Unauthorized Security Enforcement by Subcontractors

Sept 5, 2025 Benn-Ibler Rechtsanwälte

The Austrian Supreme Court (Oberster Gerichtshof, hereinafter OGH) was tasked with assessing whether a subcontractor can rely on bank guarantees under Section 1170b of the Austrian General Civil Code (Allgemeines bürgerliches Gesetzbuch, or ABGB) in order to enforce claims regarding payment for work performed when such claims are disputed.

In the case at hand, the plaintiff had been the general contractor for a construction project in Vienna and engaged the defendant through two separate contracts. Pursuant to Section 1170b of the ABGB, the defendant requested security, which the plaintiff duly furnished in the form of bank guarantees. Following the settlement of the undisputed final invoice amounts, the defendant subsequently requested an extension of the provided security.

After the plaintiff refused, the defendant ended the contract and withdrew the bank guarantees.

The plaintiff requested repayment of the guarantees, contending that their realisation was not permissible while the claims for remuneration for completed work remained undue and were subject to dispute. In response, the defendant asserted that the plaintiff had improperly reduced the final invoice amounts and had declined to settle legitimate claims for payment for services rendered.

Enforcement is allowed solely for legitimate claims

The OGH upheld the lower courts’ rulings. According to Section 1170b of the ABGB, guarantees may not be used to satisfy disputed claims. The defendant had only asserted claims for additional costs that were disputed between the parties.

This meant that the claims were not due, so the call on the guarantees was unlawful.

Reservation obligation also applies to cash discounts

The defendant lodged an objection to the final payments within the timeframe stipulated by section 8.4.2 of ÖNORM B 2110 and consequently anticipated that the contract would remain operative such that the settlement would also be conducted in accordance with these provisions.

However, the defendant did not make any reservation concerning the cash discount deduction for the third partial invoice; consequently, the claim was considered time-barred in this regard, as affirmed by the OGH.

Demand must bear burden of proof for additional cost claims

The burden of proof for the justification of the additional cost claim lies with the defendant. Since the defendant failed to provide this proof, the plaintiff was entitled to reimbursement of the guarantee amounts drawn.

OGH 5 Ob 54/25i (5 August 2025)