I have not written anything here for a long time, but it is incredible what incompetence and/or arrogance one encounters in such a construction project...
The good news upfront: the basement and ground floor are almost finished. Not free of defects, but finished. Tomorrow the painters and plasterers will come to finalize.
In the attic, however, the main bathroom was not completed by the tiler. I had terminated him extraordinarily. Subsequently, there was a termination agreement. So far so good. The reason for this still makes me angry. The belief that an invoice with the note „3% discount if payment is received within 7 days“ would already be due after 8 days.
Here an excerpt:
The contractor was already absent from the construction site on 11.02.2020 and informed the client’s architect on 13.02.2020 that he had stopped his work due to the unpaid invoice 4388 from 31.01.2020. The architect explained to the contractor on 13.02.2020 that the cessation of work was not justified. Furthermore, the consequences of his behavior – termination by the client with claim for damages – were pointed out to the contractor.
My further statement on this, unfortunately no other way to resolve it:
You have the right to stop work if we do not make progress payments or fail to pay them in full. Accordingly, you stopped work on 11.02.2020, [13.02.2020] and on 18.02.2020 and today, on 19.02.2020, [as is now known: also today, on 20.02.2020]. However, this is bound to a prior setting of a deadline by you. You missed this deadline and were/are not entitled to stop your work. If this still occurs and you thereby jeopardize the completion date (21.02.2020), we may now terminate for cause, which obliges you to pay damages. […]
It is undeniable that stopping work poses a very significant risk for the contractor. If the contractor makes a legal error in the assessment and his resulting claim is unfounded or not yet due, stopping work constitutes a serious and final refusal to perform by the contractor with the legal consequence that the client can immediately terminate the construction contract for cause and demand damages instead of performance. Therefore, the contractor is well advised to carefully check in the first step to what extent the respective progress payment invoice is actually due and based on a justified claim. Then, in any case, a written reminder by the contractor with a warning of stopping work towards the client is required in the second step. The contractor must ensure that he can prove receipt of his reminder with the setting of a deadline after the due date by the client in the event of a dispute. If these requirements are met, the contractor should generally be on the safe side with his stopping work.
Examination of step 1 (due date):
You issue an invoice with the creation date 31.01.2020 and the payment term “3% discount if payment is received within 7 days.” A discount period is always a mutually voluntary payment term! That means if the discount is not used, the statutory payment term of 30 days (VOB/B 21 days) applies. Therefore, at the time the work was stopped (11.02.2020, 18.02.2020 and 19.02.2020), there was no default in payment. According to the payment term, no due date had yet occurred.
You must attach a verifiable statement of the contractually rendered services to the progress payment invoices, which enables us to quickly and securely assess the service. As this was not done, no due date arises on this basis.
Depiction of the performance status including interim measurement
According to § 632 a paragraph 1 sentence 2 of the German Civil Code and § 16 paragraph 1 no. 1 sentence 2 VOB/B, the services that are to be billed with the progress payment invoice must be proven by a statement that “must enable a quick and secure assessment of the service.” Only then is the progress payment invoice due for payment. The verifiable statement with measurement must be made by reference to the service description. Clients must be able to verify prior to payment that the agreed construction status has been demonstrably and defect-free delivered and thus the progress payment invoice is due.
This means in practice also the attachment of an interim measurement. Under no circumstances is the general term “a-conto” with a flat sum of, for example, EUR 5,000.00 sufficient. Basically, there are no significant differences regarding verifiability between progress payment invoices and final invoices. If the contractor wants to avoid extensive measurement evidence for progress payment invoices for reasons of speed, possible easements regarding progress payment invoices must be clearly regulated in the contract in advance. In case of doubt, the requirements for comprehensibility and verifiability of progress payment invoices must be regulated in detail, e.g., that approximate measurements, approximate progress etc. are allowed. If such “easement rules” are lacking, a correct and complete interim measurement including all sketches, tables, etc. is indispensable.
A progress payment invoice is not due before the contractor has proven the actual performance status by means of a verifiable progress invoice.
Examination of step 2 (written reminder):
Brief and clear: did not occur.
