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Case:
BGH NJW 1996, 1467 = BGHZ 132, 119 IX. Civil Senate (IX ZR 153/95)
Date:
29 February 1996
Judges:
Professor Basil Markesinis
Copyright:
Raymond Youngs

Facts:

The first defendant (from now on called the defendant) and two other persons were members and directors of the A-Autovermietung (car hire) GmbH with its registered office in Frankfurt a. M. They negotiated a current account credit with the claimant at the beginning of January 1992, which was to be for the benefit of the Dresden branch of A. The claimant made the credit dependent on every director entering into a guarantee, and gave to its representatives conducting the negotiations a blank form of guarantee for the defendant without limit on time or amount. The defendant signed the document. Later his name and address were noted in the place provided for the description of the guarantor in the form. Besides this, the place and date of the declaration were entered. The stamp of A-Autovermietung appears next to the defendant's signature. The defendant claims that he put it there himself in order to show that it was the company, and not himself personally, who was entering into the guarantee for the branch in Dresden. The document was returned to the claimant. The claimant completed the form with the missing details of the creditor and the principal debtor. In 1993 bankruptcy proceedings were commenced against the company. The claimant claimed against the defendant, as joint debtor with the other directors, for the amount of the credit balances of 142, 271.77 DM plus interest.

The Landgericht rejected the claim but the appeal court gave judgment against the defendant in accordance with the application. The defendant by his appeal in law sought restoration of the decision at first instance. The appeal in law was successful.

Grounds:

I.

The appeal court, after assessing all the circumstances alleged by the parties, and on the basis of the evidence obtained, came to the conclusion that the defendant's declaration was, from the point of view of the recipient, a personal guarantee, in spite of the company stamp appearing on it. This interpretation, which in principle is the responsibility of the judge of fact, is a possible one and does not reveal any legal error (...)

II.

The guarantee must be in the form set out in § 766 sentence 1 of the BGB (...). The appeal court considers that the guarantee satisfies the requirement of written form if the guarantor signs it, and the document is completed immediately afterwards in accordance with his intentions by a third party orally empowered to do so inserting the details necessary under § 766 sentence 1 of the BGB. This view corresponds with the consistent case law of the highest courts (references omitted). Accordingly the guarantee is regarded as being given in accordance with the formal requirements as soon as the creditor is in possession of a document which contains all the details necessary under the statute. This view cannot however be followed. A document signed in blank does not become a formally effective guarantee under § 766 sentence 1 of the BGB by completion of the document on the basis of an oral authority.

1. The provisions of § 766 of the BGB are exclusively to protect the guarantor. They are supposed to encourage him to exercise greater care, and protect him from making declarations which he has not sufficiently considered (references omitted). Because the provisions are to warn the guarantor about the liability associated with his declaration, the requirement for written form is only satisfied if the document contains, besides the intention to guarantee the debt of another, a description of the creditor, the principal debtor and the demand which is being guaranteed (references omitted). The warning function is accordingly not satisfied simply by the guarantor signing a piece of paper which shows his intention of providing a guarantee. The document should also delimit the risk which he undertakes, and thereby bring it to his attention when he makes his declaration (references omitted).

2. If the statute prescribes written form for a declaration, § 126 sentence 1 of the BGB merely requires that the document is signed personally by the person who issues it. Accordingly, the text does not need to be completed when the signature is made. The declarant can sign the paper in blank, and written form is in this case maintained by completion of the document (references omitted). The case law so far is based on this idea. It cannot however convince, because it does not sufficiently take into account the sense and purpose of the strict requirements as to form in guarantee law.

a) Admittedly it cannot be deduced from the provisions of § 766 of the BGB that the guarantee must be provided by the guarantor himself with those details of the identity of the creditor and the principal debtor and the content of the obligation which are compulsorily required. Even when statute prescribes written form for a declaration of will, the party can use an agent (§ 167 (2) of the BGB) or make the signature in blank and empower someone else to complete the document to the necessary extent (references omitted). There is no basis in statute for saying that this possibility must be generally excluded in the case of guarantees. The case law until now (and the unanimous opinion in the academic literature) that the guarantor may use an agent to give his declaration (references omitted) or can empower the creditor in accordance with § 181 of the BGB to complete the parts of the declaration which are still missing (references omitted) should therefore basically be followed (references omitted).

b) § 766 of the BGB places special requirements on the written form by saying that the features of the contractual content mentioned above at 1 should be made known "in black and white" to the guarantor before he makes his signature. These requirements are only to protect the guarantor from undertaking liability too hastily. If a form is signed the contents of which unambiguously indicate that it is a guarantee, but which does not mention the creditor, the principal debtor or the liability which is to be secured, the subject matter and scope of the risk are not usually identified to the extent which statute considers to be necessary for the person who incurs liability by signing.

