The German Approach to Private Law Four typical institutions

The German Approach to Private Law

Four typical institutions

Four typical institutions of German Law

1. Doctrine of Mistake

2. Culpa in contrahendo

3. Change of Circumstances

4. Principle of Abstraction

Doctrine of Mistake

§ 119 Bürgerliches Gesetzbuch (BGB)

(1) A person who, when making a declaration of will, was mistaken about its contents or had no intention whatsoever of making a declaration with these contents, may avoid the declaration if it is to be assumed that he would not have made the declaration with knowledge of the factual position and with a sensible understanding of the case.

(2) A mistake about such characteristics of a person or a thing as are customarily regarded as essential is also deemed a mistake about the contents of the declaration.

§ 122 BGB

(1) If a declaration of intent is … avoided under § 119 …, the person declaring must, if the declaration was to be made to another person, compensate the damage that the other … party suffers as a result of his relying on the validity of the declaration; but not in excess of the total amount of the interest which the other … party has in the validity of the declaration.

(2) A duty to pay damages does not arise if the injured person knew the reason for the … the voidability or did not know it as a result of his negligence (ought to have known it).

Doctrine of Mistake

Art. 4:103 Principles of European Contract Law (PECL)

(1) A party may avoid a contract for mistake of fact or law existing when the contract was concluded if: (a) (i) the mistake was caused by information given by the other party; or (ii) the other party knew or ought to have known of the mistake and it was contrary to good faith and fair dealing to leave the mistaken party in error; or(iii) the other party made the same mistake,and(b) the other party knew or ought to have known that the mistaken party, had it known the truth, would not have entered the contract or would have done so only on fundamentally different terms.

(2) However a party may not avoid the contract if:(a) in the circumstances its mistake was inexcusable, or(b) the risk of the mistake was assumed, or in the circumstances should be borne, by it.

Doctrine of Mistake

Under German law …

… a relevant mistake consists in a discrepancy between the mistaken party‘s declaration and his idea of it, whether he had a wrong perception of what the declaration does actually mean (Inhaltsirrtum) or makes a mistake in its uttering (Erklärungsirrtum).

… it does not matter whether or not the mistake is due to the mistaken or the other party‘s fault. The mistaken party has to compensate the reliance damage of the other on the grounds of a no-fault liability, if the other party has not been negligent himself.

According to the PECL …

… a mistake can pertain to any factual or legal circumstance.

… the relevance of the mistake depends on whether or not it is excusable and can be attributed to the other party because he caused or shared the mistake or could have known it.

Doctrine of Mistake

The German concept of contractual mistake was mainly developed by Friedrich Carl von Savigny (1779-1861), the foremost German scholar of the 19th century, on the basis …

… of the distinction between a party’s declaration und his underlying will and

… of the distinction between a party’s will and a mere motive:While the latter was, in general, irrelevant, a discrepancy between a party’s declaration and his will led to the invalidity of the respective contract.

… of the restriction of the operative will to a simple reflection of the declaration’s contents:A relevant mistake occurs only where someone utters something different than he intends to or misunderstands the meaning of his own declaration. These are the two cases referred to by § 119 (1) BGB.

Doctrine of Mistake

When drafting the modern German doctrine of contractual mistake, Savigny, …

… on the one hand, adopted the natural law concept of the declaration of will:For him, a contract was, …… at least in theory, binding because of the parties’ intent to bind themselves. … no longer an inseparable entity, but was concluded by the correspondence of its parties’ individual declarations of will.

… on the other hand, returned to the Roman law doctrine of contractual mistake by restricting the relevant ‘will’ of the mistaken party to a mere reflection of the contract’s contents.

Doctrine of MistakeThe early natural lawyers like the Dutch scholar Hugo Grotius (1583-1645 )

… considered every false assumption as relevant if it was causal for the contract, i. e. if it had prompted the mistaken party to enter into the contract.

… regarded the contract as an act of self-legislation that was subjected to the tacit ‘condition’ that all underlying assumptions were correct:

Grotius, De jure belli ac pacis (JBP) 2.11.6:At viam nobis reperiendae naturali veritati pandit, quod de legum vi atque efficacia omnium ferme consensu receptum, ut si lex fundetur in praesumtione aliqua facti, quod factum revera ita se non habeat, tunc ea lex non obliget, … Similiter ergo dicemus, si promissio fundata sit in praesumtione quadam facti quod non ita se habeat, naturaliter nullam eius esse vim: quia omnino promissor non consentit in promissum, nisi sub quadam conditione, quae re ipsa non exstitit.

