Estimation of fictitious defect rectification costs

The judgment

Its decision of March 11, 2022 (case no. V ZR 35/2) was based on the following abridged facts:

The subject of the dispute was the purchase contract for a property. The sellers had concealed from the buyers that the external waterproofing of the cellar was incomplete and accordingly demanded compensation in the form of fictitious defect rectification costs.

The court of first instance had sentenced the defendants in the amount of fictitious defect rectification costs of EUR 144,800. The Court of Appeal reduced this amount to EUR 97,556 and allowed the appeal with regard to the amount of the claim.

The estimate made by the court of first instance and the court of appeal was based on an expert opinion, according to which two options for remedying the defects could be considered. According to the less expensive option A, the incompleteness of the waterproofing could not be completely eliminated, according to the more expensive option B with costs of EUR 138,920, waterproofing would be completely possible. The Court of Appeal assumed that the plaintiffs did not have to be satisfied with variant A, however, the estimation inaccuracy of +/- 30% mentioned by the expert was to be taken into account to their detriment, as the plaintiffs could only be awarded whatwould“certainly be incurred” in terms of defect rectification costs. Uncertainties in determining the costs of remedying defects should not be borne by the tortfeasor.

In its decision, the BGH initially confirmed the Court of Appeal’s assumption that the claimants did not have to settle for the cheapest option. The same applies to the rejected “new for old” deduction.

Otherwise, however, it rejected the Court of Appeal’s assumptions for determining the specific amount of damages as legally untenable. The BGH stated:

“As a starting point, the Court of Appeal correctly assumes that the contractual claim for damages instead of performance (minor damages) pursuant to Sections 437 No. 3, 280, 281 BGB can be assessed on the basis of the “fictitious” costs of remedying defects that are likely to be necessary but have not yet been incurred.

However, according to the reasoning of the Court of Appeal, the costs for the necessary renovation work determined by the expert cannot be reduced by 30% when assessing the amount of the claim for damages.

The court must determine the amount required to rectify the defect in accordance with Section 287 (1) ZPO, taking into account all the circumstances in its own discretion.

(…)

The Court of Appeal overstretches the measure of necessary conviction within the framework of Section 287 (1) ZPO and thus disregards legal principles of damage assessment.

If the asserted claim for damages is established on the merits and only the amount needs to be filled in, the injured party benefits from the facilitation of evidence under Section 287 ZPO. In contrast to the strict requirements of Section 286 (1) ZPO, when deciding on the amount of damages, a considerable probability based on a sound foundation is sufficient for the court to form its opinion; the estimate should be as close as possible to reality.

The court of appeal misjudged this. It believes that only the amount that is certain to be incurred within the scope of the estimate to be made for the rectification of defects may be awarded, so that in the case of a range of estimates, only the lower amount can regularly be awarded as damages. It thus wrongly demands absolute certainty for the assessment of damages to be carried out by it, which is not even required within the framework of § 286 ZPO. It is true that even in the case of an estimate pursuant to Section 287 ZPO, doubts about the amount of the costs required to remedy the defect may not, in principle, be borne by the tortfeasor (see BGH, Urt. v. 10.04.2003 – VII ZR 251/02 – NJW-RR 2003, 878, 879; OLG Celle, Urt. v. 17.01.2013 – 16 U 94/11 – BauR 2014, 134, 139). However, it is in the nature of things that when calculating the fictitious restoration costs required to remedy the damage, a (certain) uncertainty remains as to whether the amount objectively required for the repair (to be assessed ex ante) corresponds to the amount that would have been or would be incurred if the repair had actually been carried out. If the contractual claim for damages in lieu of performance (small damages) pursuant to Sections 437 No. 3, 280, 281 BGB is assessed on the basis of the presumably necessary but not (yet) incurred (“fictitious”) costs of remedying the defect, the court must therefore determine the damage in accordance with the principles of Section 287 (1) ZPO and in this respect to examine the extent to which damage is predominantly probable. This also and especially applies if a range of estimates is stated in an expert report. (…)”

As a consequence of the aforementioned deficiencies, the BGH referred the case back to the Court of Appeal for reconsideration and decision