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At the start of a construction project, a client will often engage an architect, engineer or consultant to help him with the design (hereafter: ‘consultant’). The legal relationship between the client and his consultant is – if nothing else has been agreed – governed by the legal rules for the commission contract. These legal rules can be found in the first section of title 7.7 of the Dutch Civil Code (art. 7:400 ff. of the Civil Code). The summary statutory regulation has a general and open character and is largely of a regulatory nature. It is therefore common for parties to make further agreements. Usually this is done by means of general conditions modeled by professional organizations of architects in addition to and in order to elaborate the legal regulation of the commission contract. The most recent set of general conditions in consultancy law is De Nieuwe Regeling 2011 (hereafter: ‘DNR 2011’). The rights, obligations and liabilities of the parties to a commission contract are explained below, both on the basis of the legal regulations and on the basis of the DNR 2011.
Rights and obligations of a consultant during a construction project
Based on the legal regulations, a number of general duties of care apply to the consultant. In the first place, the consultant must observe the care of a good contractor when carrying out his activities. After all, the client may expect a certain level of competence and commitment. When evaluating whether there is a good contractor, one must look at the norm requirement. The consultant will have to meet the standard which applies to a ‘reasonably competent and reasonably acting professional’.
Secondly, the consultant has an information duty towards the client. The consultant must keep the client informed about his activities in the execution of the commission and inform him when the commission is ready. The consultant must also render an account with respect to the manner in which he has carried out the commission.
In the DNR 2011 the obligations of the consultant are further specified. In general there is for the consultant in the design stage a (i) consultation obligation with the client about those subjects which are important for the commission, (ii) an information obligation on the ground of which the consultant has to inform the client about the (progress of the) execution of the commission and has to provide information about alterations of legal regulations, financial aspects, financial consequences of alterations in the commission and agreements between the consultant and third parties in relation to the fulfilment of the commission and (iii) an obligation to execute the commission in a proper and careful manner, whereby the consultant stands by the client in a position of trust and will carry out his services to the best of his knowledge and ability. This position of trust between the client and the consultant applies during all stages of the building process (the design stage, the contracting stage and during the management).
More specifically, the DNR 2011 determines that the obligations of the consultant in the design stage also include the realization of (i) a technically sound design (state of the art), (ii) a financially feasible design, (iii) a legally executable design (the work must qualify for a permit) and (iv) an obligation to warn the client if his information, data or decisions obviously contain such errors or show such deficiencies that he has to point these out to the client.
In the tender phase the consultant will have a role in particular in advising the client about the tender method to be followed and possibly in advising and bringing about a contract with the contractor. However, the awarding of the contract to the contractor is reserved for the client himself.
During the execution stage the consultant has a role in the management. The consultant has to see to it that the contractor carries out the work according to the specifications and in time. If the consultant is granted powers of representation during the management, a written authorization will have to be issued by the client on the basis of the DNR 2011.
Rights and obligations of the client during the construction process
Opposite the obligations of the consultant are the obligations of the client during the construction process.
Based on the legal regulations, the client owes the consultant a wage and is obliged to reimburse the incurred expenses of the consultant insofar as these are not included in the wage. If the level of the wage is not determined, then the client owes the wage calculated in the usual way or a reasonable wage. The client has the right to cancel the commission contract at any time.
The DNR 2011 further elaborates that the client must behave as a good and careful client. This duty of care is further elaborated in an obligation of the client to provide the consultant with the information necessary for the execution of the consultancy work. Examples are the brief or information coming from other consultants involved in the building project. The client can rest on the obligation to evaluate in time the activities of the consultant. Possibly the consultant is dependent on this evaluation before he can proceed with the next design stage. A client is not obliged to check the activities of the consultant, but if he does, the client must warn about any shortcomings in his consultant’s activities. However, this warning obligation does not extend as far as the warning obligation which rests on the consultant. The client has no warning obligation with respect to shortcomings of which he could have been conscious.
Finally, the DNR 2011 (just like the legal regulation) also contains the obligation for the client to pay the consultancy fees in time. On the basis of the DNR 2011, a payment schedule will usually be agreed for this purpose. The DNR 2011 also contains further rules about what is to be understood by consultancy costs and how these costs are to be determined. One can think of a percentage of the contract sum, an amount based on time spent or a fixed fee.
If the consultant has been contracted under the DNR 2011, the client can cancel the commission contract with the consultant on the basis of the cancellation possibilities as formulated in the DNR 2011. Dissolution of the contract under the force of the DNR 2011 is excluded, unless the client is a natural person who is not acting in the exercise of a profession or business.
Liability of the parties in a commission contract in a building process
If a client or consultant does not comply with his obligations and damage occurs as a result, the client or consultant can be held liable. On the basis of legal regulations a party is liable if damage has been caused by his shortcoming. If the consultant can still fulfill his obligations, for example by making good his mistake, then for liability it is required that the consultant is in neglect.
The DNR 2011 contain a number of liability limiting provisions. The first limitation of liability is that the consultant or client is only liable if there is a culpable shortcoming. In other words: there must be a shortcoming for which the failing party is responsible. Furthermore the liability of the consultant is limited to a considerable extent. Under the DNR 2011:
- Is the liability of the consultant limited to direct damage (so no compensation for consequential damage, such as trading loss, loss of turnover or profit or higher costs);
- Is the compensation obligation of the consultant limited in scope
o The compensation is (at the choice of the parties) equal to the consultancy costs with a maximum of € 1 million or the compensation is equal to three times the consultancy costs with a maximum of € 2,5 million;
o If a third party is called in on the instructions of the client, the compensation is limited to the sum to which the consultant can appeal to this third party by virtue of the agreement between the client and the third party; and
o In the case of the realization of an object, the compensation is limited to that part which is not covered by the CAR insurance of the client.
- Is the liability period limited. There is an expiry period of five years after completion or two years after the shortcoming has been protested about.
Real estate lawyer in Rotterdam
The real estate lawyers at LVH regularly assist clients, consultants and contractors. They advise on the conclusion of the commission contract between the client and the consultant, on the execution of the consultancy work and on how to act when a shortcoming occurs. In view of the short expiry period under the DNR 2011 it is always useful to obtain legal advice in good time. If necessary, we conduct proceedings before the courts or the Arbitration Board in construction disputes.