OGH on Guarantees under Section 1170b ABGB

Apr 21, 2023 Benn-Ibler Rechtsanwälte

The Austrian Supreme Court (Oberster Gerichtshof, hereinafter OGH) has clarified that a claim for guarantee under Section 1170b of the Austrian General Civil Code (Allgemeines Bürgerliches Gesetzbuch, hereinafter ABGB) also exists in the case of an agreed upon liability retention, and that a simple security trust deed is not an acceptable means of guarantee.

In the original case, the plaintiff had provided construction work for the defendant on four different construction projects. The plaintiff provided the defendant with guarantees for the agreed liability retention amounting to EUR 28,000, which the defendant did not accept. Subsequently, the plaintiff demanded a guarantee from the defendant in accordance with Section 1170b ABGB in the amount of the liability retention. The defendant sent the plaintiff four security trust deeds from a limited liability company (GmbH), a 50% shareholder of the defendant. The plaintiff returned these documents and set the defendant a grace period for providing proper guarantee documents, but these were never provided.

The plaintiff demanded EUR 28,000 (i.e., the liability retention), relying on the lawful cancellation of contract according to Section 1170b ABGB because the defendant had not provided guarantee documents as requested.

Such guarantee had been rightfully demanded.

Furthermore, the defendant did not comply with the demand for a guarantee by submitting a security trusts deed. Irrespective of whether the list of guarantee instruments (cash, cash deposits, savings books, bank guarantees, or insurance policies) in Section 1170b ABGB is exhaustive or demonstrative, a guarantee must, at all events, provide a comparable legal position to the instruments mentioned in the law. This requires either directly available means of satisfaction (cash, cash deposits, or savings books) or, as in the case of a bank guarantee, a guarantor with probable sufficient liquidity (which, in the case of banks, for example, is guaranteed through strict oversight). In the case of an ordinary GmbH, however, which is not subject to any special supervisory regime, sufficient liquidity cannot be assumed without further consideration.

As a result, the complaint was justified.

OGH 3 Ob 28/23y (15.03.2023)