Supreme Court clarifies contractor’s liability after guarantee period

The Supreme Court has issued a significant judgment KKO:2025:3, concerning contractor’s liability after the guarantee period under Section 30 of the General Conditions for Building Contracts YSE 1998. This judgment clarifies the conditions under which a contractor may be held liable for defects caused by negligence, after the guarantee period has ended. In addition to other criteria, the Supreme Court highlights that the repetition of defects is significant in the assessment of the seriousness of negligence.

The case involved housing company, as the Client, that contracted with a Contractor to replace the water pipes in multiple apartments. After the end of the guarantee period, a leak in one apartment caused extensive water damage to several other apartments.

The District Court found that the Contractor had failed to properly seal the plumbing, which caused the leak. This failure was deemed contrary to the contract and building regulations and was attributed to the Contractor’s gross negligence. Consequently, the Contractor was held liable for damages. The Court of Appeal upheld the District Court's decision.

The Supreme Court granted the Contractor leave to appeal on the specific issue of whether the Contractor’s failure to properly seal the water pipes was the result of gross negligence thereby making the Contractor was liable for the damage even after the guarantee period.

In this case, the Contractor had breached both the contract and the building regulations with defective sealing. It was found out that the defect had been repeated in several apartments. Defective installation was detected in 52 apartments out of 72 apartments 18 of which could not be inspected. The Supreme Court determined that the Contractor's conduct significantly deviated from the standard of care expected of a professional contractor and that the risk of damage was evident. Therefore, the defect was deemed to result from gross negligence, making the Contractor liable for damages after the guarantee period.

The ruling provides an important precedent for assessing gross negligence under Section 30 of YSE 1998 conditions.

The Supreme Court defined gross negligence as a deliberate disregard of the duty of care. The assessment of gross negligence requires the consideration of the contractor's obligations, deviations from proper performance, risk of damage and factors such as the repetition of defects.

The Supreme Court’s judgment highlights that the repetition and extent of defects are critical in assessing the seriousness of negligence. However, the Supreme Court’s judgment did not clarify whether repetition of multiple different defects should be given the same weight in assessment as the repetition of one specific defect, the latter being present in this case. Ultimately, determining gross negligence involves a comprehensive evaluation on a case-by-case basis.

If you have any questions about this Legal Alert, please feel free to contact the undersigned or your regular Borenius contact.