GERMANY Law and Practice Contributed by: Wolfram H. Krüger, Barbara Rybka, Markus Wollenhaupt and Alexander Zitzl, Linklaters
7.2 Assigning Responsibility for the Design and Construction of a Project Often the responsibility is split between a constructor for construction work and an architect for the planning of the project. In this case, the cost of the architect’s remuneration is prescribed by law (HOAI, the official scale of fees for services by architects and engineers); for the constructor it is – as usual in German Civil Law – freely negotiable. The other possibility is to instruct a general contractor for all construction services, including planning tasks. In this case, the HOAI is not applicable, although architect services are included in the general contrac - tor agreement. 7.3 Management of Construction Risk To manage construction risks on a project, a construc - tor’s all-risk insurance is a general liability insurance normally used to reduce risk. Additionally, the Civil Code offers a liability system, which usually applies to every construction, architectural and engineer - ing contract. Furthermore, it offers a special liability system including a longer limitation period regarding construction contracts, taking the general terms and conditions for building contracts into account. The liability of a contractor is generally not limited. Some contracts provide limitation of liability in the amount of the insurance coverage or to the extent of purpose or gross negligence. 7.4 Management of Schedule-Related Risk Under the Civil Code, the contractor is liable for con - struction delays if they are caused negligently or wil - fully. Furthermore, the parties may agree on contractual damages ( Vertragsstrafe ) for the delay of contractu - ally agreed milestones. In this case, the parties agree on a certain amount the contractor has to pay for each day’s delay after the breach of a milestone, with a usu - al maximum cap of 5% of the overall fee. The parties may agree intermediate milestones or the finalisation date of the construction work, which will be subject to liquidated damages. According to High Court judg - ments, the maximum amount of damage per day may be 0.25% of the net purchase order for the finalisation of construction work, and 0.15% of the net purchase
Protection against such extraordinary termination right can be granted in the form of a tenant ease - ment, which gives the tenant a right in rem to continue to occupy and use the premises in accordance with all the conditions set forth in the lease agreement, irrespective of the termination. The tenant easement is an encumbrance that needs to be registered in the land register. 6.23 Remedies/Damages for Breach In case of an extraordinary termination of a lease agreement due to tenant breach, the landlord is enti - tled to damages in the amount of outstanding rent and ancillary charges less saved expenses until the date of the next ordinarily possible termination. Additional statutory damage claims are not excluded. As long as the tenant is not a very strong market play - er or a part of the public sector, the provision of a rent security is usually agreed in a lease agreement. The standard is an amount of three monthly net rents, but for commercial tenants up to six monthly net rents can be seen, in the form of a cash deposit, pledged account or bank guarantee or, less often, collateral promise or a parent guarantee. 7. Construction 7.1 Common Structures Used to Price Construction Projects For construction agreements, two types of prices are usually agreed on: either a unit price ( Einheitspreis ) for partial services or a fixed price ( Pauschalpreis ) for the completion of the entire project. If the parties choose to agree upon a unit price, all individual services pro - vided to complete construction as a whole are listed separately. In this case, the price is not fixed in the beginning but will be calculated depending on the services and units actually delivered for construction. The construction contract, therefore, includes only a cost estimate, which is not final until the final invoice for the work is rendered. Hourly-rate contracts ( Stundenlohnverträge ), cost- plus contracts ( Selbstkostenerstattungsverträge ) and guaranteed maximum-price (GMP) contracts ( garanti- erter Maximalpreisverträge ) are relatively rare.
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