CLAIMING AND DETERMINING

PROLONGATION COSTS
UNDER GERMAN LAW

A paper presented to the Centre of Construction Law

25th Anniversary Conference
held at King's College London on 29th June 2012

Dr Wolfgang Breyer

August 2012

D138

www.scl.org.uk
 CLAIMING AND DETERMINING
PROLONGATION COSTS
UNDER GERMAN LAW

Dr Wolfgang Breyer

Introduction
This is a paper about claims: the requirements that claims for additional
monies need to fulfill if those monies are claimed due to delays or disruptions
in the execution of the works. The paper, drawing on Costain v Haswell,1 will
attempt to sketch the conditions that appear to be imposed by English courts in
order to approve such claims; and then, drawing on a German landmark
decision BGH VII ZR 225/03,2 compare these with the requirements German
courts lay down. The paper will then attempt to discuss the conclusions, if
any, that might be drawn from this comparison, and also point out some
further fields where further legal comparative research might be of benefit to
all involved.

The issue in question

Delays in construction projects appear to be commonplace around the world,
as are also contractors’ claims related to them. In England, Costain v Haswell
suggests that, in order to obtain a court order for the payment of the monies
claimed, the claimant must, according to Richard Fernyhough QC, the judge in
the case:
‘… show what losses he has incurred as a result of the prolongation of
the activity in question. … But the contractor will not recover the
general site overheads of carrying out all the activities on site as a matter
of course unless he can establish that the delaying event to one activity
in fact impacted on all other site activities. Simply because the delaying
event itself is on the critical path does not mean that in point of fact it
impacted on any other site activity save for those immediately following
and dependent upon the activity in question.’3

This leads to the conclusion that a contractor must prove, to the usual civil
standard of the balance of probabilities, that:

1 Costain Ltd v Charles Haswell & Partners Ltd [2009] EWHC 3140 (TCC), [2010]
TCLR 1, 128 Con LR 154.
2 BGH VII ZR 225/03, published in BauR 2005, 861. [Note to English readers: German
court decisions tend to be published in legal journals, each covering a specialised legal
field. The leading German journal on construction law is ‘Baurecht’, abbreviated to
‘BauR’. The citation states the court, the journal, followed by the year of publication
and the page number. There are also registers of official decisions, but these are not
organised according to subject matter.]
3 Costain v Haswell, note 1, para [184].

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 o the disruption or delay event in fact led to a delay;
o the said event impacted on the activities on the site; and
o to what extent exactly, and how, the delay or disruption did impact
on all activities on the site.

It appears that a contractor, wishing for a recovery of site overheads, must

prove that the delay in question was indeed the cause of the extra time
required, which appears to make proving such a loss significantly harder.

Dr Ronan Champion, in his SCL paper Prolongation Costs: Where now after
Costain v Haswell? discusses at length the implications of this ruling.4 He
establishes that prolongation costs can be classified into various types of cost,
and narrows the term down to ‘site running costs’ and ‘winter working costs’
in order to discuss Costain v Haswell. He goes on to show that the Time
Impact Analysis, as performed by the experts in the case, failed to show the
causal link between the delay undoubtedly suffered by the claimant at that
time and the impact of that delay on the completion of the Works as a whole.
Thus, the claim, first and foremost, failed on the facts.5 From this, however,
Champion concludes:
‘… claimants proving delays may be put to the burden of proving the
impact of every subsequent delay event, merely to confirm that the
earlier delay in issue in fact crystallized. This could result in a
disproportionate burden that was never intended, and which is
unsupported by authority elsewhere.’6

He then goes on to point out:

‘At the very least, the claimant should provide sufficient evidence to
allow the court to make a positive finding that delays were incurred
absent other causes.’7

According to Costain v Haswell, a claimant must prove that all activities being
carried out on site were affected by the delay in question. This requirement is
challenged on the basis that it was arrived at without reference to authority or
to established principles of valuation based on time-based resources alone.8
Phrased differently: the judge in Costain v Haswell required that a link be
proven between time-related losses and other activities underway at the time
of the losses; arguably, such a link should not have been required.9

4 Dr Ronan Champion, Prolongation Costs: Where now after Costain v Haswell? SCL
Paper 170 (September 2011), downloadable from www.scl.org.uk, pages 2-3.
5 Champion, note 4, page 10.
6 Champion, note 4, page 10.
7 Champion, note 4, page 11.
8 Champion, note 4, page 14.
9 Champion, note 4, page 14.

