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Terminating or withdrawing from a construction contract: rights and cost consequences

Releasing yourself from a construction contract: withdrawal for default under section 918 ABGB and dissolution from your own sphere under section 1168 ABGB.

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18 June 2026 · Mag. Bernhard Brandauer, Rechtsanwalt

A construction project stalls, the relationship with the contractor has broken down or your own planning has changed. In such situations the question arises of whether and how one can release oneself from the construction contract. The answer depends decisively on the reason for which the release is to take place.

The ABGB draws a clear distinction: where there is default by the contractor, the client can withdraw under section 918 ABGB, as a rule after an unsuccessful additional period. Where, by contrast, the client wants to exit for reasons within its own sphere, section 1168 ABGB applies with an entirely different cost consequence.

This article explains the two routes, their requirements and above all their cost consequences. Those who know the difference avoid an expensive misjudgement. From a lawyer’s perspective, the correct legal classification decides how much the separation costs in the end.

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Withdrawal for default or dissolution from your own sphere?

Answer one or two questions about the reason for dissolution and the additional period. You receive an initial assessment of the consequences.

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01 Question 1

Why do you want to release yourself from the construction contract?

The legal consequences depend heavily on the reason. Default by the contractor leads to different consequences than a dissolution for reasons within your sphere.

All paths at a glance

Overview of all answers.

01

First set the contractor a reasonable additional period for performance.

Withdrawal from the contract for default under section 918 ABGB in principle requires that you set the defaulting contractor a reasonable period to catch up on performance. Only once this additional period expires without success can you withdraw effectively. You should set the additional period in writing and provably.

How long is reasonable depends on the extent of the outstanding performance. A period that is too short can endanger the later withdrawal.

02

After an unsuccessful additional period you can withdraw from the contract for default.

Where the reasonable additional period has expired without success, you can withdraw from the contract under section 918 ABGB. You declare the withdrawal to the contractor. For the work performed free of defects up to that point a proportionate remuneration is generally due to the contractor, but not for the work not performed.

Whether withdrawal is the economically best route or whether keeping to the contract with damages would be cheaper should be examined beforehand.

03

On a dissolution from your sphere the contractor keeps the remuneration less what is saved.

Where you dissolve the contract for reasons within your sphere, section 1168 ABGB applies. The contractor then keeps the claim to the remuneration but must allow as a deduction what it saves through the non-performance or acquires, or deliberately fails to acquire, through other use of its labour. You therefore do not pay the full remuneration, but more than only the performance rendered.

How high the remaining claim is depends on the expenditure saved in the individual case. A contractual cancellation clause may apply in addition.

Withdrawal for default under section 918 ABGB

Where the contractor falls into default with the construction, that is to say does not perform at the agreed time, withdrawal under section 918 ABGB is open to the client. The requirement is in principle that you set the contractor a reasonable period to catch up. Only once this additional period expires without success does effective withdrawal become possible.

The additional period serves a warning function: the contractor is to receive a final opportunity to perform after all. How long it must be depends on the extent of the outstanding performance. An unreasonably short period does set a period running but can prevent immediate withdrawal.

After effective withdrawal the performance not yet rendered falls away. For the partial performance properly rendered up to that point a proportionate remuneration is generally due to the contractor. A loss going beyond this, such as the extra cost of a substitute performance, can additionally be claimed as damages where there is fault.

Dissolution from the client’s sphere under section 1168 ABGB

Where the client no longer wants to have the work carried out, without the contractor being affected by a default or a defect, section 1168 ABGB applies. Where the performance is omitted for circumstances on the client’s side, the contractor keeps its claim to the remuneration.

However, the contractor must allow as a deduction what it saves as a result of the omission or acquires, or deliberately fails to acquire, through other use of its labour. From the agreed remuneration the expenditure saved is therefore deducted, such as material not procured or working time used elsewhere.

As a result the client pays more than only the performance already rendered, but less than the full remuneration. How high the remaining claim turns out to be is a question of the individual case and often the subject of disputes about the amount saved.

The routes at a glance

Routes out of the construction contract and their consequences

The consequences differ according to the reason for which the dissolution takes place.

Dissolution of the construction contract by reason and legal consequence under the ABGB
Route Requirement Cost consequence
Default Withdrawal (sec. 918 ABGB) Default and unsuccessful additional period Proportionate remuneration for performance rendered
Client’s sphere Dissolution (sec. 1168 ABGB) Performance omitted for reasons on the client’s side Remuneration less what is saved
Defect Rescission (sec. 932 ABGB) Substantial defect, repair failed Unwinding, often difficult with a building

The table classifies the typical routes broadly. Which route holds depends on the individual case and does not replace a legal examination.

Caution: a hasty release from the contract without an effective additional period can turn against you. If you withdraw without a ground of default, you risk the dissolution being treated as one from your sphere, with the cost consequence of section 1168 ABGB. Have the ground examined before the declaration. Booking an initial consultation (EUR 72) protects against expensive mistakes.

Observe contractual cancellation and withdrawal clauses

Alongside the statutory rules, many construction contracts contain their own clauses on cancellation and withdrawal, frequently by reference to ÖNORM B 2110 where this is agreed. Such clauses can regulate the requirements and the amount of the payment in the event of dissolution differently. You should therefore first check what is agreed in your contract.

A flat cancellation fee is not effective in every case. Where it is unreasonably high, it can be subject to judicial moderation. Here, too, what matters is the specific wording and the circumstances of the individual case.

How to check a construction contract for such clauses before signing is set out in our article on reviewing a construction contract before signing. Where a default with an agreed contractual penalty is at stake, our article on construction delay and liquidated damages helps. An overview is provided on our focus page on construction contract and remuneration.

Frequently asked questions

Terminating or withdrawing from a construction contract.

Can I simply withdraw from the construction contract when the build stalls? +

Not without more. Withdrawal for default under section 918 ABGB in principle requires that you have set the contractor a reasonable additional period for performance and that this has expired without success. Only then does effective withdrawal become possible. A written, provable additional period is therefore the decisive first step.

What does it cost if I dissolve the contract for my own reasons? +

Where you dissolve the contract for reasons within your sphere, the contractor keeps its remuneration claim under section 1168 ABGB. To be deducted from this, however, is what it saves or acquires elsewhere. You therefore pay more than only the performance rendered, but not necessarily the full remuneration. A contractual cancellation clause may apply in addition.

How does withdrawal differ from rescission? +

Withdrawal under section 918 ABGB attaches to default, that is to say to performance not rendered in time. Rescission under section 932 ABGB is a warranty remedy and attaches to a defect in the work already rendered. Both lead to dissolution but have different requirements. Which route fits depends on whether the issue is default or defects.

Further reading

Related topics around the construction contract

Construction contract and remuneration

The focus page on the construction contract, the maturity of the remuneration and the rights of both sides.

Reviewing a construction contract before signing

What matters before signing, from the specification to cancellation and withdrawal clauses.

Construction delay and liquidated damages

Which rights exist on a missed deadline and how an agreed contractual penalty operates.

Remuneration claim and payment refusal

When the remuneration falls due and when you may legitimately withhold payment.

Topics
construction contractwithdrawaldefaultremunerationABGB

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