But a way to natural truth is to be found in the dominant opinion on the force and efficacy of laws that are supposed to be not binding, if they rest upon a presumption of any fact, which in reality is different. … The same rule applies to the interpretation of promises. For where they are made upon the supposition of a fact, which in the end proves not to be true, they lose the force of obligations, because the promisor made them upon a certain condition only which was not fulfilled.

Doctrine of Mistake

The early natural lawyers …

… were criticized by later natural lawyers such as Christian Thomasius (1655-1728) who denied that an error could have any effect on the contract because the mistaken party could, and should, have protected himself against the risk of any false assumption by inserting an appropriate express condition into the contract.

… developed a concept that laid the foundation for its own reversion by Savigny: A false assumption does not affect the contract unless it pertains to its contents, because someone cannot insure himself against the risk of his own misunderstanding of his declaration. A relevant error can, therefore, consist only of the discrepancy between the declaration and the idea that the declaring party has of it.

Doctrine of MistakeSavigny’s concept of contractual mistake is a modernized form of the doctrine of the Roman

lawyers who …

… considered a mistake as relevant if it pertained to the nature of the contract (error in negotio) or to the body or material of its object (error in corpore/error in materia) and, thus, …

… only regarded a contract as void if a party had a wrong idea about the contract’s contents.

D 18.1.9 Ulp 28 SabIn venditionibus et emptionibus consensum debere intercedere palam est: ceterum sive in ipsa emptione dissentient sive in pretio sive in quo alio, emptio imperfecta est. si igitur ego me fundum emere putarem Cornelianum, tu mihi te vendere Sempronianum putasti, quia in corpore dissensimus, emptio nulla est. … Inde quaeritur, si in ipso corpore non erratur, sed in substantia error sit … Marcellus scripsit libro sexto digestorum emptionem esse et venditionem, quia in corpus consensum est, etsi in materia sit erratum. ego in vino quidem consentio, quia eadem prope ousia est, si modo vinum acuit: … in ceteris autem nullam esse venditionem puto, quotiens in materia erratur.

It is obvious that there has to be consent in contracts of sale. Otherwise, if parties differ either about the nature of the contract or about the price or about something else, the sale is not valid. If I believe to buy the Cornelian real estate and you believe to sell the Sempronian one, the sale is void, because we differ about the body. … The solution is doubtful, if there is no mistake on the body, but on the substance. … Marcellus wrote … that the sale is valid, because there is consent relating to the body, even if there is a mistake on the material. … I agree in the case of vine, because it is nearly of the same essence, if wine has turned to vinegar … For the rest, I believe that there is no sale if a mistake on the material occurs.

Doctrine of Mistake

The German concept of contractual mistake …

… is innovative only in that sense that it takes a logical step in order to avoid the inconsistency of the natural law model.

… is essentially conservative because it continues the Roman doctrine of error,

... using the natural law terminology (‘will’/’declaration of will’) as a mere decoration and

... not taking into account whether or not the error was owing to the negligence of the mistaken or the other party.

Culpa in contrahendo(Precontractual liability)

§ 311 BGB

(1) In order to create an obligation by legal transaction and to alter the contents of an obligation, a contract between the parties is necessary, unless otherwise provided by statute.

(2) An obligation with duties under § 241 (2) also comes into existence by1. the commencement of contract negotiations2. the initiation of a contract where one party, with regard to a potential contractual relationship, gives the other party the possibility of affecting his rights, legal interests and other interests, or entrusts these to him, or3. similar business contacts.

(3) An obligation with duties under § 241 (2) may also come into existence in relation to persons who are not themselves intended to be parties to the contract. Such an obligation comes into existence in particular if the third party, by laying claim to being given a particular degree of trust, substantially influences the pre-contract negotiations or the entering into of the contract.


§ 241 BGB

(1) By virtue of an obligation the creditor is entitled to claim performance from the debtor. The performance may also consist in forbearance.

(2) An obligation may also, depending on its contents, oblige each party to take account of the rights, legal and other interests of the other party.

§ 280 (1) BGB

If the debtor breaches a duty arising from the obligation, the creditor may demand damages for the damage caused thereby. This does not apply if the debtor is not responsible for the breach of duty.


Article 2:301 PECL

(1)A party is free to negotiate and is not liable for failure to reach an agreement.

(2)However, a party who has negotiated or broken off negotiations contrary to good faith and fair dealing is liable for the losses caused to the other party.

(3)It is contrary to good faith and fair dealing, in particular, for a party to enter into or continue negotiations with no real intention of reaching an agreement with the other party.


The rule that contractual liability applies also to precontractual contacts …

… was codified only in 2002 as part of the reform of the German law of obligations.

