In 1977 the claimant ordered the defendant to install windows and doors with aluminium frames in his one-family home against payment of DM 21,607.04. Since the claimant demanded the lowest possible heat loss factor (K-factor), the defendant offered to use frames for the construction which had a K-factor of 2.4 to 2.6. This offer and the defendant's conditions for delivery and payment formed the basis of the contract; otherwise the General Contractual Conditions for Building Works (VOB), Part B were to apply.

In respect of warranty rights, Number 9 ( of the conditions for delivery and payment stated a.o.:

In case of justified claims for defects, repairs will be done free of charge or new
goods delivered for which an adequate period of time is agreed. Further claims
such as for damages are excluded.

In 1977 the work performed by the defendant was accepted. It later transpired that the actual K-factor of the window and doorframes was 3.8 (heat loss/square m).

By his action the claimant demands remedy of the defect by exchange of all frames and wings of windows and doors for new ones with a K-factor of 2.4 to 2.6 as well as all necessary ancillary work. As a reason he points out that because of the reduced protection from heat loss additional demand for heat has arisen with the result that condensation is formed more readily in the corners of windows and doors which, amongst other things leads to the formation of fungus on wallpaper and paintwork.

Alternatively, the claimant demands payment of DM 25,145.13 and also alternatively the removal of certain specified defects as well as payment of DM 11,078.79 plus interest.

As a rebuttal the defendant claims that: the exchange of all windows and doors requires him to incur unreasonable and disproportionate expenses, since his own costs alone would amount to about DM 22,000. Such costs would in fact amount to a new performance for which he is not liable once the work has been accepted. In his offer for the contract he had included K factors submitted to him by the supplier; in fact, in 1977 a K-factor of 2.4 to 2.6 for frames could not have been achieved, given the state of technology. The shortfall in the K-factor listed by the defendant in his offer to the claimant only slightly reduces the value or the usefulness of the windows and doors. The danger that condensation is formed only occurs at outside temperatures of -5 to -10 degrees Celsius, thus only during a few days per year.

The Landgericht and the Kammergericht have granted the main claim. The defendant's - permissible - further appeal (Revision) failed.

Reasons

............(I, II and III, 1. omitted)

III.

2. The Senate renounces its previous established case law and now decides the legal question which is also relevant for a judgment in the current case as follows: the claim for repair can be framed as a claim for a complete second performance (new performance) of the commissioned work, where only thereby defects can lastingly be repaired, irrespective of whether the contract for work and labour is subject to the provisions of the Civil Code (BGB) or those of the General Conditions for Building Works, Part B.

a) The previous judgments were generally based too heavily on an (assumed) terminological difference between replacement and repair and insufficiently on the purpose of the repair of defects which is the main point of the law on contracts for work and labour.

The law and also the Contractual Conditions for Building Works merely speak of the removal of a defect, which can be demanded (paras 633, 634 BGB; para. 4 No. 7 VOB/B). But the removal of a defect, when judged according to its natural meaning, means nothing else than that a defective performance is to be substituted by one which is free from defects insofar as this is necessary, in order to create a finished product which as a whole is free from defects. The more extensive the defect, the bigger the extent to which repairs are needed which can be claimed. It is thus from the outset a basic criteria of total removal of defects, that this can lead to a complete exchange of the work so far performed by a new performance free from defects, where the aim behind the right to have defects repaired would otherwise be missed. In such cases new performance basically only means repairs to the utmost but necessary limits. Where repair work is to be carried out to the extent that even the last detail of the existing product has to be redone, such repair work often becomes in effect indistinguishable from a total new performance, once even the final bit of the finished product needs to be replaced. There is no difference in quality but merely in quantity between such measures to repair defects. To make the duty of the contractor to repair defects dependent on whether one or the other of these circumstances exist would lead to difficulties of delineation which could almost be insuperable and will often lead to results which are merely hap hazardous and thus unsatisfactory.

