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Case:
BGHZ 99, 101 VII. Civil Senate
Date:
12 November 1986
Judges:
Professor Basil Markesinis
Copyright:
Raymond Youngs

Facts:

In 1981, the claimant intended, together with his business partner at that time as shareholder of a company M which had not been entered in the trade register, to develop a chain of various types of fast food restaurant, and have it run under a franchise system. On the 25th June 1981, M (as seller) and the defendants (a married couple) concluded a contract of sale in which the seller agreed to set up a restaurant "Sch" completely ready for business in the shopping centre B-T which was under construction at that time, and the defendants agreed to pay a total price which was expected to be between 200,000 and 250,000 DM plus VAT. The defendants were to provide 60,000 DM plus VAT, and the rest of the purchase price was to be financed. (...)

Grounds:

I. (...)

II. (...)

1. It is necessary to proceed on the basis of the appeal court's (...) opinion that:

(1) The franchise contract is void as a whole (§ 138 (1) of the BGB). This is because of a number of provisions which benefit the franchiser unilaterally, and excessively limit the defendants' economic freedom of action, and for which they have not even been given only approximately reasonable compensation.

(2) The purchase contract is also included in this invalidity (§ 139 of the BGB).
This assessment which the appeal in law adopts, and which is not called in question by the reply to the appeal in law, does not reveal any legal error.

2. It follows from the invalidity of these contracts that the claimant has obtained the sum of 87,800 DM paid to him by the defendants without legal grounds. He is obliged, in so far as he has been enriched, to hand over what he has received (§ 812 (1) sentence 1 of the BGB). (...)

3. The appeal court has correctly examined whether the defendants have benefited from anything which diminishes their claim to repayment - whether by way of restitution for the enrichment or because of a counterclaim which could be set off by the claimant against their claim. (...)

b) The claimant however did not have a restitutionary claim, as the appeal court recognised, if he was obliged because of fault committed in the contractual negotiations, to release the second defendant from his liability to pay the purchase price.

aa) The appeal court's starting proposition was that it was possible for a person who concludes with his partner a contract drafted and used by him, but which is ineffective, to be liable for fault in conclusion of the contract. The reply to the appeal in law is wrong to challenge this. The case law has always taken the line on certain factual situations that, when a contract is ineffective, the party who is responsible for the ground of invalidity can be obliged to pay compensation because of fault in contractual negotiations (references omitted). This can arise for instance in case of a failure to give an explanation about the absence of a valid authority under the law relating to communes (BGHZ 6, 330, 333), about the need for permission for a transaction in foreign exchange law (BGHZ 18, 248, 252 f), about the absence of statutory or contractual form for a contract (BGH judgment of 29th January 1965 - V ZR 53/64 = NJW 1965, 812, 814; judgment of the senate of 19th April 1967 - VII ZR 8/65 = WM 1967, 798), and about the invalidity of a transaction because of illegality (OLG Düsseldorf BB 1975, 201); or in a case where so-called "hidden disagreement" is culpably induced (RGZ 104, 265, 267 f). (...) It cannot be otherwise in the case of the culpable use of a contract which is contrary to good morals under § 138 (1) of the BGB because of disadvantage to the other party (references omitted). The objection made by the reply to the appeal in law that the liability of the user of a contract which benefits him unilaterally (and is therefore contrary to good morals under § 138 (1) of the BGB) should be limited to the definition in § 826 of the BGB cannot be followed. The basis of liability consists of the violation of the pre-contractual duty to show consideration to the other contracting party (BGH judgment of 28th May 1984 loc cit), in whom trust in the existence of a contractual relationship is induced. Fault is admittedly required here, as in comparable cases of liability for pre-contractual conduct, but not intention to inflict harm in a manner contrary to good morals.

bb) Likewise the objection in the reply to the appeal in law that the appeal court had not established fault by the claimant is unsuccessful in the end result. The deliberations of the appeal court to the effect that the claimant was responsible for the invalidity of the contract independently of whether he was conscious of the legal effects of the formulation of the contract are open to objection when expressed with this degree of generality. But the appeal court did not have to express itself more exactly in the present case, because the claimant had never said in any of his submissions that he did not realise and had no reason to realise the one-sided nature of the formulation of the contract in violation of good morals, and why he claimed this was so. The claimant had a duty of explanation here. In the area of liability for fault in contractual negotiations, the case law has admittedly not proposed any general reversal of the burden of proof of the kind contained in § 282 [§ 280 (1) sentence 2] of the BGB. But in relation to individual pre-contractual legal relationships, in particular in the case of the violation of duties of protection and explanation, it has divided the burden of explanation and proof according to areas of organisation or risk (references omitted). The position is the same here. When deciding whether the claimant could regard the franchise contract as effective in spite of the numerous provisions which burdened the defendants unilaterally, the only potentially important matters (eg possible legal advice to the claimant, or use of a preformulated contract recommended by a respected association) are ones on which the defendants cannot be expected to make factual statements, but on which the claimant must be in a position to give information. In the absence of explanations of this kind, the appeal court could assume that the claimant was responsible for the pre-contractual violation of duty.

(...)

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