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Case:
BGHZ 71, 144 VII. Civil Senate (VII ZR 145/76)
Date:
16 March 1978
Note:
Translated German Cases and Materials under the direction of Professors P. Schlechtriem, B. Markesinis and S. Lorenz
Translated by:
Tony Weir
Copyright:
Professor B.S. Markesinis

By standard form contract dated 29 June 1967 the defendant architect undertook with the plaintiff to plan, manage and supervise the building of a vertical and lateral extension to its office building. The contract contained the following provisions:

para. 6. Representation of the Employer. In the execution of his duties the architect is entitled and bound to protect the employer's rights

para. 12. Extent of Liability, and Subsidiarity. The architect is liable only for harm proved to be due to his fault. Such liability is limited to paying for direct damage to the buildings.

2. In case of inadequate supervision or inspection of faulty work executed by a building subcontractor or subcontractors, the architect is liable only if such subcontractor is insolvent.

para. 14. Prescription. 1. The employer's claims against the architect for failure to comply with the contract and claims for damages prescribe in two years ... The period of prescription starts to run when the building is taken over, and the building is deemed to have been taken over when it is taken into use.

2. If a claim is brought against both architect and a subcontractor the architect ceases to be liable when the subcontractor ceases to be liable, if not earlier.

On behalf of the plaintiff, the defendant selected the builder S. to do the basic construction work, under a contract on VOB/B terms. The building was completed on 18 April 1968.

In 1970 cracks appeared. Their cause is still a matter of dispute. In January 1974 the plaintiff started proceedings to secure evidence. According to expert opinions obtained on 2 July, 5 August, 5 September and 24 September 1974, one possible cause of the cracks was a failure adequately to refill an excavation behind the new concrete foundations.

This action, in which the plaintiffs seeks to make the defendant liable in damages for the cost of mending the cracks, was brought at the end of February 1975. The defendant denies that he is liable for the harm, asserts that should he be liable for fault in supervision, such liability is purely secondary, and raises the defence of prescription.

The Landgericht and the Oberlandesgericht held that the plaintiff's claim had prescribed. The Bundesgerichtshof now allows the plaintiff’s appeal on the following grounds:

The Court of Appeal did not determine whether the damage to the office block was due to faulty conduct on the part of the defendant, or whether any 'working space' excavated behind the foundations had remained unrefilled.

They held that the harm was not due to any fault of the defendant in drawing up the plans. The defendant's liability for any fault in supervising the building works was purely secondary. It is not shown that the party primarily liable, viz the building firm, was insolvent. The claims for breach of warranty against the building firm prescribed on 18 April 1970, but this prescription was not analogous to insolvency, since the plaintiff knew of the harm by March 1970 at the latest, that is, before prescription occurred; and could have started a fresh period of prescription running by making written demand on the building firm that it remedy the defects. The plaintiff could not look to the defendant for payment of the harm which was due to its own negligence.

The Court of Appeal proceeded to note that if the defendant had also been aware of the cracks in March 197O, he would have been bound under para. 6 of his contract to protect the plaintiff's claims for breach of warranty against the building firm; breach of this duty would give the plaintiff a claim for damages for positive breach of contract, but any such claim had also prescribed, as had any claim against him on the guarantee. The running of prescription on the guarantee claim up till 18 April 197O was not interrupted under para. 639 par. 2 BGD, because he had not undertaken to examine his own work as architect. The claim for damages for positive breach of contract did not begin to prescribe until 18 April 197O, but the contractual period of two years applied to this claim also, and there was no suggestion that the running of this period had been interrupted.

Nor was it fraudulent of the defendant to involve the defence of prescription.

These observations of the Court of Appeal are not free from legal error.

I.
1. ...
2. ...

3. In this court we must assume that the defendant was guilty of the fault in planning which is in evidence, and also of faulty supervision of the inadequately executed excavations. The plaintiff assertions have not yet been established, but if they are, the question is whether the defence of prescription is good.

The Court of Appeal was right to hold that the running of the two-year period of prescription relating to the architect's work was not interrupted by the investigations which took place before the middle of April 1970; the defendant was not in this matter undertaking an examination of his own work (para. 639 par. 2 BGB), but was only helping the plaintiff to assert his possible rights against the joinery firm (see the decisions of the senate in NJW 1964, 647, 648 ...).

Accordingly the plaintiff's claims on the defendant's guarantee prescribed on 18 April 1970.

II.

1. The Court of Appeal was right to see that the defendant might be guilty of a positive breach of contract in failing to write to the builder S. to demand correction of the defects, and so interrupt the prescription of the plaintiff's claims on the builder's guarantee. A duty to protect the employer's rights against subcontractors arises expressly from para. 6 of the architect's contract, but is also part of the architect's general duties when he is entrusted with the planning, management and supervision of building work (decision of this Senate in NJW 1967, 2010, 2011; 1973, 1457, 1458). If there was evidence that the windows were letting in water and that the window-sills were sinking, the defendant would certainly be at fault if he did not immediately investigate the cause, invoke the building firm's responsibility on the available evidence and take care to prevent the prescription of any such claim vested in the employer (reference omitted). It was his job to know and appreciate that the prescription of the claims on the guarantee against the firms doing the work was imminent, and he should have protected the plaintiff's interests by timeous intervention. Failure by the defendant to do this, if indeed it was the fact that S had done the excavation work improperly, would cause harm to the plaintiff in that he would be unable, in the absence of fraudulent concealment of the defects, to claim damages from the subcontractor or demand that they put the defects right. This harm would only arise when the claims for breach of warranty against the builder prescribed, that is on 24 April 1970 (reference omitted).

