The Higher Regional Court of Munich ruled
The fact that the construction project has repeatedly stalled because the contractor's changing site managers and several subcontractors have ceased work despite repeated requests from the client is likely to cast serious doubt on the contractor's reliability and to severely shake the client's confidence in the purposeful continuation of the construction projectcontinuation of the construction project.
The case:
A private builder (defendant) commissions a construction company (plaintiff) to build a single-family house at a fixed price.
The construction project progresses only sluggishly in the period that follows. There are repeated instances of construction coming to a halt. The reasons for the hold-ups are, on the one hand, the construction company's changing site managers and, on the other, the discontinuation of services by several subcontractors. The building owner was not responsible for either of these circumstances.
The client repeatedly complains to the contractor orally and in writing about the slow progress of construction, but to no avail. The contractor always responds evasively and continues to provide the service slowly.
After the client's last request also fails to result in a more rapid construction process, the client terminates the contractual relationship with the construction company extraordinarily without notice for good cause.
Subsequently, a dispute arises between the parties regarding the question of whether and to what extent the building contractor can claim compensation for services not yet provided due to the termination. The outcome of the action for compensation for work was largely determined by the question of whether the building owner was entitled to terminate the contract without notice for good cause in view of the faltering construction progress.
The court decision
Both the Augsburg District Court and the Munich Higher Regional Court affirm, in view of the present case constellation, the principal's right to extraordinary termination of the construction contract without notice for good cause in accordance with Section 314 BGB. The Higher Regional Court states:
The mere fact that the construction project repeatedly came to a halt because, on the one hand, the plaintiff's changing construction managers and, on the other hand, several subcontractors suspended their work, which was likely to cast serious doubt on the reliability of the construction company, already constitutes good cause for extraordinary termination of the construction contract without notice for good cause in accordance with Section 314 BGB. The fact that the construction manager and the subcontractors stopped working despite several requests from the client to the construction company is certainly a suitable reason to seriously shake the client's confidence in the determined continuation of the construction project. In this case, the building contractor must accept the behavior of the construction manager or subcontractors in accordance with § 278 BGB.
The Higher Regional Court of Munich therefore rejected the construction company's claim for compensation for services not yet provided in accordance with Section 649 sentence 2 BGB.
Practical tip:
The question of whether the builder is entitled to extraordinary termination of the construction contract without notice for good cause must always be clarified on a case-by-case basis. Unfortunately, it is not possible to give a general answer to this question. Regardless of the commented decision of the Munich Higher Regional Court, termination of the house building contract should therefore always be a last resort. On the one hand, it is generally not easy to provide legally secure reasons for an extraordinary termination without notice for good cause and, if necessary, to enforce it in court. On the other hand, after termination of the construction contract, the client is faced with a number of consequential problems that require considerable know-how, time and, above all, money.
It is therefore strongly recommended to seek qualified help at an early stage in the event of a faltering construction process in order to ensure the correct handling of this situation.
Reference:
BGH, decision of November 5, 2015 – VII ZR 53/15 (non-admission of appeal rejected)
previous: OLG Munich, judgment dated 11/02/2015 - 27 U 3407/14 Bau
LG Augsburg, judgment of July 25, 2014 - 64 O 3118/13
The statements represent initial information that was current for the law applicable in Germany at the time of initial publication. The legal situation may have changed since then. Furthermore, the information provided cannot replace individual advice on a specific matter. Please contact us for this purpose.