… was already developed in 1861 by Rudolph von Jhering (1818-1892) who considered cases in which someone suffered a loss because a valid contract did not come into existence owing to the mistake of one party or initial impossibility of performance.

… was, as a concept, rejected by the legislator of the 1900 version of the BGB who adopted it only as a remedy for special situations.

… was, already in the beginning of the 20th century, adopted by the courts as a general principle and extended to a precontractual misconduct of a party to a valid contract. This is now its main scope of application.


The rule that contractual liability applies also to precontractual contacts is, …

… according to the still dominant opinion in German doctrine and jurisdiction, based on the reliance of the aggrieved party.

… according to Jhering, based on a guarantee imposed by law on the future parties of contract requiring them to behave as they will have to after the conclusion of the contract.

… actually, just a simple consequence of the fact that the conclusion of contract can only be the starting point for the parties’ duties to perform, but is a rather accidental date for their duties to behave in order to prevent any damage to each other.

… therefore, not depending on the reliance of the aggrieved party that can at any rate expect due behavior of its counter-part after and before the conclusion of the contract.


Contractual liability for precontractual misconduct …

… is only technically contractual, but in its essence, liability for delict.

… fills a gap in the German law of extra-contractual liability which … requires either the tortfeasor’s wrongful intention to cause damage or the violation of a so-called absolute right (property, life, health, freedom) and therefore… does not provide for a liability for negligence causing purely economic loss:

§ 823 (1) BGBA person who, intentionally or negligently, unlawfully injures the life, body, health, freedom, property or another right of another person is liable to make compensation to the other party for the damage arising from this.

§ 826 BGBA person who, in a manner contrary to public policy, intentionally inflicts damage on another person is liable to the other person to make compensation for the damage.


To extend contractual liability to precontractual contacts …

… is, on the one hand, an adequate way to remedy the situation of someone who suffers purely economic loss, because it stems most regularly from expenses incurred in business contacts.

… is, on the other hand, a less systematic approach compared to the natural law and French model of a comprehensive clause of extra-contractual liability:

Grotius JBP 2.17.1Maleficium hic appellamus culpam omnem, sive in faciendo, sive in non faciendo, pugnantem cum eo quod aut homines communiter, aut pro ratione certae qualitatis facere debent. Ex tali culpa obligatio naturaliter oritur si damnum datum est, nempe ut id resarciatur.Here the name of misdemeanor is applied to every act of commission or omission repugnant to the duties required of all men, either from their common nature or particular calling. Such offences create naturally an obligation to repair the loss or injury that has been sustained.

art. 1382 Code civil (CC)Tout fait quelconque de l'homme, qui cause à autrui un dommage, oblige celui par la faute duquel il est arrivé à le réparer. Any act whatever of man, which causes damage to another, obliges the one by whose fault it occurred to compensate it.


To extend contractual liability to precontractual contacts …

… is basically an approach of Roman law which had a wide concept of contractual liability, but provided for extra-contractual liability only in very a restricted area which also excluded cases of purely economic loss.

… is opposed to the progressive concept of natural and French law.

… is also characteristic by its conservatism.

Change of Circumstances(Wegfall der Geschäftsgrundlage)

§ 313 BGB

(1) If circumstances which became the basis of a contract have significantly changed since the contract was entered into and if the parties would not have entered into the contract or would have entered into it with different contents if they had foreseen this change, adaptation of the contract may be demanded to the extent that, taking account of all the circumstances of the specific case, in particular the contractual or statutory distribution of risk, one of the parties cannot reasonably be expected to uphold the contract without alteration.

(2) It is equivalent to a change of circumstances if material conceptions that have become the basis of the contract are found to be incorrect.

(3) If adaptation of the contract is not possible or one party cannot reasonably be expected to accept it, the disadvantaged party may withdraw from the contract. In the case of continuing obligations, the right to terminate takes the place of the right to withdraw.


Art. 6:111 PECL

(1) A party is bound to fulfill its obligations even if performance has become more onerous, whether because the cost of performance has increased or because the value of the performance it receives has diminished.

(2) If, however, performance of the contract becomes excessively onerous because of a change of circumstances, the parties are bound to enter into negotiations with a view to adapting the contract or terminating it, provided that:(a) the change of circumstances occurred after the time of conclusion of the contract,(b) the possibility of a change of circumstances was not one which could reasonably have been taken into account at the time of conclusion of the contract, and(c) the risk of the change of circumstances is not one which, according to the contract, the party affected should be required to bear.

