23.5.2024

Changes in the construction industry provide good grounds for updating the General Conditions for Building Contracts

The need for updating and reforming the YSE 1998 General Conditions for Building Contracts has been discussed for quite some time in the construction industry. These conditions, which are over 20 years old, have mostly served their purpose for operators in various fields by allowing contracting parties to focus on project-specific terms and conditions during the project preparation phase rather than on the basics. Nevertheless, now is a good time to update the standard conditions now that the construction industry is undergoing significant changes due to the green transition, digitalisation and the reform of the Finnish Building Act.

In Sweden, a project to update the local General Conditions of Contract for Building and Civil Engineering Works and Building Services, which are similar to the Finnish YSE 1998 conditions, has been ongoing for some years. Sweden has also recognised the changed market conditions and the need to clarify ambiguities in the standard conditions, which in some respects are similar to those in Finland. In Sweden, the aim is to have a more consistent set of conditions in order to improve the cost-effectiveness, transparency and predictability of construction.

Case law and the development of the construction industry has resulted in a need to update the the YSE 1998 conditions

One of the special characteristics of the Finnish YSE 1998 conditions is that over the years they have given rise to case law that affects the interpretation of standard conditions and that may have decisive relevance in managing potential disputes concerning a construction contract. This is often a concern, particularly for foreign operators. Now is the time to introduce the principles established in case law into the standard conditions.

Although projects as a rule must be subject to more or less project-specific conditions, general terms and conditions create a predictable environment for the industry operators to manage business risks. Simpler projects will continue to be the main type in the construction market, but as the construction industry evolves, the YSE 1998 conditions will need to be adapted to more complex projects in addition to straight-forward apartment buildings.

The updated conditions could also be differentiated for various types of projects, if necessary. The question could be raised as to whether general terms and conditions should better account for performance guarantees relating to plant and industrial construction, contracts executed using an alliance or project management model and, as in other Nordic countries, construction contracts that include design responsibility.

Negotiations on updating the conditions are in progress

Negotiations on reforming the YSE 1998 conditions between employer and contractor organisations are finally underway. This offers a good opportunity to ensure that the new YSE 1998 conditions will continue to serve various types of projects as well as possible for the next 20 years.