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Comparison with the situation in German law and the decision
BGH VII ZR 225/03
The purpose of this paper is not to discuss Costain v Haswell in yet more
detail, but to compare it with German principles. In Germany, there exists a
rather large number of judicial decisions that have examined and discussed in
quite some detail the requirements that the contractor needs to satisfy in order
to be able to successfully claim monies resulting from an extension of the time
required for executing the works.

As German law, however, does not follow the principal of stare decisis, the
law can and does develop differently in different districts of the various high
courts, depending on the stance of those courts on the subject matter.
Ultimately, the legal community will turn to the Federal Court of Justice
(Bundesgerichtshof, abbreviated in Germany to BGH) for a final authoritative
ruling on how to interpret the law. Despite the absence of stare decisis, such
decisions usually shape the interpretation of the law for years to come.

The Federal Court of Justice has had the opportunity to discuss at length and
lay down the requirements that a contractor’s claim for monies due to an
extension of time needs to fulfill in order to succeed in the case BGH VII ZR
225/03.10 The facts of the case: a general contractor entered into a turnkey
contract, under which it was to construct a residential park. The employer was
responsible for providing the design. The employer was, amongst other
things, late in providing the design.

The contractor claimed for ‘damages’ arising out of the delayed date for
completion, based on circumstances which were attributable to the employer,
like delayed delivery of the drawings, delays in the employer making
decisions and the like. Hence, the contractor claimed for ‘compensation for
prolongation costs’ which had been caused, at least according to the facts
established by the courts, for reasons other than variations (this will become
important later on). In its statement of claim, the contractor relied, and
primarily referred to, the report of an expert, which was attached to the
statement of claim as an exhibit.

The contractor failed at both first and second instances, both the regional court
and the high court holding that the contractor’s claim was not substantiated
enough, ie the contractor had failed to sufficiently show why it was entitled to
the monies it claimed. Both courts held that:
o mere reference to expert opinion is not sufficient to provide
particulars for supporting the claim; and
o the claimant had failed to provide evidence of causation – that the
circumstances attributable to the employer were the cause for the
whole of the delay that had arisen; and
o had also failed to show the impact that such ‘employer delay’ did
have on the date for completion.

10 BGH VII ZR 225/03: note 2.

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In its ruling, the Federal Court of Justice (BGH) set the judgment aside and
made two findings. First, reference to an expert opinion, even if only annexed
to a statement of claim, can be sufficient and can be considered to be part of
the statement of claim, provided however that the essential facts which form
the basis of the claim are included in the statement of claim itself.
Secondly, the court held that there is a need for the claimant to prove the
concrete actual period of delay arising out of each single delay event. The
question of whether or not the contractor had met this criteria remained
unanswered, as the courts of first and second instance had not dealt with that
matter, as they had dismissed the claims due to the allegedly improper
reference to the expert opinion.

In a second step to this part of the ruling, the BGH also provided guidance on:
o how the contractor might prove the concrete period of delay
arising out of each single delay event, and how such delay affected
the date for completion; and
o what requirements the contractor had to satisfy to prove the
additional costs that arose out of the whole of the delay.

The court stated that it is sufficient to show in a reasonable way, for example
by using a chart reflecting a delay analysis, the impact on the completion
date.11 The cause and effect relationship between a ‘delay event’ and actual
‘delay’ or ‘prolongation’ needs to be clear. However, there is no need to
prove the total actual impact on the date of completion by analysing and then
summarising all single events together. Rather, the exact amount of additional
time that was or is required is subject to para 287 of the German Code of Civil
Procedure, which allows the court, under certain conditions, to estimate the
damage.

The BGH ruled that it is sufficient to provide a plausible basis for such an
estimation. Single mistakes, ambiguities and other small discrepancies are, by
themselves, not reasons to dismiss a claim, provided that the court can ‘fill the
gaps’ with such an estimation.12 Nevertheless, the contractor has to present
his claim in as detailed a way as possible. This also holds true for the
damages arising out of the delay. Such damages may be estimated in
accordance with para 287 of the German Code of Civil procedure, provided
that a plausible basis for such estimation is provided by the contractor.

