Austria: Construction

The In-House Lawyer Logo

This country-specific Q&A provides an overview to construction law in Austria.

It will cover termination requirements and obligations, permits and licence, procurement, financing and security, and disputes as well as insight and opinion on challenges and opportunities.

This Q&A is part of the global guide to Construction. For a full list of jurisdictional Q&As visit http://www.inhouselawyer.co.uk/practice-areas/construction/

  1. Is your jurisdiction a common law or civil law jurisdiction?

    Our legal system is a civil-law system.

  2. What are the key statutory/legislative obligations relevant to construction and engineering projects?

    The governing provisions are the provisions of the Austrian Civil Code Allgemeines Bürgerliches Gesetzbuch ([German acronym:] ABGB) and the Building Codes of the individual Federal Länder.

  3. Are there any specific requirements that parties should be aware of in relation to: (a) Health and safety; (b) Environmental; (c) Planning; (d) Employment; and (e) Anti-corruption and bribery.

    Rules in the area of health and safety are found in the Building Codes.

    Rules in the environmental area are found in a host of environmental statutes.

    Rules in the area of anti-corruption and bribery are found in the Criminal Code.

  4. What permits/licences and other documents do parties need before starting work, during work and after completion? Are there any penalties for non-compliance?

    A building permit is required for a construction project. Where a construction project is carried out without a building permit, the public authority may order the project discontinued and may impose sanctions.

  5. Is tort law or a law of extra contractual obligations recognised in your jurisdiction?

    In the Austrian law governing liability, a distinction is made between contractual liability and tort liability.

  6. Who are the typical parties to a construction and engineering project?

    On a typical construction project /technical project, the typical parties are the client and the contractor.

  7. What are the most popular methods of procurement?

    Where private clients are involved, there are no standardised methods of procurement. On public contracting, the most frequent methods of procurement are public procurement proceedings, negotiated proceedings with prior publication and non-public proceedings without prior publication.

  8. What are the most popular standard forms of contract? Do parties commonly amend these standard forms?

    Construction contracts, as a rule, are unit price contracts or lump-sum price contracts. On the unit price contracts, the client is charged based on the quantities actually used. On lump-sum contracts, there is no charging by quantities. There is also the option of agreeing to an hourly rate. On contracts with an hourly rate, the client is charged based on the actual hours expended.

  9. Are there any restrictions or legislative regimes affecting procurement?

    The only restrictions on procurement are those in respect of public clients. Public contracting is covered by the Federal Procurement Act.

  10. Do parties typically engage consultants? What forms are used?

    Parties will usually engage advisors. One should distinguish here between legal advisors, tax advisors and technical consultants.

  11. Is subcontracting permitted?

    There are only restrictions in respect of public procurement. Where contracts are awarded by private clients, the only way restrictions on sub contracting can be imposed is by contract.

  12. How are projects typically financed?

    Projects are usually financed by equity capital, bank loans and private equity.

  13. What kind of security is available for employers, e.g. performance bonds, advance payment bonds, parent company guarantees? How long are these typically held for?

    Security interests will depend on the contractual agreement. Customary types are performance guarantees, pre-payment guarantees and guarantees provided by parent companies. The period covered by the security will depend on the parties’ contractual agreement. Parties will also agree to so-called retentions. A retention is a percentage of the amount payable under a partial invoice, which is then only paid at the time of the final payment.

  14. Is there any specific legislation relating to payment in the industry?

    There are no specific legal rules governing payments in the construction sector.

  15. Are pay-when-paid clauses (i.e clauses permitting payment to be made by a contractor only when it has been paid by the employer) permitted? Are they commonly used?

    Such clauses are permitted and are customary. However, court jurisprudence in Austria requires general contractors to use their best efforts to urge their client to make payments.

  16. Do your contracts contain retention provisions and, if so, how do they operate?

    Parties may agree in a construction agreement that in the event of a reduction of value or if a portion of the job is cancelled, the contractor must be compensated for the disadvantage suffered which is not covered by unit prices or otherwise. However, this is only where the loss totals more than 5% of the contract price.

  17. Do contracts commonly contain delay liquidated damages provisions and are these upheld by the courts?

    Contracts do usually provide for lump-sum contractual penalties in the event of default. However, such contractual penalties are subject to a judicial right of abatement. However, the court may not abate the contractual penalty to an amount which is below the actual losses suffered.

