Contracts and performance

Standard contract forms

What standard contract forms are used for construction projects in your jurisdiction? To what extent do parties deviate from these standard forms?

The Civil Code and the Commercial Code provide general rules with specific provisions for service and contractor agreements. Parties are mostly free to decide how to set up their relationship. As construction projects often give rise to similar questions, the Austrian Standards Institute issued voluntary Standard B 2110 for general contractor agreements and voluntary Standard B 2118 for general contractor agreements for large-scale projects in the public sector, containing essential clauses for the contracts. Both standards are considered general terms of contract and must be included in contracts by mutual agreement of the parties. While the institute recommends including or excluding Standards B 2110 or B 2118 in full, it is possible to only agree on certain parts. Under the Federal Procurement Act, the use of Standard B 2110 is mandatory for construction projects and parties wishing to deviate need to justify such alterations.

Definition of ‘construction work’

How is ‘construction work’ legally defined?

There is no definition of ‘construction work’ in the Civil Code or the Commercial Code. Voluntary Standard B 2110 defines ‘construction work’ as follows:

construction, modification, maintenance, dismantling or demolition of buildings and building components, landscaping and other construction work of any kind within a service contract, the required preparation and ancillary works as well as construction and dismantling or demolition of ancillary buildings and building services.

Governing law

Are there any rules or restrictions on the governing law of construction contracts?

Where a contract concerns the jurisdiction of two or more countries, the parties can agree on the governing law with the exception of ordre public rules. The right to choose applies only to the law of contracts but not to public law restrictions or requirements or in rem rights (eg, the Austrian land register always follows Austrian law). International standards such as the International Federation of Consulting Engineers are known in Austria, but rarely agreed on between the parties in domestic contracts.

Formalities

Are construction contracts subject to any formal requirements?

There are no formal requirements for construction contracts. They can be executed orally or in writing in any language. This can give rise to problems in court as disputes on the exact contents of contracts can arise, especially because non-German language documents must be provided in the form of a legalised translation (with or without apostille). It may be more sensible to choose an arbitral court where this obligation does not generally apply.

Mandatory/prohibited provisions

Are there any mandatory or prohibited provisions in relation to construction contracts?

There are no specific mandatory or prohibited provisions concerning construction contracts. However, in recent years, the Association for Consumer Information and the Federal Chamber of Labour have initiated proceedings against construction companies allegedly using unfair contract clauses (in agreements with consumers). There is a need to regularly review and update construction contracts based on Supreme Court case law.

Implied terms

Can any terms be implied in construction contracts?

Apart from mandatory provisions under Austrian law, the parties can agree freely on any issue in a construction contract. If questions arise which are not covered by any of the specific terms in the construction contract, the courts will assess whether the absence of the clause was intended. In the latter case, the courts will apply general contract law to fill the void.

Risk allocation

How are risks typically allocated between parties to construction contracts?

Parties can agree on risk allocation freely unless it is deemed unfair, which is assessed based on a case-by-case analysis (risk taken versus consideration paid). According to general contract law, the ground risk (ie, the risk that the ground contains contamination, archaeological remains or is unfit for construction) is vested with the owner, but may be transferred to the contractor by agreement. In any event, contractors must examine and warn employers if the ground is unsuitable, provided that the contractor either knew or should have known. The risk of fulfilment of the contract (ie, the completion of the building) is vested with the contractor until handover. Voluntary Standard B 2110 limits the producer’s liability in the case of force majeure. In concrete terms, the purchaser bears the risk for force majeure even before takeover of the work if the producer took all protective measures to avoid damage.

Limitation of liability

How and to what extent can parties to construction projects contractually limit or exclude their liability?

Liability and warranty claims may be excluded in contracts for construction projects. In business-to-business contracts, the parties can agree on waivers for light negligence and minor forms of gross negligence, but not for severe gross negligence or intent. Parties may also waive warranty claims. The situation is different in business-to-consumer contracts, where a waiver of liability for injuries is not permitted and waivers for light negligence may be deemed unfair in general contract terms. Consumers cannot waive warranty claims before such claims arise. Voluntary Standard B 2110, if applicable, limits liability (not warranty) to certain caps which, from an employer’s point of view, could make it wise to not include the specific limitation.

Liquidated damages

How are liquidated damages typically calculated and to which liabilities are they usually applied?

Parties can agree on liquidated damages pursuant to Section 1336 of the Civil Code for non-performance or delayed performance. It is customary to agree on liquidated damages of up to 10% of consideration, some of which are due for each week of delay or specific non-performances. Courts can reduce the amount of liquidated damages. Voluntary Standard B 2110 allows parties to claim liquidated damages of up to 5% of consideration.

Force majeure

How are force majeure clauses treated in your jurisdiction? Is there a legal definition of force majeure events?

Sections 1311 and 1168a of the Civil Code deal with force majeure events and attribute their risk according to scope. Prior to handover, the contractor bears the risk of force majeure and remains under obligation to fulfil the contract in case of full or partial destruction. An employer may rescind a contract. After handover, an employer bears the risk of force majeure. Voluntary Standard B 2110 deviates from general contract law insofar as the contractor may have a right to claim payment of consideration in certain cases of force majeure. Parties usually include rules for non-performance and force majeure in their contracts.

General performance obligations

What are the general performance obligations of contractors and employers?

Contractors must fulfil the contract according to the technical specification and contractual timeline. Implied terms may stipulate further obligations – in particular, in relation to the quality of the work (ie, it must be of the quality usually expected). The employer must effect payment as set out in the agreement in regular instalments after provision of the respective invoices. In the case of full or partial non-fulfilment, parties may have the right to rescind the contract and claim damages.

Project delays

How are project delays typically handled? Do any set rules, restrictions or procedures apply in this regard?

Parties can agree on the rules and procedures for delays, in particular on liquidated damages and measures to accelerate performance. In addition, parties have the right to rescind the contract according to general contract law.

Contract variations

To what extent can the parties make variations to the contract? Do any set rules, restrictions or procedures apply in this regard?

Under general contract law, neither of the parties has the right to unilaterally alter the contract unless otherwise agreed. Voluntary Standard B 2110, if applicable, grants employers the right to make alterations to the contract or request additional services according to the prices already agreed on in the construction contract if certain conditions are satisfied. The parties can agree on variations. Public procurements laws may restrict unilateral or mutual changes.

Termination

What are acceptable grounds for the termination of a contract?

General contract law allows either party to rescind the contract in case of non-performance or delay. Voluntary Standard B 2110, if applicable, sets out in more detail what may be accepted as grounds for termination, including:

  • delay;
  • impossibility of fulfilment;
  • cancellation;
  • insolvency;
  • excessive costs; and
  • loss of trust.

Remedies for breach

What remedies are available for the breach of construction contracts?

Prior to handover, employers can request fulfilment or rescind a contract and, in both cases, request the payment of damages for non-performance. After handover, employers can request fulfilment or fully/partially rescind the contract and claim damages. Contractors have the right to claim fulfilment (usually payment) and damages.