The story: a claim of almost 600,000 euros — dismissed in full
The contractor extended and maintained the fire alarm system (Brandmeldeanlage) of a clinic. The principal terminated both contracts — the one for the extension works and the one for the maintenance. The contractor issued a final invoice as if everything had been performed completely and free of defects: the main contract over 200,000 euros net plus two undisputed supplementary orders over 290,000 and 9,500 euros net, together 499,500 euros net, 594,404 euros gross — including the part he never performed after the termination. On top of that he claimed the lost profit from the terminated maintenance contract.
The regional court (LG Berlin II, judgment of 16 December 2024, 14 O 137/23) dismissed the claim in full. The Kammergericht announced in a guidance decision (Hinweisbeschluss) of 13 May 2025, 21 U 8/25, that it would dismiss the appeal — and the contractor withdrew it. Not because he was owed nothing. But because he did not know how to settle the claim the way German case law requires. This lost case reads like a complete manual for getting the settlement right.
Large and small termination payment — what you can claim after a termination
German construction law distinguishes two scenarios. After a free termination (freie Kündigung, § 648 sentence 2 BGB, and for VOB/B contracts § 8(1) VOB/B) the principal may end the contract at any time without any reason, but pays a price for it: the contractor is entitled to the agreed remuneration also for the unperformed works, reduced by the expenses he saves and by what he earns — or in bad faith fails to earn — with the capacities freed up by the termination. This is the so-called large termination payment (große Kündigungsvergütung).
Things are different after a termination for cause by the principal: what remains is only the small termination payment, the remuneration for the part of the works performed up to the day of termination (§ 648a(5) BGB). In the present case the maintenance contract had been terminated extraordinarily on the basis of a contractual clause — and since the contractor had not yet performed any inspections, his claim under that contract amounted to zero. When the contractor himself may terminate for cause, we explain in our article on terminating a construction contract under § 648a BGB.
Along the way the Kammergericht confirmed a point of real importance for installation and service companies: a contract for the maintenance of the fire alarm system of a clinic is a construction contract within the meaning of § 650a(2) BGB, because the functioning of that system is essential for the intended use of the building. The consequence: such service contracts are governed by construction law — settlement rigours included.
First requirement: a verifiable settlement, not an invoice “for everything”
The large termination payment requires a verifiable final invoice (prüffähige Schlussrechnung) — also under a lump-sum contract. Under the established case law of the Federal Court of Justice the contractor must first separate the performed works from the unperformed ones and then value the performed part according to the ratio of its value to the value of the entire works covered by the lump sum. The calculation of the price has to be disclosed — so that the principal can check the settlement and defend himself. How to build such a final invoice, we explain step by step in our article on the final invoice (Schlussrechnung).
The Berlin contractor did exactly the opposite: he invoiced everything, although in the proceedings he himself conceded that defects and unfinished works existed at the moment of termination. No deductions for reduced works, no saved expenses, no reference to the calculation of the lump sum. The Kammergericht summed it up like this:
„Es bleibt völlig unklar, wie die Kl. diese Leistungen ursprünglich kalkuliert hat und wie dieser Preisansatz für die Einzelleistung in den Pauschalpreis eingeflossen ist. Ein vollständig bepreistes Leistungsverzeichnis als Grundlage der vorgenommenen Pauschalierung liegt nicht vor.”
“It remains entirely unclear how the claimant originally calculated these works and how this price for the individual item found its way into the lump sum. A fully priced bill of quantities underlying the agreed lump sum has not been produced.”
KG, decision of 13 May 2025, 21 U 8/25 — our translation
A particularly painful detail: the principal never objected to the verifiability of the invoice within the period under § 16(3) VOB/B. He did not have to. The court examines the conclusiveness of the settlement of its own motion — and its absence means the claim is dismissed as unfounded, not merely as premature.
Settling “from the top” — only where at most 5 per cent remained
There is a shortcut: where only minor residual works remained, the case law allows a settlement “from the top” (Abrechnung von oben) — only the unperformed part is valued and deducted from the full lump sum. The threshold of insignificance lies at no more than 5 per cent of the value of the entire works. In this case the threshold was 24,975 euros net — and the principal showed that the completion of the works by a third company had cost 110,451.56 euros net. The shortcut was out of the question.
