Contract to produce a work
Contract to produce a work (Werkvertrag)
February 09, 2023
What is a contract to produce a work?
The legal basis for a contract to produce a work can be found in §§ 631 ff. German Civil Code (BGB). The contract to produce a work obliges the contractor to produce the promised work and the client to pay the agreed remuneration. A classic example of a contract to produce a work is the obligation to build a building. A ccontract to produce a work also created when maintenance or repairs are carried out.
How is a contract to produce a work formed?
A contract to produce a work is a mutual contract that is created by simultaneous declarations of intent between the contractor and the client.
The conclusion of a contract to produce a work is not subject to any formal requirements, i.e. it can be concluded orally, in text form (e.g. by e-mail) or in writing. However, for reasons of legal certainty, as with many other contracts, a verbal agreement is not recommended.
In particular, the following points should be included in the contract
- the exact names of the parties
- precise description of the work owed/place of performance
- the date of completion
- remuneration and payment arrangements (due date, method of payment, invoicing, etc.)
- Acceptance of the work and possible delivery
- Liability in the event of non-compliance with the contract
- Cancellation and termination/term of the contract to produce a work
Other desired provisions such as place of jurisdiction, duty of confidentiality or agreement on contracts of use (copyright protection).
Like any other contract, a contract to produce a work is null and void if it violates a statutory prohibition under § 134 BGB or offends against common decency under § 138 BGB.
What are the rights and obligations of the parties to a contract to produce a work?
First and foremost, the contractor owes the timely production of the promised work free of defects of quality and title, § 633 (1) BGB.
A material defect exists if the work does not have the agreed or usual quality, cannot be used for the intended purpose, a different work has been delivered or has been produced in insufficient quantity, § 434 BGB. The work is free of defects of title if third parties cannot assert any rights or only agreed rights in respect of it, § 435 BGB.
The risk of performance - i.e. the risk of having to perform again after the destruction or deterioration of the item - shall be borne by the Contractor until acceptance by the Client, Section 644 (1) BGB.
The construction of the work means any act, such as the production itself or the repair of a work. In addition, intellectual work such as the preparation of an expert opinion, an artistic painting or even a haircut at the hairdresser's or a bus ride can constitute a contract for work. It is important that the contract is performance-related. The contractor is therefore always liable for the actual provision of the work agreed in the contract for work and not just for the work itself.
In return, the client is obliged under Section 631(1) of the German Civil Code (BGB) to pay the agreed remuneration on acceptance. This is usually expressly agreed between the parties, but can also be tacitly agreed if the production of the work is only to be expected against payment according to the circumstances, § 632 para. 1 BGB. If the amount of the remuneration is not specified, the usual or customary remuneration applies, § 631 (2) BGB. In addition, pursuant to Section 632a of the German Civil Code, the contractor may require the client to make advance payments for services rendered, which may initially be only the preparation of the construction site. Full payment is not due until the work has been accepted by the client, § 641 BGB. The client is only obliged to accept the work if it has been completed free of defects and in accordance with the contract. Acceptance may be express or implied.
If any action by the client is required for the completion of the work, the client is obliged to cooperate in accordance with § 642 BGB.
If the work is accepted in the knowledge of a defect, this generally excludes the client's warranty rights, § 640 para. 3 BGB.
If the contractor fails to deliver the work in accordance with the contract, the client shall be entitled to the rights set out in Section 634 of the German Civil Code. He may claim damages, a reduction in price and subsequent performance. In the latter case, the contractor shall bear the necessary expenses such as transport or material costs. The client is only entitled to withdraw from the contract if there is a substantial defect in the work.
A disclaimer is not possible under Section 639 of the German Civil Code (BGB) if the contractor has fraudulently concealed the defect or has given a guarantee for the quality of the work.
A special feature of the law on contracts to produce a work is that the buyer has the right to remedy the defect himself. He can therefore remedy the defect himself and claim the costs.