Construction and tradesperson agreements

Are you renovating your home, building an extension or hiring a tradesperson for a larger project? Then a written construction contract or tradesperson agreement is your most important protection against conflicts, extra bills and poorly done work. Yet many homeowners fail to draw up a proper agreement, and pay the price afterwards.

This guide explains what a construction contract contains, how AB Forbruger 2018 protects you, and what to require of your tradesperson before the work begins.

What is a construction contract?

A construction contract is a written agreement between a client (you as the homeowner) and a contractor or tradesperson for the performance of building and construction work. The contract establishes:

• What is to be carried out (a description of the work)
• Price and payment terms
• Timetable and delivery date
• The allocation of responsibility for defects
• Rules for additional work

The construction contract differs from a simple service agreement in that it typically covers larger building work, everything from a bathroom renovation to the construction of a whole home.

A tradesperson agreement is often used for smaller tasks such as painting, carpentry or plumbing, but should contain the same basic elements as a construction contract.

AB Forbruger 2018: your most important right

Since 2018, homeowners in Denmark have had access to AB Forbruger 2018, a set of standard conditions developed specifically for consumer construction. AB Forbruger 2018 gives consumers a clearer and more balanced protection in construction matters.

The most important elements of AB Forbruger 2018:

1. Requirement of writing

Agreement on the content of the work and the price should appear in writing. Oral agreements are hard to enforce.

2. Documentation for additional work

The tradesperson can as a rule not demand payment for additional work unless it is agreed in advance. This is one of the most valuable protections in AB Forbruger 2018, as many conflicts arise precisely because the tradesperson subsequently demands money for work the client did not know about.

3. The right to withhold payment

If there are defects in the work carried out, you as the client have the right to withhold a reasonable amount corresponding to the cost of remedying the defects, until they are remedied.

4. Liability for defects after handover

AB Forbruger 2018 contains rules on the contractor's liability for defects after handover, including hidden defects you could not discover in the normal inspection. After handover there is a multi-year liability period (5 years), and claims may also be subject to the general rules of the Limitation Act.

5. Mandatory handover meeting

The parties must carry out a formal handover meeting, where the work is approved or any defects are noted. This is important, because the risk of accidental damage (fire, water damage, etc.) passes to the client at handover.

How do you make AB Forbruger 2018 apply?

It is not enough simply to sign a contract with a tradesperson. You must actively agree that AB Forbruger 2018 applies. This is done by writing it into the contract:

"The parties agree that AB Forbruger 2018 applies to this construction relationship."

Many tradespeople and contractor firms use their own standard conditions, which can deviate from AB Forbruger 2018. Always read the conditions thoroughly, and insist on AB Forbruger 2018 if you want the best consumer protection.

Fixed price vs. work on account

One of the most important decisions when entering into a tradesperson agreement is choosing the pricing model.

Fixed price (tender)

The tradesperson gives a fixed tender for the whole job. You know in advance what you will pay, regardless of whether the work takes less or more time than expected.

Advantages:

• Predictability in the budget
• No surprises on the final bill
• The tradesperson bears the risk of their own time

Disadvantages:

• The tradesperson can build a buffer into the price
• Harder to obtain tenders for unclear tasks

When to choose a fixed price? A fixed price is best suited to well-defined tasks where the scope is clear from the start, for example painting a specific wall, fitting a new kitchen or building a new bathroom according to approved drawings.

Work on account

The tradesperson works according to the consumption of hours and materials, and you pay the actual price.

Advantages:

• A fair price if the task is easier than expected
• More flexible in the event of unforeseen complications

Disadvantages:

• A risk of budget overrun
• Hard to check the hours spent
• Requires close monitoring on your part

When to choose work on account? Work on account is appropriate for complex renovations where the scope is unknown, for example remedying moisture damage, work in older properties with surprises behind the walls, or tasks that require ongoing adjustment.

Combination model

Many agreements use a combination: a fixed price on the predictable parts, work on account on the unforeseen parts. The important thing is that the agreement clearly distinguishes between the two parts, and that there is a cap on the extent of the work on account.

What must the construction contract contain?