Further note on the tax requirements regarding the form requirements for the progress payment invoice. The following point 6 may also be insufficient on the invoice:
Every issued invoice must contain the following information according to § 14 paragraph 4 UStG:
1. the full name and full address of the performing entrepreneur and the recipient of the performance
2. the tax number or VAT identification number of the performing entrepreneur
3. the issue date
4. a unique, sequential invoice number
5. scope and nature of the service
6. time of the service
7. the remuneration for the service and any agreed advance reduction of remuneration (e.g., discount), unless this is already included in the remuneration
8. the applicable tax rate as well as the tax amount attributable to the remuneration
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Regarding your “notice of obstruction”:
Content:
The first paragraph refutes itself regarding the time factor because other work could be carried out. In addition, it must be noted that we agreed, regardless of the non-completion of other trades, to begin with the tiling work in the basement and utility room since the move-in was scheduled for 31.12.2019.
From 06.01.2020, the work was resumed. Since 06.01.2020, according to your letter, there has been a “slight rescheduling” due to the delayed sanitary installation.
You worked two weeks in December. You wanted to be finished within four weeks. Presumably also due to the fact that you wanted to work with two men simultaneously. Consequently, from 06.01.2020 there would have been two more weeks, hence completion on 17.01.2020. If you now finish as agreed on 21.02.2020, this is a delay of five weeks. This certainly does not justify the “slight rescheduling.”
Form:
To secure his claim for extension of construction time, the contractor must notify the client in writing of the obstruction (construction obstruction). Since a notification to the site managing architect only suffices in exceptional cases, the contractor should take the safe route and send the obstruction notification to the client. The contractor has no claim to consideration of the hindering circumstances if he fails to comply with the notification obligation.
A notice of obstruction also exists if the obstruction is evident from the construction meeting minutes or recorded in the site diary, provided these reach the client or are countersigned by him.
During the execution of a construction project, obstructions to construction may arise. In a VOB contract, detailed regulations on this are made in § 6 of the VOB/B. An obstruction must be reported by the construction company as contractor to the client immediately in writing according to § 6 paragraph 1 VOB/B. This should be analogously done towards a client or consumer. However, it is not necessary that the obstruction has already occurred. The notification should already be made upon concern by the contractor. Essentially, it is a contractual ancillary obligation.
When formulating such a notification, one should always keep in mind its function. The purpose of the obstruction notice is to protect the client. The client should be comprehensively and in detail informed about the existing disruptions and their probable effects on work progress in order to be able to take timely action and provide appropriate remedy. That is, the notice has an informational, protective, and warning function.
Under no circumstances is a general statement that obstructions occur sufficient. Rather, the contractor must specify as precisely as possible which concrete work he cannot carry out as planned due to which circumstances, what impact this has on the construction period and further measures, why no alternative evasive possibilities exist, etc. If the work is not made completely impossible by the obstructions but only complicated, the contractor must specify as accurately as possible what difficulties arise from the necessary changes to the construction process.
The contractor is obliged to reasonably undertake all that is reasonable for the further construction execution and to resume work after the hindering circumstances have ceased. He must protect the already completed construction services from damage and proactively promote the continuation of the construction execution.
In conclusion, the content of the “notice of obstruction” is debatable, the form insufficient. The originally contractual completion date within four working weeks (excluding Christmas and company holidays) after start of execution, i.e. 17.01.2020 remains. We generally and cooperatively waive any claim for damages on our part from this date up to today.
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The matter here concerns the fourth progress payment invoice. The first three progress payments were all paid on time and in full, although we could already have made defect withholdings here. So far, xx.xxx,xx EUR (gross) have been paid on time. The disputed matter now is a discount withholding of EUR 124.95 (gross). You endanger yourself with your actions because of this amount. As outlined above, also legally completely incomprehensible.
It should be noted that the contractor is not entitled to stop work if the outstanding payment is so small that it is disproportionate to the performance still to be rendered. Due to a minor payment arrears, the contractor is accordingly not entitled to refuse performance pursuant to the general principle of good faith.