Pre–contractual negotiations (Ius Commune ch. 9)

This weeks reading is about the role of good faith in pre-contractual negotiations.

The combination of the words „good faith“ and „pre-contractual“ immediately triggers the association of culpa in contrahendo in a german law students mind. However, I learned that the c.i.c does not only comprise situations where there is a claim for personal damages in question, but also the obligation to negotiate in good faith. More precisely, there can even be situations when it is contrary to good faith to end negotiations.

While I can understand that it is important for a party to rely on the other's sincerity, my first reflex was to ask for the implications this has on contractual liberty (Vertragsfreiheit).

Why should it be against good faith to end negotiations? The point of negotiations is for the parties to find an agreement. However, if one party does not feel confident that there will be an agreement, contractual liberty allows to stop negotiations and look for better deals elsewhere. It seems that this was a misconception, taking the meaning of good faith too far. The authors explain on p. 381 that good faith in pre-contractual negotiations does not amount to what could be conceived as a “Kontrahierungszwang”. This would be contrary to a free economy.

The role of good faith is therefore to protect the party which is led to believe that there will be a subsequent contract in the future.

Also, it was interesting to see that although there is no general duty of good faith in common law, the outcomes are not very different. Other doctrines, like the doctrine of fraud, fulfill the same role.

: 20 Nov 2011 14:48 |  Comments (0) |  Close comments |  Report a problem

Cause and consideration (Ius Commune ch. 5.1–5.3)

I read Ius Commune Contract ch. 5.1-5.3 in preparation for this weeks class.

The chapters deal with additional requirements to contracts. In France this is “la cause”, while in England the “consideration” forms such a requirement.

For a german law student these concepts are not so easily to grasp (at least this goes for me: I am still not quite confident to be able to fully appreciate the concept of consideration although it has been explained to me on numerous occasions). This is owed to the fact that in german law those supplementary conditions do not exist.

The other jurisdictions will deny the enforceability or even the existence of a contract in case of lack of consideration, respective lack of cause. This context makes the requirements seem rather important. Considering this, it is astonishing to see that a clear doctrine of consideration does not exist.

Also I find it quite intriguing, that an offer which is deemed to be “irrevocable” can in fact be freely revoked unless the promissee provides some kind of consideration. Why bother calling it irrevocable then?

But why does the BGB get on without these conditions? The Ius Commune authors explain this as one of the effects of the abstraction principle: the obligatory contract (schuldrechtlicher Vertrag) may be void without causing any damage to the real contract (dinglicher Vertrag). The real contract does not need a “cause of transfer”. This situation is remedied by the doctrine of unjust enrichment. Therefore the doctrine of unjust enrichment takes the place of cause and consideration in the BGB.

: 16 Nov 2011 22:38 |  Comments (0) |  Close comments |  Report a problem

The relationship of § 309 Nr. 9 BGB and § 307 BGB

Follow-up to Roll–over contracts and the BGB from Per's blog

In the last entry, I referred to the argument on the relationship of § 309 Nr. 9 BGB and § 307 BGB being unclear.

Having done further research on that matter, it became clear that § 307 BGB serves as a catchall element (Auffangtatbestand) to § 309 Nr. 9 BGB. Therefore, § 309 Nr. 9 BGB only provides for the outer boundary of legality of rollover clauses¹.

This special relationship is a consequence of the making of § 309 and cannot be derived immediately from the wording, which seems to be quite specific about what is allowed and what is not. In the process of making § 309 BGB, the legislator intended to create an abstract provision which covers the vast majority of cases². This approach necessarily led to a compromise concerning the acceptable length of time. Consequently the limits are now simply too long for some contracts³. Therefore the purpose of customer protection requires the test according to § 307 BGB.

Interestingly enough, the above issue points to one of the issues of statutory law: it is difficult to create abstract, all-covering provisions while considering the particular case at the same time. A possible remedy for this is to create a catchall provision like § 307 BGB. At that point, the rest is left up to the judge who will decide the particular cases. Therefore, in constellations like above, a “common law element” enters into the german black letter civil law jurisdiction. Taking into account the growing complexity of life, it might be sensible to consider a blended “civicommon law”, when talking about the future of a common european law. There could be statutory rules to set the basis of law, while the particular application heavily relies on judges.

Would this be a means to combine the positive features of both systems?

Footnotes:

1 compare Staudinger BGB §§ 305 – 310 (2006), D. Coester-Waltjen, § 309 Nr. 9 Rn. 18, also: Münchener Kommentar BGB 4. Aufl. - Basedow, § 309 Nr. 9 Rn. 11.