Added to that was a substantive argument beyond the numbers. At the moment of termination the system had undisputed defects of category M, which excluded operational safety, and had not passed the technical acceptance:
„Die fehlende Funktionalität der Brandmeldeanlage im Zeitpunkt der Kündigung spricht indiziell gegen die Annahme, dass die Kl. nur noch geringfügige Restleistungen zu erbringen hatte […]. Eine Brandmeldeanlage ohne technische Abnahme und bestätigter Betriebssicherheit ist kein bis auf geringfügige Restleistungen vollendetes Werk.”
“The lack of functionality of the fire alarm system at the time of termination is circumstantial evidence against the assumption that the claimant only had minor residual works left to perform […]. A fire alarm system without technical acceptance and confirmed operational safety is not a work completed except for minor residual works.”
KG, decision of 13 May 2025, 21 U 8/25 — our translation
The Kammergericht added a control calculation that exposed the entire claim: from the lump sum of 499,500 euros net it deducted the completion costs of 110,451.56 euros — leaving 389,048.44 euros. The principal, however, had already paid 522,338.75 euros. Even on the most generous view nothing was left for the contractor.
VAT also on unperformed works — the shift after the ECJ ruling
There is one thread the contractor actually won — important for every company settling a terminated contract. For years the Federal Court of Justice and the Federal Fiscal Court held that the part of the remuneration attributable to unperformed works was not subject to VAT. The Court of Justice of the EU decided otherwise: the amount owed to a supplier after the customer’s early termination of the contract is consideration for a service and subject to value added tax (ECJ, judgment of 28 November 2024, C-622/23). The Kammergericht drew the conclusion directly:
„Hieraus folgt, dass auch die Vergütung für nicht erbrachte Leistungen grundsätzlich einen nach § 1 I Nr. 1 UStG steuerbaren Umsatz darstellt und bei der Bemessungsgrundlage gem. § 10 I UStG zu berücksichtigen ist.”
“It follows that the remuneration for unperformed works, too, constitutes in principle a taxable turnover under § 1(1) no. 1 UStG and must be taken into account in the taxable amount pursuant to § 10(1) UStG.”
KG, decision of 13 May 2025, 21 U 8/25 — our translation
In practice: the final invoice after a termination may charge VAT also on the unperformed part — the previous line of the BGH and the BFH is, according to the Kammergericht, outdated. The tax side should still be coordinated with a tax adviser, because the case concerned the settlement in civil proceedings and the practice of the tax authorities is still taking shape.
A post-termination settlement that survives in court
First establish the nature of the termination — free or for cause — because it decides whether you may claim the unperformed works at all. Separate precisely the performed from the unperformed works and value them in proportion to the lump sum, disclosing the calculation. Deduct the saved expenses — material, travel, costs you will no longer incur — and calculate the other earnings under the formula AWE = T × A. Charge VAT also on the unperformed part. And never invoice “for everything” while undisputed defects exist or the residual works exceed 5 per cent — such an invoice can sink the whole case.
Saved expenses and other earnings: the formula AWE = T × A
The large termination payment arises from the outset only in the amount reduced by the savings. The contractor must therefore himself identify and value what he will not spend thanks to the termination: material, spare parts, travel costs. In the maintenance dispute the Kammergericht pointed out that the contractor had kept silent both about the material allowance in the contract and about the travel — more than 300 km one way, at least four times a year. Valuing the savings “at zero” was simply not credible to the court.
The second deduction is the anderweitiger Erwerb — the earnings from using the freed-up capacities elsewhere. Here the decision hands contractors a very practical tool, because the Kammergericht accepted a simple numerical statement as sufficient at the first stage of the dispute:
„Dieser kann jedenfalls im Ausgangspunkt mit der Formel AWE = T x A ermittelt werden, wobei T die Gesamtdauer der kündigungsbedingt entfallenen Arbeitslast und A im Zweifel die Bruttogesamtkosten sind, die der Kl. pro Einsatzstunde ihrer kündigungsbedingt freigestellten Arbeitskräfte entstehen. […] Es handelt sich dabei nur um ein von der Kl. behauptetes Zahlenwerk, ihrer Erstdarlegungslast ist damit gleichwohl genüge getan.”
