Agata Jóźwiak | In Principle

When is the investor required to pay for the performance of work? How do identified defects relate to this obligation, and when can handover be refused? These questions cause many difficulties in practice and are the basis for numerous, often very complex and long-running disputes. Recently, this issue was addressed by the Supreme Court of Poland. The interpretive direction it affirmed may help market players, including construction contractors, to whom these findings may apply by analogy.

On 9 December 2021, the Supreme Court of Poland issued a resolution (case no. III CZP 26/21) examining liquidated damages in construction contracts. In construction, liquidated damages are particularly common, generating serious disputes even threatening the completion of projects. In practice, this instrument is mainly used by investors, and the problem usually affects general contractors and subcontractors.

Recent amendments to civil procedure in Poland (especially the one dated July 2019) have raised numerous doubts on how to interpret the Civil Procedure Code, in particular provisions on service of court documents, justifications for rulings, and appeals. Some of these ambiguities have caused lots of problems for parties and their counsel, as incorrect application of these regulations can have severe consequences and even result in losing the case on procedural grounds. Some of the doubts concerning justifications for rulings were recently clarified by the Supreme Court of Poland.

The investor and the general contractor are jointly and severally liable for the subcontractors’ fees. However, this does not automatically mean that the provisions of the agreement between the subcontractor and the general contractor will apply directly to the investor. A particular provision is an arbitration clause determining the method for pursuing claims. If the general contractor and the subcontractor have agreed to arbitration, can the subcontractor pursue the investor in arbitration as well, or must the subcontractor file suit in state court?

Recently, the Supreme Court of Poland adopted an important resolution specifying the rules for running of the statute of limitations after a postponement of payment (creditor’s extension of the payment deadline). Under the resolution, if payment is postponed, the statute of limitations begins to run again from the new payment deadline. Thus, the view expressed by the Supreme Court allows the repayment of the debt to be divided into instalments along with postponement of the due date, and thus postponement of the beginning of the limitation period.

From August 2019, the fee for an application for interim relief to secure a monetary claim (e.g. for payment of a specific sum of money) made before a legal action is brought to court has increased significantly. Instead of PLN 100, the fee is equal to one-fourth of the fee that would be payable in a suit on the claim (maximum PLN 50,000). Under certain conditions, the fee for an application for interim relief will be set off against the fee on the document instituting the principal proceeding (statement of claim). However, the provisions allowing for this possibility may give rise to problems of interpretation, and thus the need to incur additional costs.

The Supreme Court of Poland has presented to an expanded panel legal questions concerning a summons to attempt a settlement as an action interrupting the limitations period on a claim.

In the judgment of 26 April 2019 (case no. V CSK 80/18), the Supreme Court of Poland held that it is not contrary to the nature of a construction contract to condition the payment of fees on the absence of defects in the structure. Therefore, the parties’ terms requiring payment only after a faultless handover protocol has been obtained are permissible. However, in the Supreme Court’s opinion, such objections may also be included in the terms of the handover protocol. The court approved the possibility for the parties to invoke reservations made in the handover protocol, which constitute additional provisions in relation to the contract.

The Supreme Court of Poland has recently issued several rulings on setoff (Civil Code Art. 498), confirming the existing line of case law and the established legal and commercial practice. The regulations on asserting the defence of setoff in civil proceedings have also been amended.

Many contracts provide for a contractual penalty for reputation of the contract due to the other party’s fault and a contractual penalty for delay in performing the contract. But in such cases can both of these penalties be pursued simultaneously?

The amendment of Poland’s Civil Procedure Code which entered into force on 7 November 2019 changed certain provisions on the formal requirements for pleadings and the consequences of failure to meet these requirements. Harsh rules, uncertainty on the proper method of curing formal defects, and varying practices of the courts may result in final rejection of a pleading and loss of the case for seemingly trivial reasons. Professional attorneys must exercise particular caution.

It is permissible to agree on a contractual penalty for non-payment or late payment of fees due to subcontractors, the Supreme Court of Poland held in its resolution of 30 June 2020 (case no. III CZP 67/19).