I. About This Article
A contract of work is one of the most practical and frequently used contracts in business relations. It is used where one party undertakes to perform specific work and the other party is obliged to pay the agreed remuneration. Such relationships are especially common in construction, repair, engineering, production, design, technical and other business activities.
The main feature of a contract of work is that its centre is not merely performance of an action, but achievement of a specific result. As a rule, the contractor’s obligation means not simply carrying out a certain work process, but delivering the agreed result of the work to the customer.
In practice, a significant part of disputes related to contracts of work begins when the parties do not precisely define the result of the work, performance deadlines, acceptance-handover procedure, cost estimate, preconditions for payment of remuneration and consequences of termination.
For this reason, a contract of work should not be treated as a simple agreement on performance of work. It requires a clear legal structure, because any ambiguity may later develop into a dispute concerning quality of performance, deadlines, remuneration, damages, termination of the contract or other issues.
This article will help you understand what a contract of work means, how it differs from a service agreement, what main obligations the contractor and the customer have and what risks may arise during a contract of work.
The article discusses determination of remuneration, the contractor’s right to payment, the importance of the work result, performance deadlines, termination of the contract of work, reimbursement of the contractor, cost estimates, success fees and recent practice of the Supreme Court of Georgia.
II. What Is a Contract of Work?
Under Article 629(1) of the Civil Code of Georgia, by a contract of work, the contractor undertakes to perform the work provided for by the contract, while the customer is obliged to pay the contractor the agreed remuneration.
A contract of work is a contract focused on performance of work. Its main legal content is that the contractor must perform specific work and deliver the result of the performed work to the customer. The customer’s main obligation is to pay the agreed remuneration.
According to the interpretation of the Supreme Court of Georgia, a contract of work is a bilateral, consensual and paid contract. It is bilateral because both parties have rights and obligations; consensual because it arises through agreement of the parties; and paid because performance of work is connected with remuneration.
A contract of work is particularly important in business relations because it regulates relationships arising directly in the process of performing work. In such a contract, the interests of the parties are usually connected with a specific result: completed work, a manufactured item, a finished project or another materially assessable result.
III. How Does a Contract of Work Differ from a Service Agreement?
A contract of work is close to a service agreement, but there is an important difference between them.
The subject of a contract of work is the result of performed work. If the agreed result does not exist, the issue of non-performance of a contractual obligation may arise. Therefore, the result is the central element in a contract of work.
In a service agreement, the emphasis is often placed on the action, process or provision of professional services, the result of which may be intangible. For example, consulting, information, audit, tourism or other similar services are usually closer to the logic of a service agreement.
However, in practice the boundary is not always simple. Certain consulting or technical agreements may contain elements of both service and contract of work. In such cases, the decisive issue is what the parties mainly agreed on: achievement of a specific result or provision of a service process.
In practice, parties often confuse contract of work and service agreements. This mistake may become important in a dispute because, in a contract of work, the court pays particular attention to the result of the work, proper performance, acceptance-handover and preconditions for the contractor’s right to remuneration.
IV. In What Form May a Contract of Work Be Concluded?
The Civil Code of Georgia does not establish a special mandatory form for a contract of work. This means that a contract of work belongs to form-free contracts and may be concluded either in writing or orally, unless the law or the parties’ agreement requires otherwise.
According to the practice of the Supreme Court of Georgia, the mere fact that there is no written contract between the parties does not automatically exclude the existence of a contract of work relationship. In a specific case, the court may assess the conduct of the parties, correspondence, performed work, payments, acceptance-handover and other evidence.
Nevertheless, in business relations, concluding a contract of work in writing is practically necessary. An oral agreement may be legally permissible, but in case of dispute it increases the difficulty of proof.
In practice, where there is no written agreement, the main disputed issue often becomes determining what scope of work was agreed, what deadline was defined, what quality of result the customer was supposed to receive and what amount of remuneration was agreed.
V. What Obligations Do the Contractor and the Customer Have?
Under a contract of work, the contractor’s main obligation is to perform the work provided for by the contract. This performance must be proper, in good faith and carried out at the agreed time and place.
The contractor is obliged to present to the customer a result that complies with the contractual terms. If the contract provides for manufacturing an item, the contractor must present an item free from material and legal defects.
The customer’s main obligation is to pay the agreed remuneration. Under Article 648 of the Civil Code of Georgia, the customer is obliged to pay remuneration to the contractor after the work is performed, unless the contract provides for payment in instalments.
Therefore, in a contract of work, particular importance is attached to defining when the work is considered performed, what document confirms performance, how acceptance-handover is carried out and when the right to remuneration arises.
VI. When Does the Contractor’s Right to Remuneration Arise?
As a rule, the contractor’s right to remuneration arises when the contractor has properly performed the work provided for by the contract and has presented the result of the performed work to the customer.
If the contract does not provide for payment in instalments, the customer’s obligation to pay remuneration arises after the work is performed. If the contract provides for stage-based payments, performance of each stage may independently create the right to the relevant remuneration.
According to the practice of the Supreme Court of Georgia, in a contract of work relationship, the contractor must indicate and prove that the work provided for by the contract was properly performed. A general statement that the work was performed is not sufficient.
