead to the desired result. 

In order to fully comply with the procedure for early closure of the contract on the initiative of the two parties, it is necessary to prepare and sign an acceptance certificate for the work performed on the current date.  

Unilateral withdrawal from the construction contract

Early cancellation of the construction contract agreement unilaterally can occur both at the initiative of the customer and at the request of the contractor. If it is necessary to terminate the contract, the initiator party must notify the counterparty on the basis of clause 1 of Article 450.1 of the Civil Code of the Russian Federation.

Legal practice shows that the termination of the construction contract is more often initiated by the customer. There are a number of reasons for this:

• The contractor has performed work of inadequate quality or not in accordance with the requirements of the contract. 
• The contractor intentionally or for reasons beyond his control does not meet the deadlines set by the contract. 

If we are talking about the desire to terminate the contract by a contracting firm, then the reasons here are most often: 

• The customer did not provide the conditions for the work. 
• The customer does not make the payment for various reasons. 
• The cost of work has increased for reasons beyond the contractor’s control. 

It is important to take into account here that when the construction contract is terminated by the customer, the latter will be obliged to transfer funds for the work performed, unless otherwise provided by the terms of the contract. The agreement may also contain a clause on payment of compensation to the contractor upon termination of the agreement. 

Cancellation of the construction contract agreement in court 

Such a situation is possible if one of the parties decided to terminate the contract with the disagreement of the second counterparty. You can also file a lawsuit in case of a clear violation of contractual obligations in accordance with sub-clause 2, clause 2, Article 450 of the Civil Code of the Russian Federation.

As a rule, the statement of claim will contain data on the violation of the agreement or information about other circumstances of the termination of the agreement on the part of the customer or contractor, fixed in the contract. All violations or inconsistencies must be listed in the text of the statement of claim and supported by relevant documents. 

When filing a claim, it is important to determine the extent of possible damage that took place and the amount of compensation. 

If there are difficulties with the termination of the construction contract, you must seek qualified legal assistance. VALEN specialists have extensive experience in dealing with cases of termination of various agreements both in pre-trial and in court.