Construction Contracts: Legal Perspectives for Successful Execution in the Republic of Guatemala

Published on May 23, 2024

Our lawyers in Guatemala, experts in Real Estate Law, share this article on the legal perspectives for a successful execution of work contracts in the Republic of Guatemala.

In the field of construction and industry, work contracts are the basis on which projects of any size are built. These contracts establish commitments between contractors and clients, or owners of the work, to carry out specific works, from the construction of buildings to large-scale infrastructure projects. However, beyond being simple written agreements, work contracts represent a complex set of legal and technical provisions that regulate every aspect of the project, from initial planning to final delivery.

Work contracts are vital instruments in the development of construction projects. The Republic of Guatemala has witnessed a significant increase in investment in infrastructure and real estate development in recent years, which has generated a growing demand for specialized knowledge in the management and execution of work contracts. Understanding the legal and technical complexities associated with these contracts is essential to ensure the success of the projects and protect the interests of all parties involved.

The novelty of this topic lies in its growing importance in a context of economic expansion and development in the Republic of Guatemala. With the increase in activity in the construction sector, there is also an increase in the need to adequately address the legal and technical challenges associated with work contracts, where contractors and clients face a series of challenges that require an understanding of the applicable laws and regulations.

The Civil Code, Decree Law Number 106, of the Head of Government of the Republic of Guatemala, establishes that for the work or company contract, the contractor undertakes to execute and deliver a work commissioned by another person, for a price that the latter is obliged to pay. In this regard, according to the Explanatory Memorandum of the Civil Code, it is important to consider the distinction between the employment contract and the work contract, highlighting that, in the latter, the contractor is not subject to a relationship of dependency with the principal; and, on the other hand, that this contract can refer to all types of works, but the one that receives the most attention is the construction of buildings, due to its importance and complexity.

The work contract can be both private and public. In the first case, even when it involves a party that is a merchant and a party that is not, it must also follow, as applicable, the regulations of the Commercial Code, Decree Number 2-70 of the Congress of the Republic of Guatemala. In the second case, it would be necessary to consider what is established for this purpose by the State Contracting Law, Decree Number 57-92 of the Congress of the Republic of Guatemala. Likewise, depending on the specific case, it will be necessary to take into consideration the different laws and regulations that, on the matter, exist in the Republic of Guatemala, such as the Preliminary Urban Planning Law, Decree Number 583 of the President of the Republic of Guatemala; the Municipal Code, Decree Number 12-2002 of the Congress of the Republic of Guatemala; the Construction Regulations and the Territorial Planning Plan of the Municipality where the work will be built, if any; among others.

In any case, among the key aspects of the contract, which it is recommended to regulate and clearly establish, are: the obligations of each party, especially the responsibility of the contractor for the work performed, the delivery of the work in accordance with the agreed specifications and scope, the possibility of modifications to the contract, the price and adjustment scenarios, the payment method, the deadline, fines for delay in the work, supervision of the work, acquisition of insurance and bonds, obtaining permits and licenses, termination advance payment, fortuitous case and force majeure events, the method of dispute resolution, among others that will depend on the nature of the work. Likewise, it is obviously of utmost importance to include in the content of the contract all the technical aspects of the work, even attaching the documents that contain them, such as specifications, instructions, plans, among others. By carrying out all of the above, all aspects of the contract will be adequately regulated, which will avoid uncertainty if conflicts occur during its execution and will guarantee the success and satisfaction of all parties involved.

In conclusion, work contracts are fundamental elements in the successful execution of construction and development projects; therefore, to ensure success and minimize the associated risks, it is of utmost importance that all parties involved in these contracts have a clear understanding of their legal terms and conditions, as well as adequate legal advice. By proactively addressing the legal and technical challenges associated with work contracts, companies can maximize opportunities for success, and contribute to the growth and sustainable development of the construction industry in the Republic of Guatemala.

The Arias team is made up of professionals with extensive experience in real estate law, who will be happy to advise you on this and other issues in the matter. So, if you have any questions or need additional information, do not hesitate to contact us.

The information provided by ARIAS® is presented for informational purposes only. This information is not legal advice and is not intended to create, and does not constitute, an attorney-client relationship. Readers should not act upon this information without seeking advice from professional advisers.