REALWorld Law


Obligatory requirements

Are any terms and conditions imposed or implied by law or mandatory in contracts for the design or carrying out of building works?



German law contains many mandatory provisions which cannot be summarised here. It is important to note that the Construction Contract Procedures Part B (VOB/B) are regarded as the model for general terms and conditions and if those are substantially departed from, individual provisions of the contract are likely to be checked by courts with the result that a court may declare one or more particularly onerous provisions to be invalid.

An important mandatory provision in construction contracts is section 650e of the Civil Code. Section 650e allows the contractor to get the benefit of security mortgage registered on the land register where the principal is the registered owner of the property. Contractors always have a right to ask for a bank guarantee covering the total outstanding amount due to them. Even if the parties agree on a 10% payment guarantee in the contract, the contractor may come back to the principal again and ask for appropriate security for the remaining 90% of the amount payable. Principals should usually comply with such requests because contractors are entitled to cease work if the payment guarantee is not provided within reasonable period of time.