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In (plant) construction projects, disputes under construction contract law about the remuneration ultimately owed to the contractor carrying out the work are not uncommon. Is there a lump sum contract or not? The distinction between a global lump-sum contract and a detailed lump-sum contract can regularly cause major difficulties.
The background to this is the fact that in many cases it is almost impossible to determine down to the last detail which services the (plant) construction project in question requires. Against this background, the question arises in almost every (plant) construction contract as to which party should bear the risk of unforeseen services that turn out to be necessary for the success of the project and to what extent.
The following article attempts to provide an overview of the common contract types, their significance for the calculation risk and typical demarcation problems:
Unit price contract
The contractor will always want a so-called unit price contract. In such contracts, the services and quantities owed are listed by item and priced per unit. After completion of the entire service, the final invoice is issued on this basis. The risk described above therefore lies entirely with the client in the case of a unit price contract.
The risks are more evenly distributed in the case of flat-rate contracts. Here, a distinction is usually made between the so-called global lump-sum contract and the so-called detailed lump-sum contract:
Global flat-rate contract
A distinction is made between the extended global lump-sum contract and the complex global lump-sum contract. In both cases, in addition to the price, the service is also included in the lump sum, albeit to a different extent.
Extended global flat-rate contract
In the case of the extended global lump-sum contract, the client provides the design or approval planning for the construction project, on the basis of which the contractor must then independently determine the type and scope of the services required.
Calculation risk for the contractor
The legal consequence is that the calculation risk lies with the contractor, so that services that are not included in the specifications but are necessary for implementation are included in the lump sum price (Kandel, BeckOK VOB/B, 20th ed. 1.7.2015. Section 2 (7) para. 20). As a result, additional service changes subject to remuneration can only arise if the client subsequently changes its planning and issues instructions within the meaning of Section 2 (5) VOB/B.
Such a change may also exist if the contractor has to perform a technical service “as required” and the construction planning on which the contractual relationship is based has changed (see Kandel, BeckOK VOB/B, 20th ed. 1.7.2015. § 2 para. 7 para. 20).
The client is liable for own planning errors
The client is generally liable for its own planning errors. He cannot transfer this risk to the contractor by means of general terms and conditions (Kandel, BeckOK VOB/B, 20th ed. 1.7.2015. § 2 para. 7 para. 21). Necessary services are to be taken into account by the contractor as part of his performance determination and are therefore already part of the contract anyway (Kandel, BeckOK VOB/B, 20th ed. 1.7.2015. § 2 para. 7 para. 22).
Complex global flat-rate contract
In the case of a complex global lump-sum contract, the client provides a purely functional description of services, in which the planning must also be provided in full by the contractor, with the legal consequence that the entire planning and calculation risk lies with the contractor, who must therefore also be liable for errors in the planning. He bears the full risk of completeness in qualitative and quantitative terms (Kandel, BeckOK VOB/B, 20th ed. 1.7.2015. § 2 para. 7 margin no. 23, 25)
Detailed flat-rate contract
In a so-called detailed lump-sum contract, the price is fixed in terms of amount, which is decoupled from the quantities and masses actually required for the construction work, whereby the lump-sum price for the overall service is based on a detailed bill of quantities (Leupertz, in Messerschmidt/Voit, Privates Baurecht 2nd ed. 2012, Chapter K, para. 19). This means that only the remuneration is lump-sum, but not the construction work owed for it (Kimmich/Bach, VOB für Bauleiter 6th ed. 2014, Chapter D, para. 526).
Performance owed follows the detailed service description
The priced scope of services results from the detailed service description. If only the underlying quantity assumptions prove to be incorrect, the lump sum price remains (cf. Section 2 (7) No. 1 VOB/B), so that the contractor only bears the quantitative quantity risk by setting a lump sum price (Kandel, BeckOK VOB/B, 20th Ed. 1.7.2015. Section 2 (7) para. 10).
Additional remuneration for services outside the service description
For services that are provided in order to achieve the construction success owed or as a result of changes to the construction plan or other instructions from the client over and above the work included in the service description, the contractor can – in the case of the VOB/B contract pursuant to Section 2 (5), (6) in conjunction with Section 2 (7) no. 2 VOB/B – demand additional remuneration (Leupertz, in Messmidt/Voit, Private Baurecht 2. § Section 2 (7) No. 2 VOB/B – demand additional remuneration (Leupertz, in Messerschmidt/Voit, Privates Baurecht 2nd ed. 2012, Chapter K, para. 20; Kimmich/Bach, VOB für Bauleiter 6th ed. 2014, Chapter D, para. 529 with further references from case law).
