The construction contract and the final cost: the client's legal levers in Estonia

Each moment has its own risk and lever, each lever a basis in law. The last column gives the provision to invoke against an unexpected claim.

The first two moments cost little and give the most. A sentence changed in the draft costs nothing; argued over at the end, it costs lawyers' hours, delay and often part of the claim. The later levers only work on foundations laid at the start.

The contract for work chapter of the Law of Obligations Act (võlaõigusseadus, VÕS) favours the client, but is largely default law: it says what applies where the parties have not agreed otherwise. The estimate is binding unless agreed to be non-binding (VÕS § 639(1)). The contractor is presumed not entitled to payment for preparing it (§ 637(2)). The client may terminate at any time (§ 655(1)). Each rule leaves the contract room to change it.

Protection the contract cannot set aside is the exception. In a consumer contract for work, an agreement departing from the law to the client's detriment is void (§ 657(1)), but that contract concerns movables (§ 635(4)). For construction within the meaning of the Building Code under a business to consumer contract, a non-conformity appearing within 2 years is presumed to have existed at handover; a contrary agreement is void (§ 642(2^1)). Nor can the right to have an unreasonably high contractual penalty reduced be excluded (§ 162(2)). For a professional client, protection is therefore almost entirely a matter of wording.

Learn to spot the sentence that reverses the default: “the estimate is indicative”, “the price will be specified as the works proceed”, “on termination by the client, the client pays the full contract price”, “owner's supervision confirms the quantities”. None is unlawful, but each shifts risk to the client, who accepts it by signing.

Public law beats the contract. Under the Building Code (ehitusseadustik, EhS), statutory obligations do not affect contractual ones, but in a conflict the Building Code prevails (EhS § 21(3)). Owner's supervision (§ 20) and documenting construction (§ 15) cannot be removed by contract, only added to.

Estonian law names the same person differently depending on the law that applies. In the Law of Obligations Act the parties are the tellija (the client) and the töövõtja (the contractor) (§ 635(1)). The Building Code speaks of the omanik (the owner), who must ensure compliance and owner's supervision (§ 19, § 20). The Public Procurement Act (riigihangete seadus, RHS) says hankija (the contracting authority), never tellija. The supervision regulation calls the contractor the ehitaja (the builder). Peatöövõtja (main contractor) is not a legal term but everyday usage for the business answerable to the client for the whole work.

Here, “estimate” means the eelarve of the Law of Obligations Act: the estimated cost of the work agreed in the contract, binding or non-binding on the contractor (§ 639(1)). In the guide to construction estimating, the same Estonian word means the contractor's detailed internal calculation behind the tender. One is a contract term, the other a tool.

In public procurement, the estimate gives way to the estimated value (eeldatav maksumus): the contracting authority's own estimate of the contract value, which must reflect the average market price just before the procurement starts (RHS § 23(3)). It is the basis of the procurement, not a contract term; its accuracy decides whether the authority can use its strongest lever, rejecting all tenders.

Before signing, the client chooses, often unknowingly, between three price models: a fixed price, a binding estimate or a non-binding estimate. The choice follows from the wording and its interpretation, not the heading. The branch The contract price before signing covers that choice, the scope of the price and conflicts between documents; the main lines follow.

VÕS § 639(1) is short, and for the client the most valuable sentence in the chapter: “A contract for work may provide for an estimate of the work which is either binding or non-binding on the contractor. In the absence of such an agreement, the estimate is presumed to be binding.” (unofficial translation, as are all quotations in this guide). The client need not demand it, only ensure the contract does not remove it.

According to the Supreme Court's case law review (the review), published decisions point the same way. In judgment no. 2-15-15662/55 of 19.12.2017 (para. 12), the civil chamber of the Riigikohus (the Supreme Court) stressed that absent agreement the estimate is binding, and that the contractor then cannot claim payment above it. Judgment no. 3-2-1-79-08 of 05.11.2008 (para. 12) described a non-binding estimate as a preliminary calculation under which the parties may agree to change the price. These are trends in published decisions, not general rules.

