The legal analysis of the independent contracting according to the albanian legislation

1. The independent contracting and its characteristics

The meaning of the independent contract is given by the article 850 of the Civil Code of the Republic of Albania, which provides as follows:

“An independent contract is a contract through which one party (the independent contractor) is obligated to, using its means and assuming the risk, complete a work (job) or provide a service or independently perform a specified job, while the other party is obligated to accept it, paying the price defined in the contract”.

Therefore, based on this contract the independent is obligated to the costumer to complete a work (job), paying a compensation with the necessary means and under his administration, assuming the risk for performing or not the work or service.

It is worth mentioning that based on this contract the obligation of the independent it is not an obligation with the object to develop an activity but an obligation with the object the achievement of a result which consist on the accomplishment of a work or a service, which is possible due to the special abilities of this independent.

The work or service on question in the independent contracting, as the main object, is completed as a result of an independent work. Therefore, it is necessary that the independent contractor should not have dependent relation with the customer otherwise it is a job contract. Hence, in the independent contracting the independent is not the subject of a decision –making power in relation to execution of its obligation like the job contract where the employer is obliged to put his/her own energy in disposal for daily or weekly time of the working timetable, accomplishing all the duties one is hired.

2. The characteristics of the independent contracting.

An attribute of independent contracting consist on the fact that the independent provides the material required to perform the work or service. This is the all-purpose rule (³), but it is not excluded the possibility that the materials are provided by the customer, even whether the material provided by the customer is detective or unsuitable and the latter does not fulfill the requirement of the independent for substituting the material as we will see below the independent contractor has the right to renounce the contract and demanding compensation for the damage (⁴).

Another attribute of the independent contracting is the existence of the risk which burden to the independent contractor.

This risk consist on the fact that the independent risks to get any compensation from the customer if with his activity and the costs could not perform the work undertaken except when the work or service is impossible for different reasons from the customer as for ex:

Due to execution of the instructions of the customer because the material has been defective or unsuitable notwithstanding the warning the independent contractor gave the customer.

The same rule is applied when the work performed with the materials of the contractor is lost or damaged before the deadline without the fault of the contractor or customer.

Furthermore this risk consist on the fact that the independent contractor is obliged to perform the work or job with a compensation that the parties have defined in the contract regardless of the fact that the compensation that both parties agreed upon might not cover the cost of the service, however if as a result of unforeseeable circumstances have occurred increases or reductions in the cost of the materials or of labor as to cause increase or reduction by more than one –tenth of the total price agreed upon, but even in this case the independent contractor has the right to request only the difference which exceeds one-tenth (⁵).

This is as well known in the cases when in the course of work difficulties are revealed deriving from geological conditions, water, or other similar causes not foreseen by the parties, which made the performance of the contractor considerably more onerous, the independent contractor is entitles to just compensation therefore.

Another characteristic of the independent contracting is that the independent contractor is obliged to perform the work or service the parties have agreed upon.

This attribute comes from the content of the independent contracting is obligated to complete a work (job) or provide a service defined in the contract, using its means and assuming the risk.

This attribute is given in the content of the relevant provision of the Civil Code where it is foreseen that :

“An independent contractor cannot subcontract the performance of work or services unless he has been authorized by the customer”.

Consequently, it results that the independent contractor is obliged to complete the work or provide the service using the necessary means under his administration and exceptionally he can subcontract the performance of work or services unless he has been authorized by the costumer (⁶).

It is worth emphasizing that regardless of the fact that work or service might be subcontracted by the independent contractor, the independent contractor is responsible for failure deriving from the contract and not the subcontractor. Therefore, the risk of work failure rests on the independent contractor and not the subcontractor, but always the independent contractor has the right of the claim for the restitution against the subcontractor if exercises the right within the deadlines for example: the contractor, in order to exercise the right of the claim for the restitution against the subcontractors, shall notify them for the denouncement within sixty days from the receiving of the notice with the decadence condition that brings the loss of such right (⁷).

Certainly, in everyday life the subcontracting contract usually happens because the independent contractor does not attain the necessary abilities to complete the work or provide the service thus for example: in the construction field the independent contractor might not have the abilities to accomplish the plumbing works and for this reason consigns the completion of the such works to a specialized subcontractor. Big and small entrepreneurs have a considerable number of small enterprises which order one or more phases of the process to complete the work or provide the service.

Another attribute of the independent contracting is that it is not dissolved by the death of the contractor.

As a general rule, the independent contracting is not dissolved by the death of the contractor, except when the contractor was considered necessary for the performance of the work.The contract of undertaking it is not dissolved by the death of the contractor, except when the contractor was considered necessary for the performance of the work for example; in cases when the parties have assign a contract which object is the painting of a picture, then if the contractor dies the contract of undertaking is considered dissolute as the completion of this work is closely related to the personal abilities of the contractor.

