Tag: warranty claims

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German Caselaw: When will warranty claims for rooftop solar power stations be time-barred?
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Unreasonable disadvantage to contractor: Securing warranty claims by standard terms and condi-tions restricted by German Federal Supreme Court

German Caselaw: When will warranty claims for rooftop solar power stations be time-barred?

By Christoph Mank, K&L Gates, Berlin

The question of when warranty claims are time-barred according to the German Civil Code, may differ from contract to contract. Often, warranty claims are time-barred two or three years after transfer of risk; however, for construction works, longer periods of four or five years may be applicable, starting with the completion and acceptance of the works.

The civil division of the German Federal Supreme Court (“BGH“), which is ─ inter alia in charge of construction law, had to decide a case recently in which rooftop solar panels were installed subsequently on the roof of an indoor tennis center. Three years ago, another civil division of the BGH ─ which is in charge of the law related to sale and purchase agreements ─ had to decide a very similar case in which rooftop panels were installed on a barn. In the case of 2013, the BGH ruled that warranty claims for the solar panels, which were only delivered and not installed by the vendor, are time-barred two years after delivery. According to that decision, the rooftop solar power station is not a building or a “structure,” which it needs to be considered to qualify for the five-year warranty period. Only the barn is a building, and the solar power system is not relevant for the construction and the continued existence of the building; the solar power system is only used for generating electricity.

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Unreasonable disadvantage to contractor: Securing warranty claims by standard terms and condi-tions restricted by German Federal Supreme Court

By Christoph Mank, K&L Gates, Berlin

Background
Standard terms and conditions in German construction contracts often contain requirements to provide a warranty bond to secure performance by the contractor of its warranty obligations under the contract. These requirements often stipulate the contractor to provide both a performance guarantee and a warranty bond.

The warranty bond secures the contractor’s warranty obligations during the warranty period (typically arising after the acceptance and take-over of the construction works) and is often in an amount of not more than 5% of the contract sum. This practice has been established due to prior case law by the German Federal Supreme Court. According to the Federal Supreme Court, the client´s security interest after acceptance of the construction is significantly lower than its security interest during performance.

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