(3) If the parties fail to reach agreement within a reasonable period, the court may: (a) end the contract at a date and on terms to be determined by the court ; or(b) adapt the contract in order to distribute between the parties in a just and equitable manner the losses and gains resulting from the change of circumstances.…


The doctrine of change of circumstances (Lehre vom Wegfall der Geschäftsgrundlage) …

… became also codified only in 2002 when the German law of obligations was reformed.

… was in its current form essentially developed by Paul Oertmann in the early 1920s.

… was at that time immediately adopted by the German courts in order to remedy the situation of parties to a contract which had been frustrated by inflation.

… had as a predecessor the so-called doctrine of precondition (Lehre von der Voraussetzung) which was developed by Bernhard Windscheid (1817-1892) in 1850 and likewise rejected by the law-maker of the 1900 version of the BGB.


Windscheids doctrine of precondition …

… was mainly based on Roman sources concerning the unjust enrichment by frustration of purpose (condictio causa data causa non secuta). In Roman Law, this action had had a specific function which had become obsolete by the introduction of freedom of contract: It had served as remedy for contracts like barter that did not fall into one of the categories of fully recognized contracts.

… was formally based on the ‘will theory’ of natural law: A contract was considered to be binding because of the respective will of the parties, and in the cases of an unforeseen change of circumstances, the will of at least one of the parties to enter into the contract was deemed to depend on an ‘undeveloped condition’, which would have become an express one had the relevant circumstance only been considered.

… had, as to its essence, a predecessor in the medieval doctrine of tacit condition that circumstances will remain unchanged (clausula rebus sic stantibus).


The medieval doctrine of tacit condition (clausula rebus sic stantibus) …

… stemmed also from Roman sources on the law of restitution, but …

… followed a certain example given by the decision of the Roman lawyer Julian from the 2nd century:

D 46.3.38pr. Afr 7 quaest Cum quis sibi aut Titio dari stipulatus sit, magis esse ait, ut ita demum recte Titio solvi dicendum sit, si in eodem statu maneat, quo fuit, cum stipulatio interponeretur: ceterum sive in adoptionem sive in exilium ierit vel aqua et igni ei interdictum vel servus factus sit, non recte ei solvi dicendum: tacite enim inesse haec conventio stipulationi videtur ‘si in eadem causa maneat‘.

Julian said that if someone has been promised that performance is rendered to him or Titius, it is better to say that performance is rendered to Titius effectively only if he remains in the same status that he was in when the promise was made. Otherwise, if he has become adopted or exiled or emigrated or made a slave, you cannot say that performance was rendered to him effectively. There is a tacit condition inherent to the promise saying: ‘if he remains in the same status’.


The medieval doctrine of tacit condition …

… was rejected by the natural lawyers who demanded that a motive, in order to serve as a condition of the contract, had to be the sole one und apparent, which practically means that it had to be subject to an express condition:

Grotius JBP 2.16.25:Solet et hoc disputari, an promissa in se habeant tacitam conditionem, si res maneant quo sunt loco: quod negandum est, nisi apertissime pateat, statum rerum paesentum in unica illa quam diximus ratione inclusum esse.

It is a point often disputed, whether the continuance of things in their present state is a tacit condition, on which the fulfillment of all promises is founded. A position that can by no means be maintained, unless it is very much apparent that such continuance was the sole motive upon which the treaties were made.


The medieval doctrine of tacit condition …

… was also rejected by the French Code civil of 1804 that declares a contract to have, among its parties, the same effect as the law:

art. 1134 CCLes conventions légalement formées tiennent lieu de loi à ceux qui les ont faites.

Agreements lawfully entered into take the place of the law for those who have made them.

… became, as a consequence of the Code’s dominance in the 19th and 20th century, more and more obsolete and was, therefore, not even adopted by the German law-maker of 1900.


The German doctrine of change of circumstances …

… is basically a Roman or at least a medieval one.

… is not innovative, but even opposed to the progressive concept of the Code civil.

… characterized und characterizing by its conservatism: Its peculiarity is that it preserves a legal tradition that was given up by other legal systems during the 19th century.

Principle of Abstraction(Abstraktionsprinzip)

§ 873 BGB

The transfer of real property … requires a contract between the owner and the acquiring party on the respective change of right and its registration in the land register.

§ 929 BGB

The transfer of property of a movable thing requires that the owner delivers the thing to the acquiring party and that both consent that property shall pass.


The principle that ownership passes upon a separate legal transaction independent of the underlying obligation was developed by Gustav Hugo (1764-1844) and, again, Friedrich Carl von Savigny (1779-1861) on the basis of …

… the Roman sources pertaining to unjustified enrichment by erroneous performance of a non-existing obligation. To Hugo and Savigny, their existence showed that ownership had to pass independently, because, otherwise, there would be a vindicatio instead of a claim for unjustified enrichment.

