CROATIA Law and Practice Contributed by: Marko Paulinović and Dino Vukoša, Buterin & Partneri
6.22 Termination by a Third Party A lease agreement may be terminated only by the contracting parties. However, a third party, such as the state or a local self-government unit, may indi - rectly affect the continuation of a lease, for example through expropriation or administrative measures such as prohibiting the use of a building for safety or urban planning reasons. 6.23 Remedies/Damages for Breach In the event of a breach of the lease agreement by the lessee and subsequent termination of the lease, the lessor may claim payment of outstanding rent, com - pensation for damages suffered and restitution of pos - session of the property. Damages include compen - sation for both actual loss and loss of profit that the lessee could reasonably have foreseen as a possible consequence of the breach in light of the facts known, or which ought to have been known, to the lessee. In practice, a security deposit is the standard means of securing the lessor’s claims. It is most commonly provided in cash in an amount corresponding to one to three months’ rent, although alternatives such as bank guarantees or promissory notes may also be used. 7. Construction 7.1 Common Structures Used to Price Construction Projects In Croatia, two principal pricing structures are used for construction contracts. One model is the unit price contract, under which the final contract price is deter - mined on the basis of the actual quantities of works performed and the agreed unit rates set out in the bill of quantities. The second model is a lump-sum (fixed price) contract, where the total contract price is agreed in advance. In such contracts, a turnkey clause is frequently includ - ed, pursuant to which the contractor assumes the risk of unforeseen works and quantity overruns, except where the scope of works is modified due to circum - stances attributable to the employer.
7.2 Assigning Responsibility for the Design and Construction of a Project The most common model in construction contracts in Croatia is one in which the employer retains respon - sibility for the design, typically by engaging the designer under a separate agreement and providing the contractor with the project documentation. In this structure, the designer is liable for the accuracy and completeness of the design, while the contractor is responsible for the proper and timely execution of the works in accordance with the design documentation. An alternative model is the design-build arrangement, in which the contractor assumes integrated responsi - bility for both the design and the construction of the project, including the functional performance of the completed structure. This model is often combined with a turnkey clause. 7.3 Management of Construction Risk Construction risk in Croatia is primarily managed through contractual risk-allocation mechanisms. The most commonly used instruments include: • contractual penalties for delay; • performance security and defects liability security, typically provided in the form of bank guarantees, deposits or, in smaller contracts, promissory notes; • defects liability periods and quality warranties; • limitations of liability (liability caps); and • exclusions of certain categories of damages (eg, loss of profit). Such contractual provisions are subject to statutory limitations. In particular, liability for wilful misconduct or gross negligence cannot be excluded or limited in advance. Contractual penalties must be propor - tionate, and the court may reduce them if they are manifestly excessive. Furthermore, liability for material defects of a structure cannot be validly excluded by contract. 7.4 Management of Schedule-Related Risk Schedule-related risk is primarily managed through contractual scheduling mechanisms. The detailed construction schedule (programme) typically includes intermediate milestones and imposes obligations on the contractor to provide regular progress reports.
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