In practice, acceptance-handover acts, invoices, correspondence, photo and video materials confirming performance, expert opinions and other evidence confirming the scope and quality of performed work often have decisive importance in disputes related to remuneration.
VII. Why Is the Result of the Performed Work Important?
The result of the performed work has central importance in a contract of work. A contract of work is not exhausted merely by the fact that the contractor performed certain actions. The important question is whether the result agreed by the parties was achieved.
If the work includes manufacturing an item, the contractor must present to the customer an item free from material and legal defects. An item is materially defect-free if it complies with the agreed terms. If such terms are not agreed, the item must be suitable for the use provided by the contract or for ordinary use.
An item is free from legal defects if third parties cannot exercise any rights against the customer. This is especially important where the contract of work concerns a result whose use may be connected with third-party rights, permits, technical conditions or other legal restrictions.
In practice, this is often where disputes arise: the contractor argues that the work was performed, while the customer argues that the result received does not correspond to the agreed terms or is not suitable for the intended use.
VIII. What Is the Role of Performance Deadlines?
Deadlines have particular importance in a contract of work. One of the contractor’s main obligations is to perform the agreed work on time.
The parties may define the final deadline for completion of the work, as well as the start date and intermediate deadlines. In some cases, the time of performance may be one of the essential terms of the contract — time is of the essence. In such a case, delay may completely remove the customer’s interest in receiving the work.
If the performance deadline is not defined by the contract, performance should take place within a reasonable time. A reasonable time is an evaluative category and depends on the nature of the work, its scope, technical complexity, the relationship between the parties and other circumstances.
According to the interpretation of the Supreme Court of Georgia, the contractor may be considered in delay where the obligation was not performed within the established time or where, after the performance deadline, the contractor still fails to perform despite the customer’s warning.
In practice, general wording of deadlines in a contract of work often creates dispute risk. Therefore, it is advisable for the contract to clearly define the start date, interim stages, completion deadline, consequences of delay and cases where extension of the deadline is permitted.
IX. When Can the Customer Withdraw from a Contract of Work?
Under Article 636 of the Civil Code of Georgia, the customer has the right to withdraw from a contract of work at any time before completion of the work. However, in such a case, the customer must reimburse the contractor for the performed work and the damage caused by termination of the contract.
This rule has particular importance in contract of work law. It gives the customer flexibility to withdraw from the contract before completion of the work, even where a specific breach is not required. However, this flexibility is balanced by the mechanism protecting the contractor — payment for performed work and compensation for damage caused by termination.
This rule distinguishes a contract of work from termination of a long-term service agreement. In the case of a contract of work, the customer has a special possibility to withdraw from the contract before completion of the work. In contrast, termination of a long-term service agreement or another long-term contractual relationship is generally assessed under a different legal standard, including valid ground, mutual interests, warning, reasonable time and the requirements of Article 399 of the Civil Code of Georgia.
For more information about this issue, see our blog: Termination of a Long-Term Contract in Georgia – What Businesses Should Know About Article 399 of the Civil Code.
Before withdrawing from a contract of work, a business should assess what work has already been performed, what expenses the contractor has incurred, what evidence exists, how the termination notice should be prepared and what financial consequences may follow from termination.
X. What Should Be Reimbursed to the Contractor Upon Termination?
If the customer withdraws from the contract of work before completion, the customer has two main obligations toward the contractor: payment for performed work and reimbursement of damage caused by termination of the contract.
Performed work means the part that the contractor actually performed before termination. Such work should be assessed based on the contractual terms, scope of performance, quality and evidence.
Damage caused by termination may also include expenses incurred by the contractor for the purposes of the specific contract. For example, this may include purchase of specific materials or equipment, lease of technical resources, engagement of specific specialists, rental of work tools or machinery and other similar expenses.
At the same time, the contractor bears the burden of proof to confirm what work was performed and what damage was caused by termination. A general reference to expected damage is not sufficient.
XI. What Happens If the Ground for Termination Is Breach by the Contractor?
The situation is different where the customer terminates a contract of work not merely based on its own decision, but because of breach of contractual obligations by the contractor.
For example, the contractor may fail to start work on time, perform work so slowly that completion within the contractual deadline becomes impossible, or perform work in a way that does not comply with agreed terms.
If the ground for termination is breach of contractual obligations, termination is generally permissible only after the unsuccessful expiry of the period granted for remedying deficiencies or after an unsuccessful warning.
Therefore, before terminating the contract due to breach by the contractor, the customer should send a clear warning, record the content of the breach, grant a reasonable cure period where required in the specific case and preserve relevant evidence.
In disputes related to termination of contracts of work, decisive importance often belongs not only to the existence of breach, but also to whether the warning, cure period and subsequent termination procedure were properly documented.
XII. Why Is a Cost Estimate Important in a Contract of Work?
A cost estimate has particular importance in a contract of work, especially in a construction contract, where the work is complex, includes several stages or requires significant materials and technical resources.
A cost estimate may be fixed or approximate. In the case of a fixed cost estimate, the amount of remuneration to be paid by the customer for the performed work is precisely determined. In the case of an approximate cost estimate, costs may increase or decrease during the performance process.
