The principal laws governing construction matters in the Republic of Slovenia are the Construction Act (GZ-1), the Obligations Code (OZ) and the Spatial Management Act (ZUreP-3). Both GZ-1 and ZUreP-3 have been subject to recent amendments, which have further modernised and refined the regulatory framework, particularly with regard to administrative procedures and digitalisation of permitting processes. In addition to these, construction contracts may be governed by the Special Construction Usages specifying the rights and obligations of the contracting parties in more detail, although these may be excluded from the contractual relationship should the parties choose.

The Republic of Slovenia has no provisions mandating the use of a standardised construction or construction-related contract. International Federation of Consulting Engineers (FIDIC)-approved provisions are the most widely used when it comes to the involvement of international investors and are even stipulated as necessary in some projects financed by state or EU cohesion funds. Those most commonly used are the FIDIC red, yellow and silver books. In accordance with historical practice, they are mostly applied in order to regulate the employer-contractor relationship.

Employers in Slovenia are mostly legal entities, generally in the form of limited liability companies. They must procure the permits necessary for a construction project, hand over the construction site and all the documentation necessary for the execution of the construction project to the contractor, and pay the agreed amounts in accordance with the construction contract. They have the right to appoint and carry out construction supervision, and must notify the contractor of the identity of the nominated supervisor. Employers typically have no direct relationship with subcontractors although they may, under certain conditions, be directly liable to subcontractors, should the contractor not fulfil its obligations towards the subcontractors. Employers generally finance their own construction projects. However, should a project be financed by a third-party financier, the latter usually has no relationship with any party to the construction other than the employer (eg, by means of a loan agreement).

Contractors are legal entities, mainly limited liability companies or independent entrepreneurs. They are required to maintain a construction log and a construction ledger and carry out all the work necessary for completion of the construction project in accordance with the construction contract, applicable standards, laws and technical regulations, as well as to perform other administrative/organisational tasks related to the safety and maintenance of the construction site. Furthermore, they are responsible for the work of the subcontractors whom they have entrusted with the execution of the work.

Unless otherwise specified in the construction contract, the contractor does not have to carry out the work personally but may contract it out to subcontractors. Subcontractors, as well as contractors, are legal entities, usually limited liability companies and independent entrepreneurs. Subcontractors follow the instructions and demands of the contractor, who remains solely liable for the performance of the work in relation to the employer, as if performed by the contractor. Following the fulfilment of certain legal conditions, subcontractors may turn directly to the employer for the payment of fees that have not been settled by the contractors.

Financiers are most often banks or investment funds. In principle, the financier has no relationship with any party involved in the construction other than the employer, unless explicitly agreed otherwise with individual participants in the construction project.

Legal entities, such as limited liability companies or independent entrepreneurs, typically act as designers. In general, the designer is responsible for preparing a project’s documents. The designer follows the wishes and instructions of the employer (investor) but, most importantly, is responsible for ensuring that a project’s documents are prepared in compliance with the law. The contractor is obliged to follow the documentation produced by the designer. The contractor’s performance is overseen by a supervisor, who may be a third party separate from the designer; or, if a special agreement is in place, the designer may also supervise the contractor’s work.

The scope of the project is covered by the technical documentation, which is prepared by the designer, usually at the employer’s request, accompanied by a detailed specification of the work to be carried out. The designer is a legal entity or a natural person who, as a participant in construction projects, prepares the technical documentation and meets the conditions under the law governing architecture and engineering. The technical documentation is a systematically arranged set of plans or technical descriptions, reports, calculations, drawings and other annexes which determine the location as well as the functional, design and technical characteristics of the construction work. A building permit is issued based on the technical documentation, in accordance with which the contractor is required to carry out the construction. From the point of view of contractual law, it is advisable to stipulate contractually any employer requirements that go beyond the works defined in the building permit.

There are typically two options for determining the scope and price of variations if these are requested by the employer, as follows.

• The parties determine ahead of the project and in the underlying construction contract the price of any potential variations requested by the employer, or at least a mechanism for determining this price.
• The parties are completely free to negotiate the price of variations. In this case, the employer must request that the contractor send a quotation for additional works, including the price, the period of performance and the period of validity of the quotation. Once there is agreement between the parties, they conclude an addendum to the construction contract.

However pursuant to Slovenian legislation, if it has been agreed that the price for the work will not be changed if, after the conclusion of the construction contract, the prices of the elements on the basis of which it was fixed have increased, the contractor may, notwithstanding such a contractual provision, request a change if the prices of the elements have increased to such an extent that the price for the work should have been increased by more than 10%. However, in this case, the contractor may only claim a price difference exceeding 10%, unless the prices of the items have increased after the contractor has been in default.