One sentence reverses the presumption, so find it before signing. “The estimate is indicative” or “the final price will become clear as the works proceed” probably makes it non-binding. Accepting this trades certainty for flexibility; know which protections remain (part B). A binding or a non-binding estimate compares the three models where quantities grow, prices rise or the client changes the brief.

Preparing the estimate is presumed free (VÕS § 637(2)). Asking several businesses for one creates no payment obligation by default; a fee must be agreed.

The price covers the subject matter of the contract, read from the signed documents. Where they are ambiguous, VÕS § 29 applies: first the parties' actual common intention, failing that the understanding of a reasonable person in the same circumstances, considering among other things pre-contractual negotiations, the parties' conduct and the usual meaning of words in the field.

The trend in published decisions does not help a client who assumes everything technically necessary is in the price. According to the review, the mere fact that work should have been in the tender or was technically necessary does not prove it was within the agreed price (2-15-15662/55, para. 13; judgment no. 2-13-40856/124 of 20.09.2017, para. 14). The client also answers to the contractor for the conformity of the design it supplied (2-15-15662/55, para. 19). The vaguer the design, the more the scope of the price is a matter of interpretation.

The design stage is therefore the legal limit of the price. Regulation no. 97 on building design requirements distinguishes preliminary, main and working design (§ 5(1)). The main design describes solutions and quality “with a precision that makes it possible to determine the estimated cost of the building, organise the construction procurement and prepare a tender for construction” (§ 9(1)). A stage approved by the client becomes the binding brief for the next (§ 5(3)). Signing on a preliminary design leaves open what the main design would have settled.

For conflicts, the regulation sets an order few clients know. Within one stage, “the explanatory memorandum is followed first, then the drawings and then the other documents contained in the building design” (§ 6(2)); for a working design without one, drawings come first (subs. 3). The design must be free of contradictions (§ 2(1)), and the lead designer answers for the completeness of its parts (§ 2(3) to (5)). The contract may set its own order, for example contract, tender, technical specification, drawings, and should.

What is written in before signing decides what can later be refused. Three steps close the scope: a full list of contract documents with dates and versions, their order of precedence, and explicit exclusions naming interface works such as utility connections, external works and landscaping. Tender comparison and estimate structure are covered by the guides to construction costs and estimating.

Changes are normal; the final cost moves when they are not classified, approved and evidenced as they happen. The branch Additional works and changed works during the contract covers classification, exceeding the estimate, price increases and evidence. Unit rate pricing and cost tracking belong to the estimating guide; here the question is what the client may demand, accept and refuse.

Lisatöö (additional work) and muudatustöö (changed work) are absent from the Law of Obligations Act; the distinction comes from practice and case law. According to the review, additional works fall outside the subject matter and require the parties' agreement; without it, the contractor cannot claim payment under the contract. Changed works stay within the subject matter but are done differently from what was agreed; classifying them means interpreting the agreement.

The difference decides what is negotiated. For additional work: did the client agree? If not, published decisions tend to deny a contractual basis for payment. For changed work: the price difference between plan and execution. The article Additional work or changed work: why the difference matters shows how to classify a change in writing when proposed: description, price or pricing method, effect on the deadline.

Even a non-binding estimate gives the contractor no free hand. Under VÕS § 639(2), on a substantial excess the contractor may claim payment above the estimate “if the exceeding of the estimate could not be foreseen”, and must notify the client without delay. Failing notice, they may claim the excess “only to the extent that the client has been unjustly enriched”.

A client who terminates because the estimate is exceeded need not pay the excess (§ 639(3)). This choice must be deliberate and written. According to the review, the client must be able to choose between accepting the excess and terminating; under judgment no. 3-2-1-102-14 of 12.11.2014 (paras. 19 and 22), the excess can only be claimed if unforeseeable, and under 3-2-1-79-08 (para. 13) a large excess does not in itself prove unforeseeability.

