REALWorld Law

Construction

Rights of purchasers, tenants and banks

How are third parties who are not parties to the construction contract – such as purchasers, tenants and lending banks providing finance towards the development – afforded protection and given rights against the original designers and contractors involved in the design and construction of the project?

Germany

Germany

In principle, third parties who are not parties to the construction contract are not able to recover financial losses from the original designers and contractors involved in the construction project. However, the party, which enters into the contractual relationship with the designers and contractors, may in theory include rights and safeguards in the construction contract in favour of a third party. Though, the practical relevance of such agreements is in fact low to non-existent.

In addition, the contracting party may assign its rights under the construction contract to the financing bank, eg claims for damages or in respect of any warranty. Even where the claim for damages, which the contracting party may have against the constructor or designer, differs from the damages actually suffered by the financing bank or the purchaser, the bank or purchaser will nevertheless be provided with some security in this way.