GER: Consumer Construction Contracts for Single Firms?

May 5, 2023 Benn-Ibler Rechtsanwälte

For the first time, the German Federal Supreme Court (Bundesgerichtshof, hereinafter BGH) had to rule on the controversial requirements for ‘consumer construction contracts’[1] newly introduced in 2018. If a home is not built by a general contractor and the various services are contracted out to individual craft firms, this does not constitute a ‘consumer construction contract’.

The defendant spouses, as private builders, had a new house built. They contracted out the necessary works to individual building contractors. The plaintiff provided their services under a contract for interior plastering and exterior plastering work based on a unit price. The defendants paid EUR 20,337.61 on partial invoices for EUR 29,574.80. After having unsuccessfully demanded payment, the building contractor sued for payment of a security deposit, a so-called construction lien. It was of relevance to the case at hand whether this constituted a consumer construction contract. Only then would laws apply in favour of the defendant builders, and the contractor would not be able to invoke his right to a construction lien. For a consumer construction contract to be present under German construction law, consumers must hire a contractor to construct the entire building.

The BGH ruled on this as follows: In the case at hand, there is no such contract, since, according to the wording, a single job would have to be taken over by one craft firm. A ‘general’ contractor is required to construct an entire house.

The imperative of legal clarity also forbids expanding the definition of a ‘consumer construction contract’ with consumer protection in mind without making this fact recognisable through the phrasing of the applicable laws. Contractors have to be able to recognise which obligations to inform and advise consumers are required of them in the run-up to a contract. This is also not a legally intended loophole.

Press Release No. 51/2023 on BGH, VII ZR 94/22 (16.03.2023)

[1] In the course of the 2018 reform of private construction law, German legislators created a new type of ‘consumer construction contract’ which includes a mandatory description of services by contractors.