Limitations and exclusions of liability in business to business contracts in Austria

Between commercial parties, the principal legal sources are the Austrian Civil Code (ABGB) as well as case law regarding the respective provisions. The central rules in the ABGB governing contractual limitations or exclusions of liability between commercial parties are: Section 879, which ensures “good morals” and fair practice; and, for a party’s general terms and conditions (GTC), Section 864a prohibits “surprising clauses”.

Generally, Austrian law is much stricter when governing business-to-consumer (B2C) relationships compared to B2B relationships. One of the most notable differences is that Austrian law effectively prohibits severability clauses in B2C contracts. Consequently, a legally invalid limitation of liability may lead to a complete loss of the relevant limitation vis-à-vis the consumer. On the other hand, there is much less risk of overreaching limitations of liability in a B2B relationship because an invalid clause can be replaced by the court with a legally valid one that is as similar as possible.

Austrian liability law operates based on the idea of fault-based damages. Advance exclusions of liability for intentional harm or blatant gross negligence are contrary to good morals and legally void under Section 879 ABGB. Additionally, exclusions or limitations for personal injury or death are invalid as contrary to good morals.

Austrian case law generally treats blanket exclusions more strictly. In GTC, exclusions that also cover breaches of core obligations or go materially beyond the default statutory protections (i.e. rules that would apply absent contrary agreement) (i.e. “dispositive law”) are typically void under Section 879(3) ABGB, while tailored, individually negotiated allocations may pass muster.

Advance exclusions or limitations of liability under the Austrian Product Liability Act (PHG) are invalid pursuant to Section 9 PHG.

Under Austrian law, commercial parties may contractually exclude consequential or indirect losses, provided the clause is clear, proportionate, and not grossly disadvantageous under Section 879(3) ABGB when using GTC. The Austrian courts are sceptical of exclusions that would effectively deprive the counterparty of the substance of its bargain or would also apply to blatant gross negligence or intent. In sales between businesses, the notice rule under the Austrian Business Law (UGB) should be kept distinct from the different categories of damages. Claims for consequential damages are not cut off by late defect notification under Section 377(2) UGB, which only addresses damages based on the defect itself, and may be pursued under contractual liability principles despite a notice failure. The practical effect is that exclusions must be targeted and calibrated to survive GTC control, and they should not attempt to exclude intentional or grossly negligent harm.

Generally speaking, most exclusions which are not impermissible regardless of the circumstances will be assessed based on the entire relationship between the commercial parties. As such, Austrian law is very much characterised by case-by-case decisions.

Such exclusions are not prohibited per se in commercial relationships. However, they must comply with the general principles mentioned above. 

When talking about an exclusion or limitation of liability for data, the GDPR’s ground rules are to be adhered to when personal data is being processed. GDPR duties/administrative liability are regulatory and not contractually “waivable.” 

Liability caps are generally respected in B2B relationships if they are transparent, reasonable relative to the contract’s risk allocation, and subject to standard carve outs (at least for intent and typically for blatant gross negligence and death or personal injury). 

In GTC, caps are reviewed under Section 879(3) ABGB’s regime against dispositive law and the parties’ commercial or market strength. Disproportionate caps, or caps that effectively shift strict liability can be void. Symmetrical caps can weigh against a finding of gross disadvantage or disproportionality. 

Austrian law permits commercial parties to concentrate remedies, for example by limiting warranty to repair or replacement, but the clause must align with the warranty framework set out in Section 922 and the following sections of the ABGB.

However, this must not lead to a situation where non-compliance with the contract remains effectively unpunished. Austrian case law has accepted contractual narrowing of remedies in contractual relationships outside of consumer law, while holding that, once the seller has acknowledged a duty to cure, reliance on a strict no withholding or exclusive remedy clause after failed cure can be abusive. If repair or replacement is refused, not provided within a reasonable timeframe, or entails significant inconvenience, the buyer may resort to secondary remedies such as price reduction or rescission. A GTC clause that suppresses these secondary remedies unreasonably risks being invalid under Section 879(3) ABGB.

In other words, legal remedies may not be limited in a way basically rendering them ineffective. 

In a B2B relationship, a partially unenforceable or legally void clause will be interpreted considering the parties’ intentions to preserve the most similar clause possible, which is permissible under Austrian law. The idea behind this is that the court shall interfere as little as possible with what the parties wanted to agree on. 

This is a significant advantage in B2B contracts compared to B2C contracts, where a partially unenforceable clause is simply replaced by dispositive law to ensure transparency vis-à-vis the consumer. 

Commercial parties cannot validly extend statutory limitation periods in advance or waive limitation prospectively, as Section 1502 ABGB prohibits both. 

The general three-year limitation period for damages under Section 1489 ABGB (known as the “short” period, in contrast to the thirty-year “long” period) applies unless a special statute provides otherwise. Shortening the applicable limitation period is, in principle, possible as a matter of freedom of contract, but in GTCs a significantly shortened limitation period can be void, as grossly disadvantageous under Section 879(3) ABGB, especially if it undermines the statutory balance for defect claims or cuts off claims before discovery is reasonably possible. Sensible practice is to use moderate, transparent contractual periods keyed to claim types and to ensure discovery-based triggers, where appropriate.

The main public policy considerations are the good-morals controls contained in Section 879 ABGB. Clauses excluding liability for death or personal injury are contrary to good morals, and therefore legally void.

The ABGB’s fairness controls for standard terms (Sections 864a and 879) provide a substantive check on clauses that surprise or grossly disadvantage the other party. Statutes with strict or non-waivable liability, such as the PHG, apply irrespective of the contract and cannot be excluded in advance.

In the international setting, the Austrian Law on International Private Law (IPRG)’s ordre public clause allows Austrian courts to set aside foreign law results that offend fundamental values, although this exception is narrowly construed and invoked only in exceptional circumstances.

• Austrian‑law governed contract performed abroad: The contractual validity and effect of liability limitations/exclusions are determined by the chosen Austrian law (subject to any internationally mandatory rules at the place of performance). Austrian overriding mandatory rules apply as a matter of Austrian ordre-public.
• Foreign‑law governed contract performed in Austria: The chosen foreign law applies, but Austrian courts will still give effect to their own overriding mandatory provisions and may also have to respect mandatory rules of the place of performance, where appropriate.