Future costs due to construction defects: how to justify and recover?

Imagine hiring a contractor with the expectation of a quality result, but ending up with defective work, extra costs and an unresolved problem. The contractor does not remove the defects and you have no choice but to save yourself. Is it possible to get your money back in such a situation - even if the extra costs are yet to come?

Viktorija Dubovskienė, an attorney at AVOCAD, explains when a court can award future damages and what is the most important thing you need to prove in order to ensure that your interests are not unprotected.

In such a situation, the Court of Cassation has pointed out that civil liability usually applies when the injured party has already suffered actual damage, for example, when it has already incurred relevant costs.

However, there may be cases where the fact of damage is obvious or easy to prove, and it may take a long time to calculate the exact amount of damage. In such cases, your interests may be affected if your financial situation is not good and you need the money immediately.

Lawyer Viktorija Dubovskienė explains that in such cases, the court can assess not only the damage already suffered, but also the future damage. If there is a reasonable likelihood that the damage will occur, the court may award a specific amount of money, periodic payments or oblige the debtor to otherwise provide compensation for the damage. Both the Civil Code and the case law apply the realistic probability test to future damages, which means that the occurrence of the damage must be highly probable.

"The most important thing is that the future costs are necessary to repair the damage (e.g. defects in the work)," she stresses. Estimating future damages is used when the loss has not yet occurred but can be expected, or when estimating the amount of damage may take time. In such cases, it is important to prove that the damage will actually occur. This is often done on the basis of specialist calculations or models that allow the potential size of the loss to be predicted.

In contrast, where compensation is claimed for damage that has already been suffered, it must be clearly demonstrated that the damage has already occurred and can be accurately calculated. However, this is not enough: both for future and for existing damages, the amount of the damages must also be substantiated: it must be shown that all the costs claimed were (or will be) necessary and reasonable.

"This interpretation is based on the fact that civil liability is not meant to punish - it is meant to compensate. Therefore, damages are awarded to the extent necessary to restore the person to the position he or she would have been in if the damage had not been caused," explains Ms Dubovskienė, referring to case law. The case law of the Supreme Court of Lithuania stresses that the most important thing is fair compensation for damages. This means that the actual amount of the damage must be established when settling disputes. If less than the actual damage is awarded, the victim's rights remain partially unprotected. If the award is higher, the injured party is unjustly enriched at the expense of the debtor. In both cases, the principle of justice is violated.

If you haven't yet actually incurred all the costs needed to remedy the defects in the contractor's work, it doesn't mean you have no right to claim for these future costs. It is important that these costs are necessary, unavoidable, realistically foreseeable and easily justified, for example on the basis of professional valuations or market prices.

However, as lawyer V. Dubovskienė points out, it's not enough to have signed a contract or to have made certain payments. In order for the court to award future damages, it is necessary to prove both the reality of the damage itself (that it is unavoidable) and the necessity and market value of the costs of repairing the defects.

For example, if the amount of future costs quoted is more than three times the value of the repairs estimated by the experts, the court may consider that the amount quoted is not in line with the true market situation. Similarly, if the projected costs relate to solutions or implementations that are completely different from the original ones, they may be disallowed as they do not relate to material defects in the works.

It is therefore important to assess whether the costs claimed are really necessary and reasonable, and whether they relate directly to defects in the work and not to additional or substantially new work, before going to court.