Construction Contract

Construction Contract - A construction contract is a contract for services between a client and a contractor regarding the construction, alteration, or repair of a building. Since 2018, the German Civil Code (BGB) has distinguished between the general construction contract (Section 650a BGB) and the consumer construction contract (Section 650i BGB), which offers private building owners special protections-including a right of withdrawal, a detailed obligation to describe the construction work, and a right to a security deposit.

Types of Contracts in Construction

Depending on the contract structure and compensation model, various types of construction contracts are distinguished:

Contract Type	Compensation	Cost Certainty	Typical Application
Unit Price Contract	Quantity × Unit Price	Low	Large projects with competitive bidding
Lump-Sum Contract	Fixed Price	High (with precise scope of work)	Turnkey construction, general contractor contract
Hourly Wage Contract	Based on time spent	None	Minor repairs, emergency measures
General contractor contract	Lump sum, single point of contact	High	Single-family homes, commercial
Developer contract	Lump sum, purchase + construction	High	Condominiums, new construction projects

Unit price contract: The most common form in commercial construction-remuneration is calculated based on the actual quantities completed multiplied by the agreed-upon unit prices. The advantage: high transparency regarding individual prices. The disadvantage: no cost certainty, as the total amount is not determined until completion.

Fixed-price contract: A fixed total price for a defined service. The contractor bears the quantity risk; the client has cost certainty. A precise building specification is required-gaps in the scope of work lead to claims for additional payments.

Property Development Contract: A combination of land purchase and construction-special consumer protection under the MaBV and a requirement for notarization. The payment schedule follows the 13 MaBV installments based on construction progress.

VOB/B vs. BGB Contract Law

The German Construction Contract Procedures Part B (VOB/B) is not a law, but a set of clauses that becomes valid through agreement in the contract. Key differences from the BGB:

Aspect	BGB	VOB/B
Warranty period	5 years from acceptance	4 years from acceptance
Acceptance	After a reasonable period	Deemed acceptance after 12 business days
Notice of defects	No formal requirements	In writing
Addenda	§§ 631, 649 BGB	§ 2 VOB/B (detailed)
Termination	§ 648 BGB (at any time)	§ 8 VOB/B (for good cause)

The VOB/B protects both parties, but is fully applicable to consumers only if it is agreed upon as a complete set of rules. Individual clauses from the VOB/B without the complete set of rules may be invalid under the law governing general terms and conditions (§§ 305 ff. BGB).

Important Contractual Components

A complete construction contract must contain at least:

• Detailed construction specifications with product details (not just “high-quality tiles”)
• Binding completion date with a contractual penalty for delay (0.2% per working day, max. 5%)
• Payment schedule based on construction progress (not by calendar months)
• Security deposit from the contractor of 5% of the remuneration (Section 650m BGB)
• Provisions regarding special requests and addenda - in particular, price agreements prior to execution
• Insurance obligations: Who provides which construction insurance policies?
• Cancellation policy for consumer construction contracts (14-day period pursuant to § 650l BGB)

Practical Tip for Property Owners in Nuremberg and Franconia

We recommend that private builders in the Nuremberg metropolitan region have construction contracts reviewed by an attorney specializing in construction law before signing. Pay particular attention to: a complete building specification with product details (manufacturer, type, quality class), a binding completion date with a contractual penalty for delay, a payment schedule based on verifiable construction progress, and a security deposit from the contractor amounting to 5% of the total remuneration.

The consumer construction contract (Section 650i of the German Civil Code) grants you a 14-day right of withdrawal-use this period to have the contract carefully reviewed by a lawyer and an expert. Under Section 650j of the German Civil Code, developers are required to provide you with the construction specifications in a timely manner before the contract is concluded. You can search for a specialist construction law attorney through the Nuremberg Bar Association - a contract review costs 500-1,000 euros and can prevent tens of thousands of euros in disputes.

Frequently Asked Questions

What must be included in a construction contract?

A complete construction contract must contain at least: the contracting parties with full addresses and tax ID numbers, a detailed building specifications or bill of quantities with product specifications, payment terms (lump sum or unit prices), a payment schedule with progress payments based on construction progress, execution deadlines with a binding completion date and liquidated damages, warranty provisions, insurance obligations, and-for consumer construction contracts-the cancellation policy pursuant to § 650l BGB and the binding construction description pursuant to § 650j BGB.

Can I terminate the construction contract?

The client may terminate the construction contract at any time of their own volition (Section 648 of the German Civil Code (BGB))-but must then pay the agreed remuneration minus any expenses saved by the contractor. This can become considerably expensive if construction is at an advanced stage. A termination for good cause (Section 648a BGB)-such as in cases of serious defects, significant delays, or the contractor’s insolvency-releases the client from the obligation to pay for services not rendered. Extraordinary termination requires a prior notice period with a warning of termination; in urgent cases, this may be waived if the contractor definitively and seriously refuses to perform.

What does the payment schedule in the construction contract cover?

The payment schedule specifies when the client makes which progress payments. According to § 650m BGB, in consumer construction contracts, the total amount of progress payments may not exceed 90% of the total remuneration. Payments should be linked to specific, verifiable construction progress-not to calendar dates. Common milestones include: excavation and foundation slab, completion of the shell (topping-out ceremony), roof waterproofing, window installation, start of interior finishing, rough installation of building services, completion, and final inspection. Advance payments without corresponding consideration must be strictly avoided-they jeopardize your protection in the event of the contractor’s insolvency.

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