In the opposite case, if, between the conclusion of the construction contract and the performance of the contractor’s obligations, the price of the elements on the basis of which the price of the work was set has fallen by more than 2% and the work has been carried out within the agreed time limit, the contractor will have the right to require a corresponding reduction in the agreed price for the work in excess of that percentage. Where it has been agreed that the price for the work will not be changed and the work has been completed within the agreed time limit, the employer will be entitled to a reduction in the agreed price in the event that the prices for the elements on the basis of which it was fixed have decreased so much that the price would have been more than 10% lower, and by a difference of more than 10%. If the contractor is in default, the employer will be entitled to a proportionate reduction in the price for the work for each reduction in the price for the elements on the basis of which that price was fixed.

Time-related costs are usually not charged as they are included in the construction service.

The technical documentation is prepared by the designer, usually on the basis of a design contract concluded with the employer. The designer’s task is to ensure, in accordance with the rules of their profession, that the documentation is prepared in such a way that it complies with statutory and professional requirements. The designer is responsible to the employer for the content and correctness of the technical documentation used to obtain a building permit.

After the building permit is obtained, the employer concludes a construction contract with the contractor who is responsible for carrying out the work in accordance with the building permit and technical documentation. In order to ensure that the work is carried out correctly, the employer must nominate a supervisor who is responsible, in relation to the employer, for overseeing the contractor’s work and is usually entitled to act and issue binding instructions on behalf of the employer.

The contractor is responsible for the layout, protection and appropriate marking of the construction site and must ensure the safety of the locality, those working on it, passers-by, traffic, neighbouring properties and the surrounding area.

During construction, the contractor must give access to the construction area to the designer who drew up the design documentation for the construction and to the designer of the design documentation for the execution of the works. The contractor is also required to give access to the investor, the supervisor and the occupational safety and health co-ordinator. Once construction is completed, the contractor is obligated to remove construction obstructions and any access restrictions and to clean and dispose of waste from the site area in an appropriate manner. Any special requirements regarding pollution, obstacles, geotechnical conditions and, in particular, archaeological finds are usually dealt with by the employer at the building-permit obtention phase, as the employer is also typically obliged to obtain consents and permits.

Mandatory or regulatory laws govern the regulations around building permits or any other required consents, and the supervisor is responsible for ensuring that the requirements of the Construction Act are met in respect of these, with any errors avoided and any preventive action taken on a timely basis. The supervisor must verify that a final consent, or final building permit, if required, has been obtained before taking over the work. The supervision manager, appointed by the supervisor, manages and co-ordinates the overall supervision of the construction project.

Construction usually requires notification of the start of the construction process and a final building permit which is issued on the basis of the technical documentation provided and submitted by the designer on behalf of the employer. In the case of minor structures, the construction may be carried out without a permit. Once construction work is complete, the employer is generally obliged to obtain a fit-for-use permit, unless the construction was carried out without a building permit, or the structure is merely temporary. The employer remains solely responsible for acquiring the building permit and all other permits in accordance with the Construction Act. The latest Amending Act of Construction Act also establishes the possibility of obtaining a final building permit in a summary determination procedure. Therefore, the competent administrative unit may issue a final building permit within 30 days based on complete documentation provided by the investor. The processes of obtaining the required permits mentioned above are governed by mandatory law. The Amending Act of Construction Act further enhances the possibility of obtaining permits through simplified procedures and introduces more efficient administrative processing, including digital submission of documentation through e-Graditev and reduced processing times in practice.

Slovenian legislation does not include any special provisions as to which party is responsible for the maintenance of the work during construction. The contractor is responsible for the maintenance of the entire construction site during the work itself, unless otherwise specified in the construction contract.

A supervisor appointed by the employer is also involved in the construction project. The supervisor’s task is to oversee the work of the contractor and the designer so as to ensure compliance with the requirements of the construction contract and the Construction Act, preventative action and the timely handling of defects.

The employer is generally the party entitled to give instructions to all participants in the construction project, except for insurance companies and banks, as these are usually contracting parties of the contractor only to the extent that the contractor has to provide bank guarantees, bills of exchange, proof of insurance coverage, etc, to the employer.

