Right to Refuse Performance: Austrian OGH Clarifies Requirements

Jul 25, 2025 Benn-Ibler Rechtsanwälte

The Austrian Supreme Court (Oberster Gerichtshof, OGH) recently addressed the issue of whether a customer may refuse performance under Section 1170 of the Austrian General Civil Code (Allgemeines bürgerliches Gesetzbuch, ABGB) when there is a claim for improvement pursuant to Section 933a ABGB.

The terrace renovation revealed several defects

The plaintiff undertook terrace renovation work for the defendant; however, multiple deficiencies were identified in the completed project.

The plaintiff requested payment of unpaid wages from the defendant. The defendant responded by asserting, on the basis of warranty and damages claims, that the wages were not payable due to certain existing defects.

The courts of first instance and appeal both rejected the claim. Although the defendant’s warranty claims were time-barred, the entitlement to remuneration for work performed was not yet enforceable due to outstanding claims for damages under Section 933a of the (ABGB) in relation to existing defects.

The OGH affirmed the lower courts’ rulings.

The right to decline performance applies, including in cases involving claims for improvement under tort law

Under Section 1170 of the ABGB, a customer’s right to refuse performance is contingent upon the existence of a valid claim for rectification. This requires that the customer continues to seek remedy for defects and asserts their right to performance. Accordingly, the right of retention does not apply if the customer prevents the previously requested rectification or if such remediation by the contractor no longer aligns with the customer’s interests.

The case law of the OGH indicates that an objection of non-due date under Section 1170 of the ABGB may also be based on a claim for improvement arising from tort law. If the transferor is responsible for a defect, the transferee has the option to claim damages. When seeking damages, the transferee retains the right to choose between improvement and replacement.

As a result, the defendant is entitled to raise the objection under Section 1770 of the Austrian General Code (ABGB).

OGH 4 Ob 78/25m (24 June 2025)