Dr. Jörg Klingmann
Dr. Jörg Klingmann is a partner at the law firm Schlatter. law in Heidelberg. His practice focuses on construction and real estate law, as well as public procurement law. His client base consists primarily of well-known companies, public-law entities, and international research institutions. He has extensive experience in drafting contracts and providing legal counsel for large-scale construction projects.
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A guest article by attorney Dr. Jörg Klingmann on balanced scope of services, flexible adjustment options, and the value of experienced mediators
The planning and execution of complex industrial or logistics projects are always the result of collaboration among multiple stakeholders based on a structured allocation of tasks and responsibilities. At the legal level, this is achieved through the conclusion of contracts. In the history of a project, these contracts mark the very beginning. They are entered into at a stage when the parties still have maximum flexibility in shaping the terms. Figuratively speaking, they thus form the legal and economic foundation of the project. They are of considerable importance to the project’s success—throughout all project phases and beyond.
But what distinguishes good contracts in this sense? Certainly not the attempt embodied in them to assert one’s own interests as ruthlessly as possible or even to take advantage of the contracting parties. Rather, a good contract is one that appropriately takes into account the legal and economic interests of all parties involved and proactively addresses anticipated scenarios in a manner that balances their interests, using clear language and unambiguous content—neither too brief nor unnecessarily verbose. Good contracts are designed with the goal of enabling all partners to enjoy the project and of turning the success of the individual into the success of the project for everyone.
Experience has shown that the following parameters are particularly relevant; ensuring they are taken into account significantly increases the likelihood of a successful project:
Clear Definition of the Contractual Basis
Clear and consistent provisions are crucial here. Unnecessary statements that are taken for granted—such as the frequently encountered note that the provisions of the German Civil Code (BGB) apply—should be omitted. Conversely, it generally makes sense to refer, as far as possible, to the basic services outlined in the HOAI when defining the scope of services in contracts for planning services. For construction contracts—even those not involving the public sector—the inclusion of the VOB/B is recommended. These are well-established provisions that have been largely clarified by professional literature and case law, with which every project participant has experience and knows how to work. This effectively protects against unresolved issues and misunderstandings.
Performance-Oriented Allocation of Tasks and Risks
The basic principle that, in a system based on the division of labor, everyone should do what they do best and have the most influence over applies particularly to complex planning and construction projects. The client should contractually assume the risks that they can minimize in advance through appropriate planning and control during implementation. Only inexperienced or poorly advised clients succumb to the temptation to shift such risks onto the contractor, thereby exposing the contractor to incalculable risks.
A Balanced Economic Approach
The services provided and the compensation paid must be appropriate and in a healthy balance. Economic terms that are untenable for the contractor are also a sure path to an unsatisfactory project outcome for the client. Conversely, excessive or even speculative pricing ultimately harms the contractor at least as much as it does the client. A financially balanced contract is typically the result of a careful description of the services and healthy competition during the bidding process. A fundamental prerequisite for this, in turn, is sound, forward-looking budgeting of the objectively necessary funds.
Forward-Looking Contract Adjustment Provisions
In the current phase of severe economic upheavals, unpredictable price trends, and material shortages, reliable, manageable provisions for adjusting contract terms in the event of extraordinary, unforeseen changes in economic conditions are recommended for all parties involved, and this becomes all the more urgent the longer the project duration. Such provisions should be neither unnecessarily complicated nor too vague. Provisions based on appropriate indices from the Federal Statistical Office or comparable surveys are recommended.
Achievable Time Frame
A realistically estimated project duration with appropriate milestones for the key phases is another fundamental prerequisite for project success. Setting “ambitious” deadlines can actually be beneficial in this context. On the other hand, deadlines that are too short—and that cannot be met, or can only be met by neglecting the necessary diligence—are extremely counterproductive and ultimately lead only to conflict and disappointment among all parties involved.
Protecting the Parties from Unreasonable Legal Consequences
High contractual penalties, termination consequences contrary to the parties’ interests, lump-sum claims for damages at unrealistic amounts, or similar agreements that lead to the unilateral disadvantage of one contracting party should be avoided. The longer the duration of a project and the more complex the project requirements are, the more important openness and mutual trust become as the foundation for the project’s success. Unreasonable contractual legal consequences that disadvantage individual parties stand in the way of these goals.
Dispute Resolution Mechanisms / Mediation
Despite all efforts—and even when the parties involved do everything correctly when drafting the contract—the complexity of large-scale projects in industrial and plant engineering means that conflicts of interest and disagreements may arise that the contracting parties cannot resolve without the assistance of a third party. Rushing to involve the competent court as such a third party is not sound advice. This applies in particular to the preliminary injunction under Section 650d of the German Civil Code (BGB), which has been regulated in the BGB since 2018 and which, in the author’s experience, is completely unsuitable—at least for larger projects. It is far better, by contrast, for both parties to appoint, at the start of the project and based on appropriate contractual provisions, an experienced, mutually accepted conciliator or mediator whom they can consult in such cases and who can then contribute to resolving the problem by making appropriate proposals. In the author’s experience, this alone can prevent most disputes from arising in the first place. And in the event that this proves unsuccessful, arbitration clauses—such as the application of the Rules of Conciliation and Arbitration for Construction Disputes of the Working Group on Construction and Real Estate Law within the German Bar Association (SOBau)—have proven highly effective in practice.