In the case of the dissolution of the contract because of the death of the contractor, the

customer is obliged to pay to the heirs the value of the work done based on the price established, as well as the expenses for the completion of the part remaining, but only within the limits in which the work done or the expenses made are useful to him. The customer has the right to demand the delivery towards a fair compensation of the value of the materials prepared and of the projects on the way of their performance, for as far as the rules for the protection of inventions and intellectual property allow (⁸).

3) Obligations of the Independent Contractor and costumer in the independent contracting

The independent contracting gives binding effects because it is an obligation source for the contractor and the costumer as well where among the obligations of the contractor we will mention:

1. The independent contractor must give timely notice to the customer:

a) When the material provided by the customer has defects, if they are discovered during the course of work and they jeopardize the quality of the work;

b) When the instructions of the customer cannot be implemented or when their implementation makes the work inadequate or unsuitable;

c) When there are circumstances unrelated to the independent contractor which influence the work and cause it to be inadequate or unsuitable;

If the independent contractor does not accomplish the oligations mentioned above is responsible for the damage caused to the customer if he tails to provide notice of the above.

2. The contractor is obliged to undertake measures to maintain the material given by the customer.

When we cited above the characteristics of the contract, we emphasizes that the work or service is completed with the materials of the contractor but the parties might envision in the contract that the work be performed with the materials of the customer. The independent contractor is responsible for loss or damage of materials provided to him by the customer, except when it is proved that the loss or damage of materials has occurred because the materials were defective or unsuitable or due to execution of the instructions of the customer for the performance of the work notwithstanding the fact that the independent contractor has provided timely notice to the customer.

Hence as a condition that the independent contractor deviate from the responsibility for the loss or damage of materials provided to him by the customer, it is not required that this loss or damage occurred because the materials were defective or unsuitable or due to execution of the instructions of the customer for performance of the work notwithstanding the fact that the independent contractor has provided timely notice to the customer, since the moment the material has started to be damaged or lost or in the moment when he has noticed that the material will be damaged as a result of the execution of the instructions given by the customer.

3. The contractor is obliged to, in order to complete the work, respect the projects and the stipulated manners to complete the work as well the guidelines given by the customer.

Such an obligation derives from the content of the relevant provision of the Civil Code where it is provided that;

“An independent contractor cannot vary from the stipulated manner in which the work is to be done, unless such variations have been authorized in writing by the customer.”.

The implementation of the obligations from the contractor implicates the strict observance of the stipulated manners and conditions by the parties in the contract to complete the work and their variations without the approval of the customer to the withdraw of the contract by the customer and the obligation of the contractor to any compensation because of the damage as the contractor failed to accomplish the work and it varies the project the parties agreed upon (⁹).

The variations of the stipulated manners and conditions is carried out only when the customer authorizes in writing.

When variations have been authorized by the customer, the contractor is not entitles to compensations for such variations if the price of the entire work have been determined, unless otherwise is agreed.

4. The contractor is obliged to create the appropriate conditions to inspect the completed work.

This means the obligation of the contractor to allow the customer or the specialist to inspect the work if it is performed according to the standards and condition the parties have agreed upon, creating the necessary facilities, as well the technical assistance if it is necessary (¹⁰).

5. The independent contractor is bound to give a guarantee for the deformations and the defects of the work. This is provided in the relevant provision of the Civil Code:

“The independent contractor is bound to give a guarantee for the deformations and the defects of the work…”

The contractor is excluded by this obligation if the customer accepted the work and the deformities or the defects were known to him or were obvious, unless when those were maliciously hided by the undertaker.

In the case when the work completed by the undertaker has deformations or defects

the principal shall notify the undertaker within 60 days from their discovery with a decadence condition, that brings the loss of such a right. The notice it is not necessary when the undertaker did know for the deformation and the defects or when he has hided them.

The claim against the undertaker shall be prescribed within two years from the day of the date of delivery of the work.

The customer can demand that the non-conformities or the defects be eliminated at the expense of the contractor or that the price be reduced proportionally, saving the right for the compensation of damages in case of fault of the contractor.

In case the undertaking has as its object buildings or other immovable things which, by their nature have a long term destination, if from a period of ten years from the termination, the work, because of the land or defects of construction, is destroyed totally or partially, or it is in an obvious risk of being destroyed or other serious detects, the contractor is liable to the customer and the parties that derive rights from him with the condition that their claim is done within one year from the discovery.

In this situation the right of the customer is prescribed within one year from the denouncement.

Rights and Obligations of the Customer

1. The customer is obliged to pay the price agreed upon in the contract.

The main obligation of the dependent contractor for work completion or service performance is replied by the obligation of the customer to pay the price the parties agreed in the contract. The companion sat might be defined either referring the whole work or referring a defined measure (for example x ALL per m² and this is payed by the customer beside eventual payements as the work is inspected and accepted by him. But if it is the case of separated works in the same contract as the case of residential blocks the independent contractor might ask for inspection and payement of each part (¹¹).

