Can contractors be fired

Termination by the contractor in the case of a BGB contract

The contractor's right of termination is only regulated in a few places in the BGB. There is the possibility of termination if an action on the part of the client is required during the production of the work and the client fails to do this and is therefore in default of acceptance.

In this case, the contractor can set the client a reasonable deadline to carry out this action with the simultaneous express declaration that he will otherwise terminate the contract. If the deadline set by the contractor has passed without result, the termination is deemed to have taken place; an express declaration of termination is no longer required here.

After the termination takes effect, the contractor is entitled to remuneration for the work he has performed as well as the actual expenses not included in this remuneration. Insofar as the client has culpably prevented the full performance of the service by the contractor, i.e. at least slightly negligently, the contractor is still entitled to a claim for damages.

Furthermore, the contractor has the option of asserting a claim for compensation as well as a claim for reimbursement of the additional expenses that he had to make for the unsuccessful offer and for the storage and maintenance of the building. In principle, the above claims can be asserted side by side, but in some cases overlap in their scope of compensation.

Another highly practice-relevant termination option opens up a provision in the BGB, according to which the client is fundamentally obliged to provide a security to cover all advance services to be provided by the contractor and not yet paid. If the contractor requests this security by setting a deadline and if the client does not provide the security even after setting a further grace period with the threat of termination, the contract is again deemed to have been terminated at the end of the grace period.

After termination of the contract, the contractor is initially entitled to remuneration for the services provided so far. Furthermore, he can also demand reimbursement of the expenses here, insofar as these are not included in the remuneration. Finally, in the event of termination, the contractor is also entitled to compensation for the so-called fidelity damage, i.e. compensation for the damage that the contractor incurred in reliance on the execution of the contract.

After the legislature has foreseen difficulties in providing evidence on the part of the contractor with this claim, it is assumed by law that the damage caused by the termination amounts to 5% of the total remuneration of the contractor.

However, both the client and the contractor have the option of refuting this legal presumption of the amount of damage, i.e. proving lower or higher damage.

In addition to the above-mentioned termination options, the contractor is also always entitled to the so-called extraordinary termination right for an important reason.

Such a termination is always possible if the contractual relationship is seriously disrupted for reasons for which the client is responsible. A classic example of this is a serious refusal, declared by the client, to fulfill his contractual obligations, in particular the obligation to pay wages.

If the termination is planned for an important reason due to a breach of duty by the customer, according to Section 648a BGB in conjunction with Section 314 Paragraphs 2 and 3 BGB, the termination must be regularly preceded by a warning with a deadline.

Such a prior warning with setting a deadline will only be dispensable if the breach of duty on the part of the customer was so serious that it is unreasonable for the executing company to continue to adhere to the contract.

After termination for an important reason, each contracting party can request the other to participate in a joint determination of the level of performance, Section 648a, Paragraph 4 of the German Civil Code (BGB). Such a performance level determination is not associated with an acceptance effect.

After a termination for an important reason, the services provided so far must be billed, Section 648 a (5) of the German Civil Code (BGB). In addition, each party can make claims for damages, provided that the conditions for a claim for damages are met.

However, an unjustified termination issued by the client can also constitute an extraordinary reason for the contractor to now terminate the contract for an important reason. The courts also recognized, for example, the unauthorized drawing of a performance bond as an important reason for extraordinary termination by the contractor.

Since, as shown above, when exercising the right to extraordinary termination, one does not have to refer to paragraphs standardized in the BGB, but essentially to judges' law, this step should be handled very carefully. Each individual case is different and a decision that is positive for its own purposes, for example by the Düsseldorf Higher Regional Court, may be judged very differently by the Munich Higher Regional Court.

In addition, it should never be forgotten that the courts assume an unconditional obligation to cooperate for both parties to a building contract. Smaller disruptions therefore certainly never justify extraordinary termination. Before issuing an extraordinary termination, the other party should, if possible, always be given the opportunity to remedy the disruptive circumstances by setting a deadline.

In the event of a justified extraordinary termination, the contractor is of course entitled to compensation for the work previously performed. In addition, in the event of fault on the part of the client, claims for damages may exist, which then also include, for example, the lost profit.

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