Works Contract Without Fixed Price: When the Contractor Commits to a Maximum Price

You are the owner of a flat in Chamalières and you entrust a company with the renovation of your bathroom. The initial estimate is €8,000, but during the works, the contractor discovers a pipe that needs replacing. He tells you: 'Don't worry, I'll stay within the €8,000 budget.' Yet the final bill rises to €10,500. What should you do? Do you have to pay everything? And if the contract does not specify that the contract is a fixed-price contract, who should bear the excess?

This question is asked by hundreds of owners and contractors every year. The French Supreme Court answered it in a judgment of 22 June 1976, which is still relevant today. It ruled that a works contract may not be a fixed-price contract (i.e., at a fixed and final price) while still containing the contractor's commitment to build without exceeding a certain price. In other words, the contractor may be bound by a cap, but the contract remains 'measure and value': additional works not foreseen must be accepted by the client to be paid.

This decision protects the owner against nasty surprises, but it also imposes vigilance: any overrun must be formalised in writing. Otherwise, the contractor risks not being paid for the extras. Let's delve into this case, which took place in Paris, but whose lessons apply to everyone, from Clermont-Ferrand to Lyon.

The facts: a story like many that happen every day

In 1971, the company Rivoli Saint-Jacques, which operates a shop in Paris, entrusts the company Caillette et Dony with structural works in its commercial premises. The accepted estimate amounts to a certain sum, but during the works, additional works become necessary. The company carries them out without obtaining a new estimate signed by the client. At the end, it claims payment for these additional works, i.e., an amount exceeding the initial estimate.

The company Rivoli Saint-Jacques refuses to pay, arguing that the contract was a fixed-price contract and that any overrun had to be authorised in writing. The company Caillette et Dony brings the case before the commercial court, then the Paris Court of Appeal. In 1975, the Court of Appeal rules in favour of the contractor: it considers that the contract was not a fixed-price contract, but a 'measure and value' contract with a maximum price. The contractor was entitled to be paid for the additional works, even without a written variation order.

The company Rivoli Saint-Jacques appeals to the Supreme Court. It argues that any works contract is by nature a fixed-price contract, and that overruns must be accepted by the client. The French Supreme Court, in its judgment of 22 June 1976, dismisses the appeal. It confirms that 'a works contract may not have the character of a fixed-price contract while containing the contractor's commitment to build without the cost of construction exceeding a certain price'. Thus, the Court of Appeal correctly applied the law of the parties (the will of the contracting parties) by refusing the contractor payment for unauthorised additional works.

Note: The Supreme Court dismissed the appeal, but in favour of the contractor? No, in fact it validated the reasoning of the Court of Appeal, which had rejected the contractor's claim for unauthorised overruns. The judgment is therefore favourable to the client: without written agreement, the contractor cannot claim the excess.

The reasoning of the court — broken down

The Supreme Court relies on Article 1134 of the Civil Code (now Article 1103 since 2016), which provides that 'legally formed agreements take the place of law for those who have made them'. In everyday language: the contract is law between the parties. Judges must respect the will expressed in the contract, without adding conditions that the parties did not foresee.

Here, the contract between Rivoli Saint-Jacques and Caillette et Dony did not stipulate that the contract was a fixed-price contract. It only set a maximum price not to be exceeded. The Court of Appeal interpreted this clause as a cap, but not as a fixed and final price. Therefore, the contractor could charge for additional works, provided they had been accepted by the client. However, in the absence of written acceptance, these works were not due.

Rivoli Saint-Jacques argued that any construction contract is by nature a fixed-price contract, which is a misconception. The Supreme Court sweeps this aside: nothing in the law requires a works contract to be a fixed-price contract. The parties are free to choose a 'measure and value' contract, with a maximum price, or even without a predetermined price. What matters is what they intended.

This judgment does not create a change in case law: it confirms a classic solution. On the other hand, it reminds us of a fundamental principle: the fixed-price nature of a contract is not presumed. If the contract does not expressly say 'fixed-price contract', it is considered 'measure and value'. For contractors, this is a warning: without a written variation order, overruns risk remaining unpaid. For owners, it is a protection: they only have to pay what they have accepted.