c) § 167 (2) of the BGB, which says the declaration does not need to be in the form laid down for the legal transaction to which the authority refers, is interpreted restrictively by the case law for transactions which need authentication under § 313 of the BGB. According to the consistent case law of the highest courts, a corresponding authority must be notarially authenticated, in spite of the provisions of § 167 (2) of the BGB, if the legal power given is to be irrevocable (references omitted). But if the authority can be revoked, it is in fact binding in accordance with the principal's intention, because the legal transaction serves the agent's interests exclusively. It allows him to exploit immediately the authority given to him, even though the case law of the highest courts affirms the need for form (references omitted).
§ 313 sentence 1 [§ 313b sentence 1] of the BGB which guarantees protection from ill-considered dealings, guarantees the buyer expert advice from the person providing authentication, and is meant to bring about clarity and security in legal transactions generally. In contrast to this, § 766 sentence 1 of the BGB only protects the guarantor, whose liability as a rule only benefits others: the creditor and the principal debtor. Between the guarantor and the agent, there therefore usually exists a division of interests, which in the area of land transactions needing authentication under § 313 [§ 311b sentence 1] of the BGB, requires an authority complying with formal requirements. In the case of guarantees needing special form, it is therefore generally justified to require written form for the authority for giving the appropriate declaration of will, or the power to complete the blank form. The purpose of the protective provisions of § 766 of the BGB, ie to bring clearly to the guarantor's attention the content and scope of his liability, would be eroded if the guarantor could put his signature on a piece of paper which does not contain all the necessary components of the declaration, and orally empower a third party - in particular the principal debtor, or the creditor - to fill in the missing details, and this was allowed to suffice. If such a regime is permitted, the statutory formal provisions cannot fulfil their purpose of warning the guarantor. (...) This is especially the case where the guarantor empowers another person - in particular the creditor, at the same time releasing him from the provisions of § 181 of the BGB - to complete the document.

d) If the signature in blank combined with an oral authority is allowed to suffice, the decision about the effectiveness of the guarantee is virtually exclusively dependent on facts which are not evident from the document. The protection intended by § 766 of the BGB is thus almost destroyed. This is demonstrated particularly clearly if the parties are also in dispute about who completed the document and made the addition to the signature indicating the liability of another person. Besides this, the view propounded so far by the case law of the highest courts exposes the guarantor to a considerable extent to the danger of misuse of a blank form. If the signature is genuine, the presumption applies under § 440 (2) of the ZPO (Civil Procedure Code) that the text above it corresponds with the intention of the person issuing the document. He therefore has to prove that completion of it was not as agreed (references omitted). The requirements which § 766 sentence 1 of the BGB places on the form of a guarantor's declaration are to avoid such risks. (...)

III.

As the guarantee does not satisfy the formal requirements of § 766 sentence 1 of the BGB, the contract is void (§ 125 sentence 1 of the BGB).

1. The defendant is not violating the principle of good faith (§ 242 of the BGB) by relying on formal ineffectiveness.

a) The absence of form in respect of a legal transaction can only in quite exceptional cases be ignored on the basis that it amounts to impermissible exercise of a right. Otherwise, the formal provisions of civil law would be eroded (references omitted). Admittedly the conduct of a party can be contrary to good faith if he has drawn benefits from an important contract over a lengthy period, and now wants to withdraw from his obligations by appealing to the lack of form. In relation to a guarantor, this needs in particular to be considered when he has drawn indirect benefits as a shareholder in the principal debtor from the granting of credit over a period of years, and has by his actions caused the creditor to place justified trust in the effectiveness of the contract, and the creditor has performed his obligations with this in mind (references omitted).

b) Such prerequisites are lacking in this case. (...)

2. The alteration made by this judgment to case law of the highest courts which has existed for decades not only has implications for the future. It likewise affects legal relationships which have been entered into but not yet concluded.

There are no constitutional grounds which militate against this.

a) Judgments of the highest courts are not to be equated with statutes and do not achieve comparable binding legal effect. By deviating from a previously held legal opinion, the judge is not in principle violating Art 20 para 3 of the Basic Law. In particular, he does not need proof that factual relationships or general views have changed in a certain respect (references omitted). A court decision which concerns the effectiveness of a legal transaction is a finding evaluating an act, and has effect, simply by its nature, on a set of facts existing in the past and not yet concluded. This so-called false retrospective effect is, in the same way as for statutory provisions, in principle unobjectionable from a legal point of view (references omitted). The rules developed in the constitutional court case law about limiting retrospective alteration of statutes (references omitted) cannot simply be carried over to the case law of the highest courts. This is because the courts are not as a rule bound to an established case law which in the light of better knowledge is shown to be no longer tenable (references omitted). It follows from this that limitations of false retrospective effect are more seldom required for judicial decisions than for statutes.

b) The Federal Constitutional Court has not so far established any generally valid rules in this respect (references omitted) and has contented itself with decisions in individual cases. Accordingly, limits on retrospective effect can arise from the constitutional state principle of legal certainty. For the citizen this means primarily protection of trust. (...) In the balancing exercise which must accordingly be carried out, it should in particular be borne in mind that substantive justice embodies a component of the constitutional state principle which is at least equal in importance to the principle of legal certainty (references omitted).

c) Besides this, in private law the general clause of § 242 of the BGB guarantees that the judge can never limit himself to looking at the matter in a formal way, if this is inconsistent with the principle of good faith. In this connection, a party's trust in the continued existence of a right must be given appropriate consideration if it is worthy of protection. The case law of the highest courts has worked out a string of legal concepts for this purpose (eg impermissible exercise of a right, absence or disappearance of the basis of a transaction, forfeiture) which in general facilitate sufficient consideration of the justified interests of both parties. (...)

False retrospective effect as a result of a change in the case law of the highest courts has therefore for good reason been so far limited in the realm of private law only in cases of the continued existence of a long term obligation relationship, frequently of a care or maintenance nature, and the retrospective effect had consequences for the persons affected by it which possibly threatened their existence (...).

d) Protection of trust of a kind comparable with those cases should not be granted to the claimant in this case. At the point in time of the legal transaction, the decisions of the highest courts which were significant for a correct understanding of § 766 sentence 1 of the BGB and of §§ 126 and 167 of the BGB had been issued a long time before (references omitted). The case law had merely delayed in expressing the legal consequences suggesting themselves here in the case of guarantees in blank. (...) The effect is limited in this case to one of three guarantees given for the same loan contract.

The decision has no “knock-on effect” for the claimant, because it has itself stated that in its business there is in principle no signing in blank.

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