The law sets no percentage for “substantial”; market thresholds are opinions. The lever is procedure: require the reason and immediate notice, decide in writing before works continue.

With a fixed price or binding estimate, rising costs are in principle the contractor's risk. The statutory exception is a change in the balance of obligations (VÕS § 97). Amendment can be demanded only if four conditions are met together: the change was not reasonably foreseeable at conclusion, the party could not influence it, they did not bear its risk under law or contract, and they would not have contracted, or only on substantially different terms (subs. 2). Where amendment is impossible or unreasonable, the last resort is withdrawal or termination of a long-term contract (subs. 5).

An indexation clause makes the risk foreseeable, sparing both parties proof of extraordinary circumstances. It names the index, base date and trigger threshold; reading the index is covered by the construction costs guide.

A claim for extra payment is decided on documents, not memories. Construction requiring a building permit must be documented by the person carrying it out (EhS § 15(1)). Construction documents include the construction diary, the covered works certificate and site meeting minutes (§ 15(3), version from 01.08.2026). The owner's supervisor records notices in the construction works diary and gives written reasons for refusing to sign a document (regulation no. 80 § 5(4), § 6(4)).

Verbal consent at a meeting is unminuted consent. Conduct counts in interpretation (VÕS § 29): letting additional work run for 2 months and objecting only at the final invoice hands the contractor an argument. Minute every change decision, put every price agreement in writing.

A contracting authority is no ordinary client: it cannot freely negotiate an overrun or change the contract at will. It has three levers and three limits. The branch The public works contract: price, changes and limits covers rejecting all tenders, limits on changes, and price review and indexation. Choice of procedure, thresholds and abnormally low tenders belong to the public procurement guide.

A contracting authority need not sign at a price above its estimated value. Under RHS § 116(1), by written reasoned decision it may reject all tenders if “the values of all tenders or of the tenders declared compliant exceed the estimated value of the public contract”, or if the procurement documents provided for this on an objective, non-discriminatory ground that exists. With lots, this works lot by lot (subs. 2), and rejection ends the procurement (§ 73(3) point 3).

The lever needs a realistic estimated value. Set too low, every tender exceeds it, and the authority must restart or sign at an unfunded price. It must reflect the average market price just before the procurement starts (RHS § 23(3)), and for works includes goods and services the authority supplies (§ 25).

A public contract can be changed without a new procedure only in the cases of RHS § 123(1). Three are central to the final cost, with percentage limits.

Subs. 2 defines a substantial change, among other cases, as one that would have allowed wider competition, shifts the balance towards the contractor in a way the contract did not provide for, or considerably extends the subject matter. With indexation, the limits in points 1, 3 and 4 apply to the indexed value (subs. 4). If a change breaches § 123, the authority may terminate or withdraw (§ 124(1) point 1). The article Limits on changing a public contract: 15 and 50 per cent covers each case and its register notice.

The limit is a statutory ceiling, not a free reserve. Changes must be funded and add up. A fictitious example: a works contract's initial value of 1,800,000 euros is indexed to 1,890,000 euros. The cumulative point 1 limit is 15%, or 283,500 euros, provided the international threshold is not exceeded either. After earlier changes of 200,000 euros, 83,500 euros remains under point 1. Under points 3 and 4, no single change may exceed 50% of the indexed value, or 945,000 euros, but that does not mean the budget holds such a sum.

Price review is written into the procurement documents, not decided during the contract. Only a review provided for clearly, precisely and unequivocally escapes the percentage limits under § 123(1) point 2. According to the review, decision 3-2-1-102-14 (paras. 13, 14 and 19) found that a price agreement in a public contract cannot be wholly non-binding. The authority cannot leave the price open, only set rules for changing it.

