Contact 
LEXIKON
Loss of remuneration for work performed due to breach of the duty to warn
The contractor’s duty to warn is a central element of Austrian contract law. In its recent decision of January 21, 2025, 1 Ob 165/24g (www.ris.bka.gv.at/jus), the Austrian Supreme Court outlined the limits of the duty to warn. If the contractor fails to comply with his duty to warn, this can lead not only to liability consequences but also to the loss of his claim for remuneration.
Facts of the case
The above-cited decision was based on the following facts: The plaintiff is the owner of a property on which an old mixed sewer runs, through which both sewage and rainwater (mainly from a parking lot of approximately 2,000 m²) are discharged. Problems with the sewer occurred in a building located on the property because water was “forced up” when a toilet was flushed. The plaintiff therefore contacted the defendant civil engineering company, described the problem, and asked for a renovation proposal. She also provided plans of the sewer and a report of a recent video inspection (“sewer inspection”), which revealed damage to the sewer in the area of the building. The defendant inspected the property and suggested replacing only the defective section of pipe. Work on the rest of the sewer was not discussed, nor were alternative solutions for the disposal of surface water or the dimensioning of the sewer pipes. The defendant’s offer on which the contract was based specified a diameter of 200 mm for the new pipe, because this was the dimension of the existing sewer as shown in the sewer plan provided to the defendant. Since, contrary to the plan provided to the defendant, the sewer pipes found only had a diameter of 150 mm, the defendant laid pipes with a diameter of 150 mm. However, sewer pipes with a diameter of at least 300 mm would have been necessary to drain the parking lot, which an experienced civil engineering contractor should have known and noticed. After completion of the work, heavy rainfall caused flooding of the parking lot and, as a result, water to enter the building. In its lawsuit, the plaintiff is seeking (among other things) repayment of the remuneration it paid for the work.
On the duty to warn under a contract for work
According to Section 1168a of the Austrian Civil Code (ABGB), a contractor is liable for damage if the work fails as a result of the obvious unsuitability of the material provided by the customer or an obviously incorrect instruction given by the customer and the contractor has not warned the customer of this. The duty to warn only exists within the scope of the contractor’s own performance obligations and the associated duties of care and protection, which protect the interests of one party to the contract and must therefore be observed by the other party, but must be determined in accordance with general principles based on the meaning and purpose of the specific contract.
The contracting parties must behave in such a way as the other party may expect with regard to the purpose of the contract, so that the latter is not thwarted but facilitated and damage is prevented. “Obvious” within the meaning of Section 1168a of the Austrian Civil Code (ABGB) is an incorrect instruction, incorrect material, or any other risk of failure of the work for reasons within the sphere of responsibility of the customer, if the contractor could have recognized this based on the expertise that could objectively be expected of them.
The decision
While the court of first instance affirmed a breach of the duty to warn, this was denied by the court of appeal. The Supreme Court, however, upheld the claim: In this case, it was to be assumed that the “sewer to be partially renovated” by the defendant was (also) intended to serve for the drainage of the parking lot. According to the Supreme Court, this is evident from the fact that the defendant addressed the drainage situation on the entire property it had inspected in detail in its offer. As a civil engineering company, the defendant should also have recognized that the purpose of surface drainage of the parking lot could not be achieved due to the obvious unsuitability of the material provided (the insufficient dimensions of the pipes to be connected to the pipes to be replaced, which had to be of the same dimensions). By failing to point this out to the plaintiff, it culpably violated its duty to warn.
The purpose underlying the contract for work and services, at least implicitly (and therefore forming part of the contract), namely to ensure the drainage of the parking lot with the sewer to be renovated by the defendant in one section, was not fulfilled. This meant that the defendant’s work was unusable for the plaintiff in terms of its intended function. The defendant is therefore not entitled to any remuneration for the work.
Conclusion
The contractor would be well advised to express any concerns in a timely and verifiable manner. Otherwise, in extreme cases, there is a risk of losing the entire remuneration for the work.