This becomes particularly evident when one looks at the earlier judgments of this Senate, logical though they had been taking the previous point of view, according to which it had to be decided from the total scope of a work commissioned whether or not a certain measure, needed in order to obtain the contractually agreed state, could still be classified as repair or already as a total new performance, i.e. whether the new performance of only part of the work still constituted repair (see BGHZ 58,7, 9/10 with further references). This means: the more extensive the order, the less frequent a total new performance will come into play and the more limited the order, the more frequent this will be the case, i.e. will the contractor/recipient of the order be entitled to refuse any kind of repair - given that the various parts of the performance were equally defective. This train of thought becomes illogical where an overall commission to perform a work and a partial commission coincide: thus for instance a general contractor commissioned to provide a house ready for immediate occupancy would have to renovate the building totally if its roof had been covered throughout with defective tiles, whilst he could not demand the same from his subcontractor who merely had to carry out the roofing. The same means of removing defects would thus be repairs for one of them and total new performance for the other.

Such disparities show that it is only appropriate to include all measures in what constitutes a repair of defects, which are necessary for the production of works which are overall free from defects as stipulated in the contract, including the total replacement of work already carried out. In this context it can make no difference what costs such new performance to repair the defect will entail. Even the new production of only single parts of a work can be very costly and often far exceeds in volume the payment for labour for the entire commission. On the other hand, a total new performance can actually be cheaper for the contractor than repairs to a multitude of single parts. Thus the contractor was already allowed, under the rules of good faith, to carry out afresh work which he must repair where, under the given circumstances, this was not an unreasonable demand as far as the principal is concerned (see also Glanzmann, op. cit. Marg. No. 20; Ingenstau/Korbion, op. cit. Marg. No. 154 a, with further references).

b) The inclusion of the provision of new work into the scope of the repair of defects, once a work has been accepted, is not at odds with the nature of the claim for repair as a claim for performance which, once the work has been accepted, is restricted to that particular work. Such restriction does not necessarily mean that the repair still owed by the contractor could in no circumstances include a complete renewal of the work already executed. There is no justification for an acceptance to have such far-reaching effect. Defects detected and specifically mentioned at the point of acceptance need to be repaired unreservedly, even where this would lead to a total repeat performance. Here, the principal could in most cases even refuse acceptance. There is no reason why this must be different where faults only appear after acceptance took place. Even where defects are already detected prior to acceptance, new performance of the work cannot be demanded in all cases. Instead, at least under the principle of good faith and according to the stage of performance (for instance the extent to which building works have been carried out), only repair of specific parts can be claimed, as long as the contractually due end result, i.e. the work free from defects, can thereby be obtained ( see also para. 4 No. 7 VOB/B); Glanzmann, op. cit. Marg. No. 36). Vice versa, after acceptance, the contractor must be able to demand the repair of defects in the form of a complete repeat performance if the work commissioned can only thus be provided free from defects.

c) The nature of an acceptance by which the principal shows that he wants to acknowledge the work provided as a performance which mainly conforms to the contract, does not alter this conclusion (last decision of this Senate in NJW 1985, 731,732 with further references). Such acceptance depends on the state of his knowledge at the point of acceptance. It is self-evident that the principal will wish to have repaired defects which are unknown to him and which become apparent only at a later date (compare the similar starting point in Nicklisch, op. cit., before para. 13, Marg. No. 8 and Kiesel, op. cit.). Mere acceptance will not necessarily preclude that this right can go as far as a total renewal of the work, according to the kind of defect in question, its severity and consequences. The contractor may not automatically assume that he will merely have to repair the accepted work ( perhaps differing: Larenz, op. cit.). At least where he has provided work which is so defective that mere repair of some parts is insufficient to provide the contractually agreed result, i.e. a work free from defects, his good faith is not deserving of protection.

The function of acceptance as a stage in the execution of the contractual obligations important for both parties is thereby not put into question. It marks the end of (i) the contractor's duty to provide prior performance, (ii) the start of payments for labour becoming due in principle, (iii) the reversal of the burden of proof for defects which have become apparent after acceptance and (iv) normally also the restriction of the principal's claim for performance to the accepted work, which does not merely mean that the principal is prevented from demanding complete renewal as part of his claim for repair of defects, where this is necessary given the nature, severity and extent of the defects.