A solid construction contract should as a minimum contain the following:

1. The parties' details

• The name, address and CVR number of the tradesperson/contractor firm
• Your full name and address

2. A description of the work

The more detailed, the better. Refer to drawings, the tender list and any written description of the work. Unclear descriptions are the source of most disputes.

3. Price and payment terms

• Total price (fixed price) or hourly rate + material price (work on account)
• Payment plan, when are which amounts paid?
• What happens on delay?

Important: Avoid paying the whole amount in advance. A good practice is to pay:

• 10 to 20% on entering into the contract
• Ongoing interim payments at milestones
• 10 to 15% withheld as security until a fault-free handover

4. Timetable

• Start date
• Expected completion date
• Significant milestones along the way

5. Rules for additional work

The agreement should state that additional work is only carried out and paid for if it is approved in writing by both parties.

6. Liability for defects and complaint deadlines

When must you complain? What is the tradesperson's duty to remedy defects?

7. Insurance

Confirm that the tradesperson has valid professional liability insurance covering damage during the performance of the work.

8. Dispute and complaint

The agreement should state what happens on disagreement, for example the Tradespeople's Complaints Board (Håndværkets Ankenævn) or the Building and Construction Arbitration Board.

Additional work: the most common source of conflict

Additional work is frequently the cause of disputes between homeowners and tradespeople. The situation typically arises when the tradesperson discovers something unexpected, rotten wood behind tiles, defective pipes behind walls, and carries out work beyond this.

Your rights under AB Forbruger 2018:

• The tradesperson must immediately notify you if a need for additional work arises
• You must approve the additional work before it is carried out
• The tradesperson can as a rule NOT subsequently demand payment for additional work that has not been approved

Practical tip: Confirm agreements on additional work in writing, for example by email or a messaging service. Written communication is in many cases sufficient documentation.

The handover meeting

The handover meeting is the formal review of the finished work. Here you:

1. Jointly review the work carried out
2. Note any defects
3. Agree deadlines for remedy
4. Sign handover minutes

Important: Note EVERYTHING that is not as agreed in the handover minutes. Defects that are not noted can be harder to assert afterwards.

The handover minutes are a crucial document. Keep a copy and share it with the tradesperson immediately.

What do you do if the tradesperson does poor work?

Even if you have a good contract, problems can arise. Follow these steps:

Step 1: Complain in writing and quickly

Complain when you discover a defect. If you wait too long, you can lose the right to complain. Write a written complaint with a description of the defect and photos.

Step 2: Give the tradesperson the opportunity to remedy

The tradesperson as a rule has the right to remedy defects. Give a reasonable deadline, typically 14 to 30 days depending on the nature and extent of the defect.

Step 3: Withhold payment

If the defects are not remedied, you can withhold an amount corresponding to the cost of remedy.

Step 4: Bring the case before the Tradespeople's Complaints Board

The Tradespeople's Complaints Board handles complaints from private consumers about tradespeople. A decision is binding unless the business, within a deadline, notifies that it will not comply with the decision.

Step 5: Arbitration or the courts

For larger cases, the matter can be brought before the Building and Construction Arbitration Board (if AB conditions are agreed) or before the courts.

Always obtain at least three tenders

Whatever the size of the project, you should obtain at least three tenders from different tradespeople. The tenders make it possible to:

• Compare prices realistically
• Identify unusually low or high bids
• Negotiate on the price
• Assess the tradespeople's professionalism and communication

A good tender is itemised and transparent. Be sceptical of tenders that only state a total price without a breakdown of materials and hours.

Checklist: before you sign

Before you put your signature on a construction contract, you should make sure that:

• The work is precisely described
• The price is clear, fixed price or hourly rate + maximum amount
• AB Forbruger 2018 is agreed as a condition
• The timetable and delivery date are stated
• A payment plan is agreed (no full payment in advance)
• Additional work requires written approval
• The tradesperson has valid professional liability insurance
• You have checked the tradesperson's CVR number and reviews

Related topics

Are you in the middle of a larger business establishment and need agreements with subcontractors? Read our guide to cooperation agreements and consultancy agreements.

Are you letting a commercial property to your tradesperson business? Read about commercial leases.

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