Comparing BGH VII ZR 225/03 with Costain v Haswell

It appears, then, that it is easier for a contractor to succeed before a German
court with such claims than it is before an English court, as the contractor need
not prove the damages suffered in final detail, down to the last penny or cent.

11 When the court is asking for a ‘proof of concrete delay arising out of each single delay
event’, it is in fact demanding what is known in English terminology as a ‘Time Impact
Analysis’. Other types of delay analysis will usually not meet the standards of the BGH.
12 It appears that the court acknowledges the weaknesses of ‘Time Impact Analysis’ in
estimating such a total impact, its willingness to make an estimate in effect providing a
workaround.

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In Costain v Haswell, the court held that Costain had failed to show that the
delays had actually delayed the completion of the works by 12 weeks, or at
all.13 The court expressly required such proof, as previously shown. Would
the BGH have replaced any such lack of evidence with an estimation, in the
light of the above?

According to the principles mentioned earlier, the answer must be ‘yes’. In

the German case in question, the problem was not the delay in the erection of
the two buildings, but the impact of this delay on the other site activities and
thus on the date for completion, very similar to Costain v Haswell. This
impact on other site activities could, according to the BGH, in principle be
estimated rather than proven.14 So, it appears that the requirements for
succeeding in front of a German court are not as high for a contractor as they
would be in front of an English court.

However, the ‘estimation’ is supposed to be based on a plausible basis.15 The

BGH would probably have held that the showing of a plausible relationship
between the delay of the two buildings and the date for completion would be
required to form a ‘plausible basis’. Lacking adequate evidence of such a
relationship, the claim would probably also have been dismissed, because the
court would then not be able to make a reasonable estimation.

This means that, even though basically, according to German law, proof of
delay is demanded, proving the extent of the delay is made easier because this
impact can be estimated. In other words: the BGH still requires proof that a
‘delay event’ did in fact delay the works in question, but the extent of the
delay, that is the ‘size of the footprint’, may be estimated.16 This estimation,
however, requires a plausible basis.

So, even though the ‘theory’ might be different, the requirements for ‘proof’
will not be all that dissimilar. It does mean, however, that, once causation has
been proved, the consequences of a delay will not need to be presented in
excruciating detail, as these can be estimated once they have been made
plausible.

If compared with Costain v Haswell and Ronan Champion’s paper discussing

the decision, several things emerge:
1. The requirement for proving causation between the ‘delay event’ and the
‘impact on the schedule’ required in Costain v Haswell is something that
is in principle also required by German courts.17 What Champion refers
to as a ‘disproportionate burden that was never intended, and which is
unsupported by authority elsewhere’18 is in fact the starting point for
requirements that the contractor – as a claimant – will have to meet to

13 Costain v Haswell, note 1, paras [181]-[185].

14 BGH BauR 2005, 861, Item II 2 a aa.
15 BGH BauR 2005, 861, Item II 2 a bb.
16 BGH BauR 2005, 861, Item II 2 a aa
17 BGH NJW 2005, 1653 (NJW is the German ‘Lawyers’ Weekly’)
18 Champion: main text to note 6.

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 obtain an award in Germany. That a delay occurred because of a delay
event must be proven,19 even if its extent need not.20
2. Costain v Haswell appears to suggest that the contractor must show what
losses were generated as a result of the delaying event.21 This
requirement is, in fact, quite similar to the German requirements: The
contractor must prove that losses were incurred as a result of the delay
event in front of a German court too.

However, the BGH appears to be aware of the shortcomings of the Time

Impact Analysis method, and therefore wishes to ‘ease the burden’, to utilise
the language of Ronan Champion. It will therefore accept estimates as to the
extent of the ‘impact’ a delay event had, either time-wise or money-wise, once
the basic causal relationship has been proved to its satisfaction.22

Complications in German practice

Things get more complicated if the above principles of the BGH are
transferred into reality, not the least due to some specifics of German law.
Usually, a site experiences delays of the date for completion not only due to a
disruption or obstruction (attributable to whomever), but may also encounter
such an extension of time due to variations.

