What VÕS § 639 says exactly
Section 639, "Exceeding the estimate", is short and worth reading in full, because each subsection gives the client a different lever. The quotations below are an unofficial translation.
| Subsection | Text of the Act |
|---|---|
| subs. 1 | "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." |
| subs. 2 | "If a non-binding estimate is substantially exceeded, the contractor may claim payment of the fee exceeding the estimate if it was not possible to foresee that the estimate would be exceeded. In that case, the contractor must notify the client of the substantial overrun of the estimate without delay. If the contractor fails to notify, the contractor may claim the amount exceeding the estimate only to the extent that the client has been unjustly enriched." |
| subs. 3 | "If the client terminates the contract because the estimate is exceeded, the client need not pay the fee exceeding the estimate." |
The first subsection allocates the risk, the second sets conditions for the töövõtja (the contractor), the third gives the client a way out. The Act does not state what percentage counts as a "substantial" overrun; nor should that be read from a contract template claiming that a given percentage is "customary".
Binding effect is the default rule
If the contract contains an estimate and says nothing about whether it is binding, the estimate is binding. The client does not need to add anything or use any particular wording. According to the Supreme Court's case-law review, it follows that the contractor cannot claim a fee exceeding a binding estimate (Supreme Court civil chamber judgment of 19.12.2017, 2-15-15662/55, para 12). The trend of published decisions is therefore unambiguous: a binding estimate works as a ceiling.
A binding estimate does not, however, cover work that falls outside the subject matter of the contract. If the client later orders something that was not in the contract, that is a new agreement, not an overrun of the estimate. This distinction is covered in the article Additional work or changed work: why the difference matters. Binding effect therefore protects the client against the contractor's own calculation errors and rising costs, not against the client's own changes.
A related presumption: under VÕS § 637(2), it is presumed that the contractor may not claim a fee for preparing an estimate of the work. Taken together, the two presumptions mean that the Act's default position favours the client both when the estimate is prepared and when it is performed.
A non-binding estimate is a preliminary calculation
According to the Supreme Court's case-law review, a non-binding estimate is in substance a preliminary calculation, and the parties may agree to change the price (Supreme Court civil chamber judgment of 05.11.2008, 3-2-1-79-08, para 12). A non-binding estimate does not mean, however, that the contractor may invoice any amount at all.
Subsection 2 of § 639 sets the contractor three conditions: the overrun must be substantial, it could not have been foreseen, and the contractor must notify it without delay. If notice is not given, the claim does not disappear entirely but is limited to the amount by which the client has been unjustly enriched. The trend of case-law is demanding towards the contractor: a fee exceeding the estimate can be claimed only if the overrun could not have been foreseen (Supreme Court civil chamber judgment of 12.11.2014, 3-2-1-102-14, paras 19 and 22), and a large overrun does not on its own prove unforeseeability (3-2-1-79-08, para 13). The Supreme Court's case-law review also stresses that the client must be able to choose whether to accept the overrun or terminate the contract. How the client should respond to a notice, how to record the decision and what termination costs are covered in the article Substantial overrun of the estimate and the duty to notify.
The clause that reverses the presumption
The presumption of binding effect disappears whenever the contract says otherwise, and the words "non-binding estimate" rarely say it. The contrary agreement is usually written indirectly. Typical wordings the client should look for in the contract, the tender and the general terms:
| Wording in the contract or tender | What it is likely to do | What the client can do |
|---|---|---|
| "The estimate is indicative" or "for information" | makes the estimate non-binding | ask for it to be deleted or replaced with an express confirmation of binding effect |
| "The price will be specified as work proceeds" | implies that the agreed sum is not a ceiling | limit the specification to listed lines and keep the rest binding |
| "Invoiced on the basis of actual quantities" | ties the fee to the quantities actually performed, not to the estimate | agree a ceiling, or a threshold of total change above which the client's consent is required |
| "The tender is based on the assumption that..." | introduces assumptions which, if they fail, change the price | have the assumptions listed and check that they are consistent with the client's documents |
These sentences are not always in the main text of the contract. They are often in the tender's covering letter, in the notes to the price schedule or in the general terms to which the contract refers. If the contract lists the tender among the contract documents, the reservations in the covering letter may also become part of the contract. Under VÕS § 29, a contract is interpreted as a whole and in the light of the preliminary negotiations, so a sentence hidden in one document can determine the meaning of the entire price clause.
