New construction contract legislation drafted
> June 2016

The German Cabinet passed draft legislation at the beginning of March which included a comprehensive review of construction contract legislation and changes to guarantees for defective construction materials. These changes are designed to provide greater protection for consumers. The draft includes special provisions for construction contracts and consumer construction contracts. The main points of the planned revision are:

+ The right for the client authority including provisions for price adjustments for over- or underperformance

+ Changes and additions to the acceptance provisions

+ Standardisation of terminations for good reason

+ in consumer construction contracts: Addition of the contractor's duty to describe the construction work, a binding agreement of the construction period and the right of the client to cancel within two weeks

+ Provisions for contracts with engineers and architects, particularly related to liability

+ Changes to purchasing law: Right to compensation for installation and removal costs, including between contractors

The purpose of the revision is to close loopholes in current work and labour contract law and provide additional detail. Construction technology is continuously advancing, and construction law has become a complex and specialised area. Work and labour contract law provisions are frequently not detailed enough for complex long-term construction contracts. The absence of clear legislation makes it difficult to draw up and implement construction contracts in a financially efficient way, serving the interests of the parties. Clauses therefore have to be worded carefully to cover the gaps in the legislation. The new provisions make this easier.

The draft still has to be ratified by Bundestag, and is due to come into effect six months after it is published in the Federal Law Gazette. The revisions are therefore not expected to be implemented until 2017.

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