d) All these arguments equally apply to a building contract subject to the provisions of the General Conditions for Building Work, part B. In this respect it does not differ from the contract for work and labour under the Civil Code (BGB). The least convincing result would be to deem it possible to claim total new performance as part of the claim for repair of defects especially in respect of the VOB/B contract merely because the claim for repair under 13 No. 5 VOB/B - other than that under s. 633 BGB - might constitute a "pure" warranty claim (as held, for instance, by Hereth NJW 1959, 483). There is no reason why a warranty claim as a derived claim should go further than a claim for performance, even if modified, which essentially is normally the strongest claim (see also Nicklisch, op. cit., before s. 13 Marg. No. 8; Kaiser, op. cit.).

e) The result reached by this Senate is also just. It effects an adequate balance of interests of the parties to the contract for performance irrespective of whether the contract is subject to the provisions of the Civil Code (BGB) or the General Conditions for Building Contracts, Part B.

The nature of the interests involved in respect of the repair of faults is characterised by the dominant interests of the principal/customer in the provision of a work free from defects , as owed by the contractor/supplier. In comparison, the interests of the latter, after acceptance to restrict his obligations to the work so accepted and merely to have to repair separate parts of it must take second place. Judged by the result for which he is contractually liable, these interests are less deserving of protection. Thus the interests of the principal/customer in the provision of work free from defects are more important, even and especially where this aim can only be achieved by a complete substitution of the performance already executed (new performance), given the nature, severity and extent of the defects.

Under these circumstances the contractor/supplier is not exposed without protection to the principal's/customer's claim for new performance: he will only have to completely repeat the performance where this is absolutely necessary for a lasting repair of the defects, i.e. where thus only a repair of certain parts of the work performed is insufficient (see also Esser/Weyers, op.cit.). In general, the scope of the repair work due depends on what is necessary for a performance free from defects.

The claim for repair in the form of total new performance is further restricted by the fact that the contractor/supplier can refuse to repair the defects where this would entail inappropriate expenditure. This constitutes a further barrier faced by any claim for repairs (s. 633 II 2 BGB; s. 13 No. 6, 1st sentence VOB/B). It normally suffices to prevent unfair results in particular cases.

It can be left undecided to what further extent and under what specific exceptional circumstances the contractor can, under the rules of good faith, refuse a repeat performance for other reasons. There are no such circumstances present in this case.

3. In this case, the amount of heat loss for the door and window frames guaranteed by the defendant can without doubt only be achieved by a complete exchange (including window panes). This equals a new performance. When planning the building works, the claimant placed particular importance on an above average degree of insulation. He was thus decisively interested in window and doorframes providing a high degree of heat retention. The findings of the appeal court, based on the report of an expert, have reveal however, that the windows and doors built in by the defendant constitute "a major weak point and considerably put into question the prevention of heat loss".

Under these circumstances the claimant is not well served by a repair of single parts; the performance as due by the defendant with all its guaranteed characteristics can thus only be carried out free from faults if all the windows and doors are exchanged. This can be demanded by the claimant; in particular, he does not need merely to demand a reduction in price for the work carried out. It is irrelevant to what extent he also has a claim for damages.

4. The appeal court quite rightly held that the defendant was not entitled to refuse the demanded form of repair (here: new performance) because it required disproportionately high expenditures (s 13 No. 6 VOB/B).

The defendant could only refuse repairs if, when weighing up all circumstances, the costs for repair of the defects were unreasonably disproportionate to the degree of success attainable by repairing the defects (see BGHZ 59, 365, 367/368). In this respect it is not the amount of costs which is decisive, but rather the relationship of these expenditures to the advantage obtained by the principal through the repairs. The improvements in the K-factor thus to be achieved constitute a considerable advantage for the claimant, since an important "weak point" in the heat insulation of the building is thereby abolished. By this desired high degree of heat insulation the claimant intends, a.o. to abolish the risk of condensation over a longer period of frost, so that it is irrelevant how many days annually, on average, condensation is formed on the frames currently installed.

In respect of extra heating costs incurred, the claimant also runs the risk of sustaining losses from an unexpected and considerable increase in heating costs. Considering all circumstances, the new fitting of windows and doors complying with the guaranteed K-factors is thus not disproportionate to the expenditure specified by the defendant as own costs amounting to about DM 22, 000. As to the question of "disproportionality", the amount of labour costs is irrelevant (BGHZ, ibid. p. 368/369).

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