2. The Court of Appeal did not consider the possibility that the defendant might perhaps be guilty of a further positive breach of contract when the defects in the building due to the settlement first manifested themselves, in failing to make a decisive investigation of the causes, including any for which he himself was liable, and give the plaintiff a prompt and accurate report on the technical and legal methods of remedying the damage; had this been done, the claims for breach of guarantee and damages against himself would not have prescribed. There was quite sufficient time and reason for the defendant to give the plaintiff comprehensive and disinterested advice well before 18 April 197O when his liability for defective work prescribed, and he should also have told the plaintiff about his oversight in allowing the plaintiff's guarantee claim against S. to prescribe. Instead of this, as the correspondence before the court clearly shows, the defendant, in breach of duty, left it to the plaintiff itself to ascertain the cause of the harm.

The duty of loyalty imposed on an architect (decision of this senate in NJW 1973, 1457) includes not only the duty to protect the employer's rights as against subcontractors, but also the principal duty to give an objective explanation of the causes of the defects, even if these are due to his own fault in planning or supervision (NJW 1967, 2010; 2611; 1971, 1130). Of course an architect is not exactly like an attorney, and one cannot expect him to inform the employer explicitly of any regress claim the employer nay have against himself by reason of his failure to look after his employer's legal interests (on the liability of the attorney see BGH NJW 1975, 1655, 1656 with further references). But as a specialist adviser, the architect does owe the employer a duty to give a prompt and comprehensive report on the causes of defects in the work which have manifested themselves, as well as a technical explanation of the result of the investigations and of the legal position which results therefrom.

It is as much the duty of the architect to inform the employer of such matters as it is, in proper circumstances, to apprise him of relevant provisions of public law or of available building tax reliefs (compare BGHZ 60, 1, 3). The fact that the architect himself has an interest in avoiding liability so far as possible cannot justify his failure to give the employer proper information. On the contrary, it is because the employer trusts the architect and relies on him to investigate the sources of building defects that the architect must also inform him of defects in his own work as architect so that the employer can assert his rights against the architect himself in good time before prescription occurs.

If an architect breaks his contract by wholly failing to make proper investigation and give proper advice with the result that the claims against himself prescribe, he is liable, just as he would be for erroneous advice, to a further claim for damages, the legal effect of which is that the existing claims against the architect for breach of warranty and damages are deemed not to have prescribed at all (RGZ 158, 130, 136; BGH NJW 19964, 1022, 1023; DGH 28 Jan. 1977, WM 1977, 410).

3. We cannot agree with the Court of Appeal that the two-year period of prescription contained in para. 14 no, 1 of the architect's contract applies to claims for damages based on positive breach of contract arising after the building work is taken over,

a) The standard form contract used in this case is in use throughout the whole of the Federal Republic. This court therefore has a certain freedom in construing the standard terms (see BGH 12 Jul. 1971, WM 1971, 1371; NJW 1975, 1215, 1216).

b) In general conditions of business, a narrow construction is indicated, so the provision that an employer's claims against his architect for non-performance or damages prescribe in two years must apply only to claims for performance and claims for damages arising out of defective work as an architect (paras 633-635 BGB). This may well include claims for positive breach of contract which lead to a defect in the work done by the architect (references omitted). To limit the prescriptive clause to claims by the employer which are based on the conduct of the architect before the building is taken over makes good sense, because under these clauses -- as in paras 12 no, 5 par. 2, 13 no, 4 VOB/B 1952 the prescriptive period starts to run when the building is formally handed over or is taken into use, The clause relating to the beginning of the period of prescription cannot possible be applied to damages claims which only arise later, such as claims which only arise once the claims on the guarantee have prescribed. This justifies the conclusion that these clauses, properly and narrowly construed, do not apply to claims which arise only after the building is handed over or taken into use.

c) But the Court of Appeal did apply the two-year prescriptive period here, though it held that in the case of a claim arising later, the period of prescription started to run only when the claim arose. This is logical enough from the Court of Appeal's point of view, and it is a possible creative interpretation of the contract. But the Court of Appeal did not give sufficient weight to the fact that both the period of prescription and the moment when prescription starts to run are here modelled on the rules applicable to building contractors under para. 13 VOB/B. This shows that, for the architect as for the building contractor, the two-year prescription period beginning when the building is taken over is not meant to cover claims of the employer for breach of collateral duties after the building has been taken over, for example in the investigation and remedying of building defects which manifest themselves only later, or in protecting the employer's rights under guarantees and in advising him accordingly. para. 14 no. 1 sent. 1 of the architect's contract is not so widely formulated as to give rise to the inference of a contractual will (paras 133, 157 BGD) that the two-year period is to apply to all claims for damages, regardless of how or when they arise. Accordingly any claims for damages arising from positive breach of contract in this case are subject to the thirty-year period of prescription (para. 195 BGB).

d) This construction of the architect's standard form contract of 29 June 1967 is not in conflict with any prior decision of this court (see NJW 1971, 1840, 1842, with further references)...

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