Generally the contractor is entitled to payment of the price when the work has been accepted by the Customer, unless except as otherwise agreed, (as to define in the contract other ways of payment, such as advance payment or installment payment).

Therefore, as it was cited above the compensation is defined in the contract, specifying the ways of payment, but it may happen that the parties have not defined the compensation in the contract and have not defined the way to establish the compensation.

The compensation is calculated on the basis of existing rates or the local customs and in cases of disagreement, the court has the authority to set the compensation.

The customer is obliged to pay the value of the material as well the work performed by the independent contractor when the performance was impossible or lost or damaged due to the execution of the instructions or as the result of defective or unsuitable materials.

The customer is obliged to pay the compensation in case he changes the material with defective or unsuitable quality or when it does not change the instructions to perform the work notwithstanding the fact that the independent contractor has provided timely notice to the customer.

The customer is obliged to compensate the independent contractor for the main works in case of variations in the plan, not involve an amount in excess of one-sixth of the total price agreed upon.

2. The customer is obliged to take the work performed by the independent contractor.

The acceptance of the work, as we cited above, obliges the customer to pay for it. It may happen that after the accomplishment of the work the customer do not express any interes to take the work.

If notwithstanding the request made to him by the contractor, the customer fails, without justifiable reason, to proceed with testing, or if he tails to make known the result thereof within a short time, the work is considered to have been accepted.

4) Dissolution of the Contract and Legal Consequences

Throughout the analyze of the independen contracting we emphasized that this is a mutual contract which brings rights and obligations for both parties where the failure of obligations brings the dissolution of the contract and the relevant consequences of the party the contract is dissolute or when it comes as a result of the conditions estimated by both parties

1. In the independent contracting the customer different from the dependant contracter can withdraw from the contract even when the work or the service has started to perform.

The right of the customer to withdraw the contract is conditions by a number of legal consequences such as, the condition that the contractor is compensated for the expenses,work done and the profit loss.

With the profit loss we understand the profit that the dependant contractor have achieved as a result of work completion of service provided agreed in the contract.

In such case it is convenient not to exercise such a right.

2. Another case when the contract is dissolved because the performance of the work is made impossible as a result of a cause that can not be blamed in any of the parties. But in such a case the contractor pays for the part of the work performed at the limits within which it is useful for him, in proportion with the price established for all the work.

When the work done with the material of the contractor is lost or destroyed, as well as when

the complete performance of which becomes impossible before the term for the delivery of the work has come, but in any case without the fault of either of them, the contractor has no right to demand to the customer the value of the material or of the work done.

However, despite the fact that the performance of the work is made impossible as a result of a cause that can not be blamed in any of the parties, the dependent contractor or customer will pay for the material and the customer for the work performed.

The cases are:

a. When the material that is given to the contractor from the customer or, when the work prepared with this material is lost or damaged, as well as the complete performance of the work becomes impossible without the fault of either of them, but in any case after the contractor is in delay for the delivery of the work, he is obliged to compensate to the customer the value of the material and it has not the right to demand from him to be paid for the work done.

b.When the work done with the material of the contractor is lost or destroyed, as well as when the complete performance of which becomes impossible before the term for the delivery of the work has come, but in any case without the fault of either of them, the contractor has no right to demand to the customer the value of the material or of the work done.

c. When the work performed with the materials of the contractor is lost or is damaged,

as well as when its complete performance has become impossible without the fault of the contractor or that of the customer, but after the customer is in delay of taking delivery of the work, he is obliged to pay to the contractor, the value of the material and that of the work done.

3. Another situation of the dissolution of the contract of undertaking is the death of the contractor, when can not trust the heirs of the contractor for the good performance of the work or the service or when the performance was closely related to the personal abilities of the contractor.

In this case the customer is obliged to pay to the heirs the value of the work done based on the price established in the contract.

4. Other situation of contract dissolution is when the changes in the price exceed 1/6 (one sixth) of the total price agreed upon in the contract. In this case the contractor can withdraw from the contract and according to the circumstances, receive just indemnity.

5. Another situation of contract dissolution is when the customer does not replace the defective or unsuitable material or does not change the instructions for the performance of work, despite the tact that he has received timely notice. In this case the independent contractor has the right to renounce application of the contract and demand compensation for damages. Therefore as the condition for the independent contractor to know the right to renounce the application it is required to receive timely notice for the defective or unsuitable material and the changes of the instruction for the performance of work.

6. Another situation of contract dissolution is when the contractor is not in accordance with the conditions established in the contract and according to the standards regardless of the deadline given.

As we have cited above the obligation of the contractor is to respect the conditions established in the contract and the perfrom the work. If the customer inspects the progress of the work and in the course of the work, it is ascertained that the performance is not proceeding in accordance with the conditions established by the contract and according to the standards of the trade, the customer can establish a suitable time limit within which the contractor must conform to such conditions. When such time limit expires without results, the contract is terminated without prejudice to the right of the customer to be compensated for damages which can be for example; the value of the materials that the customer has payed, etc.

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