If the other contract partner is a Finnish enterprise, it will generally refuse to agree on any other applicable law than Finnish law. In this situation, the choice of a foreign law can be achieved only by offering the contract partner some, usually financial, compensation. Such compensation will often prove disproportionately high since, the Finnish contract partner is not in a position to evaluate the risks that may be caused by the use of the foreign law.

In any case, the contractual choice of a foreign law will render Finnish law inapplicable only insofar as this is permitted by Finnish law. However, in construction law there are significantly more restrictions on the parties’ freedom of contract than in other areas of international trade.

In most European countries, the construction industry is used to a situation in which the rights and obligations of the parties to a construction contract are clearly expressed in the wording of the contract, the applicable law, and the relevant case law. Conversely, Finnish legal practice is characterised by a greater desire to achieve justice in individual cases. In many Finnish court decisions, the weighing of the interests in the individual case prevails over aspects of terminology or legal dogma.

This approach is crystallised in section 36 of the Finnish Legal Transactions Act, which gives Finnish courts wide discretion to amend contract terms if these appear inequitable in the context of the contract, or lead to inappropriate results. This provision expresses a general principle of Finnish law, according to which an equitable result in an individual case is regarded as more important than legal certainty in a more general sense. Therefore, judgments that are fundamentally grounded on reasons of equity are encountered frequently in Finnish legal practice, even where section 36 of the Legal Transactions Act is not explicitly invoked or even directly applicable.

The consequence of this is that anyone testing the limits of what is regarded as fair play in Finland risks defeat in a possible legal dispute, no matter what degree of care is taken in the formulation of the contract.

For example, agreeing a fixed price may not be sufficient to protect the client from claims for additional remuneration for the agreed services. If the client did not give the constructor sufficient documentation to enable the making of an accurate price calculation, this causes an imbalance that presents a risk for the client as well as the constructor. In the case of a dispute, the court may well come to the conclusion that the constructor has made an offer in the absence of sufficient information, and has therefore consciously accepted a risk. However, depending on the circumstances of the individual case, the court may also find that it was unfair to request an offer at a fixed price in the absence of adequate planning. The court will then look for a way to render the contract more appropriate. One possible variant might be an interpretation of the contract that limits the scope of the agreed fixed price to those services that the constructor could reasonably expect on the basis of the documentation received.

When carrying out any kind of business activity in Finland, it is useful to acquaint oneself with what is regarded as fair play in the relevant Finnish business community. The conclusion of contracts that can be regarded as containing an imbalance of duties and obligations, as well as insufficient cooperation when carrying out a contract, can endanger the prospects of success in potential legal disputes.

One aspect of fair play in construction contracts is the choice of a contract type appropriate for the situation. If at the point in time when the contract is awarded the planning of the project has advanced far enough that the necessary quantities can be at least approximated, the parties will often agree on a fixed price. If such approximation is not yet possible, it may be more appropriate to conclude a unit price contract.

The target price contract – a hybrid between a fixed price contract and a unit price contract – is a very popular solution in Finland. In target price contracts the price is dependent on the quantities used, but the profit margin of the contractor is increased if the total price remains below the agreed target price. Conversely, if the target price is exceeded, the contractor must bear a certain proportion of the additional cost itself. It is also common practice to agree an upper limit for the total price. In order for this form of contract to be advantageous, the client should put in place functional control mechanisms for the development of the costs and participate in the selection of suppliers and subcontractors in cooperation with the main contractor.

Finnish law does not contain any particular provisions for work contracts, particularly not for construction contracts. Insofar as the contract parties do not make detailed provisions in the contract itself, the gaps are filled by the general principles of contract law. However, these are not very suitable for the management of construction projects.

There is, however, a collection of provisions for such contracts in Finland. These are the YSE terms (at present in the version of 1998 – YSE 98). These terms do not constitute provisions enshrined in the law, but are standardised general contract terms that have been drafted by a public committee.

The YSE terms are applicable only if the parties to a construction contract expressly agree to their use. However, they are generally regarded as being fair, and are agreed upon in most Finnish construction contracts. Therefore, in practice there is usually no way around the YSE terms, even for foreign contractors, and they must accordingly be taken into account when drafting the contract.

One of the most important concepts contained in the YSE terms is that the contractor is not obliged to reveal its price calculations in order to demand additional payments. It is common practice to agree that changes in quantities will result in an increase of the price in accordance with the actual additional costs (cost price), unless the parties have agreed on unit prices for certain items. The YSE terms contain detailed provisions relating to the methods to be employed when taking into account direct and indirect costs in order to determine the cost price.

According to section 29 of the YSE 98 terms, the guarantee period even for buildings is only two years. Following expiration of the guarantee period, the contractor may remain liable for a period of up to ten years following delivery in the circumstances set out below: