Construction contracts: the property owner's right to have defects repaired by the contractor

Construction contracts: the client's right to have the work repaired by the contractor

When a contractor or construction company delivers a defective work, the client need not simply accept the result. The Swiss Code of Obligations provides precise instruments to protect those who have commissioned work. Among these, the right to free repair is the one most frequently relied upon in practice.

The right to free repair: what is it?

Under Art. 368(2) CO, the client may require the contractor to carry out a free-of-charge repair of the defects found in the work. This is the most commonly used remedy, as it gives the contractor the opportunity to correct its errors without drastic consequences. In many cases, this approach allows the dispute to be settled amicably, without recourse to litigation.

However, a fundamental point must be clarified: the client is not obliged to request repair. Even if the contractor offers it voluntarily, the client remains free to choose another path. The client may opt for a reduction of the contract price or rejection of the work (i.e. refusal to accept it), provided the relevant legal conditions are met (Gauch, Werkvertrag, N 1710).

Defects before or after delivery: a decisive distinction

Timing matters. The applicable legal regime changes depending on whether the defect comes to light before the formal delivery of the completed work or after delivery. This distinction is not merely academic: it determines which rules apply and which rights the client may assert.

After delivery of the work: how to proceed

Once the work has been received, the client who discovers a defect must notify the contractor and grant a reasonable period for repair. If the contractor carries out the repair properly, the matter is closed.

In practice, however, it frequently happens that the contractor fails to comply with the request. This constitutes "default of the contractor". The client must then set a final deadline for the contractor to fulfil the repair obligation (Gauch, Werkvertrag, N 1793). If this deadline also passes without result, several avenues open up.

It should be noted that at this stage the rights under Art. 368(2) CO are renewed: the client could, in place of the missed repair, request rejection of the work or a reduction of the contract price, provided the conditions are met (Gauch, Werkvertrag, N 1796 et seq.; Tercier, Les contrats spéciaux, N 4580).

1. Substitute performance: having a third party carry out the repair

The client may entrust the repair to a third-party firm, at the expense of the defaulting contractor. This option is based on the analogous application of Art. 366(2) CO (Gauch, Werkvertrag, N 1819). No court authorisation is required, but the client must have previously issued a formal warning to the contractor, setting a final deadline for performance (Gauch, Werkvertrag, N 1826).

The costs incurred for the third party may be claimed from the contractor. If the conditions of Art. 120 CO are met, the client may set off the contractor's remaining claim against the third-party costs, deducting them from the outstanding invoice (Gauch, Werkvertrag, N 871a). According to the case law of the Federal Supreme Court (BGE 128 III 416), the client may even demand an advance on the third-party costs, since in a construction contract the contractor is generally obliged to perform first (cf. Art. 372(1) CO).

An important limitation: if the client entrusts the repair to a third party, it cannot, save in exceptional circumstances, also commission the third party to carry out the entire continuation of the work. The original contract between the client and the contractor remains in force (Gauch, Werkvertrag, N 889).

2. Termination of the contract

The client may also choose to dissolve the contractual relationship. Under Art. 107(2) CO, the client may withdraw from the contract ex tunc, provided the conditions for rejection under Art. 368(2) CO are satisfied.

Alternatively, the client may waive the right to performance (i.e. the repair) under Art. 102(2) CO and set off the contract price still owed against the diminution in value of the work (Tercier, Les contrats spéciaux, N 4589). The loss corresponds to the difference between the current value of the work and the value it would have had if the repair had been carried out (CHK-Huerlimann/Siegenthaler, Art. 368 N 13).

3. Insisting on repair

The third option always remains open: the client may continue to demand performance under Art. 107(2) CO, if necessary by bringing court proceedings to obtain fulfilment.

Before delivery: the client's rights during execution

Many construction contracts provide for staggered performance: first the installation, then commissioning, and finally the acceptance inspection. As long as the work as a whole has not been delivered, the client's rights are not based on the warranty for defects under Art. 368 CO, but rather on Art. 366 CO.

If it is already foreseeable that the work will prove defective, for example because certain partial deliveries show defects, the client may set a deadline for the contractor to remedy the situation. If no response is forthcoming, the client may:

• Entrust the execution to a third party (Art. 366(2) CO): the third party may repair the work or complete it. The costs are borne by the contractor, who is nonetheless entitled to the agreed contract price (with set-off under Art. 120 CO). The original contract remains in force.
• Withdraw from the contract (by analogy with Art. 366(1) CO): the client may decide to pay for the work already performed and retain the partially completed work, thereby terminating the relationship ex nunc.

Significant delay in execution

Where the contractor accumulates a significant delay, the client may, after setting a final deadline, waive performance and withdraw from the contract (Art. 366(1) CO and Art. 107(2) CO). As a rule, withdrawal operates ex tunc, which would entail the return of the work already performed. However, legal scholarship also permits a termination ex nunc, which allows the client to retain the part already completed and to pay the contractor for the work carried out up to that point (CHK-Huerlimann/Siegenthaler, Art. 366 N 5).

Withholding the contract price as a means of pressure

An effective instrument to strengthen one's position: the client may withhold the contract price owed to the contractor until the repair has been properly carried out, relying on the defence of non-performance under Art. 82 CO. The contract price becomes due only upon successful completion of the repair.

Defects in the work? The assistance of Studio Legale e Notarile Haab

Disputes relating to construction defects require a careful assessment of the facts, strict observance of deadlines, and a clear strategy. Each case has its own particularities, and a procedural error can compromise rights that would otherwise be well-founded.

Studio Legale e Notarile Haab in Lugano, with Avv. Hugo Haab and Avv. Roberto Haab, regularly advises clients and property owners in disputes arising from construction contracts. If you have identified defects in work carried out by a contractor or construction company and wish to assert your rights, please contact us for an initial consultation.

For a personal consultation: info@haablegal.ch | +41 91 913 30 70