Bence Rajkai delivered a presentation entitled “Risk Management in Cultural Heritage Areas” at the European Society of Construction Law conference in Naples on 26 September. This year’s conference explored how construction projects interact with their cultural context, which provided an insightful backdrop for the topic.
If you were unable to attend, you can now read the transcript of Mr Rajkai’s presentation and view the accompanying PowerPoint slides here.
What is Culture?
To truly understand each other, we must align our perspectives and use a common language.
We can call this the “fusion of horizons” — a concept Gadamer associates with defining culture itself. I admit that this may sound theoretical, but it takes on practical significance when we consider the dilemmas we are facing when we translate technical terms into legal language.
Legal rules are not created in abstraction like mathematical equations. Drafting contracts requires that we understand the aims, constraints, and language of others.
Misunderstanding
Misunderstandings usually stem from lack of common language.
Therefore, it is an essential task in any construction contract to reconcile the differing views of the employer and the contractor. Unresolved differences in interpretation will not just disappear; but they will surface later in contrasting claims.
Risks and Risk Management
In legal terms, misunderstandings are risks.
Risks
Risk management requires that we identify potential misunderstandings and tailor contracts accordingly. Overly complex clauses, which neither the parties nor the judges can handle, are not the solution. Clarity, cooperation, and shared understanding are.
Contractors can address potential confusion more effectively if they analyze the specific technical aspects carefully and use concrete terms instead of relying on overcomplicated, legalese definitions. Obviously, this approach again requires close cooperation between lawyers and engineers.
Special Risks in Cultural Heritage Areas
Risks in heritage projects are more pronounced for two reasons:
First, participants must consider both the past and the present.
Second, contractors and developers cannot freely modify even the immediate environment of the construction.
Potential complications
All these special factors can lead to unique complications.
While these risks may have different root causes, they lead to the same result: the project cannot be executed as originally planned.
The question is, who should bear the responsibility and costs in such cases?
International Examples of Allocation of Costs and Responsibilities
To answer this question, I will give you some examples from international practices.
Allocation of Responsibility and Costs
First, we have to examine the main principles of contractual liability.
The fundamental rule in nearly all contracts is the same. The contractor bears the responsibility and risk to ensure that the building can be constructed on the specific site as designed, within the specified time and budget.
Contractors can only transfer these risks in exceptional cases. The contractor and employer may raise contrasting claims against each other depending on whether the main rule or an exception applies.
Different Legal Cultures, Different Solutions
If we examine the different legal cultures, we can see that the main rule is similar everywhere, but the exemptions that provide relief for the contractors vary significantly.
Traditionally, we make a distinction between the strict liability regime of common law jurisdictions and the fault-based liability regime of civil law jurisdictions.
I indicated the most important aspects of the different liability regimes on this table, and added the specific issue of ground risk, since this type of risk is crucial in heritage areas.
Ground Risk Table
While the allocation of ground risk varies across liability regimes, some principles seem to be universal. The first question is whether the employer provided detailed information about the specific characteristics of the ground, which functions as a form of quasi-warranty.
If this is the case, and the actual ground conditions still differ from those stated by the employer, the contractor is usually entitled to suspend work and claim for an extension of time (EOT) and extension of costs (EOC).
If this is not the case, contractors cannot usually be exempted unless the ground conditions were genuinely unforeseeable due to the insufficient data and investigative methods available at the time.
Allocation of Risks and Responsibilities in the FIDIC Contracts
This table presents the main claims that a contractor can raise under the FIDIC contracts: EOT, EOC, or profit adjustments.
One of the key points that I want to highlight is the strict liability in Silver Book contracts, where the contractor cannot raise any claim even in cases of unforeseen physical conditions.
Discharge and Force Majeure in the FIDIC Contracts
FIDIC contracts also include general clauses for cases of force majeure and impossibility.
Overview of the Liability and Risk Allocation System in Hungarian Law
Now, let’s see some examples from the Hungarian practice.
The Hungarian approach to risk allocation is similar to other civil law systems, but applies a distinct method for regulating variations and additional works. This method provides a specific framework which helps to manage variations and resolve claims related to costs and profits.
Hungarian Experience
Brief History of Buda Castle
My examples come from the reconstruction works in the Buda Castle.
First let me tell you something about the historical background. Buda Castle has experienced a turbulent history, much like Hungary itself. It has been constructed, demolished, and reconstructed multiple times, which resulted in multiple layers of both recorded and forgotten ruins beneath the surface.
Restoration works
It’s no surprise that during any restoration work in the castle, one thing is certain: somewhere, at some point, something will surface that we can call mysteriously the “known unknown”. And this poses unique challenges for contractors.
Let me explain what I mean when I use the expression “known unknown”.
If problems are known, contractors can and must prepare for them. If risks are entirely unforeseeable, contractors cannot be prepared for this scenario, and they can be relieved of liability and claim EOT and EOC.
However, if contractors anticipate certain risks but cannot predict in what form they will appear, the contractors cannot truly prepare for this situation nor can they be relieved of liability easily.
So, the question is, how these known unknown risks can be handled.
I believe this brings us back to the beginning of my presentation, where I emphasized why it is important that the communication and understanding between the parties must be transparent and consistent.
Even if they cannot foresee or precisely allocate all risks, they can still outline what kind of obstacles they may have to face. This may help them establish limits for their risks and responsibilities.
Luckily for the contractor, this was what had happened in one of the restoration projects at the castle. The parties explicitly outlined where archaeological excavations might be necessary and the locations where ruins could be found beneath the site. As some of the ruins were found outside these designated areas, the contractor was able to claim EOT, EOC, and profit.
Had the contractor failed to define these designated areas, it might have been difficult to initiate any claim. Considering the history of the castle it would have been hard to argue that the risk of uncovering hidden ruins was unforeseeable in general.
Interestingly, another claim made by the contractor, which initially appeared similar, was rejected. The contractor encountered solid rock during the construction instead of the sandy soil specified in his offer. However, his claim for EOT and EOC was denied because experts had established that the contractor must have been aware of the fact that the ground beneath the castle was formed of solid rock.
Restoration of Siklós Castle
You can read about another, similar illustrative example on my slide —the case of the restoration of Siklós Castle.
Lessons Learned
Now, it’s time to sum up the lessons we can learn from these examples.
In summary, contractors face unique challenges in heritage areas, particularly with known unknown risks. They can manage these risks reasonably if they clarify their interpretations and expectations in advance, and outline boundaries and limits for their responsibilities and liabilities as we saw in the Buda castle case.
Modern technology, such as 3D drone scanning, which is commonly used in today’s restoration work, can be of great assistance in preparations.
However, the most important lesson is that effective risk management is not about drafting overcomplicated terms, but about making genuine efforts to understand each other’s perspectives and expectations. To achieve this, we, lawyers need to fuse the horizons of diverse cultures, contrasting contractual positions, and the experience of various professions.
***
Author: Rajkai Bence
If you are interested in more articles on construction law, please visit our website: Construction Papers
Copyright © 2025 CERHA HEMPEL Dezső Partners – all rights reserved.
Our mailing address:
CERHA HEMPEL Dezső & Partners
1011 Budapest
Fő utca 14-18
Hungary
E-mail:
bence.rajkai@cerhahempel.hu