  18. Are the parties able to exclude or limit liability?

    It is permitted for parties to limit or disclaim liability. However, the limit on their ability to do so is the principle of unconscionability or gross disadvantage to the other contracting party.

  19. Are there any restrictions on termination? Can parties terminate for convenience? Force majeure?

    Both parties are able to rescind the contract prior to handing over if the other party has defaulted in performing. In addition to this general right of rescission, the Austrian legal system provides for a special right of rescission where the client fails to discharge its duties of cooperation. This right of rescission is seen as a form of termination. In addition, the client under a construction agreement is entitled to cancel performance of portions of the works at any time. This right to cancel the contract in part is not regarded as unlawful. The consequence of such cancellation is that the client is obliged to demand the agreed contract price minus
    the savings arising from the cancellation. The contractor must thus not be placed in a worse position than it would have occupied if it had been given the opportunity to perform the contract. Thus, in commercial respects, the contractor must be compensated for its lost earnings as a result of the cancellation.

  20. What rights are commonly granted to third parties (e.g. funders, purchasers, renters) and, if so, how is this achieved?

    N/A

  21. Do contracts typically contain strict provisions governing notices of claims for additional time and money which act as conditions precedent to bringing claims? Does your jurisdiction recognise such notices as conditions precedent?

    Ordinarily, contracts provide rules governing the claims of the contractor for extensions of time and additional costs. In that context, contracts will provide for short periods for giving notice of such claims, failing which the claim will lapse. As a general principle, such agreements are permitted as long as the time limits are not excessively short.

  22. What insurances are the parties required to hold? And how long for?

    The Austrian trading regulations provide that contractors or entrepreneurs in related construction sectors are required to take out liability insurance in defined amounts. For planning master builders, the law requires liability insurance of EUR 1,000,000.00. There are no prescribed mandatory amounts of insurance for architects and clients.

  23. How are construction and engineering disputes typically resolved in your jurisdiction (e.g. arbitration, litigation, adjudication)? What alternatives are available?

    Construction law disputes are customarily resolved in court. Arbitration and alternative dispute resolution tends to be rare.

  24. How supportive are the local courts of arbitration (domestic and international)? How long does it typically take to enforce an award?

    The courts are very open to arbitration. In some cases, courts put pressure on the parties to terminate their dispute out of court through mediation.

  25. Are there any limitation periods for commencing disputes in your jurisdiction?

    The limitation period governing claims for works and services is usually 3 years from the date the invoice falls due. However, it is customary in construction contracts to include clauses imposing a duty on the contractor to assert a reservation within a short period of time (within
    3 months, as a rule) from the date of correction of the final invoice, if the contractor does not agree to deductions made from the invoice amount. Where that period is not complied with, the contractor will no longer be able to assert the claim in court. There are likewise limitation
    periods governing defects or claims for damages. Defects must be asserted within 3 years from the date of handing over. Claims for damages must be asserted within 3 years from the date the claimant became aware of the loss and the party causing the loss.

  26. How common are multi-party disputes? How is liability apportioned between multiple defendants? Does your jurisdiction recognise net contribution clauses (which limit the liability of a defaulting party to a “fair and reasonable” proportion of the innocent party’s losses), and are these commonly used?

    The Austrian Code of Civil Procedure contains provisions governing multi-party proceedings. Multiple tortfeasors will, as a general rule, be liable pro rata in proportion to their share of culpability. Where causality and percentage of fault cannot be ascertained, their liability is per capita. Net contribution clauses are not customary.

  27. What are the biggest challenges and opportunities facing the construction sector in your jurisdiction?

    The biggest challenge is asserting claims for additional costs and extensions of time where the progress of construction was frequently disrupted.

  28. What types of project are currently attracting the most investment in your jurisdiction (e.g. infrastructure, power, commercial property, offshore)?

    The public sector is making high levels of investment in the realm of infrastructure. In the area of railway tunnels, the Brenner Base Tunnel, the Koralm Tunnel and the Semmering Base Tunnel are currently under construction. In Vienna, construction on a new underground line has commenced, which is largely being constructed by means of mined excavation.

    High levels of investment are also being made in residential construction in Vienna, because the population of the capital city is growing rapidly.

  29. How do you envisage technology affecting the construction and engineering industry in your jurisdiction over the next five years?

    The construction sector is one of those industry sectors that is most affected by rapid technical developments. No changes in this respect are anticipated over the next 5 years.