A penalty or contractual penalty in accordance with Section 1336 ABGB is a contractual penalty that can be agreed by the contracting parties as lump-sum compensation for specific events. A frequently agreed event in the construction industry is, for example, if the contractor fails to meet bindingly agreed completion deadlines.
The advantage of an agreed contractual penalty lies, among other things, in the facilitation of proof, because the client is entitled to liquidated damages even if no actual damage has occurred. In the event that the actual damage exceeds the penalty, the client can then claim the difference.
It is also relevant that the obligation to pay a penalty can also exist without fault, but this must be expressly agreed.
What happens, however, if the timely provision of services is thwarted for reasons that lie within the sphere of the client? Is the performance period extended in accordance with the delay or is the agreed contractual penalty obsolete? As far as can be seen, the Supreme Court last dealt with this question in its decision of 21.11.2017 on 6 Ob 101/17x.
Facts of the case:
The defendant commissioned the plaintiff as general contractor with an attic conversion. The agreed completion date was 30.11.2012 and a penalty of € 600 net per calendar day of delay, limited to 5% of the order amount, was agreed. The defendant did not provide the plaintiff with the execution and polishing plans to be submitted until two months after the agreed start of construction. The main work was completed in February/March 2013, i.e. after the agreed completion date. The failure to meet the overall completion date was due to the late provision of the polishing plans.
Legal assessment:
If the agreed schedule cannot be adhered to due to a change in the performance program or an obstruction on the part of the contractor due to the customer’s failure to comply with its obligations to cooperate, a distinction must be made between two case constellations depending on the extent of the delay:
- In the event of manageable short delays, the contractually agreed completion deadline is extended accordingly; the agreed penalty continues to ensure compliance with the extended performance deadlines.
- However, if the schedule is “thrown overboard”, there is no longer a binding completion deadline and the penalty payment does not apply. The penalty agreement therefore comes to nothing.
In its decision, the Supreme Court followed the previous case law, which is also in fundamental agreement with that of the German courts.
Whether there is still a manageable short-term delay or whether such a delay has already been exceeded depends on the respective order (scope of the work, usual time frame, etc.). In the decision on 8 Ob 156/06h, the Supreme Court judged a delay of one month and in 1 Ob 58/98f a delay of up to two months as not being a manageable short delay. In the present decision on 6 Ob 101/17x, the Supreme Court also ruled that a delay of two months with an agreed construction period of just over nine months is no longer covered by the penalty agreement.
However, it should not be overlooked that despite the omission of any agreed contractual penalty and a binding schedule, the contractor must provide its services within a reasonable period of time. If he fails to do so, the client can still assert claims for damages. In this case, however, the client must prove the specific damage that has actually occurred.
If a contractor is obliged to pay an agreed contractual penalty, he still has the option of having the amount of the penalty reduced by a court. This right cannot be excluded in advance in accordance with Section 1336 (2) ABGB.
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Sources:
OGH 6 Ob 101/17x, 1 Ob58/98f, 8 Ob 156/06h
Kletecka/Schauer, ABGB ON, § 1336