According to the Construction Act, the employer must obtain a fit-for-use permit upon completion of the construction. This permit is issued, under the condition that the work in question has been carried out in accordance with the building permit, by the competent administrative authority for construction matters following a technical inspection conducted by a specifically appointed committee. The employer must apply for a fit-for-use permit no later than in the 30 days following notification by the contractor or supervisor that the construction is complete. If the employer fails to apply for a fit-for-use permit within the prescribed time limit, it may be submitted by the contractor, the supervisor or another person who is the owner or holder of the rights in rem in the immovable property where the construction is located. The digitalisation of administrative procedures has also affected the process of obtaining use permits, with increased use of electronic submissions and co-ordination between authorities.

On completion of the work, the contractor is obliged to enter the date of completion in the construction log and invite the employer to accept and take the work over. The work is typically deemed to be completed upon the obtention of the fit-for-use permit, although the parties may agree otherwise. The takeover process typically includes the contracting parties signing a handover protocol, detailing the work taken over and any potential defects to be remedied by the contractor.

According to the general provisions of the Obligations Code (OZ), the employer is obliged to inspect the work as soon as is reasonably practicable in the ordinary course of events and to inform the contractor immediately of any defects found. After inspection and acceptance of the work, the contractor is no longer liable for apparent defects which could and should have been identified during normal inspection, unless the contractor was aware of them but failed to point them out to the employer. This does not apply to hidden defects not noticeable at first sight, as the contractor remains liable for these for two years after the acceptance of the work. Furthermore, the contractor is liable for any defects in the solidity of the construction, should these appear during the ten years following the acceptance of the works.

The general provisions concerning liability may be expanded upon by the parties, and it is customary for the contractor to provide extra warranties and security instruments in the construction contract.

Contract price is generally determined based on one of two options, as follows:

• the turnkey clause – this is widely used and means that the contractor is obliged to perform all the works necessary for the completion of the project, excluding additionally requested and unforeseeable works; and
• unit of measurement – this means that the price is determined per unit of measurement, so the final price depends on the materials used and hours of work.

Typically, indexation of the prices in construction contracts tends not to be used, although significant inflation in construction materials and labour costs in recent years has resulted in more frequent inclusion of index clauses. Since the employer commonly transfers all possible construction-related risks to the contractor, in a case where indexation of prices is included in a particular contract, this must be signed off and the risk will most likely mainly fall to the contractor. As mentioned in 3.2 Variations, possibilities regulated by law exist with regard to price adjustment.

Construction work is typically paid for monthly by the employer in accordance with the progress made by the contractor, based on the timeliness and correctness of the work carried out (reserved payments, contractual penalties, etc). Should the employer fail to fulfil its payment obligations, the contractor is usually entitled to suspend further work until payment or, ultimately, withdraw from the contract. For a major project, the employer provides payment guarantees.

The contractor typically invoices the work monthly in accordance with progress made and, upon its completion, a final settlement is made by both contracting parties with a breakdown of the settled and outstanding amounts.

The timetable is usually agreed upon by the employer and the contractor and enforced by the supervisor engaged by the employer to act on its behalf. Should the contractor not comply with the timetable, a contractual penalty for the delay is usually imposed on the contractor, and, in certain cases, the employer may also withdraw from the contract and cash in a bank guarantee issued by the contractor’s bank as an instrument securing timely and correct performance of the work.

In the event of any delays, the contractor usually informs the employer and asks for an extension. Should the employer deem the request to be well founded, it may grant the extension – typically, an annex to the underlying contract is concluded. Should the request not be well founded, the employer may make use of the remedies described under 5.1 Planning and Programme. Time-related costs are not charged, as they are included in the construction service.

See 5.1 Planning and Programme.

Refer to 5.2 Delays. Regarding the extension of time, initially the contractor informs the employer, then the employer evaluates the request. Should the employer decide that the request for extension is well founded, the permission granted for extension should be included in a new annex to the contract.

Force majeure means any unforeseen and unexpected event occurring independently of the will of the parties, and which the parties could not have foreseen at the time of conclusion of the contract, which affects the performance of the contractual obligations. The contracting parties may specify in the contract precisely which events will be considered force majeure. Extensions of time will be granted on the basis of an annex to the basic contract.

Unforeseen circumstances are set out in the Special Construction Usages that apply to construction relationships, unless explicitly excluded by the parties in the construction contract.

Should the contract price be determined by the turnkey clause (see 4.1 Contract Price), the unforeseen circumstances are significantly limited.

The contracting parties may, as indicated in 5.5 Force Majeure, additionally define what constitutes unforeseen circumstances.

In the event of any disruptions, the contractor usually informs the employer and asks for an extension. Should the employer deem the request to be well founded, it may grant the extension. An annex to the underlying contract is concluded.

