Subcontractor law

David vs. Goliath

Typically the constructor tries to pass on all the risks of his legal position to the building owner and subcontractors. This is legally not solid, though. Contracts between constructors and subcontractors are legally autonomous contracts. Rights and duties between subcontractor and constructor are independent from relation between constructor and building owner.

However, in reality some constructors try to get subcontractors obligated with contractual duties. From constructors you often hear: “Building owner didn’t pay yet, so subcontractor can’t be paid.” This expression is unjustified and a delaying tactic to force subcontractors to make deductions from their legitimate claims.

Often constructors argue that there are defects (even though the building owner didn’t reprehend it) so that the subcontractor has to make deductions from his legitimate claims in the future. In this case the constructor forgot about the adjustment of profit, which states that the subcontractor has to be fully paid. Further possibilities for subcontractors are ruled in the “Forderungssicherungsgesetz”.

Constructor insolvency is very dangerous for subcontractors especially in the building sector. In addition subcontractors have some possibilities for collateralization, like construction lien and construction bail in order to prevent loss of receivables. Even in case of constructor insolvency subcontractors have possibilities to get paid by the constructor executive. “Bauforderungssicherungsgesetz”