20.02.2019
According to § 1170 b ABGB, the contractor, i.e. the manufacturer of a building, an external structure for a building or a part thereof, is entitled to a special security. He can demand this from the client up to the amount of one fifth of the agreed fee. For contracts that are to be fulfilled within three months, the contractor can even demand up to two fifths of the agreed fee. This can be paid in cash, cash deposits, savings books, bank guarantees or insurance. According to § 1170 b ABGB, the security must be paid within a reasonable period of time to be set by the contractor; if it is not paid, the contractor can declare the contract rescission after setting a reasonable grace period. The provision is mandatory and cannot be "waived".
The termination of the work contract according to § 1170 b Paragraph 2 ABGB means that the contractor is no longer obliged to produce the work without defects and is entitled to a remuneration claim (reduced in accordance with § 1168 Paragraph 1 ABGB). The customer is no longer entitled to the defense of improperly fulfilled contract (OGH 27.09.2016, 1 Ob 107/16 s).
The Supreme Court recently dealt with the two deadlines specified in Section 1170 b ABGB. In 4 Ob 209/18s, it stated that the length of both deadlines is based on objective criteria. The deadline for providing security is reasonable if a period of time is granted in which the required security can be obtained without culpable delay. Setting a deadline that is too short does not invalidate it; instead, the longer, objectively reasonable period is available to the customer. If the customer does not comply with the request for security within the deadline, the contractor has the right to refuse performance as a first step. The contract is then terminated, if the contractor declares this, only after the expiry of the grace period to be set. This declaration of termination is also a form-free, unilateral declaration of intent that requires receipt. In cases where the client seriously and definitively refuses to provide security, the contractor has the right to refuse performance and the right to immediately terminate the contract in order to avoid any additional costs (e.g. downtime) (7 Ob 67/17d).
If a contractor demands security from the client in accordance with Section 1170b ABGB, the client would be well advised to comply with this request. Conversely, of course, in the event of an unjustified demand and a - subsequently unjustified - withdrawal by the contractor, claims for damages (substitute performance!) may be threatened.