The contract for manufacture according to Bulgarian law

With the conclusion of a contract for manufacture, the contractor obliges to perform a work at own risk; the customer obliges to pay the agreed remuneration. If not agreed otherwise, the contractor is obliged to perform the work on his own account.

The contract for manufacture is a bilateral contract that is accompanied by obligations and rights for both of the parties. According to its definition, a contract for manufacture is always a legal relationship in return for payment.

The subject matter of the contract for manufacture is the work – the actual actions made by the contractor. Here, the difference to the order becomes evident as the order’s subject matters of contract are legal actions – the agency. Furthermore, the order is principally a gratuitous contract.

Obligations and rights of the contractor

The regulations provided here are complete and detailed.

Firstly, if not agreed otherwise, the contractor is obligated to perform the work on his own account.

The contractor is obligated to perform the work in a way that it is suitable to its usual or contractually provided use.

The contractor that performs the work using his own material is liable for its quality. If several persons are obligated to perform the same work, they are liable jointly and severally unless agreed otherwise.

An essential rule is provided by Article 260 of the law of obligations and contracts: “The contractor is obligated to inform the other party immediately if the assigned project or the delivered material is not suitable to the proper performance of the work and if the necessary modifications in the project or the delivery require for suitable material.”

Rights and obligations of the customer

The main obligations of the customer are to pay the contractor and to accept the work suitable to its contractually provided use.

Regarding the remuneration, there may be modifications made during the duration of the contract as provided in Article 266 of the law of obligations and contracts: “The customer is obligated to pay the accepted work. If the remuneration was agreed to be paid in individual prices, the amount is determined when accepting the work. If the properly determined price regarding materials and work force has been modified during the duration of the contract, in spite of the arranged total price, the remuneration gets modified as well.”

Risks

The person that owns the material for the work takes the risk for its accidental destruction. The contractor underwrites the risk for the destruction that occurred non-culpably. According to the law, the contractor loses his entitlement to remuneration if the performance became impossible for reasons that none of the parties are responsible for. If parts of the performance that may serve the customer have been performed, the contractor is eligible for a partial remuneration.

The contractor is eligible for remuneration if the fulfillment of the performance became partly or completely impossible because of an unsuited project or the usage of unsuited materials that have been provided by the customer and under the additional condition that the contractor informed the customer about the current unsuitability. This rule results in connection with Article 260 of the law of obligations and contracts.

Transfer of ownership of the work

A transfer of ownership is only possible if the work has been performed using the contractors’ materials. In consideration of the rule regarding the risk of accidental destruction, the view is held that the ownership is transferred with the risk – meaning that the customer becomes the owner of the work only after he accepted it and the other party did not default.

Non-fulfillment

Besides the legal provisions of the general part of the law of obligations and contracts, there are specific rules defined in the Articles 262, 264 (1), (2) and 265 of this law.

Firstly, if it turns out that the contractor will not perform the work within the time limit or in the agreed or proper way, the customer is entitled to withdraw from the contract and to request damages according to the general rules. This is the theory of the instant dismissal of the contract whereby the contractual period is not binding upon the costumer.

Secondly, it is possible that the work exhibits certain defects. The customer is obligated to accept the contractually performed work, including its examination. The acceptance of the work follows the examination that in cases of improper performance may imply complaints – unless there are hidden defects that are not visible or appear later. The customer must report these defects to the contractor immediately after their appearance. This obligation does not apply if the contractor knew about the defects. If there are no complaints on the part of the customer, the work is considered as accepted.

Further, it is possible that the work exhibits deviations from the agreed condition. In cases of deviations from the agreed condition or defects of the work, the customer is entitled to:

 - demand a gratuitous supplementary performance within an adequate period of time;

 - demand the reimbursement of costs that arose with the rework or the reduction of the remuneration.

In cases of significant deviations from the agreed condition or defects that unfit the work for the usual usage or the contractually provided purpose, the customer is entitled to cancel the contract. These rights expire after six months; regarding constructional work after 3 years.

There are two more typical reasons for the cancellation of the contract for manufacture:

Firstly, the contract gets cancelled if the performance becomes impossible or in the case of the contractors’ decease unless his heirs are not willing to continue the performance of the work. If the contract gets cancelled, the customer must pay the work performed and material used according to the agreed remuneration.

Secondly, according to Article 268 of the law of obligations and contracts, the customer may withdraw from the contract under specific conditions: “By paying the costs incurred, the work performed and the expected profit, the customer may withdraw from the contract for essential reasons even if the performance has been initiated yet.”