Definition and legal principles of the unit price
Definition of unit price
Der Unit price is a term commonly used in construction and procurement law for presenting and billing services, especially in the context of construction contracts and public procurement procedures. It refers to the contractually agreed price per unit of a service (e.g., per square meter, cubic meter, ton, or piece), regardless of the total quantity actually performed. Billing based on the unit price is done by multiplying this price by the actual quantity delivered or performed. The unit price is thus a central element in unit price contracts and bills of quantities.
Legal sources and areas of application
Civil law anchoring
The unit price is not explicitly mentioned in the German Civil Code (BGB), but it is a central component of contracts for work and services (§§ 631 et seq. BGB), especially the so-called unit price contracts. In these contracts, no lump sum is set for the entire work; instead, a billing-oriented agreement is made in which each partial service is billed according to quantity.
Public procurement
In procurement law, especially the German Construction Contract Procedures (VOB/A and VOB/B), the unit price is the standard form of price formation (§ 4 VOB/B). In the bill of quantities, which is part of the tender documents, bidders submit their unit prices for the required items; the final billing is based on the actual quantities executed.
Areas of application
Unit prices are used particularly in construction services, infrastructure projects, and supply services, when the final quantities are not yet determined or known at the time the contract is concluded. This enables flexible, performance-based, and transparent billing.
Unit price contract: Contract design and legal effects
Nature of the unit price contract
In the unit price contract a price per unit is agreed for each service to be performed. Payment is based on the quantity actually recorded. Thus, unit prices serve as the foundation for both the calculation and later billing of a service. This distinguishes it from the lump sum contract, where a total payment is agreed for the completed work.
Performance determination and quantity determination
Quantity determination is initially carried out on a provisional basis by the client as part of the bill of quantities. The actual quantities are determined continuously during construction. The final invoice is based on the quantities of services actually performed, which are multiplied by the contractually agreed unit prices.
Adjustment of the unit price
Unit price contracts are frequently subject to changes in quantity or performance. Legally significant here is the provision on increases and decreases in mass (§ 2 paras. 3 and 7 VOB/B), which may provide for an adjustment of the unit prices if deviations from the intended quantities exceed certain thresholds and this is economically significant for the client or contractor.
Change orders and price adjustments
If there are changes or additional services during the construction process, change orders may be necessary. The following options arise from the unit price contract:
- Transfer of existing unit prices to similar additional services,
- Renegotiation of unit prices for additional or changed services if transferability is not possible,
- Adjustment of unit prices in case of significant changes in quantity.
VOB/B regulates in § 2 how new pricing is to be carried out and under which circumstances adjustments are permissible.
Unit prices in procurement law and public contracting
Unit prices in tender procedures
In public tenders, the bill of quantities must include all relevant items for which bidders can submit unit prices. The contracting authority examines and evaluates these prices as part of the review of bids for economic efficiency, appropriateness, and viability.
Obligations to review and provide information on unit prices
The obligations of bidders to review and provide information regarding the estimated quantities in the tender documents are of particular importance. If the bill of quantities contains incorrect quantity information, both bidders and contracting authorities may demand corresponding contractual adjustments or compensation claims.
Unit prices and quantity fluctuations
The unit price contract essentially shifts the risk of quantity changes to the client. Only as an exception – in cases of incorrect quantity information or unusual quantity developments – can the risk partially shift to the contractor. VOB/B (§ 2 para. 3) provides for an adjustment if the actual quantities deviate by more than 10% from the tendered quantity.
Billing and payment based on unit prices
Billing principles
In unit price contracts, invoicing is based on the measurement of the quantities actually performed. For each item listed in the bill of quantities, the actual amount of work performed is multiplied by the agreed unit price. The sum of all items results in the total amount to be invoiced.
Proof of performance and verification procedures
The contractor must provide detailed proof of the quantities performed (e.g., by measurement, delivery slips, or acceptance protocols). The client is obliged to review and countersign these proofs. Legal disputes may, for example, concern the recognition of quantities, the quality of work, or the interpretation of quantity units.
