Case 4: Construction work

In October, Company A (beneficiary) and Company B (constructor) signed a contract in order to build the Company A’s offices according to a building project. Total value of the contract: 50.000 RON.

According to the contract, Company B had to finish the construction of a building (without interior finishing). The construction was already started at the date of signing the contract and included the following work: basement construction, hardware plate over basement, ground support lifting columns, pillars of the floor, pouring plate over the office space.

Company B did not finish its work until the deadline of 24th December, as it had been agreed on in the contract. But, Company B did resume and finish its works by March the following year and Company A therefore made the payment of 50.000 RON, as agreed on in the contract.

On 31st March, both parties signed another contract, agreeing that Company B (the beneficiary) would also do the interior finishing and hand over fully furnished offices. Total value of the second contract: 80.000 RON.

At the time of signing the second contract, Company A did not notice that two tasks of the planned work had already been paid for in the first contract. Therefore Company A believed that including these costs in the second contract was not correct.

After signing the second contract, Company B showed a lack of interest in performing the work: either there were no workers on site or they were not trained to perform the tasks; there were long interruptions, more raw material than necessary was ordered and working hours were billed even though the work was conducted by machines.

In September, when the works were supposed to be finished, Company A noted that some work was poorly executed and some was not even executed at all. All attempts to contact Company B in order to agree on the termination of the work did not lead to any result, even after communicating a notice to warn them of the intention of terminating the contract for reasons attributable to Company B.

As a result of these differences, Company A sued Company B, arguing that out of the total value of the second contract of 80.000 RON, they had paid the sum of 68.000 RON, which exceeded the work done by Company B. Company A stated that they had paid the first contract´s full amount (50.000 RON) and now had paid a total of 118.000 RON, but felt that the total value of the work executed in both contracts was only about 75.000 RON.To them it was clear that the charged amount of 43.000 RON was wrong and injustifiable

Company A demanded the termination of the contract and wanted Company B to be ordered to pay the damages equivalent to the amount already paid for the unexecuted work and also equivalent to the work, which required remediations.

Company B denied all fault and rejected the demands of Company A.

This specific case therefore called for expertise.

At the initiative of one party and accepted by the other, it was requested at the trial court to try and solve the dispute by mediation.

In this mediation an important role was played by the lawyers, which assisted the parties and negotiated the conditions under which they would agree to the litigation. The mediator was a neutral and impartial person who facilitated the exchange of offers and maintained a productive framework and constructive tone allowing the parties to engage in a dialogue.

Such a commercial dispute usually lasts about a year in front of a court in first instance. In addition to court fees (which are paid according to the amount that is required to recover in court) Company A would have paid an expert to assess the amount of such loss due to delay work or work performed incorrectly.

For Company A there was also the possibility of losing the case if Company B could have proved that it had been a fortuitous fact and therefore they were not to blame for the work not being completed on time. On the other hand, Company B could have lost a considerable amount, up to the total price of the work.

What happened to Mediation?

Both parties agreed, after two Mediation sessions of 3 hours each, that: Company A would withdraw its complaint in court, no longer wishing to terminate the contract and not ordering Company B to pay the damages. Both parties agreed that the contract would be extended for a reasonable period of time, giving Company B the opportunity to execute all the works in qualitative parameters. In addition, in order to compensate the loss of Company A of not using the offices at the time scheduled, Company B committed to purchase, on its own expense, the office furniture. Considering that the parties amicably agreed and the two managers were honest, they agreed that Company B would become the service provider for other work contracts in the benefit of Company A.

The mediation agreement between the parties was submitted to the court, which noted the agreement of the parties, following the sentencing of expedient (procedural act which put an end to judgment, pursuant dealings between the parties).

Together with the delivery of the judgement, the court ordered court tax reimbursement, at the request of the party concerned.

Therefore, the court tax was recovered, no experts had to be paid, the parties complied with the mediation agreement and as a result, established new commercial relations.

In conclusion, Mediation had the following positive aspects:

  • It unlocked the conflict.
  • It allowed the continuation of the business relationship.
  • It solved the dispute in two days and not in one year.
  • It let both parties recover the value of the damages.
  • The court tax was recovered.
  • It convinced both companies that mediation is effective and efficient and that in the future they would try and resolve disputes through mediation before going to court.

Please note that the identities of the disputing individuals were altered, due to the confidentiality element Mediation carries.