Liability of the Building Contractor for Defects and Damages

Facts

Phyteia AG in Herisau awarded the construction work for a factory building to the construction company Itel AG in St. Gallen. After completion of the work, Itel AG demanded payment of the outstanding contract price, which Phyteia AG refused, as Itel AG had not yet remedied certain defects, such as faulty stair treads and scratched window panes.

Itel AG then filed a lawsuit for payment of the outstanding contract price. The High Court of Appenzell A.Rh. obliged Phyteia AG to pay, as the defects were classified as minor. Phyteia AG then appealed.

Considerations

The Federal Supreme Court first clarified that the architect's payment instruction cannot be considered as acceptance of the work within the meaning of Art. 370 CO, which would release the contractor from liability for defects and damages.

Regarding the stair defects, the Federal Supreme Court stated that these constitute a defect in the work, which establishes the contractor's liability under Art. 367 et seq. CO and postpones the due date of the contract price claim until the defects are remedied, in accordance with Art. 372 CO. The lower court had wrongly assumed the due date of the entire outstanding contract price.

With regard to the scratched window panes, the Federal Supreme Court found that…