Regarding the ‘costs’ of time, the usual approach of German law is to provide
for an evaluation, basically a variation which is supposed to be based on the
original calculation of the contract prices (in a BoQ or otherwise). This
especially holds true if the parties agreed to utilize the VOB/B, the German
standard terms and conditions for construction works, which are similar to
those provided in France (AFNOR), Switzerland (SIA), Austria (ÖNORM B
2110) or the JCT23 and ICE24 forms.

However, the VOB/B differentiates between:

o ‘additional costs for time based on variations’, which are based on
§2 sub-para 5 or 6 VOB/B; and
o ‘additional costs for time based on disruptions attributable to the
employer’, which are based on §6 sub-para 6 of the VOB/B.

This means that the basis for a claim has to be individually determined for
each delay event. In theory, paragraph 2 sub-paragraphs 5 or 6 VOB/B rely on
the calculations of the contractor, whereas paragraph 6 looks to the actual
costs. In practice, it is almost impossible to keep the impact of ‘paragraph 2
events’ distinguished and separate from the impact of ‘paragraph 6 events’.

19 BGH NJW 2005, 1653.

20 BGH BauR 2005, 861.
21 Champion, note 4, page 16.
22 BGH BauR 2005, 861.
23 Eg JCT, Standard Building Contract With Quantities 2011 (SBC/Q 2011).
24 Eg ICE, Conditions of Contract (7th ed, 1999), now replaced by the Infrastructure
Conditions of Contract, jointly owned and published by the ACE and CECA.

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This leads to a conflict: should the cost impact of the additional time now be
evaluated according to additional cost, or according to the descriptions which
underpin the calculations of the contractor? This entire principle within the
VOB/B has come under fire for being too unwieldy and failing to meet the
needs of practitioners, so it is currently being hotly debated.25

So there arises a conflict: ‘calculated time’ versus ‘actual time’. For example,
assume that, after commencement of the works, the employer instructs a first
variation which will have an impact on the critical path, leading to two weeks’
delay to the date for completion, according to the calculations and the
programme of the contractor. In reality, due to generous padding of the
programme, perfect staff or whatever reason, the varied works are carried out
within one week.

After the first week, within the (calculated) second ‘prolonged’ week, a
disturbance occurs on the site, for example delayed drawings related to the
works which follow the variation works. The contractor is ready to continue
the works, but for lack of drawings, he cannot. So, real progress on the site is
hampered by the disruption event. At the beginning of the third week, the
employer submits the drawings required, and the contractor can progress the
works once more.

This leads to the following questions:

o May the contractor claim for another week’s extension of time, as
he was actually hindered?
o Can the contractor argue that he has been delayed ‘twice’ in the
same week? In other words, should the date for completion be
extended by two weeks or three weeks in total?
o Or can this question perhaps be rephrased into a question of
‘float’?

At the present time, it seems impossible to predict how the BGH would
decide: whether it will follow the ‘theoretical’ approach with regard to time
arising out of a variation, or if the BGH is of the opinion – as are others in the
German legal community – that both circumstances have to be handled the
same way, by evaluation based on the time actually required on site.26

This problem also arises with regard to costs which stem from additional time
caused by a variation. Should these costs be determined upon the original
calculation, based on the original prices of the contractor, or should they be
evaluated based on the real costs incurred by the contractor?

On the one hand, it seems unfair to ask the employer to grant the contractor an
additional extension of time, as the contractor was not actually hindered.

25 Compare with Oberhauser, BauR 2011, 1547-1562; Schottke, BauR 2011, 1881-1896.
26 There is a tendency of the high courts to demand that costs shall be recovered only as
incurred, cf OLG Munich IBR 2012, 11; OLG Frankfurt IBR 2008, 1054; not decided
yet by the BGH. There is no established authority yet as to the handling of time.

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After all, compared with the revised programme, progress after the second
disruption will be exactly on schedule.

However, it seems equally unfair to deprive the contractor of the benefits of

over-achieving his scheduled progress. If the contractor only required one
week for a job for which the employer allotted him two weeks, should not the
contractor then also be able to enjoy the fruits of such expeditious carrying out
of the works? Yet would this not lead to the employer, in effect, being asked
to ‘pay double’ for time which did not, in fact, accrue? How can such a
benefit to the contractor be justified?

