ECUADOR Law and Practice Contributed by: Randy Arévalo, Diego F. Amen, Darío Vicuña and Sandra Touma Faytong, VIVANCO & VIVANCO
7. Construction 7.1 Common Structures Used to Price Construction Projects In the Ecuadorian private sector, the most common structures used to price construction projects are as follows. • Fixed price: The contractor agrees to complete the project for a total fixed amount. This is the stand - ard for residential and office developments, as it provides budget certainty for the developer/owner. • Unit price: The project is priced based on esti - mated quantities of work items. The final price depends on the actual quantities executed. This is common in infrastructure and earth-moving projects. • Cost plus: The owner pays the actual cost of mate - rials and labour plus a fixed fee or percentage to the contractor. This is used for high-end residential or complex renovations where the scope is difficult to define upfront. 7.2 Assigning Responsibility for the Design and Construction of a Project The allocation of design and construction responsibili - ties in Ecuador is primarily governed by the chosen contractual model, which determines the risk transfer and the central point of liability. Under the traditional method, the owner maintains separate contracts with an architect for design and a contractor for execution, splitting liability between technical flaws in the plans and defects in construction. Alternatively, the design- build model is gaining popularity in industrial and energy projects as it centralises responsibility within a single entity, effectively reducing co-ordination gaps and streamlining liability for the owner. For more complex developments, owners often utilise project management firms to oversee both the design and construction phases. While liability for specific defects remains with the individual architects or con - tractors, the project manager assumes a distinct duty of care regarding the overall co-ordination and super - vision of the project. This oversight ensures that the various actors align with the owner’s strategic goals while maintaining a structured approach to risk mitiga - tion throughout the development life cycle.
sanitary and safety orders issued by the municipality or fire department. While the expropriation process typically takes three to eight months for the government to take posses - sion, the compensation framework differs significantly for each party. The landlord is entitled to receive a “fair price” for the property from the government. Con - versely, the tenant generally does not receive direct government compensation unless they have regis - tered specific improvements in the Land Registry. Consequently, a tenant’s primary remedy is usually limited to a claim against the landlord for early termi - nation, the success of which depends heavily on the specific force majeure protections stipulated in the lease agreement. 6.23 Remedies/Damages for Breach In the event of a tenant breach, a landlord’s ability to collect damages is governed by both statutory limits and customary practice. Beyond unpaid rent and eviction, landlords may recover late interest – capped by the Central Bank of Ecuador – and proven physical damages to the property. While it is stand - ard to include a penalty clause equivalent to one or two months’ rent for early termination, judges under the Civil Code maintain the authority to reduce these penalties if they are deemed excessive. Furthermore, claiming “lost profits” for the remainder of a lease term is challenging and typically requires a specific con - tractual provision, as courts generally only grant rent up to the date the tenant vacates. Regarding the security of these obligations, the cus - tomary practice in Ecuador involves a cash deposit equivalent to two months’ rent. However, in large- scale industrial or retail sectors, corporate practice has shifted towards the use of bank guarantees or insurance bonds. This transition offers superior liquid - ity for the tenant while providing the landlord with a more secure and professional mechanism for recovery in the event of a default.
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