Questions which are frequently asked with reference to civil law issues

What does the term ‚subject to the statute of limitations’ (“Verjährung“) mean and how is it possible to prevent that a claim will be subject to the imminent time-limiting effect of the statute of limitations?

The right to demand that another party either do or refrain from doing something (a right or claim) is subject to limitation under the German statute of limitations. The term defined by „time limitation“ is the period of time after the expiration of which the debtor of a claim will be entitled to refuse payment.

 

The plea of lapse of time under the statute of limitation will only have an effect as far as the claim as such is concerned and does not, as a matter of principle, entail the extinction of the claim, but rather entails the constitutionof a permanent right to refuse a payment. In Germany the standard statutory period of limitation is three years. The law provides, however, for certain special claims for which longer periods of limitation are applicable, which are then ten or 30 years respectively.

 

 

If or when the holder of a claim faces the risk of an imminent barring of action under the statute of limitations on account of lapse of time it is imperative to take appropriate measures in order to safeguard the holder’s rights, which will either entail the temporary suspension of the running of the prescriptive period (tolling of the statute of limitations), or the new beginning of the period of limitation.

 

The statute of limitation is in the first place tolledby taking legal action. The safest way to safeguard one’s rights is to bring the case to the courts of justice in order to thus assert the claim which is otherwise subject to limitation, for instance by filing an action. A suspension has the effect that the time period during which the period of limitation is suspended is not included in the prescriptive period

How can one get rid of a prejudicial contract or agreement?

The principle which is ruling is that once they have been concluded contracts must be kept and complied with by the respective contracting parties. This means to say that each of the contracting parties is obliged to fulfil the contractual obligations to which it has committed itself. There are, however, special cases where it is possible to subsequently annul a contract by giving notice of termination, revocation, rescission or avoidance.

 

As a rule there is a regular right to give notice of termination of contracts in the case of so-called continuing or recurring obligations (e. g. tenancy agreements, usufructuary leases and employment or service contracts). In this context a difference is made between a termination on regular grounds („ordentliche Kündigung“) and a termination for exceptional reasons („außerordentliche Kündigung“).

 

A regular right to give notice of termination is stipulated either by law or by individual contracts. In the case of a right to give notice of termination for exceptional reasons this is, as a rule, only possible if there is good cause to do so. In the case of contracts for work and services (e.g. craftsmen’s or artisans’ contracts) the principal/customer has a statutory right to give notice of termination. It is, however, to be noted that this right of termination does, as a matter of principle, not affect the contractor’s (e.g. the craftsman’s)  right and title to receive a remuneration for work performed.

 

In the case of consumer contracts the law also further stipulates a right of revocation. A right of revocation is provided for so-called door-to-door sales, distance sales contracts (e.g. in the case of mail-orders, internet sales, etc.) and in the case of consumer credit transactions. If this right of revocation is exercised it is an absolute requirement that such a revocation must be made prior to a certain deadline. As a rule this period during which this right of revocation can be exercised is two weeks.

 

The term ‚rescission’ stands for the annulment of a validly concluded contract by the unilateral declaration of one of the contracting parties on the basis of a contractual or statutory right. Recourse to a statutory right to rescission can regularly only be had if a contractual relationship is deeply and lastingly „disturbed“. A claim of disturbed performance („Leistungsstörung’’) must be based on the prerequisite of a neglect of duty (as a generic term for impossibility, delay, poor performance and the non-compliance with other obligations) of the respective contracting partner.

 

A right of avoidance (termination with retroactive effect – annulment contesting) is stipulated by law in the case of „defects or deficiencies“ in the conclusion of the contract . A valid avoidance results in the nullity of such a legal transaction from the very beginning on. Reasons for avoidance are, for instance, an error concerning the statement of the contents of a contract and/or a statement made in the contract on the basis of deception, misrepresentation or threat on the part of the other contracting partner. 

 

 

Freedom of contract –where are the limits?

The ruling principle of German Civil Law has its underlying basis in the fundamental private autonomy concept. Our legal system leaves it to the individual person to responsibly organize his or her personal relations autonomously by way of their own personal legal transactions.  The principal manifestation of private autonomy is embodied in the individual’s freedom to enter into a contract („Vertragsfreiheit“).

 

This freedom of contract is subject to those barriers which are set by our constitutional order, which stipulate that both the legislative and judicature are obliged to counteract misuses of this freedom to contract. This means to say that a minimum of contractual justice must be guaranteed. In German civil law these constitutional limits are defined and specified in the general clauses of Sections 138, 242 and 826 of the German Civil Code. Accordingly a legal transaction must neither be immoral or unethical nor infringe the equity principle of loyalty and good faith. 

 

Another limitation to contractual freedom is specified in Section 134 of the German Civil Code, which provides that any legal transaction which offends a statutory prohibition is, as a matter of principle, nul and void.

 

A corrective which serves to protect a contracting party who is not versed in law or „weaker“ is to be found in the provisions concerning the monitoring and review of the contents of pre-formulated clauses in the case of general business terms an conditions. In this context it is in particular pre-formulated clauses in consumer contracts which are subject to the monitoring and review of their contents.

 

Last but not least the absolute freedom to conclude a contract (as a sub-category of the general freedom of contract) is, in special cases, restricted by the institution of the obligatory conclusion of contracts (obligatory contracting). Thus a direct obligation to conclude contracts is, for instance, prescribed for energy providers in the essential public utilities sector. A compulsory conclusion of contracts can moreover also be imposed under the aspects of antitrust law (e.g. for market-dominating companies, monopolies).

What is to be understood by the term of ‚warranty’?

Warranty is the service provider’s liability for defects or deficiencies in relation to the recipient of a service. Statutory provisions concerning this liability for defects or deficiencies are in particular specified in those German laws which govern sales contracts, contracts for work and services and tourist travel contracts. This liability for defects or deficiencies obliges the service provider to deliver or render the contractually owed service free from material defects and defects of title.

 

The respectively valid and applicable warranty periods differ depending on the type of contract concerned. As a rule the warranty period which is   provided under German civil law contracts on sales and on works and services is two years.

 

If a provider’s service is defective or deficient it is a principle that the recipient of such a service is entitled to remedy of such a defect or deficiency. If special requirements are met the recipient of the service can rescind the contract, reduce the price or assert a claim for damages.

 

In cases where the laws governing contracts for work or services are applicable these also provide for the option of what is called self-remedy.

 

 

Which contracts need to be notarized?

In the case of certain contracts German civil law mandatorily provides for the contractual form of notarized authentication which is required by law.

 

A statutory and mandatorily prescribed special form is required in particular for contracts concerning the acquisition or the alienation of real estate property, asset-transfer agreements  and certain contracts of inheritance.

 

If this requirement of mandatory form is not complied with this results, as a matter of principle, in the voidness of such a contract.