If the cost estimate is approximate and the contractor significantly exceeds it, the contractor must immediately notify the customer. If the contractor does not send such notice and continues the work, the contractor may later lose the right to demand reimbursement of the difference in price.
The situation is different in the case of a fixed cost estimate. If the parties have precisely determined the price, the contractor, as a rule, cannot demand reimbursement of excess costs merely because performance turned out to be more expensive. In such a case, adaptation of the contract to changed circumstances may become relevant only if the legal preconditions for this exist.
In practice, inaccurate wording of cost estimates often leads to disputes over whether the price was final, whether the contractor could request an additional amount and whether the customer had the right to refuse payment of increased remuneration.
XIII. What Is a “Success Fee” and When Does the Obligation to Pay It Arise?
In some contracts, parties provide for additional remuneration that depends not only on performance of work, but also on achievement of a specific result. In practice, such remuneration is often called a “success fee.”
Such a clause means that the contractor receives additional remuneration only if the result defined by the contract occurs. This may include successful completion of a project, obtaining a specific permit, winning a court dispute, commissioning of a facility or another pre-defined result.
The practice of the Supreme Court emphasizes that, in such cases, precise analysis of the preconditions defined by the contract is decisive. If additional remuneration depends on several cumulative conditions, failure to fulfil one of those conditions may exclude the right to final remuneration.
Therefore, if a contract of work or mixed-type agreement provides for result-based remuneration, the parties should clearly define what success means, when the result is considered achieved, by what evidence the result is confirmed and what happens in case of partial performance.
XIV. What Should a Business Consider Before Signing a Contract of Work?
Before signing a contract of work, a business should pay particular attention to the precise description of the subject of work, result criteria, performance deadlines, intermediate stages, acceptance-handover procedure, quality standards, cost estimate, procedure for agreeing additional work, remuneration terms and termination mechanism.
It is especially important to define what happens if the work is delayed, the result does not correspond to the agreed terms, costs increase, the customer is no longer interested in continuation of the work or the contractor requests additional remuneration.
In practice, the greatest risk in a contract of work often arises where, at the beginning of the relationship, the parties describe only the price and the general work, but do not define the issues that later become most important in a dispute: what the result is, how it is checked, when the work is considered accepted and what happens if the contract is terminated.
At the same time, the contract should not include provisions that contradict mandatory legal requirements. Otherwise, instead of a valid contract of work, the parties may face an invalid transaction that does not produce legal effects.
For more information about this issue, see our blog: Unlawful Transaction — When a Contract Does Not Produce Legal Effects.
XV. How TB Legal Can Help
Within our contract law services, TB Legal assists businesses with preparation of contracts of work, legal assessment of existing contracts and analysis of risks related to performance of work, remuneration, cost estimates, delay, acceptance-handover and termination.
Our approach is based not only on formal analysis of the contract text, but also on assessment of the parties’ real commercial interests, court practice, evidence and potential dispute risks.
If you plan to enter into a contract of work, amend an existing agreement, resolve a dispute with a contractor or customer or terminate a contract of work, it is important to obtain legal advice before making a decision.
XVI. Conclusion
A contract of work is an important legal instrument for businesses because it is connected with performance of specific work, achievement of a result and payment of agreed remuneration.
Such a contract should be prepared especially carefully where the work is complex, includes several stages, depends on a cost estimate, deadlines, acceptance-handover or result-based remuneration.
A properly drafted contract of work reduces dispute risk and gives the parties answers in advance to the key questions: what must be performed, when it must be performed, how performance must be confirmed, when the right to remuneration arises and what happens if the contract is terminated.
Contact TB Legal if you plan to enter into a contract of work, assess an existing contract, deal with a dispute related to performance of work or terminate the contract. We will help you analyse legal risks, choose the right strategy and protect your business interests.
XVII. Supreme Court Decisions Used
This article is based on the following decisions and rulings of the Supreme Court of Georgia:
- Supreme Court of Georgia, case No. AS-1222-2025, 22 January 2026, Tbilisi.
- Supreme Court of Georgia, case No. AS-186-2025, 26 February 2026, Tbilisi.
- Supreme Court of Georgia, case No. AS-60-2025, 27 February 2025, Tbilisi.
- Supreme Court of Georgia, case No. AS-1236-2023, 27 February 2026, Tbilisi.
- Supreme Court of Georgia, case No. AS-1074-2025, 6 March 2026, Tbilisi.
- Supreme Court of Georgia, case No. AS-936-2025, 12 March 2026, Tbilisi.
- Supreme Court of Georgia, case No. AS-1283-2025, 12 March 2026, Tbilisi.
- Supreme Court of Georgia, case No. AS-94-2026, 31 March 2026, Tbilisi.
Disclaimer
This article has been prepared for general informational purposes only and does not constitute individual legal advice or a legal opinion. The issues discussed in this article may be assessed differently depending on the specific factual circumstances, contract terms, conduct of the parties and relevant evidence.
Before making a decision in a specific matter, it is recommended to obtain individual legal advice from a qualified lawyer.
