BGH: No more fictitious defect remediation costs in construction law

A client who retains the work and does not have the defect remedied cannot, within the framework of a claim for damages in lieu of performance (minor damages) against the contractor pursuant to § 634 no. 4, §§ 280, 281 BGB calculate their damage based on fictitious defect remediation costs (departure from previous case law).

The case: Defects in natural stone slabs

In the legal dispute now decided, a building owner had engaged a contractor under incorporation of the VOB/B for the laying of natural stone slabs. After acceptance, defects became apparent, whereupon the building owner brought court proceedings against the contractor, taking into account contributory negligence for planning errors of 25%, for an advance payment for defect remediation in the amount of approximately EUR 90,000.

During the appeal proceedings, the building owner then sold the structure and converted the claim to damages in the same amount. No defect remediation was carried out.

Decision of the BGH

The BGH now ruled that a client who retains the work and does not have the defect remedied can – contrary to previous practice – no longer calculate their damage based on fictitious defect remediation costs within the framework of a claim for damages in lieu of performance (minor damages) against the contractor pursuant to § 634 no. 4, §§ 280, 281 BGB.

Standard: Disruption of the equivalence relationship

Rather, the damage is to be calculated in such a way that, by means of a financial balance, the difference is determined between the hypothetical value of the item created or processed by the work and owned by the client without the defect and the actual value of the item with the defect.

If the client has sold the item created or processed by the work without defect remediation having been carried out, they can calculate the damage based on the concrete reduction in proceeds due to the defect in the item.

The damage can also be calculated analogously to § 634 no. 3, § 638 BGB in such a way that, starting from the remuneration agreed for the work, the diminution in value of the work due to the (unremedied) defect is estimated. The standard is then the disruption of the equivalence relationship caused by the defect in the work.

Commentary from KFR – Kanzlei für Real Estate

In its landmark decision, the BGH systematically sets out the claims available to a client who does not have a defect remedied, in a manner worthy of a textbook. In doing so, the BGH correctly revises its previous case law, in which a distinction between primary (in particular advance payment and reduction) and secondary (damages) defect rights was precisely not made. This also appears warranted with regard to § 640 para. 3 BGB (loss of defect claims not reserved at acceptance).

Reference: BGH, Judgment of 22 February 2018 – VII ZR 46/17