Risk of completeness lies with the client
The contractor is not obliged to complete forgotten services for the lump sum simply because they are necessary for construction purposes in order to produce a functional construction service (see Kimmich/Bach, VOB für Bauleiter 6th ed. 2014, Chapter D, para. 527 with further references from case law); the risk of completeness in terms of quality is therefore generally borne by the client (Kandel, BeckOK VOB/B, 20th ed. 1.7.2015. § 2 para. 7 para. 11). However, this is controversial in the case of obvious incompleteness of a service description (Kapellmann, in Kapellmann/ Messerschmidt, VOB-Kommentar, Teil A/B, 5th ed. 2015, § 2 para. 28: risk contractor; in addition, Kandel, BeckOK VOB/B, 20th ed. 1.7.2015. § 2 para. 7 para. 169).
Importance of a detailed service description for risk allocation
It follows from the above that the existence of a detailed bill of quantities does not automatically indicate the type of lump-sum contract. Although this is considered to be characteristic of a detailed lump-sum contract, it is also the basis of a global lump-sum contract if the contractor has to independently determine the type and scope of the required services based on the design or approval planning of the construction project provided by the client, see BGH, Urt. v. 30. 6. 2011, Ref. VII ZR 13/10. In the aforementioned judgment, the BGH stated, among other things:
“The conclusion of a contract for a completely functionally described construction service at a lump sum price does not preclude the parties from making special agreements on individual services (so-called detailing). For example, they can agree that individual services are not provided by the contractor at all (BGHZ 90, 344 [346] = NJW 1984, 1676), or they can make a service description the subject of their agreement, from which it follows that the lump sum price agreement does not or does not fully cover certain services required for functionality (see BGHZ 176, 23 [29 ff.] = NJW 2008, 2106 = NZBau 2008, 437). “
Completeness clauses in detailed flat-rate contracts
In the case of a detailed lump sum contract, the client attempts to extend the scope of services covered by the lump sum price beyond the content of the service description by means of a so-called completeness or completeness clause.
Invalid if service description originates from the client
In fact, this no longer implies the construction target, but a performance target. This could then no longer be reconciled with the basic structure of the detailed lump-sum contract if the detailed service description on which the price agreements are based originates from the client (Leupertz, in Messerschmidt/Voit, Privates Baurecht 2nd ed. 2012, Chapter K, para. 21). Something else may apply if the risk of completeness is transferred by individual contract (according to Kandel, BeckOK VOB/B, 20th ed. 1.7.2015. § 2 para. 7 para. 13, ).
Effective by way of exception if contractor has drawn up the bill of quantities
On the other hand, according to the unanimous opinion, such a clause is not invalid if, exceptionally, the contractor has prepared the execution planning and the bill of quantities (incompletely), which is regularly the case with complex global lump sum contracts (Leupertz, in Messerschmidt/Voit, Privates Baurecht 2nd ed. 2012, Chapter K, para. 21; Kimmich/Bach, VOB für Bauleiter 6th ed. 2014, Chapter D, para. 546). However, this should not apply insofar as an increased remuneration would also have been paid in the event of proper planning and the contractor can invoke the objection of lawful alternative behavior and, in any case, in principle claim the corresponding additional remuneration (according to Kandel, BeckOK VOB/B, 20th ed. 1.7.2015. § 2 para. 7 para. 14).
Unreasonableness of adhering to the flat-rate price
Even in the case of lump-sum prices, the originally agreed price can be changed in accordance with Section 2 (7) No. 1 Sentence 2 VOB/B if the work performed deviates so significantly from the planned work that it is no longer reasonable for one of the parties to adhere to the lump sum. In this case, the unreasonable burden is compensated by granting the additional or reduced costs.
The standard for unreasonableness is derived from Section 313 BGB, the disturbance of the basis of the transaction. This requires a blatant disproportion between the service and the lump sum. Extremely strict requirements are set and an assessment is made depending on the individual case.
The contractor bears the risk for the correct calculation when agreeing a lump sum price; if he could have recognized that his service description is incorrect or incomplete, he cannot subsequently invoke an unreasonable lump sum price (Vygen/Kratzenberg, VOB/B, 17th edition 2010, Section 2 (7), para. 15). If a “fixed price” has been agreed, there are particularly high hurdles for the contractor to prove an unreasonable burden (Vygen/Kratzenberg, VOB/B, 17th edition 2010, Section 2 (7), para. 15).
Conclusion
The above should have shown that, in my experience, the negotiation and subsequent drafting of construction contracts, particularly in the area of plant construction, requires particular care in order to avoid a rude awakening later on with regard to the economic calculation.
With regard to construction contract law, please also read my practical article on the question of the degree of completion of the work as a prerequisite for acceptance. This is another area in which disputes often arise, as acceptance is regularly an essential prerequisite for payment becoming due.
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