retention

Which translation, when

Why

Retention in a building contract is the Sicherheitseinbehalt, the part of the price the employer keeps back as security, typically a small percentage held until acceptance and a further part held until the limitation period for defect claims has expired. It is a creature of contract: German statute does not provide for it, so the clause and, where the industry conditions are incorporated, those conditions determine how much may be withheld and for how long, and because such clauses live in standard terms they are open to the fairness review, which regularly strikes down retentions that are too large or run too long without allowing the contractor to substitute a guarantee. What German law does provide is the mirror image, and foreign employers meet it with surprise. Under § 650f BGB the contractor may demand security from the employer for the agreed remuneration that has not yet been paid, and the wording matters, because that covers the part of the works still to be carried out rather than only what has been earned, with ancillary claims added at a flat ten per cent; alleged defects do not reduce it and counterclaims are left out of account unless they are undisputed or finally established. If the employer does not provide the security within a reasonable period the contractor may refuse to perform or terminate the contract and claim accordingly, and the claim cannot be excluded or cut down by agreement, whether individually negotiated or in standard terms. Two groups of employers are outside it altogether, public-law bodies over whose assets insolvency proceedings are inadmissible and consumers under a consumer building contract or a developer contract, so the instrument is a weapon between commercial parties rather than a universal one. Alongside it stands the builder’s claim to a security interest in the employer’s land under § 650e BGB. The English word finally needs sorting, because retention does several jobs: retention of title is the Eigentumsvorbehalt, held by its own entry; a right to retain goods or documents until a counterclaim is satisfied is the Zurückbehaltungsrecht; and the retention of communications data is Vorratsdatenspeicherung, a term of an entirely different field.

Typical mistakes

• The Sicherheitseinbehalt rests on the contract and not on statute, so the amount and duration follow the clause and remain open to the fairness review.
• The statutory claim to security under § 650f BGB covers the remuneration not yet paid including the part still to be built, so a demand is wider than the work done so far, though it does not run against public-law employers or consumers under a consumer building contract.
• Retention of title, right of retention and data retention are three different German terms, so the English word alone does not settle the translation.

What matters

Reviewing the security provisions of a German building contract: the check should measure the retention against the fairness review, look for a substitution right, and note the contractor’s statutory claim to security in the other direction.

Examples