Construction company halts work despite overpayment

But you cannot be sure that he wouldn't have sued you for payment of the disputed invoice ... therefore

Honestly, I don't know. The fact is that such companies are protected by this legal system because the costs and risks for builders are not predictable. He can still sue us for the payment of the invoice now; again, it is solely a matter of the judge's discretion. If he/she believes that we did not pay the invoice unjustly, we are screwed. Since we are burdened with the proof, we have to commission this very expensive expert, recognized by the court, to prepare another expert report on the current defects.

You mean no legal action and rather use the money to continue building and repair damages

Then we would have had to terminate, and he would have been entitled to 5% for his remaining work = €20,000. That means he would have still received a reward for the mess he caused. As long as this is not legally regulated at some point, you are the fool in any case here.

There is a classic legal protection insurance for that. Maybe one really should generally advise everyone to take one out beforehand. Unfortunately, I haven't taken one out either and I am regretting it a lot right now.

That would be completely new to me. Every insurance excludes house construction as an insurable risk in legal protection insurance and with good reason, no insurance can afford that because nowhere does it go smoothly without any friction.

There is of course the classic legal expenses insurance for that. Maybe one should really generally advise everyone to take one out beforehand.

which, however, sounds easier than it is. Because the "classic" legal expenses insurance does not cover construction disputes. There are very few, and they all have significant limitations, such as coverage limits that are far too low. Only the Sparkasse offers a product, but it is only available in connection with financing.