Debrecen
Antall József str. 36., gf. 1.
+36 20 445 8480
On weekdays 8 AM to 5 PM
Open: 8 AM to 5 PM
On weekends we are closed
Antall József str. 36., gf. 1.
On weekdays 8 AM to 5 PM
On weekends we are closed
The construction contract is the most important element of a building project: it sets the contractor’s fee and the rules of settlement, the performance deadlines, the procedure for certifying performance, the liquidated damages (kötbér) and the securities. Its mandatory content is listed in section 3 of Government Decree 191/2009 (IX. 15.) on construction activity, while disputes around performance certification can be resolved through the procedure of the Performance Certification Expert Body (Teljesítésigazolási Szakértői Szerv, TSZSZ). Dr. Andirkó Law Firm is led by dr. Andirkó Balázs István LL.M., real estate law specialist. We draft, review and negotiate construction contracts for developers, property developers, main contractors and subcontractors, with in-person consultations in Debrecen and Hajdúböszörmény and online, by video call, throughout the country.
Construction disputes usually arise not because the parties have no contract, but because the contract does not properly protect the interests of the contracting party. Our work therefore always starts by clarifying which role your business holds in the contractual chain.
Developer, property developer. You bear the full financial risk of the project, and you are the one who has to be protected against delay, claims for additional work and defective performance. This calls for a system of liquidated damages, a security structure and a consistent handover procedure, as well as – if you intend to sell the completed property – a sales framework prepared in advance.
Main contractor. You owe obligations in two directions: upwards to the client and downwards to the subcontractors. The main contract and the subcontracts must be consistent with each other – if the payment deadlines or the performance certification conditions do not match, you will be pre-financing the project from your own funds.
Subcontractor. You stand at the end of the contractual chain, so delays arising at higher levels ultimately land with you. Having the subcontract reviewed in advance is therefore the few hours of legal work that, across the project as a whole, typically pays off best.
Private builder. Even for a family house or a larger renovation, it is worth having an attorney review the contract prepared by the contractor before you sign it.
Section 3(2) of Government Decree 191/2009 (IX. 15.) lists item by item the mandatory content of a construction contract. The most important of these in practice are the following:
The decree also defines the composition of the contractor’s fee: it must cover the direct costs (material costs, direct machinery costs together with transport and loading costs, and the labour charge calculated on the basis of the construction industry hourly overhead rate), plus the margin, which covers general costs and the planned profit. A quotation counts as disproportionately low if the hourly overhead rate applied by the contractor falls below the minimum construction industry hourly overhead rate set out in the ministerial decree.
A rule that is often overlooked: after the contract is concluded, the contractor bears the legal consequences arising from any deficiency in the construction documentation that it should have noticed with the professional diligence expected of it, but did not flag before the contract was signed. As a contractor, reviewing the design documentation before signing is therefore a liability question: it is worth reporting any deficiencies you notice in writing.
Under the Civil Code, the contractor must carry out work that forms part of the contract but was not taken into account when the contractor’s fee was set, as well as work without which the works cannot be completed fit for their intended use – this is additional work (többletmunka). Extra work (pótmunka), by contrast, is work ordered subsequently, typically becoming necessary because of a design change.
The distinction has financial consequences. If the parties agreed on a lump-sum fee, the contractor may claim the consideration for extra work on top of the lump sum, but is not entitled to reimbursement for additional work. The client, however, must reimburse the contractor for costs connected with additional work that were not foreseeable when the contract was concluded.
In practice, a significant part of construction disputes plays out along this dividing line. A well-drafted contract does not leave the classification to the court: it sets out the rules for notification, approval and pricing, and how an entry in the e-construction log relates to the settlement between the parties.
Performance must be recorded in the electronic performance certification log, and this forms the basis of invoiceable performance. Following inspection, the e-performance certificate is issued by the investment manager or the construction technical supervisor – and, in specified cases, by the building owner or the responsible technical manager of the ordering contractor – covering the construction activity carried out, its extent, quantity and quality, and on that basis it proposes the invoiceable amount.
Unless the law provides otherwise, the building owner must pay the amount of the invoice issued on the basis of the e-performance certificate to the main contractor within 30 days of receipt of the invoice. This deadline applies specifically to the relationship between the building owner and the main contractor; in the subcontracting chain the terms of the construction contract and – where it applies – the rules on construction escrow management govern. This is precisely why the payment deadlines in the main contract and in the subcontracts have to be aligned.
This leads to one of the most sensitive points of settlement in construction: without a performance certificate no proper invoice can be issued, and without a proper invoice the payment obligation does not arise. There is a separate procedure available for this situation, which we describe below.
