GERMANY LAW AND PRACTICE Contributed by: Wolfram H Krüger, Barbara Rybka, Markus Wollenhaupt and Alexander Zitzl, Linklaters
vision of a rent security is usually agreed in a lease agreement. 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 and 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 provided to com - plete construction as a whole are listed sepa - rately. In this case, the price is not fixed in the beginning but will be calculated depending on the services and units actually delivered for con - struction. 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 ( Selbstkostenerstattungs- verträge ) and guaranteed maximum-price (GMP) contracts ( garantierter Maximalpreisverträge ) are relatively rare. 7.2 Assigning Responsibility for the Design and Construction of a Project Often the responsibility is split between a con - structor 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 ser - vices by architects and engineers); for the con -
structor it is – as usual in German Civil Law – freely negotiable. The other possibility is to instruct a general contractor for all construction services, includ - ing planning tasks. In this case, the HOAI is not applicable, although architect services are included in the general contractor agreement. 7.3 Management of Construction Risk To manage construction risks on a project, a constructor’s all-risk insurance is a general liability insurance normally used to reduce risk. Additionally, the Civil Code offers a liability sys - tem, which usually applies to every construction, architectural and engineering contract. Further - more, it offers a special liability system including a longer limitation period regarding construction contracts, taking the general terms and condi - tions 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 construction delays if they are caused negli - gently or wilfully. Furthermore, the parties may agree on contrac - tual damages ( Vertragsstrafe ) for the delay of contractually 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 usual 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 judgments, the maximum amount of damage per
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