ARGE - construction partnership in Germany: legal issues in cooperation of different engineering firms (PDF)

Master's Thesis from the year 2012 in the subject Law - Civil / Private / Trade / Anti Trust Law / Business Law, grade: 2,1, University of Applied Sciences Stuttgart, course: Business Law; Recht, language: English, abstract: This Master Thesis investigates and evaluates the legal framework for engineering firms to step into an ARGE partnership with other planning offices. ARGE, in German construction industry an established form of partnership, becomes more and more important in acquiring and accomplishing construction projects.
ARGE underlies the regulations of the German Partnership under Civil Law. Consequently the ARGE partners are jointly and several liable for the contract to produce a work with the principal. Thus the principal reaches fundamental advantages: He reduces his risk concerning insolvency of an ARGE partner, he increases competition and he gets services from one hand.
Engineering firms, who want to participate in these projects, have to handle their capacities and risks. Engineering firms are not interested in participating in ARGE partnerships. There is no reason for voluntary sharing of liability. Engineering firms want to be responsible and liable only for services they accomplish. They do not want to share the responsibility and liability with other construction planners.
In external relationship with the principal, ARGE partners could not change the jointly and several liability.
Principals will not deal about limitation of ARGE partners' liability. However in internal arrangements could be defined other regulations.
Beside the contract with the principal is the partnership agreement equally important. The ARGE agreement has to define the purpose of the partnership, the bodies of the partnership with their responsibilities and the services the partners have to accomplish for the ARGE. Partners have to be careful concerning liability. Partners should ensure in internal relationship that they are only responsible for services they had accomplished.
It is advisable to define other regulations in the ARGE agreement than the terms in law. For example, partners should define a fulfilment obligation, due to claim for damages by the
principal. In case of insolvency of one partner, the other partners have still to fulfil the contract with the principal. If there are services they cannot carry out by themselves, they
have to integrate other partners.
Engineering firms have to weigh within the framework of their business risk, if they are interested in acquiring the contract under the precondition to participate in an ARGE partnership. Capacity utilization is just important as the choice of partner.