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Construction Contract Law in Germany

At Schlun & Elseven Rechtsanwälte, our construction lawyers provide comprehensive guidance on all matters relating to construction contracts in Germany, such as the drafting, negotiating and reviewing of contracts. The introduction of the Construction Contracts Act 2018 has aimed to improve the situation of private builders; however, risks still exist and those engaging in private building projects should consult with legal counsel before signing agreements. Signing a contract without legal advice beforehand can result in higher costs and legal disputes. Our team can be relied upon to provide you with full-service support in all of your construction contract requirements.

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Full-service support with all issues concerning construction contracts in Germany.

Our specialists advise clients worldwide in German legal matters.

What is the Construction Contract?

The construction contract is the starting point for the building project. In Germany, the regulation of the project can be based on the German Civil Code (BGB) or the framework within the German Construction Contract Procedures (Vergabe- und Vertragsordnung für Bauleistungen – VOB). The laws and regulations that apply are based on whether the project is for private clients, such as in building a house, whereby they use the BGB regulations, or whether the project is a larger project that involves public clients, whereby they apply conditions from the VOB.

The application of the VOB is required for public sector construction contracts; however, if the parties agree, they can also be applied to private construction contracts. VOB/B refers to general conditions of contract for the execution of construction work, and VOB/C concerns general technical terms of the contract for construction work. These provisions may be relevant to private builders, as they can provide greater flexibility within the contract compared to the German Civil Code. However, any arrangements agreed to should be checked by a construction lawyer before signing them.

Since 2018 standard statutory rules have been applied which cover essential provisions within the construction contract. These changes also cover the developer contract and the architect and engineer contract. The construction contract agreed should contain vital information regarding the size, cost, time period and actions relating to possible defects within the construction project, along with a right of withdrawal and right of termination. Construction contracts now provide more legal certainty and offer greater consumer protection by bringing in statutory requirements.

§ 650a German Civil Code (BGB) contains the following definition for the construction contract:

(1) A construction contract is a contract for the construction, restoration, removal or alteration of a structure, an outdoor installation or a part thereof…

(2) A contract for the maintenance of a structure is a construction contract if the work is essential to its construction, existence or intended use.

Therefore, the construction contract refers to buildings such as houses and office blocks and essential infrastructures, such as bridges, roads, tunnels etc., and outdoor facilities such as sports parks. The construction contract is a works and services contract under § 631 BGB.

The BGB does not provide formal requirements for completing the construction contract; however, it is recommendable to conclude a contract in written form, even for minor adjustments or smaller works. When properly drafting a construction contract, it should include the names of the contracting parties, define the project plans, provide guidance on remuneration and outline a payment plan.

Checking a Construction Contract

Checking a construction contract takes expert knowledge. Even as a building contractor or architect, checking the construction contract can be time-consuming. It can leave you open to common mistakes such as failure to mention a deadline for the project’s completion and not including penalties for missing deadlines. Having our lawyers conduct the required contract checking means that you can progress with the construction project knowing you have legal certainty and protection. As experienced contract lawyers, our firm can ensure that you will have a watertight construction contract that will include the essential points of the agreement. Our lawyers can be relied upon for checking contractual terms under the BGB and the VOB.

Our lawyers can provide clear guidance regarding designing the contract by working with our team from the start. Therefore, you can avoid overlooking details like the construction description. The contract should contain detailed descriptions of the project, firmly establish the project’s price, provide guidance regarding how the project will be financed and clearly outline information containing the materials that should be used. Without clearly stating the project description in the contract, the buyer may end up with a property that does not match their demands or with problems or defects that may take years to resolve.

Overlooked details and mistakes in contracts are commonplace, and explain how construction projects regularly exceed the planned budget. Such overpricing comes down to unclear performance specifications and the failure to include a specific total price or payment schedule. If the private builder had a deadline in mind for the project, but it is not specified in the contract, it can lead to extensions and higher costs. Construction contracts should protect against construction defects, and home builders need to be aware of their warranty claims from the beginning of the project. The warranty duration can vary depending on whether the contract contains BGB or VOB/B elements.

Terminating a Construction Contract

Under both the BGB and VOB, clients have the right to terminate the construction contract; however, there are differences in how this happens. Under § 648 BGB, the client can terminate the construction contract at any time without providing reasons. However, it must be provided in writing (§ 650h BGB). § 648 BGB states:

“The ordering party (or customer) may terminate the contract at any time until completion of the work. If the ordering party terminates the contract, the contractor shall be entitled to claim the agreed remuneration; however, the contractor shall be entitled to deduct from the remuneration any expenses saved as a result of the termination of the contract or which (they) acquire or maliciously refrain from acquiring through the use of (their) labour elsewhere. It shall be presumed that the contractor is entitled to 5 per cent of the agreed remuneration for the part of the work not yet performed.”