… a passage in the Institutes of Justinian saying that the transfer of property was effectuated by the pure will of the owner.


IJ 2.1.40Per traditionem quoque iure naturali res nobis adquiruntur: nihil enim tam conveniens est naturali aequitati, quam voluntatem domini, volentis rem suam in alium transferre, ratam haberi. et ideo cuiuscumque generis sit corporalis res, tradi potest et a domino tradita alienatur. itaque stipendiaria quoque et tributaria praedia eodem modo alienantur. vocantur autem stipendiaria et tributaria praedia quae in provinciis sunt, inter quae nec non Italica praedia ex nostra constitutione nulla differentia est.

At natural law, we also acquire things by delivery, for nothing is more adequate to natural equity than that the will of an owner wishing to transfer his thing to another should be ratified. Consequently, of whatever kind a corporal thing may be, it can be handed over, and if this be done by its owner, alienated. Stipendiary and tributary lands may also be alienated in the same way. Stipendiary and tributary lands are those in the provinces and, by reason of our constitution, there is no difference between them and Italic land.


By his statement in the Institutes, Justinian …

… did not intend to introduce an new model for the transfer of ownership, but …

… wanted to make the passing of title by delivery on the basis of a valid obligation the only form of transfer of ownership and

… wanted to eliminate an obsolete ritual called mancipatio which effectuated the passing of title independently of the underlying obligation:- Originally, it had been a contract of sale, but had become a legal transaction destined to the performance of an obligation stemming from another contract.

- As it was actually still a sale, its effect did not depend on the validity of the underlying contract.


Gai 1.119Est autem mancipatio, ut supra quoque diximus, imaginaria quaedam venditio: quod et ipsum ius proprium civium Romanorum est; eaque res ita agitur: adhibitis non minus quam quinque testibus civibus Romanis puberibus et praeterea alio eiusdem condicionis, qui libram aeneam teneat, qui appellatur libripens, is, qui mancipio accipit, rem tenens ita dicit: HUNC EGO HOMINEM EX IURE QUIRITIUM MEUM ESSE AIO ISQUE MIHI EMPTUS ESTO HOC AERE AENEAQUE LIBRA; deinde aere percutit libram idque aes dat ei, a quo mancipio accipit, quasi pretii loco.

Now mancipatio, as we have already seen, is a kind of imaginary sale, and it too is an institution peculiar to Roman citizens. It is performed as follows: While holding the object to be acquired in the presence of not less than five citizens of full age and another person of the same condition, who holds a bronze scale and is called the scale-holder, the acquirer says: ‘I declare that this slave is mine by Quiritary right, and be he purchased to me with this bronze ingot and with this bronze scale.’ He then strikes the scale with the ingot and gives it instead of a prize to the vendor.


The modern principle that ownership passes upon a separate legal transaction independent of the underlying obligation …

… generates legal certainty in relation to third parties: They can rely on the ownership of the apparent owner of a thing even in the case he acquired it without legal basis.

… has in this respect become superfluous by the concept of bona fide acquisition, because this institute protects the acquirer not only in case of a lacking legal basis for the assignor’s title, but also when he is not even the owner of the thing.

… was, in 19th century German law, only a less efficient substitute for a bona fide acquisition as stipulated by the French Code civil of 1804:

art. 2279 CCEn fait de meubles, la possession vaut titre.

In matters of movables, possession is equivalent to title.


The modern principle that ownership passes upon a separate legal transaction independent of the underlying obligation …

… was triggered by the misunderstanding of an ambiguous Roman source.

… was, in comparison to the progressive concept of bona fide acquisition adopted by French law, a very cautious step to provide legal certainty.

… was upheld in German law despite the introduction of bona fide acquisition in the BGB of 1900 and, thus, again stands for the conservatism of German law.

Conservatism in law…

… was also characteristic for Roman law and the Roman lawyers approach.

… can generate advantages. For instance, …

… the simple doctrine of mistake in German law prevents that a party is bound by a contract without having a correct idea of it and nevertheless provides for legal certainty as to the validity of contracts.

… the doctrine of culpa in contrahendo gives a more concrete definition of liability than a comprehensive clause of extra-contractual liability.

… the doctrine of change of circumstances meets an indisputable demand for fairness between parties to a contract.

… the principle of abstraction, although useless in its function to provide for legal certainty, facilitates the execution of contracts and is, following the example of the Roman mancipatio, copied by legal systems like the Italian in which ownership passes already upon the conclusion of the contract.

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The German Approach to Private Law Four typical institutions