The amendment to the Public Procurement Act was adopted on 16.06.2026 and enters into force on 1 November 2026. Section 6(1) of the amending act: “This Act enters into force on 1 November 2026.” So the current rules apply until 31 October 2026, and the new version from 1 November 2026. On the date of checking, 21 October 2026, the former thresholds apply.

The transitional provision concerns procedures, not concluded contracts. Under the new § 219^3, procedures started before 1 November 2026 are completed under the version in force until 31 October 2026. The text read does not expressly govern changes to contracts already concluded; check each contract. Threshold and procedure changes are covered by the public procurement guide.

When a contract goes off the rails, every way out has a price that can be calculated in advance. The branch Ending the contract and handling breaches covers four situations: termination without cause, delay by the client, defects and fundamental breach, and the contractual penalty. Knowing each price, the client negotiates rather than litigates.

The client may terminate at any time, but not for free. VÕS § 655(1): “The client may terminate a contract for work at any time. If the client has terminated the contract for work, the contractor has the right to claim the agreed fee, less what the contractor saved as a result of the termination of the contract or acquired, or could reasonably have acquired, by using its workforce otherwise.” This does not apply where the client terminates for the contractor's breach (subs. 2).

A fictitious, simplified example. The contract price is 600,000 euros. The client terminates when 250,000 euros has been paid for work done. On the work not done, the contractor saves 270,000 euros in materials, subcontracting and labour, and can earn 30,000 euros elsewhere with freed labour. The claim is 600,000 minus 270,000 minus 30,000, or 300,000 euros; 250,000 is paid, so 50,000 euros remains due. The savings and other earnings are what gets disputed: estimate them before deciding.

Three exits, three prices. Over an exceeded estimate, the client need not pay the excess (§ 639(3)). Terminating without cause, they pay under § 655 the agreed fee less savings. On the contractor's fundamental breach, for example where remedying a defect fails, is unjustifiably refused or is not done within a reasonable time, the client may withdraw (§ 647), and the § 655 price rule does not apply. Choose the ground before sending the notice.

The client can also push the bill up. If the client is late in acting, for example supplying materials, an instruction or other cooperation, the contractor may claim damages, considering the delay's length, the fee and what it saved or could have earned elsewhere (VÕS § 652(1)). If the delay is also a fundamental breach, the contractor may terminate and claim the fee for work done plus uncovered expenses (subs. 2). The contractor is not liable for non-conformity caused by the client's instructions or defective client materials, if it checked them sufficiently (§ 641(3)), and may terminate if the work is destroyed through such a defect or instruction (§ 653). An annexed schedule of client decisions is the simplest protection.

Remedying defects is at the contractor's cost, but only if the client acts in time. A professional client must inspect the work, or have it inspected, without delay (§ 643) and notify non-conformity precisely enough within a reasonable time (§ 644). The contractor bears the cost of remedy (§ 646(4)). If it does not remedy within a reasonable time, the client may remedy or have it remedied and claim reasonable expenses (subs. 5). A client who does not demand remedy with the notice, or within a reasonable time after it, loses that right (subs. 6; the exception in subs. 7 covers only a consumer contract for work, which concerns a consumer's movable property, § 635(4)). The price cannot be reduced if the contractor has brought the work into conformity or the client unjustifiably refused its offer to do so (§ 648).

The limitation period for a claim from a building defect is 5 years. General Part of the Civil Code Act (tsiviilseadustiku üldosa seadus, TsÜS) § 146(2): “The limitation period for a claim arising from a contract for work due to a defect in a building is five years.” For intentional breach it is 10 years (subs. 4). It runs from completion or, where acceptance is provided for, from acceptance (VÕS § 651).

An unreasonably high penalty does not protect the budget better; it is challenged, reduced or priced into the tender. A contractual penalty is a sum fixed in the contract that the party in breach must pay (VÕS § 158), as are agreed fixed-sum damages (subs. 3). At the debtor's request, a court may reduce an unreasonably high penalty to a reasonable amount, considering performance, the other party's legitimate interest and the parties' finances (§ 162(1)); a contrary agreement is void (subs. 2), and a paid penalty cannot be reduced (subs. 3). A reasonable penalty reflects actual loss, such as lost rent or financing costs, and is capped.

