LEGAL UPDATE REAL ESTATE 3/2013 – Aktuelle Entwicklungen für die Immobilienbranche


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SIA standard 118, General Conditions for Construction Work, new version

Introduction

As the legislator only gave very concise treatment to the work contract in the Swiss Code of Obligations, parties in the construction sector often contractually agree to adopt a specific set of private standards to supplement the general rules governing the statutory contract for works and services. In Switzerland, SIA standard 118: General Conditions for Construction Work, originally issued in 1977 by the Swiss Society of Engineers and Architects (SIA), has been very popular for many decades. After years of preparation, the SIA now issued a new version of standard 118 on 1 January 2013.

The new SIA 118:2013 has been carefully revised to ensure that the equilibrium between the interests of principals and those of contractors is maintained. Most of the changes are purely formal and concern changes to the language (e.g. consistent replacement of the term “warranty period” (“Garantiefrist”) by “time limit for claims” (“Rügefrist”)) and adjustments to comply with changes in legislation (e.g. legislation on public procurement, value added tax (VAT) or civil procedures). The article numbers also remained the same as before.

Some scholars question, however, whether the objective of maintaining the equilibrium between the interests of principals and contractors was actually met, and some writers argue that the changes to the content of the new SIA 118:2013 (slightly) shifts the balance against the principal (cf. Peter Reetz, Anwaltspraxis 6/7 2013, p. 285 et seq. and 288).

What is new?

With regard to the content, the following changes to SIA standard 118:2013 compared to SIA standard 118:1977/1991 should be mentioned:

  • According to art. 5, the principal must not only identify the composition of the subsoil before putting a construction project out to tender, but now explicitly also the composition of the existing building structure, and record the results in the tender documents. According to art. 7, the special provisions contained in the tender documents must now also explicitly include the special requirements to be met by the quality, organisation and work processes of the contractor (quality management).
  • Art. 38 now states that, unless agreed otherwise, VAT is not included in the offered price. It now also explicitly states that the principal is only entitled to a price discount or deduction for timely payment if this has been agreed in advance.
  • Art. 65 regarding inflation accounting procedures was amended and arts. 69 to 82 were repealed.
  • The minimum and maximum amounts of the collateral that can be retained (art. 150) and of the joint and several guarantee (art. 181) were adjusted to inflation since 1977. Art. 181 par. 3 of the standard now also explicitly states that the joint and several guarantee must be provided for the duration of the (two-year) time limit for claims and that the joint and several guarantee must be extended until the final removal of all defects if defects notified before the end of the time limit for claims have not yet been removed when the time limit for claims expires.

What transitional provisions apply?

SIA standard 118 is deemed to be the same as general terms and conditions of business. For the standard to have legal effect in an individual case, SIA standard 118 must therefore be contractually adopted by the contracting parties.

As there are no formal requirements for this contractual adoption, this can also be done validly by tacit understanding. In practice, the SIA standard is usually adopted by way of a written agreement. The contracting parties are free to decide if they wish to adopt the entire SIA standard 118, only parts thereof, or the standard in amended form.

The contracting parties are also free to decide whether they wish to adopt the latest or an older version of the SIA standard 118. It is also possible for the parties to agree, in the sense of a dynamic reference to SIA standard 118, that the latest version of the standard applies to their contractual relationship, thereby also subjecting themselves to any revisions of the SIA standard 118 that might be carried out after the conclusion of their contract.

If the contracting parties do not explicitly and clearly state which version of the SIA standard 118 they wish to adopt, the courts will have to settle any dispute regarding the applicable version by interpreting the adoption clauses. Many scholars argue that the lack of any other indications implies that it should be assumed that the latest version of the SIA standard 118 was adopted (Peter Gauch, Der Werkvertrag, 5th edition, Zurich etc. 2011, N 284).

For work contracts concluded after 1 January 2013 that refer to the SIA standard 118 without specifying which version, interpretation of the adoption clauses is likely to regularly result in the application of SIA standard 118:2013 as the latest version at the time of the adoption (at least until the entry into force of a future version). For work contracts concluded before 1 January 2013 that refer to the SIA standard 118 without specifying which version, interpretation of the adoption clauses is likely to regularly result in the application of the current version at the time of adoption (i.e. SIA standard 118:1977/1991), unless the interpretation should confirm that the parties agreed a dynamic reference.

To avoid long drawn-out disputes and difficulties of interpretation, it is a good idea to pay careful attention when editing work contracts in general and when adopting (and possibly amending) SIA standard 118 in the specific.


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