When contracts are awarded to external companies, this is often done on the basis of a contract for work and labour. This contract model regulates the reciprocal obligations between the client (customer) and contractor (contractor) - from the provision of services and remuneration to acceptance and warranty rights. If you want to draft contracts for work and services with legal certainty, you should know the essential legal principles and the typical pitfalls.
What are the obligations of the two contracting parties?
The contractor owes the production of a specific work or the achievement of a specific work result at the contractually agreed time. This obligation to achieve success fundamentally distinguishes the contract for work from the service contract, where only an activity is owed.
The legal basis is § 631 BGB:
§ 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.
For its part, the client is obliged to pay for and accept the work. In addition, he is obliged to co-operate in order to enable the work to be produced. Acceptance is also a prerequisite for the contractor's claim to remuneration.
What warranty rights does the client have?
If the accepted work has defects, the client is entitled to statutory rights. Firstly, he can demand subsequent fulfilment from the contractor (Section 635 BGB). If the contractor unjustifiably refuses subsequent fulfilment, the client may rectify the defect themselves and demand reimbursement of the expenses - so-called self-remedy in accordance with Section 637 BGB. In addition, the client has the right to withdraw from the contract or reduce the remuneration (Section 638 BGB) and, under certain conditions, a claim for damages if a reasonable deadline for performance or subsequent fulfilment has been set without success.
What should a contract for work contain?
The law does not prescribe a specific form, but a written agreement is always recommended. For legal certainty, a contract for work should contain at least the following information:
- Name and address of both contracting parties
- Concrete description of the work to be delivered
- Note that the contractor carries out the order under its own responsibility
- Performance period, delivery dates and, if applicable, interim acceptance dates
- Type and method of acceptance
- Agreement on remuneration (remuneration for work)
- Payment modalities
- If applicable, an agreement on rights of use
How is the contractor remunerated?
There are different models for remuneration. A flat-rate fee for the production of the work is conceivable, as is invoicing on an hourly wage basis. In accordance with Section 632a BGB, the contractor can also demand instalment payments from the client.
When billing by the hour, the question arises as to how precisely the contractor must document his work. The Federal Court of Justice has clarified this (BGH, decision of 1 February 2023, case no. VII ZR 882/21): 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. A breakdown by time periods or exact activities is not mandatory - unless the contracting parties have expressly agreed to this.
Can a contract for work be cancelled?
Yes - in accordance with Section 648 of the German Civil Code (BGB), the client can terminate the contract for work at any time until the work has been completed, without the need for good cause. In this case, the contractor remains entitled to demand the agreed remuneration; however, he must take into account any expenses saved and income generated elsewhere.
Both contracting parties may also terminate the contract for work for good cause in accordance with Section 648a (1) BGB. Good cause 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 circumstances and weighing up the interests of both parties.
Differentiation: Contract for work vs. service contract vs. temporary work
The distinction between these forms of contract is legally significant, particularly with regard to bogus self-employment and concealed temporary employment.
At the Service contract the contractor owes an activity, not success. A concrete result is not owed. Typical examples are the employment contract, the mandate contract with a lawyer or the consulting contract.
At the Contract for work On the other hand, two independent contractual partners are involved. The client has no right to issue instructions to the contractor's employees - not even during the time they are working at the client's premises.
Temporary employment (labour leasing) is characterised by the triangular relationship between the temporary employment agency (lender), hirer and temporary worker. The hirer has the right to issue instructions to the temporary worker, while the temporary employment agency remains the contractual employer. The assignment takes place within the framework of an assignment contract in accordance with the AÜG.
You can read more about differentiation in our article Service contract vs. contract for work and to the Temporary employment vs. subcontracting.
Contracts for work and labour with subcontractors from Eastern Europe
Do you have a large order that you do not want to handle independently or directly through an Eastern European subcontractor? As an international personnel service provider, Global Business Recruiting supports you in drawing up and organising legally compliant contracts for work and services. We are familiar with the legal provisions in the partner countries and can advise you on clearly defined contract structures.
Frequently asked questions about legally compliant contracts for work and labour
There is no statutory written form requirement. However, for reasons of legal certainty and provability, a written agreement that clearly regulates all essential contractual points - service description, remuneration, acceptance modalities - is always recommended.
The client initially has the right to subsequent fulfilment (Section 635 BGB). If the contractor refuses to do so, the client can rectify the defect themselves and demand reimbursement of costs (Section 637 BGB), withdraw from the contract or reduce the remuneration (Section 638 BGB). Under certain circumstances, compensation for damages is also possible.
Yes - in accordance with Section 648 of the German Civil Code (BGB), the client can terminate the contract for work at any time without good cause until the work has been completed. In this case, the contractor retains its claim to remuneration, but must take into account any expenses saved and other income.
The decisive difference lies in the object of performance owed: in the case of a contract for work and labour, a concrete result (the finished work) is owed, whereas in the case of a service contract, only the provision of an activity without a guaranteed result is owed. This is legally significant for questions of liability and bogus self-employment.
No - in the case of a genuine contract for work, the client has no right to issue instructions to the contractor's employees. If there is nevertheless a relationship of instruction in practice, this can be categorised as a concealed hiring out of employees, which has considerable legal consequences.
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