What is an Acceptance of Performance?

Acceptance of performance – the confirmation of the fulfilment of a contract for work and services

Acceptance of performance is a declaration that a product, service or service fulfils the agreed criteria defined between the client and contractor. It represents a key milestone in projects, as it is the official confirmation from the client that the requirements have been met.

DIN 69901-5:2009-1 ‘Project management – Project management systems – Part 5: Definitions’ defines acceptance as ‘confirmation by the client that the requirements have been fulfilled by the contractor’.

Legal basis for acceptance of performance

In Germany the acceptance for work contracts, which are used in the vast majority of projects, is legally regulated in Section 640 BGB (German Civil Code)¹:

(1) The customer is obliged to accept the work produced in accordance with the contract, unless acceptance is excluded due to the nature of the work. It may not be refused due to insignificant defects.

(2) A work shall also be deemed to have been accepted if the contractor has set the custumer a reasonable deadline for acceptance after completion of the work and the customer has not refused acceptance within this deadline stating at least one defect. If the customer is a consumer, the legal consequences of sentence 1 shall only apply if the contractor has informed the customer, together with the request for acceptance, of the consequences of an acceptance not declared or refused without specification of defects; the information must be provided in text form.

(3) If the customer accepts a defective work under subsection (1) sentence 1, even though he knows of the defect, he only has the rights designated in section 634 nos. 1 to 3 if he reserves his rights with regard to the defect when he accepts the work.

The most important points of acceptance are therefore

• Obligation to accept: The customer is obliged to accept the work produced in accordance with the contract, provided there are no significant defects.
• Fiction of acceptance: Acceptance is deemed to have taken place if the contractor has set the client a deadline for acceptance and the client allows this deadline to expire without asserting defects.
• Defect rights: If known defects are not reserved at the time of acceptance, the client loses certain rights to rectification of defects and possible contractual penalties.

Remark: Depending on the type of project and the contract between the contractor and the customer – i.e. the company and the purchaser – other legal regulations may also apply, e.g. the German Construction Procurement Rules (VOB/B) for construction projects or the EVB-IT contract for the procurement of IT services by the German federal authorities.

Options on acceptance of performance

Acceptance of performance is regarded as the most important milestone of a development,

as the client decides whether the agreed project objectives have been achieved. The client can proceed as follows as part of the acceptance process:

1. Acceptance without reservations: The work is accepted in full.
2. Acceptance with reservations: Minor defects are identified but can be rectified without jeopardising overall acceptance.
3. Refusal of acceptance: Acceptance may be refused in the event of significant defects.

Consequences of acceptance of performance

If the acceptance takes place, this has concrete consequences:

• Payment for the product, performance or service becomes due.
• The risk of deterioration or loss passes from the contractor to the client – the so-called transfer of risk.
• The reversal of the burden of proof takes place unless a reservation is declared.
• The principal loses possible claims for the removal of defects, unless a reservation is declared.
• The client loses a claim to a contractual penalty forfeited by the contractor if no reservation is declared.
• The limitation period for defects begins.
• The contract for work and services can no longer be terminated.

Acceptance of performance is therefore more than just a formal act; it marks the transition from project completion to the warranty phase and has far-reaching legal consequences. Careful planning and execution of the acceptance procedure can minimise risks and ensure the success of a project. To avoid problems during acceptance, both the contractor and the client should also focus on thorough documentation and clear communication. An acceptance report that covers all key points can prevent disputes later on.

Impulse to discuss:

A client cannot refuse acceptance of performance because of an insignificant defect. But who defines in practice up to which point it is an insignificant defect and from which point it is a significant defect?

Notes:

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[1] Section 640 BGB: Acceptance

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