Judicial practice

31 March 2018

The refusal of the customer to sign an act of completed works is not a reason for works non-payment

In relationship between customers and contractors of different types of works often arises a situation where the contractor actually performed the work accepted by the customer under the relevant contract, but the customer did not sign the act of completed works and did not pay for them. There arises the question about the possibility of recovering the cost of works performed in court, taking into account the fact that the main document, confirming the proper performance of works, was not signed by the customer.

Our company has a successful experience in debt collection in similar cases, confirmed by the decisions of commercial courts of Ukraine of all instances.

The main points of the case:

Between the contractor, whose interests were represented by our company, and PJSC “Creative” was signed a contract for the installation of equipment, according to which, the contractor had to carry out assembly and commissioning works at the customer’s facility, and the customer had to accept the works and pay for them.

After actual performance of the works, the contractor sent two copies of the signed act of completed works to the customer. However, the customer did not sign the act, did not provide any comments regarding the works performed, and did not pay for the works. In this regard the contractor was forced to sign his existing copy of the act of completed works unilaterally, and then applied to the Commercial Court of Kirovograd region with a lawsuit for the collection of debt.

According to the decision of the Commercial Court of Kirovograd Region dated December 26, 2014 in the case No. 912/3710/14 (left unchanged by the courts of appeal and cassation instance), claims of the plaintiff (contractor) were fully satisfied: the court ruled to recover the full price from the defendant (customer).

Legal conclusions:

  • Articles 853 of the Civil Code of Ukraine sets forth the duty of the customer to accept works performed by the contractor under a contract, examine them, and in case of detecting defects in works set forth obligation to immediately notify about them the contractor. If the customer fails to make such a statement concerning any shortage of works performed, the customer will loses the right to refer to the defects of the works performed.
  • Part 4 of Article 882 of the Civil Code of Ukraine establishes that the transfer of works by the contractor and their acceptance by the customer shall be made under an act signed by both parties. In case of refusal of one of the parties (customer) from signing the act, this fact shall be indicated in the act and the act shall be signed by the other party (contractor).
  • Thus, the contractor should not take any action in order to force the customer to sign the act of works performed, but should only prove the fact of customer’s refusal to sign the act.
  • Since in this case there was no grounding for the refusal of the customer from the acceptance of works, the plaintiff reasonably considers the works as duly performed and accepted by the customer. At that, the defendant (customer) acknowledged the fact of receiving of a copy of the act of completed works.
  • Thus, the defendant failed to provide the court with proper evidence of the validity of the refusal to sign an act of completed works. Accordingly, the customer groundlessly refused to accept the works, without promptly declaring its defects, and therefore shall not be released from the obligation to pay for the works performed by the contractor. The similar legal position is set forth in the Letter of the Supreme Commercial Court of Ukraine dated February 18, 2013 № 01-06/374/2013 “On the Practice of Reviewing Disputes Related to the Execution of Contracts (on the Materials of Cases Reviewed in the Cassation by the Supreme Commercial Court of Ukraine)”.

The abovementioned decisions of the Commercial Court of Kirovograd Region in this case are available by this link.