The legal model for remuneration in the case of a contract for work and services is billing based on unit prices, i.e. the services provided by the contractor are measured and calculated and remunerated according to previously agreed prices per unit of service (square meter, running meter, piece, etc.). In reality, however, this is not the case, especially with developer contracts. The client wants cost certainty in the form of a fixed price, and the remuneration is paid in a lump sum when the contract is signed.
If such a flat rate is agreed, disputes often arise as to which of the developer's services are covered by the agreed remuneration.
In the advertising and the construction contract, the builder promises a turnkey house. Turnkey means that all services are owed that belong to an appropriate and defect-free construction project according to the rules of technology. These include all necessary construction services, including any foundation and sealing costs, but also the ancillary costs usually associated with the construction of a building, such as surveying costs, development costs, etc.. In order to avoid a completely incalculable scope of services on the part of the builder, the construction work is indeed described as "turnkey", but the service to be provided is specified in a construction and equipment description as well as in plans. This also meets the needs of the client, who wants to have a say in the furnishings and visual design. The purely functional description of the service, according to which the builder "owes a piece of turnkey single-family house with 160 square meters of floor space at a fixed price of € 200,000.00", does not occur in practice.
Two significant cost and risk factors are always shifted back to the client through the building and service descriptions. These are, on the one hand, development and approval costs and, on the other hand, the building ground risk. If the expected load-bearing soil is not encountered when excavating the construction pit and if extensive foundation work is required or if groundwater occurs and a cost-intensive seal is needed, e.g. a white tub, the resulting additional costs are at the expense of the client despite a fixed price agreement. The building site and the water conditions should therefore be carefully checked before concluding a construction contract. Many builders have been known to save money by not obtaining a soil survey at the beginning of a construction project, and have paid dearly for it later. Of course, the builder must point out during the construction project if his assumptions are not confirmed. If he only provides the construction services originally described by him and if, in the example case, subsidence or water ingress occurs, he cannot claim that he has provided the agreed services. The contractor is liable under the warranty, but the client must contribute the so-called business-as-usual costs. This is the amount that the client would have had to spend more on if the contractor had given timely notice during the construction period.
The main points of contention are unclear, incomplete or contradictory contract documents. The generic term "turnkey service" or "complete service" alone does not allow the conclusion that, in case of an otherwise detailed service description, the scope of the flat-rate payment is to be interpreted broadly in case of doubt. It must be examined in detail on the basis of the contract documents whether the developer owes a specific service or can claim additional remuneration. The German Federal Court of Justice has recently addressed this issue in a case that has just been decided (BGH, judgment of December 5, 2002, VII ZR 342/01). The contract documents for a construction project included an external staircase in the basement in the description of services. However, the staircase was not recognizable in the plans that were also part of the contract documents. Although the Higher Regional Court had still considered the contract to be contradictory and invalid, the Federal Court of Justice ruled that the client was entitled to the staircase. A construction contract is to be interpreted as a meaningful whole and the wording of the description is given greater importance than the plans because the services are described more specifically here than in the plans. From this decision, a tendency can be seen to always give precedence to the part of the contract documents with the more specific information over the more general information. However, here too, it is only to be recommended that both partners to the construction contract take great care in the drafting of the contract and the formulation of the construction and service descriptions in order to avoid misunderstandings and disputes at a later stage.
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.