Self-debtor contract performance guarantee

Hello everyone,

we have been presented with a construction contract for review from our preferred company, in which a deviation from §650(1) is agreed upon: The contractor (BU) can already demand the last 10% payment before the service is rendered if he previously provides a "self-debtor performance guarantee" from a German credit institution or insurance company. Furthermore, various rights are withdrawn from the guarantor:

[*]The objection of prior enforcement according to § 771 of the Construction Code is waived.
[*]The objection of set-off according to § 770 para. 2 of the Construction Code is waived, unless the counterclaim eligible for set-off has been legally established or is not disputed by the client.
[*]The depositional authority of the guarantor is excluded.
[*]The guarantee is limited until acceptance.

My question concerns how this is handled in the event of a dispute. If, as the client, you simply do not pay the 10%, the pressure on the contractor is presumably high.
With this guarantee, do I as the client have to prove to the insurance company that something was not completed / defective in order to enforce my claim to get the money back in case of doubt?

Are these regulations now often found or does this construction contract represent an exception in this respect?

Thank you very much for your answers.

Developer needs liquidity and pays 0.5 to 1 % to the bank. In case of emergency, you deal with the Bürgschafrsbank.

Money is money and a guarantee is initially just a piece of paper. In case of doubt, it must first be determined with considerable effort whether there is even a defect, how high the financial value is, and so on.

It is better if the final payment can be withheld proportionally. Logically, only as much as necessary to have any existing defects eliminated. Then the contractor is definitely more interested in bringing the matter to a quick and proper conclusion rather than arguing. If he already has your money, he can take the risk and argue forever, while the guaranteeing bank meanwhile sits back comfortably in the background.

The contract is from this year (2018). I have read the mentioned paragraphs, but unfortunately did not become any wiser.

The principle of the guarantee is clear, I believe it is explicitly permitted in §650m (3), if I understood that correctly?

My question relates to how this is handled in the event of a dispute. If, as the client, you simply do not pay the 10%, the pressure on the contractor is high if necessary. With this guarantee, do I, as the client, have to prove to the insurance company that something was not completed / is defective in order to enforce my claim and, if necessary, get the money back?

The guarantee is to be seen as good as cash. It is absolutely normal in commercial transactions and works well there too. If necessary, you call on the guarantee, get your 10%, and have the legal dispute with the contractor – exactly as it would be if you withheld the 10% directly.

Thank you for your contributions.

I have received a "contract for work and services." However, I think my contract fulfills § 650i.

I looked up the laws on dejure. Whether and how all of this can be reconciled is beyond my expertise. In particular, 650m (2) is regulated in the contract for work and services in the form of a guarantee = 5% at the beginning as security for timely completion.

The wording is "Deviating from 650 m (1) and based on 650 o Building Code it is agreed that the contractor may demand payment for the last 10% of the total remuneration before performance if the contractor ... provides a suretyship ... [to us]." Further formulations follow in my opening post.

I also have a contract for work and services from 2018 for review from another / alternative construction contractor. This regulation also appears there in similar wording. So it seems to be the "standard"?