The German Civil Code (in German: Bürgerliches Gesetzbuch or in short: “BGB”) provides for the statutory rules on German Construction Law. Find an extract of the relevant Sections here:
Contract to produce a work
(1) The contractor may demand a part payment from the customer for work carried out in accordance with the contract in the amount in which the customer has received an increased value by virtue of the work. The part payment may not be refused because of minor defects. Section 641 (3) applies with the necessary modifications. The work must be documented by a list which must facilitate a rapid, secure evaluation of the work. Sentences 1 to 4 also apply to required materials or building components that are supplied or specially prepared and made available if ownership of the materials or building components is transferred to the customer or an appropriate security is provided for this, at his option.
(2) If the subject-matter of the contract is the construction or conversion of a house or comparable building and at the same time entails an obligation incumbent on the contractor to assign to the customer ownership of the plot of land or to establish or assign a hereditary building right, part payments may only be demanded insofar as they have been agreed in accordance with an ordinance based on Article 244 of the Introductory Act to the Civil Code.
(3) If the customer is a consumer, and if the subject-matter of the contract is the construction or conversion of a house or comparable building, the customer must be given a security amounting to five percent of the remuneration claim on effecting the first part payment for the correct implementation of the work without major defects. If the remuneration claim increases by more than ten percent as a result of amendments to or supplements of the contract, the customer is to be given a further security of five percent of the additional remuneration claim on effecting the next part payment. At the request of the contractor, the security is to be provided by retention such that the customer retains the part payments up to the total amount of the security owed.
(4) Securities in accordance with this provision may also be provided by means of a guarantee or other payment undertaking by a financial institution or credit insurer entitled to operate in the scope of application of this Code.
(3) The work is free of legal defects if third parties, with regard to the work, either cannot assert any rights against the customer or can assert only such rights as are taken over under the contract.
1. subject to no. 2, in two years in the case of a work whose result consists in the manufacture, maintenance or alteration of a thing or in the rendering of planning or monitoring services for this purpose,
(3) Notwithstanding subsection (1) nos. 1 and 2, and subsection (2), claims are statute-barred in the standard limitation period if the contractor fraudulently concealed the defect. However, in the case of subsection (1) no. 2, claims are not statute-barred before the end of the period specified there.
(4) The right of revocation referred to in section 634 is governed by section 218. Notwithstanding the ineffectiveness of revocation under section 218 (1), the customer may refuse to pay the remuneration to the extent that he would be entitled to do so by reason of the revocation. If he uses this right, the contractor may revoke the contract.
Except in the cases of sections 281 (2) and 323 (2), there is no need for a period to be set even if the contractor refuses cure under section 635 (3) or if cure has failed or cannot be reasonably expected of the customer.
(1) If there is a defect in the work, the customer may, after the expiry without result of a reasonable period specified by him for cure, remedy the defect himself and demand reimbursement of the necessary expenses, unless the contractor rightly refuses cure.
(3) In the case of reduction of price, the payment is to be reduced in the proportion which, at the time when the contract was entered into, the value of the work in a state free of defects would have had to the actual value. To the extent necessary, the price reduction is to be established by appraisal.
The contractor may not rely on an agreement by which the rights of the customer with regard to a defect are excluded or restricted, insofar as the contractor fraudulently concealed the defect or gave a guarantee for the quality of the work.
(1) The customer is obliged to accept the work produced in conformity with the contract, except to the extent that, in view of the quality of the work, acceptance is excluded. Acceptance may not be refused by reason of trivial defects. It is equivalent to acceptance if the customer does not accept the work within a reasonable period of time specified for him by the contractor, although he is under a duty to do so.
(2) If the customer accepts a defective work under subsection (1) sentence 1, even though he knows of the defect, he only has the rights designated in section 634 nos. 1 to 3 if he reserves his rights with regard to the defect when he accepts the work.
(1) The remuneration must be paid upon acceptance of the work. If the work is to be accepted in parts and the remuneration for the individual parts is specified, then the remuneration is to be paid for each part when it is accepted.
(3) If the customer may demand remedy of a defect, he may, after becoming due, refuse to pay a reasonable portion of the remuneration; twice the costs necessary to remedy the defect are appropriate as a rule.
(1) If, in the production of the work, an act by the customer is necessary, then the contractor may demand reasonable compensation if the customer, by failing to perform the act, is in default of acceptance.
(2) The amount of compensation is assessed on the one hand on the basis of the duration of the default and the amount of the agreed remuneration, and on the other hand on the basis of what expenses the contractor saves or what the contractor can earn by employing his working capacity elsewhere.
