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Distinctive characteristics of Norwegian construction law

January 2011 - Real Estate & Property. Legal Developments by Torkildsen, Tennøe & Co .

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Introduction: In recent years we have experienced an increase of foreign contractors wishing to establish themselves in Norway. In many ways Norwegian construction law is similar to that of other European countries and it is surely possible for foreign contractors to operate here. However, foreign contractors often experience that the Norwegian construction contracts are far less detailed than in most other European countries. As a result, foreign contractors find the need to familiarise themselves with relevant Norwegian background rules of law.

Foreign contractors working in Norway also experience the need to familiarise themselves with the responsibility a contractor has towards the planning and building authorities. A contractor working on a project requiring application and permission is to a large extent responsible towards the authorities for the execution of the project. The responsibility is strict and the consequences of failing to meet the authorities' requirements may have vast consequences. Our experience is that many contractors do not understand the full extent of the responsibility they take on as a contractor and the consequences it may lead to.

In this article, we will provide a brief insight into these characteristics of Norwegian construction law and point to some of the issues that it would be beneficial for a foreign contractor to be aware of before entering into a construction contract.

Construction contracts may be subject to unfamiliar rules of law

Although Norwegian law is based largely on written legislation, there is very little written legislation regarding construction and construction contracts. The only written legislation regarding construction contracts is the Housing Construction Act which concerns contracts between a contractor and a consumer regarding the construction of a house for the consumer.

For construction contracts between professionals, there is no such legislation. This means that construction law is primarily based on the contracts themselves. Norwegian construction contracts are usually standard contracts that have been adapted to suit the individual projects.

The contracts are usually based on a set of standard contract terms referred to as "Norsk Standard". There are sets of standard terms for various subject areas, for example for design and construction contracts or the execution of building and civil engineering contracts. These standards are usually incorporated into the construction contract and attached as an appendix.

The Norwegian standard terms are similar to some international standard terms. However, The Norwegian standard terms are far less detailed than international standards and standards used in other countries. They are to a larger extent supplemented by the background rules of law. As a result, contractors who operate in Norway may be subject to rules that they do not know of and have not explicitly chosen as part of the contract.

It is important for foreign contractors to be aware that such rules exist, especially since the non-statutory rules are not easily accessible without knowledge of Norwegian law. Furthermore, it is important that the contractor is vigilant and ensures that important issues that are not solved by the standard terms are solved in the contract itself.

A builder may also wish to use the construction contract to impose upon the contractor obligations that the builder is subject to through other contractual relationships. This can be done by making reference to an act that does not otherwise apply to the contractor.

As an example, a builder who wants to construct a residential building is subject to the above mentioned Housing Construction Act. This is the case for projects of all sizes, including large projects. The act has strict regulations intended for the protection of consumers, which a builder cannot deviate from through contract. Since the act imposes strict obligations on the builder, a builder may try to transfer these obligations to the contractor through back to back contracts or by making reference to the act.

It is also common for a builder to want to transfer his obligations following the regulation on Safety, Health and Working Environment on Construction Sites.

In cases like this, the contractor must be aware of the obligations imposed on him by the incorporated act.

The contractor's responsibility and liability towards planning and building authorities

Construction law is closely linked to planning and building law. According to the Norwegian Planning and building Act almost all building projects require application and permission from the planning and building authorities. All projects that require application and permission also require that the persons or companies that are involved with the construction are approved by the authorities.

The applicant, the designers and the executing contractors must all be approved by the building and planning authorities as "responsible enterprises". Before all the necessary roles are filled by such responsible enterprises, the planning and building authorities will not issue a commissioning permission. The roles that need to be filled will depend on the type of building project. The authorities' approval is based on an evaluation of qualifications and relevant experience. Therefore it is not uncommon that a project needs specific enterprises for specific subject areas. As an example, there are specific qualifications required in order to design and construct technical installations or fire proofing installations.

When the applicant applies for a building permit, the application must list the responsible enterprises involved and the roles they have been hired to fill. If an enterprise is approved, it is responsible towards the planning and building authorities for carrying out that role according to the requirements set out in the building permit and the relevant legislation.

The responsibility includes the actual construction work. It also includes supervision and control of the work. Although, it is required that an independent enterprise inspects the building, the executing contractor is obligated to carry out inspections and document that the building has been constructed in accordance with the relevant legislation and technical requirements. If a building project is not carried out in accordance with the requirements, this may have serious consequences for the contractor.

The contractor may lose the right to continue as the executing contractor for the building project, which may have consequences for the contractual relationship with the builder. It may also result in the contractor not being approved by the authorities for other projects. Other consequences are fines or serious criminal charges. In recent court decisions, designers and executing contractors have been given large fines for failing to carry out a building project in accordance with technical regulations.

The enterprise which accepts responsibility towards the authorities is always responsible for the role they have accepted to fill. This means that if the contractor hires a subcontractor who fails to carry out the project correctly, the main contractor is still responsible towards the authorities. As a result, a contractor should always be vigilant about only accepting responsibility for the work he will carry out himself. The contractor should also make sure that all subcontractors are qualified contractors and that they accept responsibility for their role in the building project.

The responsibility a contractor has towards the authorities does not always correspond to the responsibility assumed by the construction contract. It is not possible to contract oneself out of the responsibility towards the authorities, which means that the responsibility cannot be limited in order to correspond with the contract. Thus, the contractor has to make sure that the contract corresponds with the responsibility towards the authorities.

In our experience, some builders request that contractors carry out the project in a way that does not correspond with the building permit or the relevant legislation. A common example is starting construction before the authorities issue a commissioning certificate. This may result in consequences which cannot be indemnified through the construction contract. Although the builder may cover financial consequences such as fines, he cannot prevent or repair the fact that the contractor may be disqualified from the rest of the project and possibly other building projects in the future or the fact that the contractor may face criminal charges.

In conclusion, a contractor operating in Norway needs to be aware of the official legal requirements and keep them in mind when entering into a construction contract. In our experience, the standard contracts have few or no provisions regarding the interaction between the contractual relationship and the relationship with the authorities.


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