When contracts are awarded to external companies, this is often done on the basis of a contract for work and labour. Read about the rights and obligations of the client and contractor, what regulations a contract for work and labour should contain and how the contract for work and labour differs from other contract models.
For certain activities, it is advisable not to have them carried out by your own staff, but to commission an external company to do so. A contract for work and labour is then often concluded. In this contract model, there are various reciprocal obligations between the client (customer) and the contractor (contractor).
Rights and obligations of the two contracting parties
The contractor owes either the production of a specific work or the achievement of a specific work result at the contractually agreed time.
§ 631 BGB
(1) Under the contract for work and services, the contractor is obliged to produce the promised work and the customer is obliged to pay the agreed remuneration.
(2) The object of the contract for work and services may be both the manufacture or modification of an item and another result to be achieved through labour or services.
The client must remunerate the contractor in accordance with the agreement made. In addition, the client is obliged to co-operate in order to enable the work to be produced in the first place. He also has an obligation to accept the work. Acceptance, in turn, is a prerequisite for the contractor's claim to remuneration.
If the work is defective, the client has the following rights:
- He can demand subsequent fulfilment from the contractor (§ 635 BGB)
- If the contractor wrongly refuses subsequent fulfilment, the client can rectify the defect themselves and demand reimbursement of the necessary expenses from the contractor (so-called self-performance, Section 637 BGB)
- He can withdraw from the contract for work or reduce the remuneration (Section 638 BGB)
- Under certain circumstances, the client may demand compensation from the contractor for non-fulfilment if he has set a reasonable deadline for performance or subsequent fulfilment without success.
What a contract for work should contain
Legislation does not prescribe a specific form for contracts for work. However, in terms of legal certainty, it is recommended to conclude a written agreement. A contract for work and labour should contain the following information and provisions:
- Name and address of the contractual partners
- Concrete description of the work to be delivered
- Reference to the fact that the contractor carries out the order under its own responsibility
- Specification of the performance period/delivery date and, if applicable, the dates for interim acceptances
- The manner in which the acceptance is to take place
- Agreement on remuneration (remuneration for work)
- Payment modalities
- If applicable, an agreement on rights of use
Remuneration of the contractor
There are various models for the remuneration of the contractor. For example, it is possible to agree a flat fee for the production of the work. Billing on an hourly wage basis is also possible. In accordance with Section 632a BGB, the contractor can also demand instalment payments from the client.
Hourly wage work: What evidence must the contractor provide?
When billing by the hour, the question arises as to how exactly the contractor must document his work. In this respect, the Federal Court of Justice last year eased the obligation for contractors to provide evidence (BGH, decision of 01.02.2023, file no. VII ZR 882/21). Accordingly, in the case of hourly-paid work, the company only has to state how many hours were incurred for the provision of the contractual services and at what hourly rates. However, it is not mandatory to itemise the invoiced working hours according to time periods. It is also not necessary to allocate the invoiced hours to the exact activities. A differentiated time sheet is only required if the contracting parties have expressly agreed this in advance.
The following important Exception must be observed: Further obligations to provide evidence for hourly paid work apply in accordance with § Section 15 (3) VOB/B in connection with the execution of construction work.
Can a contract for work be cancelled?
In accordance with Section 648 BGB, the client may terminate the contract for work at any time until the work has been completed, without the need for a specific reason. If the client cancels the contract for work, the contractor is entitled to demand the agreed remuneration. However, if he saves expenses as a result of the client's cancellation, he must allow the saved expenses to be offset against the remuneration. The same applies in the event that the contractor is able to generate income by using its labour elsewhere as a result of the customer's termination.
In accordance with Section 648a (1) BGB, both contracting parties - the client and the contractor - may terminate the contract for work if there is good cause for termination. Good cause for termination exists if one party to the contract cannot reasonably be expected to continue the contractual relationship until completion of the work, taking into account all the circumstances of the individual case and weighing up the interests of both parties.
Differences between a contract for work and a contract for services
While a contract for work and labour requires a specific work result, a contract for services requires the obligation to provide the agreed service. A specific result is not owed in the case of a service contract. A special form of service contract is the employment contract: the employee is obliged to perform work in accordance with the contract, but does not owe a specific outcome.
Examples of a contract for work:
- Repair or installation of a technical system
- Production of a piece of furniture
- Building a house
- Creation of software
Examples of a service contract:
- Labour contract
- Mandate contract with a lawyer or tax consultant
- Consulting contract with a management consultancy
Differentiation between contract for work and labour - temporary work
Temporary work is characterised by the triangular relationship between the temporary employment agency (lender), the hirer and the temporary worker. The temporary worker is employed by the hirer, who is his contractual employer. During the temporary worker's employment with the hirer, the hirer has the right to issue instructions to the temporary worker, but the temporary employment agency remains the temporary worker's contractual employer. The assignment of the temporary worker to the hirer takes place within the framework of an assignment contract.
At the Contract for work There are two contractual partners, the client (customer) and the contractor (contractor). Contractors are self-employed. The client has no right to issue instructions to the contractor's employees - not even during the time in which they carry out their work in the client's company.
Contracts for work and labour with subcontractors from Eastern Europe
Do you have a large order that you want to fulfil independently or directly through an Eastern European subcontractor? We will be happy to help you.
As an international Personnel service providerwe offer our support in drawing up contracts for work and labour. We are familiar with a large number of legal provisions in the partner countries and can advise you on legally compliant and clearly defined contracts for work and labour.
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