Reviewing a construction contract before signing: what really matters

The classic construction contract is, in legal terms, a works contract under sections 1165 to 1171 ABGB. The contractor owes the production of a specific work; you owe the agreed remuneration. Unlike a mere service contract, the result is at the centre: what is owed is not effort but the finished, defect-free building.

The ABGB regulates many questions by way of default rules, that is to say only where the contract itself provides nothing different. The actual wording of the contract therefore carries great weight. What you agree in writing generally prevails over the general rules. A well-considered contract creates clarity here, while a patchy one leaves much to interpretation.

Before you sign, it is worth looking at the central building blocks: scope of services, price, payment schedule, completion date and warranty. These five points determine what you receive, what you pay and when you have which rights. An in-depth overview is provided on our focus page on construction contracts and remuneration.

The scope of services defines the target condition. It determines which works, materials and finishes are owed. The more precise it is, the less room remains for later disputes about whether a service was included in the contract. Plans, the building description and the chosen samples belong with the contract as an annex and should be expressly incorporated.

For the form of price, practice distinguishes the lump-sum price and the unit price. The lump-sum price covers the agreed scope of services for a fixed amount. Additional services and extra orders are remunerated separately. The unit price is calculated according to actual quantities multiplied by the agreed unit prices. With a lump-sum price it matters that the scope of services fully captures the work, otherwise disputed claims for extra costs arise quickly.

Pay attention to how the contract handles changes. Who bears the risk if, during the build, it turns out that a service is missing or must be carried out differently? A clear rule on additional and reduced services prevents later arguments about the final invoice.

Under section 1170 ABGB the remuneration is, as a rule, due only after completion of the work. In practice, however, instalment payments tied to construction progress are agreed. A good payment schedule ties each instalment to a reached and verifiable stage of construction. In this way you pay for what has actually been delivered.

Caution is required with extensive advance payment. Anyone who pays large parts of the remuneration before the corresponding services have been rendered bears the risk that the firm falls into default or becomes insolvent. A plan tied to construction progress protects you better than a flat advance payment.

A binding completion date belongs in every construction contract. Only with a fixed date and agreed consequences for delay, such as a contractual penalty, can you respond effectively to delays. Without such a rule, the schedule remains non-binding and a delay is hard to sanction.

For a building the warranty period under section 933 ABGB is three years from handover. Towards consumers this period may not be shortened below the statutory protective standard. Check the contract therefore for clauses that restrict the warranty, for example through short notice deadlines or a flat acceptance fiction, under which the work counts as accepted merely once a deadline has passed.

A retention amount secures you. With it you withhold an agreed part of the remuneration until the warranty period expires, or against a bank guarantee. If defects appear, this amount is available to you as leverage and security. Such an arrangement should be expressly stated in the contract.

Under section 1168a ABGB the contractor is subject to a duty to inspect and warn. If it recognises that material supplied by the customer is evidently unsuitable, or that an instruction is evidently incorrect, it must warn clearly and in good time. If it omits the warning, it may lose the remuneration and be liable, even without fault of its own for the defect. This duty cannot be freely contracted away.

If you contract as a consumer, the Consumer Protection Act applies in addition. It may provide rights of withdrawal, for example for a contract concluded off premises or a distance contract under the FAGG. Clauses that unreasonably disadvantage you may be ineffective. This does not change the fact that a careful review before signing remains the best protection.

Typically disadvantageous are a flat acceptance fiction, very short notice deadlines and an extensive obligation to pay in advance. A clause that places extra costs solely within the firm’s discretion, or a shortened warranty, also deserves particular attention. Such points can be renegotiated before signing; afterwards they bind you.

If you conclude a developer contract with advance payment before completion, the security and form requirements of the BTVG apply in addition. We deal with the risks of such contracts separately in our article on developer contracts and the BTVG. Disputes over outstanding payments are explored in our article on remuneration claims and refusal of payment.