Stipulating liquidated damages (kötbér) is not enough in itself. Two questions have to be settled precisely: the basis and the rate of the liquidated damages, and how they relate to the other breach-of-contract claims. An important limit is that alongside liquidated damages for defective performance the entitled party may not enforce a warranty claim – this has to be thought through when the contract is drafted, because a badly structured liquidated damages clause may deprive the client of its stronger right.
On the security side, the structure has to be assembled from a combination of performance bond, good performance guarantee, retention and bank guarantee that fits the size of the given project and the financial strength of the contractor. Where construction escrow management applies, the construction contract must contain the escrow manager’s details, the details of the escrow account, the building owner’s confirmation that it grants the escrow manager exclusive rights of disposal over the account, the certified source of the full funding of the construction activity specified by amount, and – if the parties so agree – the amount, form, purpose and possible use of the performance bond provided by the main contractor.
Where escrow management is mandatory, without an escrow management contract the construction site cannot be handed over, the e-main log cannot be opened and construction cannot begin. This is not a formality: without an escrow management contract construction cannot lawfully start at all.
The contractor must hand over the works in a handover and acceptance procedure, in the course of which the parties carry out the inspections customary in the given sector. A key rule is that acceptance may not be refused because of a defect in the works which – or the repair or replacement of which – does not prevent their use for their intended purpose.
An electronic record must be drawn up of the technical handover and acceptance procedure and attached to the e-main log. The e-performance certificate issued after the defects and deficiencies recorded in that document have been remedied – relating to the main contractor’s performance – is based on the electronic technical certificate.
As a contractor you can rely on this provision if the client unjustifiably postpones acceptance. As a client it means that refusal of acceptance really can only be based on a defect that prevents use for the intended purpose – the list of defects therefore has to be recorded precisely and with proper documentation.
An e-construction log must be kept of construction activity carried out on the basis of the construction documentation. The log is documentation that can be used in official and court proceedings, and it must be kept up to date so that an entry is made on every working day. Through entries in the log the participants notify each other of hazards, facts and circumstances that affect or endanger performance in accordance with the contract.
In a later dispute the log will be the most important piece of evidence. Without accurate and continuous record-keeping, neither the obstruction, nor the additional work, nor the client’s instruction can be proved afterwards. Once the log’s standby status has been terminated, no documents can be uploaded and no entries made – so missed entries can no longer be made up later.
This is one of the most frequent questions contractors ask, and Hungarian law maintains a separate procedure for the situation.
The Performance Certification Expert Body (Teljesítésigazolási Szakértői Szerv, TSZSZ) gives an expert opinion, at the request of the client, the designer, the contractor or the subcontractor, on questions arising from the construction performance of architectural-technical design and construction contracts, if
The TSZSZ procedure covers construction investments carried out in Hungary, with the exceptions set out in the Act – these include, among others, the Paks capacity maintenance investment and certain state transport infrastructure investments. The body examines performance of the contract and issues an expert opinion from which it can be established whether performance took place or was not carried out in accordance with the contract, and in what amount payment of the consideration due for performance – and, where applicable, enforcement of an accessory obligation securing the contract – is justified.
The strength of the expert opinion lies in two things. First, in an action based on the opinion the claimant relies directly on the TSZSZ opinion as the basis of the right it seeks to enforce. Second – and this is the key point – in the expert question arising in the action, the TSZSZ opinion qualifies as the same evidence as if it had been submitted by an expert appointed by the court. This can shorten the proceedings, because no further expert has to be appointed on the expert question. An important limit, however, is that only a claim covered by the expert opinion can be enforced in that action – which is why the wording of the request submitted to the TSZSZ is itself a strategic question.
Our firm undertakes the preparation of TSZSZ proceedings, the compilation of the request and the documentation, and the conduct of the action based on the expert opinion. Where the claim is not disputed but simply unpaid, we proceed along the classic route – payment notice, order for payment, enforcement and, if necessary, liquidation proceedings; you can read more about this on our debt recovery page.
As a contractor, it is also worth knowing that under the Civil Code the contractor has a lien, securing the contractor’s fee and costs, over those assets of the client that came into its possession as a result of the contract for works.
If you are developing property from your own resources or from financing, the construction contract is only one half of the project’s legal background. The other half is the sale – and it is worth keeping the two in one pair of hands.
How does the arrangement work? The developer instructs one law firm for the whole project. The same firm drafts the construction and subcontracting contracts, handles the establishment of the condominium and the deed of foundation, and then, as the seller’s attorney, concludes and countersigns the sale and purchase contracts for the individual flats.
What does the engagement cover? Drafting and reviewing construction and subcontracting contracts, establishing the condominium, preparing the deed of foundation and the organisational and operational rules (see the condominium lawyer page), drawing up a standard draft sale and purchase contract and schedule, concluding and countersigning the individual property sale and purchase contracts, administration before the land registry and the tax authority (NAV), handling the documents connected with buyers’ bank financing, and ongoing legal advice throughout the project.