In the case of section 642, the contractor is entitled to give the customer a reasonable period of time for making up for the act to be performed by declaring that he will terminate the contract if the act is not undertaken by the end of the period of time. The contract is deemed to be cancelled if the act is not made up for by the end of the period of time.
(1) The contractor bears the risk until acceptance of the work. If the customer is in default of acceptance, then the risk passes to him. The contractor is not liable for any accidental destruction or accidental deterioration of the materials supplied by the customer.
(2) If, at the demand of the customer, the contractor ships the work to a place other than the place of performance, then the provisions of section 447 governing purchase apply with the necessary modifications.
(1) If the work, before acceptance, is destroyed or deteriorates or becomes impracticable as the result of a defect in the materials supplied by the customer or as the result of an instruction given by the customer for the carrying out of the work, without a circumstance for which the contractor is responsible contributing to this, then the contractor may demand a part of the remuneration that corresponds to the work performed and reimbursement of those expenses not included in the remuneration. The same applies if the contract is cancelled under section 643.
For his claims under the contract, the contractor has a security right over the movable things of the customer that he has produced or repaired if they have come into his possession during the production or for the purpose of repair.
(1) The contractor for a building or an individual part of a building may demand, for satisfaction of his claims under the contract, that a mortgage over the building plot of the customer is granted. If the work is not yet completed, then he may demand that a mortgage is granted for a portion of the remuneration corresponding to the work performed and for expenses not included in the remuneration.
(2) The owner of a shipyard, for his claims in relation to the building or repair of a ship, may demand to be granted a ship mortgage over the ship under construction or ship of the customer; subsection (1) sentence 2 applies with the necessary modifications. Section 647 does not apply.
(1) A contractor for a building, outdoor facilities or a part thereof may demand a security from the customer for the remuneration also agreed in additional commissions and not yet paid, including associated incidental claims, which are to be estimated at ten per cent of the remuneration claim to be secured. Sentence 1 also applies to the same degree to claims replacing the remuneration. The claim of the contractor for a security is not ruled out by the customer being able to demand fulfilment or having accepted the work. Claims with which the customer is able to offset against the contractors right to remuneration are disregarded when calculating the remuneration unless they are non-contentious or have been ascertained with the force of law. The security is to be deemed sufficient even if the provider of the security reserves the right to revoke his promise, in case of substantial deterioration of the financial circumstances of the customer, with effect for claims to remuneration for building work that the contractor has not yet performed when the declaration of revocation is received.
(2) The security may also be provided by means of a guarantee or other promise of payment by a banking institution or credit insurer authorised to conduct business operations within the area of application of this Code. The banking institution or credit insurer may only make payments to the contractor to the extent that the customer recognises the claim of the contractor to remuneration or has been ordered by a provisionally enforceable judgment to pay the remuneration and the requirements are met under which execution of judgment may be commenced.
(3) The contractor must pay to the customer the customary costs of provision of security up to a maximum amount of two per cent per year. This does not apply to the extent that the security must be maintained because of objections of the customer to the remuneration claim of the contractor and the objections turn out to be unfounded.
(5) If the contractor has unsuccessfully set the customer a suitable deadline to provide the security in accordance with subsection (1), the contractor may refuse to carry out the work or may terminate the contract. If he terminates the contract, the contractor is also entitled to claim the agreed remuneration; he must however allow set-off of the expenses he saves as a result of cancelling the contract or acquires or wilfully fails to acquire from other use of his labour. There is a presumption that the contractor is accordingly entitled to five percent of the remuneration accounted for by the part of the work not yet provided.
The customer may terminate the contract at any time up to completion of the work. If the customer terminates the contract, then the contractor is entitled to demand the agreed remuneration; however, he must allow set-off of the expenses he saves as a result of cancelling the contract or acquires or wilfully fails to acquire from other use of his labour. There is a presumption that the contractor is accordingly entitled to five percent of the remuneration accounted for by the part of the work not yet provided.
(1) If the contract is based on a cost estimate without the contractor guaranteeing the accuracy of the estimate and if it turns out that the work cannot be carried out without substantially exceeding the estimate, then the contractor is only entitled, if the customer terminates the contract for this reason, to the claim specified in section 645 (1).
The provisions of sale of goods law are applicable to a contract dealing with the supply of movable things to be produced or manufactured. Section 442 (1) sentence 1 also applies to these contracts if the defect is caused by the material supplied by the customer. To the extent that the movable things to be produced or manufactured are not fungible things, sections 642, 643, 645, 649 and 650 apply, subject to the proviso that the applicable point of time under sections 446 and 447 takes the place of acceptance.