2 Staudinger – Coester-Waltjen § 309 Nr. 9 Rn. 2.

3 Staudinger ibid.

: 30 Oct 2011 19:16 |  Tags: Bgb Dauerschuldverhaeltnis Rollover |  Comments (0) |  Close comments |  Report a problem

Roll–over contracts and the BGB

In German law, a roll-over clause in a B2C-contract must comply with § 309 Nr. 9 BGB.

1. Applicability of § 309

According to § 310 I, II BGB, § 309 BGB is applicable only if 1) the contract is a B2C-contract and 2) the contract is not with an energy or water supplier. Also excluded are insurance contracts, contracts on goods which were sold as belonging together and contracts on copyrights (§ 309 Nr. 9 BGB).

2. Dauerschuldverhältnis

If these provisions are met, § 309 Nr. 9 BGB provides that the contract in question must be a "Dauerschuldverhältnis" (the regular exchange of goods or services over a certain time).

This condition is to be taken literal. The BGH recently handed down a decision stating that the contract on a BahnCard (a card by the Deutsche Bahn, entitling the customer to discounts on train fares) does not fulfill this requirement. On the grounds the customer is merely entitled to discounts, there is no regular exchange of services or goods to be seen in this contract. Therefore it is not a "Dauerschuldverhältnis" (BGH, Urteil vom 15. 4. 2010 - Xa ZR 89/09 in NJW 2010, 2942, (2943)).

3. Forbidden stipulations

The clause then is not permitted to a) bind one party for more than two years or b) provide for a tacit extension of the contract for more than one year at a time or c) stipulate a notice exceeding 3 month for ending the contract. The wording is identical to the old § 11 Nr. 12 AGBG, which was in force until 31.12.2001. As the wording is unambiguous, it seems that these conditions are met most of the times. In decisions, this question is even treated as a triviality (OLG Hamm, Urteil vom 8.4.2010 - I-17 U 203/09 in MMR 2010, 607).

4. Alternative test according to § 307 I BGB

If the roll-over clause has proven to be valid so far, it could still be violating the provision of the more general § 307 I BGB. While it is accepted, that § 307 BGB can be applied next to the § 309 Nr. 9 BGB (MMR 2010, 607), it is contested in how far the wording of § 309 Nr. 9 BGB sets the track for the evaluation of the clause according to § 307 BGB. This matter needs to be examined in further depth, taking into account concurring opinions of literature and jurisdiction.

: 22 Oct 2011 20:07 |  Tags: Bgb Dauerschuldverhaeltnis Rollover |  Comments (0) |  Close comments |  Report a problem

Common Sales Law

The german legal newspaper „Legal Tribune Online“ treats the subject of a common european sales law in this article.

The proposition of the commission on this harmonization is intended to facilitate inner-european trade and invigourate the internal market. Provided that all member states of the EU accept this proposition, it could one day become a 28^th legal regime for the sale of goods.

The commission sees the proposed common sales law as holding advantages for both, the customer and the concerned companies (details see Press Release, Commissions Communication).

Reading about this communication of the commission and taking into account our discussion in the lecture, I was surprised to see that a project we deemed as being possible only in the far future (if at all) has already taken such concrete shapes.

Twigg-Flessner says in his Cambridge Companion that „no one is expecting concrete steps towards codification (of a European Civil Code) anytime soon“ (p.18). Obviously, the Commission doesn't go as far as to propose a whole Civil Code, but the points Twigg-Flessner makes in favour and against the likelihood of the introduction of a code are by large also true of a common sales law.

The „economic case“ (Twigg-Flessner, p. 14) seems to provide a strong point in favour of a common sales law as the Commisssion heavily and exclusively relies on it (see „Background“). According to the Commission, the main idea is to facilitate and lower the costs of cross-border sales. Although this seems plausible, it leaves the question as towards the „cultural case“ (p.16) as Twigg-Flessner puts it. Especially due to a lack of independent legal culture within the EU, he holds the introduction of a common civil code as improbable.

Should the commissions' plans be realized, it might leave this cultural point as a merely scholarly one, which has to take second place to economic considerations. It will be interesting to see which one will prevail, economic forces or the spirit of diversity with all its negative and positive features.

: 15 Oct 2011 20:36 |  Tags: Commissions Common Communication Cross-Border Eu Law Sales |  Comments (0) |  Close comments |  Report a problem