A new Supreme Court ruling has ended the controversial discussion on whether the limitation period for recovery of a warranty guarantee sum is three years or 30 years. It provides that the 30-year period shall apply.
In the case in question, the customer of a contractor had drawn on a first demand warranty guarantee. The contractor sought recovery of the guarantee sum over three years since his customer had drawn the guarantee, on the grounds that the warranty claims were unfounded.
This ruling illustrates an undesirable side-effect of using warranty guarantees in the construction business: if the constructor needs to claim his remuneration, he must do so within three years. If on the other hand he receives full payment but must reimburse his bank for the drawn warranty guarantee, he has 30 years to recover the guarantee sum from his customer, thus effectively prolonging the winding up of warranty claims and lessening provability unnecessarily.
Source: Austrian Supreme Court, December 15 ,1998, 1 Ob 182/98s
For further information on this topic please contact Louis Foramitti at Ortner Pöch Foramitti Rechtsanwälte OEG by telephone (+431 535 37 21) or by fax (+43 1 533 15 55) or by e-mail ([email protected]).
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