One typical conflict deserves a separate mention: the contract calls the sum the "total cost", but the price schedule in the annex is headed "indicative estimate". Such a contract does not say clearly which of the two the client bought, and only a dispute will settle it. Before signing, it is one sentence to correct.
The three arrangements in one table
For the client, the question is not what the arrangement is called, but what they pay in each situation. The table compares the three arrangements through five typical situations. It does not replace the interpretation of a specific contract.
| Situation | Fixed fee | Binding estimate | Non-binding estimate |
|---|---|---|---|
| Quantities within the subject matter turn out to be larger | the fee stays the same, the risk lies with the contractor within the subject matter | as a rule, the contractor cannot claim the excess (2-15-15662/55) | an excess fee is possible if the overrun is substantial, unforeseeable and notified without delay (§ 639(2)) |
| Material or labour prices rise | the risk lies in principle with the contractor, unless the contract includes indexation; the exception is a change of circumstances under the conditions of VÕS § 97 | the same as for a fixed fee | the same § 639(2) conditions: substantial, unforeseeable, notified without delay |
| The client changes the brief | a new agreement; work outside the subject matter requires consent | the same | the same |
| The contractor does not notify the overrun | not relevant | not relevant | a claim only to the extent of unjust enrichment (§ 639(2)) |
| The client terminates because of the overrun | not a case for this provision | not a case for this provision | the fee exceeding the estimate need not be paid (§ 639(3)) |
The second row of the table shows that, with a fixed fee or a binding estimate, a price rise in principle stays with the contractor unless the contract includes indexation or the conditions of VÕS § 97 are met. The allocation of the risk of price rises and the drafting of an indexation clause are covered in the article Price rises during the contract: who bears the risk.
The particular case of public procurement
For a hankija (the contracting authority), the option of a non-binding price is more limited than for a private client. According to the Supreme Court's case-law review, the price agreement in a public contract cannot be entirely non-binding (Supreme Court civil chamber judgment of 12.11.2014, 3-2-1-102-14, paras 13, 14 and 19). If the contracting authority wishes to provide for a change in price, this must be written into the procurement documents as a clear price review condition, which is covered in the article Price review and indexation in a public contract.
What to write into the contract before signing
First: confirm binding effect expressly, even though the Act presumes it. The sentence "the estimate is binding on the contractor within the meaning of VÕS § 639(1)" adds nothing new in law, but it prevents other documents from quietly changing it. Add that any contrary notes in the contract documents do not apply.
Second: if the contractor insists on a non-binding estimate, limit it. Only lines whose quantity cannot be known before opening up (for example because of the ground or existing structures) should remain non-binding, and the rest should stay binding. For each non-binding line, it is worth writing down what data the estimate was based on.
Third: spell out the notification procedure. The Act requires the contractor to notify a substantial overrun without delay, but does not say in what form. The contract can require a written notice stating the reason, the estimated amount and the effect on the completion date, and provide that the additional work is not started before the client's decision.
Fourth: do not let the estimate become merely a question of accuracy. The accuracy of an estimate depends on the design stage, and how much an estimate made at different stages can vary is explained in the article on estimate accuracy by design stage. The legal question is a different one: who bears the risk of inaccuracy. That is decided by the binding-effect clause, not by the accuracy of the estimate.
Fifth: preserve your right to terminate. VÕS § 639(3) gives the client the right to terminate the contract because of the overrun without paying the excess fee. If the contract template restricts the client's right to terminate, this lever may disappear in practice.
This article describes the legal rules as at the date of checking and is intended for professional orientation. It does not replace legal advice or a review of the specific case.