In this article we will tell you about what you need to do for saving your money in situations, when the contractor made violations under the contract.
Pay attention, that now there is the new opinion of legislator, namely, now guarantee retention helps to withhold a part of the contractual payment. Because of it, if there are violations, he will be able to keep all or part of the payment.
There are some advices from us:
1) It is necessary to determine the amount and timing of the return of the withholding.
The probability that the price of the contract will be changed is rather high. To prevent it from happening, it is better to use a firm amount in the contract. The best solution is to stipulate the retention amount as a percentage of the contract price. Also, you can determine the periodic return, for example, you can split the payments over several months.
Besides, you should discuss the return period depending on how the counterparty behaves. For instance, if in the contract there are the general customer, you should discuss the moment of return the retention, which will be depended on the counterparty. Thus, the parties agreed that the subcontractor would receive such retainage within 2 years after the contractor will deliver the facility to the general customer. When the customer required the payment before the retorn period, he got the refusal.
Also, we recommend to take account of the fact that sanctions can be accrued. We mean that it can be the penalty for late payment or illegal withholding of money.
At the same time, the art. 395 Civil Code of RF cannot be used. Why? Because of the fact that condition from the contract about not calculate interest works only at the moment, when there is the withholding of money within a certain period of time. In such case the condition about the interest in accordance with the art. 395 Civil Code of RF will be considered unfair.
2) Determine in the contract your right of turning down the amount of the retention for each violation.
As a general rule, the customer can withhold the money, but later it will be recognized as an offset against the contractor's claim. It is better to write this clause in the contract before, it helps to save your money. Courts have recognized such items as balancing.
In the situation, when you want to make a clause about the penalty in the contract, we recommend to write it like this: “the customer is entitled to deduct money from the guarantee amount for any breach of contract on the part of the contractor”. This formulation will be more correct. Example from judicial practice: a contractor executed his duties, but he missed the deadline. The contractor said that the withholding of money was illegal, however the Court’s opinion was that this withholding provided compensation for liquidated damages, due to this fact the contractor must paid the penalty. By the Court opinion, every step is legal.
3) Record the breach committed by the counterparty and send to him the notification about retention.
When you have the grounds for the fact of retention money, you shall inform the other party about it. This notification can be the fixed fact of the moment of violation. You shall do it on time for the contractor has not the possibility deflect the blame.
For example, a contractor made a violation and told that the retention was illegal, however, the Court took the other side’s position and admitted that this notification was good behavior from the customer.