Request a quote for your project. The arrangement works well if we are brought in before construction starts, when the legal structure is being set up.
At the first consultation we map out the details of the project, your position in the contractual chain, the deadlines and exactly what work is needed. Our work on construction contracts usually takes one of three forms:
We give a specific fee quote after the first consultation.
Real estate law specialist. Dr. Andirkó Balázs István LL.M. obtained his real estate law specialist qualification at the University of Debrecen, and also holds an LL.M. as a compliance law specialist. Construction and property development matters are not an occasional sideline for the firm but part of its core profile.
Clear communication. We do not expect anyone to be familiar with legal terminology. We do consider it important, however, that our clients understand throughout the whole procedure what is happening and why – we try to keep the use of legal jargon to a minimum.
A business approach. With a construction contract the aim is not legal perfection but that the project gets built and paid for. When shaping a contract we always look at whether a given clause is enforceable in practice, and whether it is worth the negotiating capital it consumes.
Experience in debt recovery. A standalone practice area of the firm is debt recovery. In handling construction receivables this means that we draft the contract from the outset so that a claim arising from it can be enforced if necessary.
Online consultation. If time or distance makes a personal meeting impossible, the consultation can also take place via Teams, Zoom, Google Meet or FaceTime.
Our other practice areas: real estate law and construction, condominium lawyer, lease contract, corporate law.
No. The law does not require an attorney’s countersignature for a construction contract to be valid – in this it differs from a property sale and purchase contract, where countersignature is mandatory. The mandatory content of the contract is, however, set out item by item in Government Decree 191/2009 (IX. 15.), and the parties pay for the contract’s flaws afterwards. The cost of having the contract reviewed in advance is typically a fraction of the risk it manages.
Additional work (többletmunka) is work that forms part of the contract but was not taken into account when the contractor’s fee was set, or work without which the works cannot be completed fit for their intended use. Extra work (pótmunka) is work ordered subsequently, typically becoming necessary because of a design change. Under a lump-sum contract the contractor may claim the consideration for extra work but not for additional work – although the client must reimburse costs connected with additional work that were not foreseeable when the contract was concluded.
Unless the law provides otherwise, the building owner pays the amount of the invoice issued on the basis of the e-performance certificate to the main contractor within 30 days of receipt of the invoice. This deadline applies to the relationship between the building owner and the main contractor; in the subcontracting chain the construction contract and the escrow management rules decide.
You can request an expert opinion from the Performance Certification Expert Body (TSZSZ). The TSZSZ acts where the performance certificate has not been issued, where its issue is disputed, and also where it has been issued but payment has not followed. In a later action the expert opinion qualifies as the same evidence as if it had been submitted by an expert appointed by the court.
Acceptance may not be refused because of a defect in the works which – or the repair or replacement of which – does not prevent use for the intended purpose. The defects have to be recorded in the handover and acceptance record, and the electronic technical certificate is issued once they have been remedied.
After the contract is concluded, the contractor bears the legal consequences arising from any deficiency in the construction documentation that it should have noticed with the professional diligence expected of it, but did not flag before the contract was signed. As a contractor, it is therefore worth reporting every design defect you notice in writing before signing.
For construction activity subject to a construction log, among other cases where the work is carried out by several main contractors, where the investment falls under the Public Procurement Act, where it is a priority investment, where the activity affects a listed building qualifying as a national memorial, or where a construction escrow manager is involved.
In that case the construction site cannot be handed over to the main contractor, the e-main log cannot be opened, and the construction activity cannot begin.
The client may withdraw from the contract at any time before performance begins, and after that may terminate it up until completion. In that case it must pay the contractor a proportionate part of the fee and compensate the loss caused by terminating the contract, provided that the compensation may not exceed the contractor’s fee.
A warranty claim cannot be enforced alongside liquidated damages for defective performance. Liquidated damages for delay and a warranty claim can, however, exist side by side. This is precisely why the wording of a liquidated damages clause is not a formality: a badly drafted defective-performance clause can take away the client’s stronger right.
The contractor has a lien, securing the contractor’s fee and costs, over those assets of the client that came into its possession as a result of the contract for works. This is not the same as the property under construction, so in practice it has to be applied with care.
Yes. The firm’s seat is in Debrecen with a branch office in Hajdúböszörmény, but a significant part of matters can be handled online and by post. Instead of a personal meeting we can also hold a Teams, Zoom, Google Meet or FaceTime consultation.
When you contact us we examine the legal status of the property and explain how the contract will be concluded, the attorney's fee and the expected costs. If you go on to instruct us, the fee for the first consultation is credited against later fees.
We draft the appropriate type of contract and provide the lawyer's countersignature.
We provide representation before the land registry authority, the tax authority and – depending on the type of case – any other authority or body.