Christopher Ennis has, to some extent, discussed some of the issues that arise
from each of the above points, but the focus of the discussion seems to be
different.27 He points out the differences between the various methods of
quantifying what he terms ‘disruption costs’, and considers the pros and cons
of each method of measuring the effects of disruption.

The discussion in Germany, on the other hand, centres around the fact that the
standard form of contract actually prescribes what method of ‘quantum
measurement’ to utilise in which circumstances, but that this ‘differentiation’
has proven nearly impossible to sustain in practice, with the effect that the
courts will, to some extent, invoke paragraph 287 of the Code of Civil
Procedure and allow for an estimation of the extent of the losses suffered,
which however must have a ‘plausible basis’.

So, even though the BGH allows for estimates of the impact of delay events
on the project with regard to time or money, the basis of those calculations
depends on the type of claim being pursued: is it a claim based on a variation,
or based on a disruption? As either event can generate delays, handling them
according to these different requirements can get tricky in practice.

Under the ICE standard forms, prolongation compensation was to be valued, if

possible, as part of the variation, at or on the basis of the rates and prices in the
BOQ or schedule of rates, or on the basis of a fair valuation. Does this mean
that the ‘time’ for a time-related variation shall be evaluated based on the
breakdown provided, and that the contract generally provides such a
regulation for evaluating variations?

The SCL Delay and Disruption Protocol, on the other hand, refers to ‘work
actually done’ on the site, ‘expenses actually incurred’ etc, but it also
recommends that, in cases where prolongation is caused by a variation, the
prolongation should be included in the evaluation of the variation.28

What then is supposed to happen if the parties fail to agree on such a variation
that includes prolongation, or simply forget to address the prolongation issue?
The issues remain unresolved at this time.

27 Christopher Ennis, Evaluating Disruption Costs on Major Construction Projects, SCL

paper D125 (July 2011), downloadable from www.scl.org.uk.
28 SCL Delay and Disruption Protocol (2002), downloadable from www.eotprotocol.com.

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Conclusions
This paper has highlighted the different requirements of English and German
courts with regard to contractors’ claims for prolongation costs. It appears
that the English courts, at least after Costain v Haswell, have more stringent
requirements with regard to the impact of events on total delay, and that, in
theory at least, the German courts, by accepting estimates as to the impact of
delays, make it easier for contractors to obtain awards. In practice, however,
the requirements are not so different, as the estimates need to be made on a
‘plausible basis’, which the contractor must provide.

The VOB/B, the German standard form of construction contract, distinguishes

between ‘delays arising out of variations’ (paragraphs 2 and 6) and ‘delays
arising out of disruptions’, handling them differently. This necessitates a
separate treatment of delay claims that is, in practice, almost impossible to
achieve, especially in cases of concurrent delay, where two or more events
cause overlapping impacts. For this reason, the VOB/B has been attacked as
being too unwieldy for practical use. The question of how to determine
additional time is not answered.

English contract forms appear to handle this issue in a more uniform way, but
there is no consistency across different contract forms on how to determine
prolongation costs: by referring to the contractor’s calculations, or by utilising
the actual costs incurred? The matter seems to be discussed along different
lines than in Germany, with the key item in the English discussion being
‘entitlement to reasonable cost’, and how to prove what costs are reasonable.29
Whereas in Germany, the discussion centers on ‘when may the contractor
claim additional costs based on the original contract price calculations’, as
opposed to ‘when may he claim additional actual costs?’ The methods for
determining the extent of such an adjustment, on either basis, is currently not
the focus of the German discussion.

The question appears to be in need of further research, and may benefit from
the English discussion about various methods of determining costs.

Dr Wolfgang Breyer is an attorney and the founder and managing partner

of Breyer Rechtsanwälte, a boutique law firm specialising in German and
international construction law; he is also the Practitioner Director of the
Postgraduate Programme in International Construction Law at the University
of Vienna.

© Wolfgang Breyer and Society of Construction Law 2012

The views expressed by the author in this paper are his alone, and do not necessarily
represent the views of the Society of Construction Law or the editors. Neither the
author, the Society, nor the editors can accept any liability in respect of any use to
which this paper or any information or views expressed in it may be put, whether
arising through negligence or otherwise.

29 Christopher Ennis, note 27, page 8.

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