Performance disruptions

There are four types of performance disruptions. These are impossibility, delay, defective performance, and (positive) breach of contract.

Impossibility of performance

Impossibility of performance occurs when the performance contractually agreed upon becomes impossible to fulfill. For example, this may occur when the object that was to be renovated is destroyed in a fire or when an artist misses their performance due to a missed flight.

The consequences of the impossibility of performance depend on whether a party to the contract is at fault. In cases of negligence or intent, there may be a liability to pay damages.

If the performance becomes impossible to fulfill, and the client is responsible for the impossibility, the agreed fee must still be paid.

Force Majeure

Force majeure refers to extraordinary events or circumstances that are beyond the control of the parties involved and that make it impossible to fulfill a contractual obligation. Here are some examples of reasons for force majeure:

1. Natural disasters such as storms, floods or earthquakes.
2. War, terrorism and internal unrest.
3. Strikes, lockouts and other labor disputes.
4. Pandemics or epidemics.
5. Legal prohibitions such as official closures, curfews or gathering bans.
6. Technical failures such as blackouts, server outages or transportation failures.
7. Transportation disruptions, such as train cancellations or flight cancellations due to weather conditions.

In general, the reasons for force majeure must be unforeseeable, unavoidable, and not caused by the fault of either party in order to be recognized as such. Many contracts also list a precise definition of force majeure in order to avoid possible misunderstandings.

The legal consequences of force majeure depend on the contractual agreements and the circumstances of the individual case. However, there are generally two possible legal consequences:

1. Release from the obligation to perform: If force majeure exists, the debtor is released from his obligation to perform. The parties are then released from their contractual obligations and do not have to fulfill any claims for damages or penalties. The contract is dissolved if force majeure makes the fulfillment of the contract impossible. If the force majeure is only temporary, the obligation to perform can be suspended until the circumstances change.
2. Adjustment of the contract: In some cases, it may be possible to adjust the contract to take into account the circumstances of force majeure. For example, the parties can agree to extend the performance period to give the debtor more time to perform. Adjusting the agreed compensation or changing the place of delivery may also be considered.

It is important to note that force majeure represents an exception to the normal obligation to perform and that the parties affected are generally not liable for the damages or losses caused by force majeure. However, it is advisable to establish clear regulations in contracts in order to avoid possible conflicts. If no clear regulations are established in the contract, the legal regulations apply. This means that the contract "disintegrates" and both contracting parties are released from the obligation to perform.

Since the rules of force majeure only apply if it is an unforeseeable event, it is questionable which regulations will apply if the parties are already aware of a possible risk to the contract. It will always have to be assessed on a case-by-case basis whether an impossibility was foreseeable or not.

Therefore, it is advisable to agree on clear regulations in the contract for such cases. For example, the specific event can be defined as an event that does not qualify as force majeure. A down payment can also be agreed upon. A gradation of the down payment depending on when exactly the cancellation was made is also possible. For example, 10% down payment for cancellation eight weeks before the performance date, 25% for cancellation 4 weeks before and 40% down payment for cancellations thereafter.

Delay

Delay means that a performance is still possible, but the agreed upon performance is not provided at the agreed upon time, place, or manner.

Debtor Delay

If the debtor falls into delay, the creditor has a choice. He or she can withdraw from the contract, or set a reasonable period for performance and continue to insist on performance. If there is fault (negligence or intent), there may also be an obligation to pay damages.

Creditor Delay (Default of Acceptance)

Creditor delay occurs when the creditor does not accept the agreed upon performance. Generally, creditor delay does not have legal consequences, because the creditor only has a right to the item. The agreed upon compensation must be paid in any case, if the performance is in accordance with the contract. However, in the artistic field there are deviations from this rule, namely when the artist has a recognizable interest in accepting the performance at the time of contract conclusion. In this case, the rules of debtor delay apply to the creditor.

Warranty

In paid contracts, the person providing the service is liable, which is called warranty. The service provider is responsible for ensuring that the service or product is provided free of defects. This applies to both material defects and legal defects.

A material defect exists when the delivered product is faulty, damaged, incomplete, or the service was not provided in accordance with the agreement. For example, a material defect may occur if a delivered art or cultural object is damaged or incomplete. For instance, a painting may have cracks or stains, or a sculpture may have damaged parts. A material defect may also exist if the quality or performance of the art or cultural object does not correspond to the guaranteed characteristics. In this case, the artwork or cultural object is defective because it does not have the expected condition or quality.

On the other hand, a legal defect exists if the product or service is not free of legal defects. This means that it may, for example, violate legal provisions or there may be judicial claims by third parties that could impair the ownership or possession of the product, or restrict the usability of the service. A legal defect may occur if the artwork or cultural object is affected by a legal defect, such as violating copyrights or other legal provisions. An example of this would be if a theatrical performance is presented without the necessary approvals or licenses, or if a museum presents an exhibition of stolen art.

In case of a defect, the buyer usually has the right to demand appropriate remedies, such as repair, replacement, refund or price reduction. However, the exact claims and procedures may differ depending on the country and contract.

The individual remedies of the warranty

In Austria, the ABGB (General Civil Code) regulates the warranty for goods and other services. In case of a defect in the purchased goods or services, the creditor (client, buyer) generally has four warranty remedies available: improvement, exchange, price reduction, and rescission (cancellation of the contract).

1. Improvement: The creditor can demand that the defect in the goods be remedied. This means that the debtor must repair or improve the goods. If the improvement is successful, the defect is considered resolved and the purchase agreement continues.
2. Exchange: The creditor can demand that the defective goods be replaced with a new, flawless product. The debtor must ensure that the new product has the same or comparable value as the original goods. The purchase agreement continues in this case as well.
3. Price reduction: The creditor can demand an appropriate reduction in the purchase price if the defect in the goods cannot be remedied or replaced. The amount of the price reduction depends on the extent of the defect.
4. Rescission: If improvement, exchange, or price reduction are not possible or reasonable, the creditor can cancel the purchase agreement and return the goods. The debtor is obliged to refund the purchase price in this case. It should be noted that the creditor must grant the debtor (contractor, seller) a reasonable period of time for improvement or exchange of the goods before they can demand a price reduction or rescission.

Statute of limitations

The warranty remedies are generally available to the creditor for two years after the goods have been delivered for movable property. Immovable property (real estate) has a 3-year warranty period. The period begins to run from the acceptance of the goods or services.

Presumption of Defectiveness

It is important to know that liability only applies to defects that already existed at the time of delivery, even if they only become apparent at a later time. In the first 6 months, there is a presumption of (original) defectiveness, which means that the person providing the service must prove that the goods or services were free of defects at the time of delivery. After 6 months, the recipient of the service must prove that the defect was present at the time of delivery (even if it was only noticed later or only appeared later).

Obligation to Report Defects in Business Transactions between Entrepreneurs

In contracts between entrepreneurs, any defects must be reported. This means that the recipient of the service must inspect the goods or services upon delivery and usually report any defects to the providing entrepreneur within 14 days. Otherwise, the claim for warranty will expire.