Therefore, it should be noted that terminating the contract should only be considered after receiving expert advice in advance of the decision. There are significant consequences to the decision as the contractor is entitled to the agreed remuneration minus two elements: the saved expenses for services that no longer need to be provided and the remuneration that the contractor incurs due to the possible acceptance of new orders. To prevent the calculations from getting out of hand due to excessive space for interpretation, the legislator considers 5 % of the remuneration for the work to be appropriate. It should be noted that the 5% is not binding under law.

Under the BGB, the contractor can also terminate the construction contract. However, they must provide the customer with sufficient time and a written notice regarding the proposed action in advance. The contractor can terminate the agreement if they require an action from the customer to fulfil the contract, which is not acted upon by the customer. If this happens, the construction project may fall behind schedule. Once the termination has occurred, the contractor is entitled to remuneration for the services provided and possible expenses. Whether the customer needs to provide additional costs depends on the case matter.

Extraordinary Termination of a Construction Contract

Extraordinary notices of termination are permitted by law under § 648a BGB as it states:

“Both contracting parties may terminate the contract for good cause without observing a notice period. Good reason shall be deemed to exist if the terminating party, taking into account all circumstances of the individual case and weighing the interests of both parties, cannot reasonably be expected to continue the contractual relationship until completion of the work.”

Although this regulation may appear vague, it provides space for individual case matters. The phrase “good cause” refers to situations where the relationship of trust between the two parties is no longer stable, and therefore, further cooperation is unacceptable despite all efforts. How this arises does depend on the case facts, but incidents of malicious deception, threats or highly aggressive behaviour and refusal to remedy defects are among the justified reasons for extraordinary termination.

§ 648a provides further guidance regarding extraordinary termination, as it outlines the following:

“(5) If one party to the contract terminates the contract for good cause, the contractor shall only be entitled to demand payment for the part of the work performed up to the time of termination.

((6) The right to claim damages shall not be excluded by the termination.”

When seeking extraordinary termination collecting the evidence is critical. Without documentary evidence of the alleged wrongdoings, it is likely that parties may not proceed in the manner desired. Our lawyers can advise you regarding collecting evidence.

Our Services as Construction Lawyers

Professional legal advice is strongly recommended when drafting or seeking to sign a construction contract. Our lawyers will identify the type of contract, assess what you need to be aware of and then provide qualified and time-efficient advice regarding what you need to do next. Our lawyers will be on your side and ensure that you are in control. It is not uncommon for construction contracts to have major mistakes or incorrect terms.

At Schlun & Elseven Rechtsanwälte, our lawyers aim to provide our clients with exceptional legal support with drafting, analysing or negotiating construction contracts. They also advise regarding withdrawing from a contract and terminating the agreement, including extraordinary termination. Our team is widely experienced across all aspects of construction law in Germany and can be relied upon in times of difficulty.

Although consulting with a lawyer may seem as if it is time-consuming and costly, the potential difficulties involved with not having expert support is far more significant. If unchecked construction contracts are signed, they can leave parties in a disadvantageous position and eventually lead to protracted legal disputes, delays in the project’s completion and unplanned extra costs.

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Practice Group for German Construction Law

Dr Tim Schlun Lawyer

Dr. Tim Schlun

Daniel Schewior Lawyer

Daniel Schewior

Lawyer Verena Ziemes

Verena Ziemes

Jens Schmidt Lawyer

Jens Schmidt

Contact our Practice Group for German Construction Law

Our Construction Law Services at Schlun & Elseven

Schlun & Elseven Rechtsanwälte is a full-service law firm with offices and conference rooms with offices and conference rooms in Aachen, Cologne, Düsseldorf, Berlin, Frankfurt, Hamburg, Stuttgart and Munich. Our construction law team are available to provide comprehensive legal support with construction projects and construction projects. We support clients worldwide with their dealings with German law and provide all of our services in English, German and other languages. As a multidisciplinary law firm our lawyers combine with experts in various legal areas to determine creative legal strategies tailored to your needs. Contact our construction lawyers directly using the information below to receive specialised legal counsel regarding construction contracts in Germany.

Contact a German Lawyer regarding Construction Contract Law

Please use the contact form to tell us your concerns regarding construction contract law. After receiving your request, we will make a short preliminary assessment on the basis of the information provided and give you a cost estimation. You are then free to instruct our construction lawyers.