Germany Update: BGH: Remuneration for Defect-Free Construction Services Due Without Acceptance in Insolvency

What is it about?

The Civil Senate of the Federal Court of Justice, responsible for insolvency law, recently ruled on a highly practice-relevant issue concerning a construction contract (Federal Court of Justice, judgment of 17.07.2025, case no. IX ZR 70/24).

The case: A contractor under a construction contract became insolvent. His work contained defects, and the agreed remuneration had not yet been fully paid. After insolvency proceedings were opened, the insolvency administrator opted for “non-performance” within the meaning of Section 103 of the German Insolvency Code. In other words, any outstanding work (including defect remediation) no longer had to be completed. This is the standard outcome in construction insolvencies, as debtors typically lack the resources to continue fulfilling their contractual obligations.

In legal literature on construction law, the prevailing view to date has been that remuneration in such situations only becomes due if the services already rendered have also been formally accepted, in addition to meeting any other standard requirements (e.g. submission of a tax exemption certificate, final invoice in the case of VOB/B contracts, etc.).

The lower courts followed this approach: the insolvency administrator’s claim was dismissed for lack of acceptance.

What did the Federal Court of Justice decide?

On appeal, the Federal Court of Justice took a different position and sided with the insolvency administrator.

With the opening of insolvency proceedings, the claim (if divisible in terms of value) is automatically split:

• one claim for remuneration for services already performed without defects, and

• another claim for services not yet properly fulfilled (i.e. defective).

Importantly, the Court held that the claim for remuneration relating to the defect-free portion of the works — including the defect-free part of partially defective services — does not require prior acceptance to become due. Nor does acceptance of the overall performance have to occur first. As a result, the insolvency administrator could demand payment immediately.

For partially defective services, the remuneration is calculated as the proportion of the total fee attributable to that service, reduced by the costs necessary to remedy the defects.

Practical note

The Court did not address the wider consequences of dispensing with acceptance — for instance, questions relating to risk transfer or the commencement of limitation periods for warranty claims.

Therefore, insolvency administrators are still well advised to insist on formal acceptance by the client in order to secure these additional legal effects with certainty.

This article was first published in ImmobilienReport Metropolregion Rhein-Neckar, issue 194.

By MELCHERS, Germany, a Transatlantic Law International Affiliated Firm.

For further information or for any assistance please contact germany@transatlanticlaw.com

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