International Construction Law Review
GUARANTEES OF PERFORMANCE IN CONTRACTS FOR INDUSTRIAL PLANT PROJECTS UNDER THE NEW GERMAN CONTRACT LAW
DR MARKUS BEAUMART
Linklaters Oppenhoff & Rädler, Köln
I. INTRODUCTION
In contracts for industrial plant projects it is common practice for the contractor to guarantee certain technical data such as performance levels, power consumption or the availability of the equipment. Such contracts also contain specific provisions governing the consequences of a non-compliance with any guarantees and, most importantly, a general limitation of the contractor’s liability which excludes the liability for consequential damages such as loss of profit. Hence, commercial and legal practice has developed a certain standard for contracts for industrial plant projects which deviates from the statutory rules of warranties and which provides for a more sophisticated risk allocation between the employer and the contractor.
Until recently, the term guarantee was neither defined nor otherwise addressed by the German Civil Code so that parties negotiating a contract for an industrial plant project under German law had great freedom to agree on an individual risk allocation including certain guarantees for technical data. However, since the last comprehensive reform of the Code, effective from 1 January 2002, the term guarantee is subject to new regulations in sections 444 and 639 of the German Civil Code. As those provisions literally set forth that once a contractor or seller gives a guarantee, he may no longer invoke a limitation or exclusion of liability, this raises doubt whether the above-mentioned and well-established individual risk allocation in contracts for industrial plant projects will still be effective. The issue is all the more important as comments in legal literature state that sections 444 and 639 of the Code are provisions of a compulsory nature and may not be deviated from by agreement.
II. GUARANTEES OF PERFORMANCE IN CONTRACTS FOR INDUSTRIAL PLANT PROJECTS
The proper allocation of risk is usually a central theme of a well-drafted contract for an industrial plant project. Risk allocation will therefore often be negotiated between the parties on an individual and project-specific basis. As
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The International Construction Law Review
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