Beside the client usually stand three participants on three legal bases: owner's supervision, the designer and the project manager. None has a statutory task of holding the price unless the contract gives it. The branch Who protects the client's interests covers each role.

Owner's supervision (omanikujärelevalve) is the owner's statutory obligation. EhS § 20(1), wording from 01.08.2026: “The owner is obliged to ensure competent supervision over the construction of the building (hereinafter owner's supervision).” The supervisor may not, in business, be connected with other activities concerning the same building or with those supervised (subs. 2). A certified qualification is required (§ 24(2) point 3), and the supervisor's details go in the notice of commencement (§ 43(2)).

Supervision does not reduce the contractor's liability. Section 20(4): “Carrying out owner's supervision does not exclude or limit the contractor's liability under the contract for work.” A defect the supervisor missed remains claimable from the contractor.

The minimum content under regulation no. 80 is technical, not financial. The regulation on owner's supervision, unchanged since 2015, requires among other things checking quality and conformity with the construction contract (§ 4(2) point 13), and the owner must give the supervisor, among other things, the builder and owner contract (§ 3(2)). Judging the design's architectural or technical solution is not the supervisor's task (§ 4(6)), and other infringements of the owner's rights are reported in writing within 2 working days (§ 5(2)). The regulation does not provide for checking interim invoices or additional works. A client wanting quantities and prices checked must write it into the supervision contract. The article Owner's supervision: what the law requires and what it does not covers that boundary.

Design errors become claims for extra payment, because the design is the basis of the price. It must allow a compliant building to be built and checked (EhS § 13(1) and (2)); a technically complex or high hazard building's design needs an expert assessment by a competent person independent of its author (§ 14(3)). By the trend in published decisions, the client answers to the contractor for the design it supplied and can claim against the designer (projekteerija) under the designer's own contract. This guide does not classify that contract's legal type: liability depends on the specific contract.

Neither the project manager (projektijuht) nor the client's representative (tellija esindaja) has statutory status; their tasks are those in the contract. Depending on it, the mandate rules apply, requiring loyalty, due care and, for a professional, work “at the generally recognised level of professional skill” (VÕS § 620), or the contract for work rules. The contract must say whether they may sign a change order and accept a price, up to what amount they bind the client, and how they report the forecast final cost. The supervision regulation requires a written division of tasks between several supervisors (§ 2(2)); the same discipline suits the relationship between the project manager and the supervisor.

Six rules bring the levers above together into a method that any client building in Estonia can use. They follow the order of the five moments, from the draft contract to the question of who checks the price.

1. Keep the binding estimate presumption. Delete or change any wording making the estimate indicative, unless you deliberately chose flexibility (VÕS § 639(1)).
2. Sign on a precise design and list the documents. The price is only as precise as its design (regulation no. 97 § 9(1)); write in the documents, their precedence and exclusions.
3. Classify every change in writing before execution. Additional or changed work, price or pricing method, effect on the deadline; unagreed additional work has, by the trend in published decisions, no contractual basis for payment.
4. Answer a notice of excess in writing and know your exit price. Accept the excess or terminate (§ 639(3)); before terminating without cause, calculate under § 655 what the contractor may claim.
5. As a contracting authority: realistic estimated value, price review in the procurement documents. Only a market price estimated value gives a usable § 116 lever, and only a clearly described review escapes the § 123 limits.
6. Write in who checks the price. Owner's supervision is compulsory (EhS § 20), but its minimum content does not include price control; to get it, write it into the supervision or project management contract.

This guide covers what contract and law let the client do to hold the agreed final cost. Cost levels and indices, estimating and cost tracking, procurement procedure and thresholds, building permits and renovation have their own guides, mentioned here in one sentence at most.