Situation of the subcontractor in the event of the Investor’s withdrawal from the contract

The subcontractor’s risk of losing eligibility for joint and several liability protection in the event of the investor’s withdrawal from the general contracting agreement and the general contractor’s withdrawal from the subcontracting agreement.

Presented below is a brief overview of case law relevant to the subcontractor’s loss of joint and several liability protection in the event of the investor’s withdrawal from the general contract and the general contractor’s withdrawal from the subcontract:

• The judgment of the Supreme Court of 16 April 2014, ref. V CSK 296/13 stated that the investor’s withdrawal from the contract with the contractor does not relieve him of responsibility for the remuneration due to the subcontractor under Article 647¹ of the Civil Code. In the Supreme Court’s opinion, “the investor’s liability, which arises following the investor’s consent to the conclusion of a subcontract, constitutes an additional guarantee of the subcontractor’s remuneration. It arises from a mandatory provision of the law and as such, with regard to its scope and applicability, internal relations established by the investor-contractor agreement are irrelevant (cf. Supreme Court judgment of September 5, 2012, IV CSK 91/11, Lex No. 1275009). As stressed by the Supreme Court in its judgment of 16 May 2002, IV CKN 1066/00, termination of the latter agreement does not relieve the contractor of its obligations under the subcontract (Lex No. 294015). The effects of the investor’s withdrawal from the contract linking it with the contractor must be assessed similarly. The indicated action of the investor does not abrogate the contractor’s financial obligation to the subcontractor, and therefore cannot result in exclusion of the contractor’s responsibility for the remuneration due to the subcontractor for the works performed under the subcontract agreement.”
• The judgment of the District Court in Łódź of 28 March 2024, ref. no. XIII Ga 178/23 stated that the investor’s effective withdrawal from a construction contract concluded with a contractor does not extinguish the investor’s liability towards the subcontractor in terms of the remuneration agreed with the contractor. The court stressed that the guarantee and protection stipulated in Article 647¹ of the Civil Code with respect to subcontractors justifies the conclusion that the existence of the once-established joint and several liability of the contractor and the investor to the subcontractor is independent of the continued existence of obligations under the general contract or the subcontract.
• In the resolution of 10 July 2015, ref. no. III CZP 45/15 the Supreme Court concluded that the investor is released from liability once the contractor withdraws from the agreement with the subcontractor. In the opinion of the Court, the settlement between the subcontractor and the general contractor will be based on a legal basis other than Article 647¹ of the Civil Code, thus one is justified to assume that upon withdrawal from the subcontract agreement, the investor’s guarantee responsibility for settlements resulting therefrom ceases.
• The judgment of the Court of Appeals in Krakow of 21 May 2020, ref.no. V AGa 11/20 stated that withdrawal from the contract linking the investor and the general contractor by any of the parties causes the contract to expire with retroactive effect, hence the investor’s liability under Article 6471 of the Civil Code likewise expires.

It is noteworthy that even the court decisions that questioned the existence of joint and several liability of the investor in the event of withdrawal from the general contract or subcontract did not deprive the claims of the subcontractor of their viability, stating only that the claims ought to be based on other legal grounds, subject to individual, case-by-case assessment.