Pursuant to the Obligations Code (OZ), liability for intent (wilful misconduct) or gross negligence cannot be contractually excluded in advance. Any such contractual provisions are null and void. As a general rule, parties may limit or exclude liability for ordinary negligence, but only within the limits permitted by law. Any exclusion of liability that would be contrary to mandatory provisions, public policy or good morals is unenforceable. In the context of construction contracts, this means that a contractor cannot validly exclude liability for serious breaches of its obligations, particularly where these result from intent or gross negligence. Furthermore, under construction law liability for defects affecting the structural integrity (solidity) of a building cannot be excluded; the contractor remains liable for such defects for a period of ten years following completion.

See 6.1 Exclusion of Liability.

The parties to the contract have the option to exclude liability for slight negligence See 6.1 Exclusion of Liability, but the court may invalidate the related clauses if they result from an unequal relationship between the parties to the contract. The parties may agree on a maximum amount of damages if the amount so fixed is not manifestly disproportionate to the damage in question or if the law does not dictate otherwise in the particular case. The contractor may be free from liability in relation to the employer if it warned the employer that the requested work would not be appropriate but the employer insisted on its performance despite the contractor’s warning.

The parties to the contract agree on the compensation at their own discretion. In most cases, the contractor is liable to the employer for delay and defective work. The contractor typically has insurance cover for different types of damage caused by the contractor in connection with the performance of the construction work.

Bank guarantees for the performance of work and for the rectification of defects within the warranty period are the most widely used instruments to ensure that the contractor fulfils its obligations under the construction contract. Additionally, the parties may agree that the employer reserve a share of the amounts owed to the contractor each month as a security instrument similar to the bank guarantees. Lately, insurance policies for the performance of work and for the rectification of defects within the warranty period have started to feature more prominently in construction projects instead of bank guarantees.

The Slovenian Construction Act provides for compulsory construction insurance to cover damage arising in connection with carrying out the activity. The contractor would typically take out insurance covering the construction work, damage to the construction site and building, damage to the health or assets of third parties, force majeure, etc.

If insolvency proceedings are opened against the contractor or the employer, the construction contract usually provides for the possibility of withdrawal from the contract by the other party.

Risk sharing is possible, but not common, as the employer typically transfers all possible construction-related risks to the contractor. Since risk sharing is not typical, there is no generally established standard for pricing shared risks. Indexes such as those for calculating the difference in the price of construction services may potentially be used.

Construction contracts usually contain a provision stipulating that the contractor remains solely responsible for carrying out the work in relation to the employer, regardless of whether such personnel or subcontractors actually performed the work on the contractor’s behalf.

The contractor typically has the option to subcontract the work, unless otherwise specified in the construction contract. It is common, however, for the contractor to disclose its subcontractors to the employer prior to the conclusion of the construction contract.

All intellectual property is typically transferred to the employer to the extent necessary for the execution of the construction project.

In the event of a breach of the construction contract, the employer can claim restitution and damages against the offender or make use of security instruments issued in its favour. Ultimately, the employer may also withdraw from the contract.

In respect of the concurrent performance objection, the contractor also has the right to withhold the delivery of the Technical Examination Documentation if the employer’s payments to date have not been made.

The construction contract may limit the liability of the parties although, under Slovenian law, the right to seek a remedy before a competent court cannot be waived. However, arbitration clauses as a form of dispute resolution have been widely used recently, and arbitration continues to gain popularity, particularly in international construction projects. Arbitration clauses may be included in the construction contract or agreed by a separate contract for resolution of issues arising from a specific construction contract. Should an arbitration clause be agreed, it has an advantage before seeking a remedy before a competent court.

See 9.2 Restricting Remedies.

To the extent permitted, direct and consequential damages are typically limited, although liability for intent and gross negligence cannot be ruled out.

Retention and suspension rights stipulated under the general rules of obligations are typically not ruled out, unless explicitly agreed otherwise by the parties. Moreover, as stated in 9.2 Restricting Remedies, there is a trend currently in place of including arbitration clauses as a means of solving possible contractual issues.

The contracting authority may terminate the construction contract in certain cases. In the event of termination, the client must pay the contractor the appropriate part of the agreed price for the work done up to that time and fair compensation for the necessary costs. However, an opportunity must be given in any case to remedy the delay.

Construction-related disputes are typically adjudicated by the specialised commercial law departments of the district courts. The location depends on the jurisdiction clause agreed upon by the parties.

The parties may initiate a mediation procedure, but only where both parties agree to it. Mediation is very commonly used, both before and after the initiation of court proceedings. The parties may also agree that their dispute be settled in arbitration proceedings, although they must agree on an appropriate arbitration clause at the conclusion of the construction contract or at a later time.