What this changes for you — concretely

For the owner carrying out works: if you sign an estimate without mentioning 'fixed-price', the contractor may charge you for additional works, but only if you have accepted them in writing. In practice, be wary of oral 'little extras'. A contractor tells you 'I'll change this socket, it'll be included in the price'. If he does not note it down, you could receive an extra bill. Example: initial estimate €15,000 for a kitchen renovation in Clermont-Ferrand. During the works, the electrician adds three sockets and under-cabinet lighting. Without a signed variation order, you are not obliged to pay the additional €800. But be careful: if the works are essential (e.g., compliance with standards), the judge might consider them implicitly included.

For the contractor: this decision obliges you to formalise each modification. Do not rely on the client's good faith. Have a variation order signed before carrying out additional works. If the client refuses, you can stop the works or inform them that the cost will exceed the cap. Example: in Chamalières, a plumber carried out emergency works without a signed estimate. The client refused to pay half the bill. The court ruled in favour of the client, due to lack of written agreement.

For the co-owner: if you carry out works in your private parts, the same principle applies. But for common parts, it is the managing agent who represents the co-owners' association. Contractors must obtain a written order from the managing agent for any overrun. Otherwise, the association may refuse to pay.

Time limit to remember: the contractor's action for payment is barred after 5 years (general limitation period). If you receive a bill for unauthorised works, you can challenge it within this period.

Four tips to avoid this type of dispute

• Require a written contract specifying whether it is fixed-price or not. If you want a fixed price, have 'fixed-price contract' written in and list all the services. This avoids any ambiguity.
• For any additional work, sign a variation order before execution. Even for a small modification, get into the habit of writing an email or signing a purchase order. Example: in Clermont-Ferrand, a client refused to pay €200 for extra paint because the contractor had no written evidence. The court ruled in his favour.
• Photograph the progress of the works. In case of dispute, dated photos prove what was done. Attach them to the estimates and variation orders.
• Check the legal mentions of the estimate. The estimate must state the total price, the period of validity, and the payment terms. If it is vague, ask for written clarifications.

In-depth: related case law and developments

The 1976 judgment is part of a consistent line: the Supreme Court regularly reminds that the fixed-price nature of a contract is not presumed (Civ. 3e, 11 May 2000, no. 98-17.123). More recently, in a judgment of 16 June 2021 (no. 20-13.647), it ruled that the absence of mention of the fixed-price nature in an estimate is not sufficient to exclude a fixed price, if the parties agreed on a global and final price. In other words, everything depends on the will of the parties, expressed in the contract.

Another notable development: the Law of 17 June 2008 reduced the limitation period from 30 to 5 years for professionals' actions for payment. This reinforces the need to act quickly.

In practice, courts are demanding regarding proof of the client's agreement. A simple exchange of emails may suffice, but a signed writing is better. The trend is towards consumer protection: unfair terms in contracts for work are sanctioned. For example, a clause that would require the client to pay all overruns without their agreement would be deemed unwritten.

Key points to remember

Practical FAQ:

• Is an estimate always a fixed-price contract? No. An estimate is a price offer, but the contract is only fixed-price if the parties have expressly agreed. In the absence of mention, the contract is 'measure and value'.
• Can I refuse to pay for additional works not foreseen in the estimate? Yes, if you have not accepted them in writing. But if the works were essential for the proper performance of the contract, the judge might consider them included in the price.
• What should I do if the contractor claims an overrun that I did not authorise? Challenge it in writing (registered letter with acknowledgement of receipt) stating the lack of agreement. If the contractor sues you, you will have a strong defence.
• Can the contractor stop the works if I refuse an extra? Yes, if the extra is necessary and you refuse to pay. But he must put you on notice to accept the variation order. If he stops without notice, he may be liable for delay.

In summary: a works contract is not necessarily fixed-price. To avoid disputes, formalise everything in writing. That is the lesson from this 1976 judgment, still relevant today.

Do you find yourself in a similar situation? A first 30-minute consultation with Maître Zakine (€45) can save you months of proceedings — and often much more. Book an appointment →