Buyer liable to pay subcontractor

THE financial inability of the seller to complete the construction of a building, such as an apartment, a house or another project, creates a serious problem, especially to the subcontractors he uses, who are forced to stop the works and to the buyer, who is obliged to complete them himself. The seller may have asked the buyer to pay the subcontractors directly on his behalf during the execution of the works, as well as the buyer may use the services of a subcontractor appointed by the seller. In such a case, the subcontractor, in order to secure his rights, must agree that he is now acting for the buyer and invoice him directly. By doing so, he avoids the possibility of the buyer refusing to pay him, claiming that no contractual relationship exists between them and invoking the sale agreement with the seller.

A problem may arise with the suppliers of building materials to the project, who continue delivering them on credit without being informed that the buyer has taken over the project and thus, they may not receive their payment. Their practice to issue invoices or waybills stating only the name of the seller or the project is not to their advantage, as the buyer may refuse to pay them and claim that it is the seller’s obligation to do so, being the person who ordered the delivery of the materials. The invoices contain an indication that there was an agreement between the issuer and the recipient and the matter concerns the issuer more, i.e. the suppliers who should issue invoices to the person with whom they agreed.

A dispute arose between a subcontractor and a buyer when the subcontractor accepted the latter’s proposal to complete the construction works on the house, which were undertaken by the seller and who was unable to execute them. The subcontractor, although he executed the works and was directly paid by the buyer on behalf of the seller, then, for the remaining works he undertook to carry out, received part of the price and a balance remained, which the buyer refused to pay. The case was submitted to the Court in 2009 following a lawsuit filed by the subcontractor against the buyer. The Court of first instance issued its judgment in October 2013, finding that the buyer agreed directly with the subcontractor and rejected the buyer’s allegations that he had not contracted with him, ordering him to pay the balance.

The buyer appealed the decision and the Supreme Court issued a judgment on 28.8.2020 upholding the decision of the Court of first instance. In particular, the Supreme Court states that from the evidence it was found that at some point the seller, which was a developing company, faced serious financial problems and as a result the buyer made an agreement with the subcontractor to undertake the building works for the completion of the house; this fact came into the knowledge of the seller. The buyer tried to reverse the findings of the Court of first instance, claiming that no agreement had ever been signed with the subcontractor and that there was no evidence of an offer or acceptance of the works. He claimed that all payments were made through his lawyer on the basis of the original sale contract and that the alleged final invoice was not addressed to him, but it simply mentioned the name of the project and the seller, who was the main contractor. The particular invoice was disputed by the buyer for its legality and actual validity.

The Supreme Court did not accept the buyer’s allegations, emphasising that the Court of first instance rightly decided that there was an agreement between the subcontractor and the buyer, according to which the subcontractor undertook to complete the works on the house and the agreement was proved through the various cheques which were issued by the buyer’s lawyer depending on the progress of the works. The last payment was made against the last invoice and the subcontractor issued a receipt stating the balance. The buyer, even though he received the benefit of the completed works on the house, did not want to pay the balance; however, in a relevant email to the subcontractor, he confirmed that the subcontractor was acting under his instructions. The Court pointed out that an invoice, according to case-law, contains a note or an indication of an agreement when the lawsuit is based on the execution of works and, as the written account between the parties when the lawsuit is based on invoices in relation to the delivery of products.