Three price arrangements that are not equivalent
In practice, the price clause of a construction contract falls into one of three types, and for the client the difference between them is greater than the wording suggests. The first is an agreed fixed fee for the whole subject matter of the contract. The second is a binding eelarve (estimate) within the meaning of § 639 of the Law of Obligations Act (võlaõigusseadus, VÕS): the töövõtja's (the contractor's) estimated sum, which the contractor cannot exceed. The third is a non-binding estimate, which according to the Supreme Court's case-law review is in substance a preliminary calculation (Supreme Court civil chamber judgment of 05.11.2008, 3-2-1-79-08, para 12).
A note on wording: in this guide, "estimate" means the estimated sum agreed in the contract within the meaning of the Law of Obligations Act, not the construction company's detailed internal calculation. The difference between that internal calculation and the document presented to the client is explained in the article on why a budget and a tender are not the same.
| Arrangement | What it looks like in the contract | What the client pays if costs rise | What the client must check |
|---|---|---|---|
| Fixed fee | a single sum for the agreed subject matter | the same sum, within the subject matter of the contract | the limits of the subject matter: what is in the price and what is not |
| Binding estimate | an estimated sum that the contract does not call non-binding | as a rule, the contractor cannot claim a fee above the estimate | that no other clause removes the binding effect |
| Non-binding estimate | "the estimate is indicative", "the price will be specified as work proceeds" | the excess as well, if the overrun is substantial, unforeseeable and notified without delay | the notification procedure and the client's own right to terminate |
All three arrangements leave one thing out: work that is not part of the subject matter of the contract. Payment for it depends on a separate agreement, and it is covered by the branch Additional works and changed works during the contract.
What the law presumes when the contract is silent
If the contract contains an estimate but the parties have not agreed whether it is binding or non-binding, the estimate is presumed to be binding (VÕS § 639(1)). This is one of the strongest client-protecting rules in Estonian contract-for-work law, because it operates without any formal requirement. The trend of published decisions is clear: according to the Supreme Court's case-law review, 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 second presumption concerns the preparation of the estimate itself. In the words of the Act: "It is presumed that the contractor may not claim a fee for preparing an estimate of the work." (VÕS § 637(2), unofficial translation). A client who receives an invoice for the preparation of a quotation may ask where that fee was agreed in advance.
The third rule applies when no fee has been agreed at all. The client must pay the usual fee or, failing that, a reasonable fee (§ 637(1)). A contract without a price is therefore not a favourable contract but an open one, whose price will later be set by a dispute.
All three are presumptions, not mandatory rules. A contract template or general terms drafted by the contractor may contain a sentence that makes the estimate non-binding, and that is exactly the sentence to look for before signing.
The price covers the subject matter, and the subject matter is written in the documents
A price is always the price of something, and that something is written in the contract documents. Under VÕS § 29, a contract is interpreted primarily according to the parties' actual common intention and, failing that, as a reasonable person would understand it in the same circumstances, taking into account, among other things, the preliminary negotiations and the parties' conduct. If a piece of work is not in the subject matter of the contract, it is not in the price either: according to the Supreme Court's case-law review, the mere fact that work was technically necessary does not prove that it was included in the agreed price (Supreme Court civil chamber judgment of 19.12.2017, 2-15-15662/55, para 13). This is a trend in published decisions, not a statutory provision.
The design stage determines how much is left to interpretation. Under the regulation on requirements for a building design (regulation no 97), the põhiprojekt (the main design) must describe the solutions "with a level of detail that makes it possible to determine the budgeted cost of the building, organise the construction procurement and prepare a quotation for construction" (§ 9(1)). A contract signed on the basis of the eelprojekt (the preliminary design) leaves open much of what the main design would have fixed. A stage approved by the client becomes the binding brief for the next stage (§ 5(3)), so what the client approves also delimits what is priced later.
Conflicts between documents are a price issue. For conflicts between documents of the same stage, the regulation sets an order: first the seletuskiri (the explanatory memorandum, here called the specification), then the drawings, then the other documents (§ 6(2)). Unless the contract provides otherwise, that order is the starting point for deciding which version was priced in the tender. If the client wants to compare several tenders, they must first make sure that the tenders price the same subject matter; a separate article explains why two quotations are often not comparable, and it is not repeated here.
The articles in this branch
- The article A binding or a non-binding estimate covers the text of VÕS § 639, the presumption of binding effect, the clauses that reverse it and what the client pays when quantities or prices rise.
- The article What the contract price covers and what it does not explains how the subject matter of the contract is read from the signed documents, why technical necessity does not prove that work is included in the price and how to close the scope of the price in the contract.
- The article When the drawings and the specification conflict covers the priority rule of regulation no 97, the lead designer's responsibility and why it pays to write the order of documents into the contract itself.
- A construction contract checklist before signing brings together the questions the client should ask about the contract before signing, each with a reference to the article that explains it.
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.