Tax and social security treatment of unit prices
Classification under VAT law
Unit prices are always to be understood as net prices, to which statutory VAT is added. Construction companies are obliged to indicate VAT correctly when issuing invoices (§ 14 UStG). For cross-border contracts, special tax requirements may apply.
Aspects of social security law
Billing based on unit prices affects the social security law assessment above all when employment relationships are involved, for example when reporting wage-based social security contributions or in the assessment of employee-like activities.
Unit price in the international context
Comparable legal instruments
In Anglo-Saxon and French legal systems, comparable concepts exist, such as the unit price contract or prix unitaire. The legal treatment is based on similar principles of flexible, quantity-based billing.
Summary
The unit price is a fundamental instrument for representing and billing services, especially in construction and procurement law. It offers the client flexibility in quantity planning and enables performance-related and transparent compensation. Legally, the unit price is a central component of unit price contracts, particularly in connection with the provisions of VOB/B and the BGB. Its application requires precise contract drafting, careful quantity determination, and compliance with applicable civil and procurement law provisions. Practical billing by unit prices calls for accurate documentation and allows for a fair allocation of quantity and price risks between the contracting parties.
Frequently asked questions
What are the legal obligations for specifying the unit price in retail?
Retailers are required by the Price Indication Ordinance (PAngV) to state, in addition to the total price of a product, the so-called unit price—that is, the price per unit of measure. This applies in particular to goods offered by weight, volume, length, or area. This obligation ensures price transparency and consumer protection, enabling customers to compare prices regardless of packaging sizes and fill quantities. The unit price must be stated clearly, legibly, and perceptibly, so that consumers can readily recognize the unit price information. Violations of this obligation may be considered administrative offenses and can be fined.
When is it legally permissible to dispense with indicating the unit price?
According to § 4 of the Price Indication Ordinance, indicating a unit price is exceptionally not required if products are offered in sales units that are not usually suitable for mixing or comparison with other products, for example, individual items such as furniture or clothing, or for goods where a unit of measure does not provide a meaningful basis for comparison. There is also an exception for very small packages whose main surface is less than 25 square centimeters, provided the unit price is not given elsewhere, such as on the shelf. These exceptions are to be interpreted narrowly, so that retailers are usually still obliged to indicate the unit price in case of doubt.
What sanctions are imposed for breaches of the obligation to indicate unit prices?
Breaches of the Price Indication Ordinance and thus the obligation to indicate the unit price constitute an administrative offense and can be fined up to 25,000 euros. Moreover, there is a risk that consumer protection associations or competitors may issue a formal warning or take legal action against the retailer on grounds of unfair competition. In the event of a warning, further costs, such as lawyer and court fees, may arise. A violation can further result in the invalidity of the price marking and poses the risk that contracts may be challenged.
Must unit prices also be specified in online retail?
The Price Indication Ordinance explicitly applies to online retail as well. This means that online retailers are required to state the unit price for all goods offered or advertised by weight, volume, length, or area. The unit price must be displayed in close proximity to the total price so that customers can clearly and easily see both the price and the unit of measurement during the ordering process. The unit price must also be indicated in digital advertisements or price comparisons if a total price is stated.
Are there specific requirements for the presentation of the unit price?
The unit price must always refer to the legally prescribed unit of measurement, usually 1 kilogram, 1 liter, 1 meter, 1 square meter, or 1 cubic meter. The font size and design of the unit price must not be significantly smaller or less conspicuous than that of the total price. There must also be no special emphasis of the total price to the detriment of the unit price. Additionally, the unit price must be stated in euros and cents. The indication of additional, differing units of measurement is not permitted and may constitute a misleading business practice under the Act Against Unfair Competition (UWG).
Can incorrect unit price specifications give rise to civil claims?
Yes, incorrect or missing unit price information can lead to civil law claims, especially under the rules of the Act Against Unfair Competition (UWG). Competitors or consumer associations can assert claims for injunctive relief and removal. If a retailer receives a warning and does not respond appropriately, legal proceedings may be initiated, which, in addition to the claim for injunctive relief, may also include claims for damages. Incorrect information may also provide grounds for the rescission of completed transactions if the consumer can prove they were misled by the price information.
