OGH on the guarantee demand of the general contractor

Oct 27, 2021 Benn-Ibler Rechtsanwälte

In the case at hand, the Supreme Court (Oberster Gerichtshof, OGH) examined the legality of a significantly excessive request for collateral by the contractor of a building within the meaning of Section 1170b of the Austrian Civil Code (Allgemeines bürgerliches Gesetzbuch, ABGB).

With the submission of the final invoice, the plaintiff, who had been commissioned by the defendant as general contractor for the construction of a residential complex, demanded payment of the remaining amount from the main contract and remuneration for additional services, totaling approximately EUR 1.64 million. The defendant disputed the commissioning of the additional services, whereupon the plaintiff requested collateral in the form of a guarantee (bank guarantee) in the amount of one fifth (approx. EUR 1.16 million) of the original main contract (EUR 5.82 million) to secure the plaintiff’s alleged claim within the meaning of Sec. 1170b para 1 ABGB. At that time, an amount of EUR 360,000 was outstanding from the main contract, which the defendant paid but withheld EUR 150,000 (due to alleged defects); the defendant did not provide a guarantee. The plaintiff therefore withdrew from the contract for work pursuant to Sec. 1170b para 2 ABGB and sued for the retained balance of the main claim.

It was subsequently disputed whether the non-observance of the guarantee demand, which was clearly excessive with regard to the outstanding main claim (without the disputed additional services), entitled the plaintiff to withdraw from the contract according to Sec. 1170b ABGB and consequently the plaintiff was no longer obliged to produce the work free of defects.

The OGH held that an excessive claim for collateral must in principle be reduced to the permissible level; however, such a claim is irrelevant if it is clearly excessive and the party ordering the work can only determine the appropriate amount with disproportionate effort.

However, the latter was not the case in the case at hand: Even if the request for a guarantee was clearly excessive, disregarding the (still) disputed additional orders, the defendant could have determined the reasonable amount on the basis of the final invoice, according to the OGH. Since there was at least a residual claim of EUR 150,000 and the defendant never offered to provide another, adequate guarantee - which would have enabled the defendant to prevent a withdrawal from the contract at any time - the plaintiff was entitled to terminate the contract.

OGH 9 Ob 30/21h (28.07.2021)