“It can, at least as a starting point, be determined with the formula AWE = T × A, where T is the total duration of the workload that fell away due to the termination and A is, in case of doubt, the total gross cost the claimant incurs per deployment hour of the workers freed up by the termination. […] This is merely a set of figures asserted by the claimant, yet it satisfies her initial burden of substantiation.”
KG, decision of 13 May 2025, 21 U 8/25 — our translation
At the start it is therefore enough to show two figures: how many working hours fell away because of the termination and what one gross hour of the freed-up workers costs — in the case it was 60 euros per hour. Even mislabelling that statement as “saved expenses” did no harm. Watch the other side of this coin, though: the Kammergericht starts from full utilisation of the company. Whoever fails to show that the freed-up capacities could not be used on other jobs will have the entire lapsed workload counted against him as other earnings. The Federal Court of Justice puts the accent more gently, on so-called fill-in orders (Füllaufträge) which the contractor could only take on because of the termination. That difference can decide the amount of the claim and is worth playing deliberately.
What this means for a foreign construction company in Germany
- A termination without cause is not the end of the money. After a free termination you are entitled to remuneration also for the unperformed works — but only if you settle them according to the rules of the case law.
- Start with the calculation, not with the invoice. Separate performed from unperformed, value in proportion to the lump sum and disclose the basis of the calculation. An invoice “for 100 per cent” in the face of undisputed defects is a straight road to losing.
- Settling “from the top” only with residuals up to 5 per cent. Where a third company completed the missing part, its costs will be the yardstick — as in this case, where 110,000 euros buried the shortcut.
- Charge VAT also on the unperformed part. After the ECJ ruling C-622/23 the Kammergericht accepted this approach — coordinate the details with a tax adviser.
- Count the savings and the AWE before the court does. Material, travel, working hours times the gross rate — a simple statement suffices at the start, and its absence sinks the claim entirely.
- Document the state of the works on the day of termination. Photographs, protocols, notices of readiness for acceptance — without them you can prove neither the scope performed nor the insignificance of the residuals.
Frequently asked questions
The principal terminated the contract through no fault of mine. What can I claim?
After a free termination — the full agreed remuneration, also for the unperformed works, reduced by saved expenses and other earnings (§ 648 sentence 2 BGB, § 8(1) VOB/B). The condition is a verifiable final invoice separating the performed from the unperformed works.
What is the difference between the large and the small termination payment?
The large one covers the remuneration for the entire works — performed and unperformed — after deducting savings and other earnings, and is due after a free termination. The small one is the remuneration for the part performed up to the day of termination and is all that remains where the principal terminated for cause.
Do I charge VAT on the remuneration for unperformed works?
According to the ECJ (C-622/23) and the Kammergericht — yes, it is a taxable turnover. The previous contrary line of the BGH and the BFH is considered outdated. Confirm the invoicing details with a tax adviser.
When may I settle “from the top”, without a full calculation?
Only where the residual works are worth no more than about 5 per cent of the entire works and the settlement does not conceal calculatory shifts to the principal’s disadvantage. Where the insignificance is disputed, the completion costs of a third company are one of the yardsticks.
How do I present the anderweitiger Erwerb so that the court accepts it?
At the first stage a statement suffices: the total number of working hours that fell away because of the termination and the gross cost of one working hour of the freed-up workers (formula AWE = T × A). If the freed-up capacities could not be used on other jobs, that has to be shown separately.
Discussion and quotations based on the reasoning of the KG decision of 13 May 2025, 21 U 8/25 (our translation), which concerns the judgment of the LG Berlin II of 16 December 2024, 14 O 137/23. The ECJ judgment of 28 November 2024, C-622/23, and §§ 648, 648a, 650a BGB as well as §§ 8, 16 VOB/B are taken into account. This article is for information purposes and does not replace legal advice in an individual case.