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Case:
BGHZ 91, 324 IX. Civil Senate (IX ZR 66/83) Sparkassen -decision = NJW 1984, 2279
Date:
07 June 1984
Translated by:
Raymond Youngs
Copyright:
Professor B.S. Markesinis

I. Landgericht München II

II. Oberlandesgericht München

The claimant, which manufacured steel buildings, had demanded from its customer the firm SVG GmbH ("SVG") bank securities to guarantee obligations arising from supplies. The director of SVG also agreed to this. He accepted a bill of exchange made out by the claimant on the 4th September 1981 and drawn on SVG for 259,046.83 DM for this firm. On the 8th September 1981, the defendant savings bank sent the following letter to the claimant:

" Our security for the sum of 150,000 DM in favour of SVG GmbH
Ladies and gentlemen
For the benefit of SVG GmbH, we have taken up directly enforceable security in the sum of 150,000 DM to your firm in favour of SVG GmbH.
We would be very obliged to you for a brief indication of the extent of the obligations of SVG GmbH to you at the moment.
..."

The claimant replied on the 17th September 1981:

" Thank you for your letter of the 8th September 1981. We are pleased to note that you have taken up in respect of SVG GmbH ... directly enforceable security to our firm in the sum of 150,000 DM.
Our claims against the firm mentioned above amount to 1,652,717.83 Austrian schillings at today's date which is equivalent to 236,102.54 DM.
..."

On the 24th September 1981, the defendant wrote to the claimant:

" In reply to your letter of the 17th September 1981, we are informing you that we have not taken up directly enforceable security in the sum of 150,000 DM in your favour as against the above mentioned firm (SVG GmbH). The details quoted in your letter are not therefore correct.
..."

After the claimant had referred on the 28th September 1981 to the contradiction with the letter of the 8th September 1981, the defendant replied on the 6th October 1981:

" ...
In the letter of the 8th September 1981, our branch office proceeded on the basis that a security exists as against Sch Hallen Bau GmbH. This assumption was based on a mistake. In December 1980 the taking up of a security as against the firm Sch was under discussion. This security never came into existence..."

By a letter of the 17th November 1981, the defendant avoided "as a precaution, once again on the grounds of mistake, a security declaration it had possibly given".

On the 8th December 1981 the bill of exchange for 259,046.83 DM was protested because it had not been paid by the drawee.

The Landgericht awarded the claimant 150,000 DM, together with procedural interest, by a reservation judgment of the 12th August 1982. It declared this judgment to be without reservation on the 11th November 1982. The Oberlandesgericht rejected the appeals, which were combined for joint proceedings and decision. The appeal in law by the defendant was unsuccessful.

Reasons:

...

I. The following has been established on the basis of the assessment (reserved for the judge of fact) of the undisputed circumstances. The claimant was permitted to interpret the letter of the 8th September 1981 to the effect that, by this letter, the defendant wanted as against the claimant to enter into a directly enforceable security of up to 150,000 DM for the obligations of SVG arising from the deliveries of steel buildings. The debt arising from the bill of exchange of the 4th September 1981, which was accepted by this company and not honoured, also belongs to these obligations. The claimant also understood the letter in this way, and accepted the contractual offer recognised in it. In this respect the appeal in law raises no objections.

1. As it correctly states, however, it is necessary, according to the assumption of the judge of fact, to proceed for the purposes of the appeal in law on the basis that the defendant's representatives only intended by their letter of the 8th September 1981 to make a factual communication; and thus, by signing and sending it, they did not have the intention or even the consciousness of making a binding declaration in relation to a legal transaction. But then, as the appeal in law claims, the prerequisites for a declaration of will were absent. Its nullification by avoidance under § 119 para 1 of the BGB was therefore not needed. In any event harm arising from reliance (which had not been demonstrated) was compensatable by analogy with § 122 of the BGB if the defendant could have recognised the possible interpretation of its conduct as a declaration of will by application of the care which it had a duty to show.

The challenge is unfounded.

(a) The view that consciousness of making a declaration was a constitutive requirement for a declaration of will, and that therefore its absence would result in invalidity without the need for avoidance (and in any event, by analogy with § 122 of the BGB or under culpa in contrahendo, liability of the declarant for compensation for harm arising from reliance fell to be considered) is held in particular by [references omitted]. The view that a declaration given without that consciousness, which its recipient might understand as relating to a legal transaction, was at first effective, but could be avoided as a declaration mistake in accordance with §§ 119 para 1, 120, 121 of the BGB is principally held by [references omitted].

The Bundesgerichtshof has not so far decided the question conclusively. It has expressly left it open in the judgments of 20th October 1952 [reference omitted] and 11th July 1968 [reference omitted]. It cannot be unambiguously deduced from the decision of the 10th May 1968 [reference omitted] that the Bundesgerichtshof considered the consciousness of making a declaration to be constitutive. It is stated there that the belief in a legal transition taking effect by virtue of statute law could not replace the intention to enter into a legal transaction and its declaration. On the other hand, the judgment concerning a grace and favour transaction [reference omitted] and the decisions of the Federal Labour Court in [references omitted] accept that it does not depend on the internal intention of the declarant, which remains hidden, but on how the recipient of the declaration could understand the statement in accordance with good faith and considering all the accompanying circumstances. In its judgment of the 14th March 1963 [reference omitted], the Bundesgerichtshof apparently regards the consciousness of making a declaration as a prerequisite for a declaration of will, but also states that a person who creates the impression by decisive conduct that he had and expressed an intention to enter into a legal transaction, without actually having it, must under § 242 of the BGB let himself be treated as if he had such an intention. According to the judgment of the Bundesgerichtshof of the 23rd February 1976 [reference omitted], the signing of a trade register notification by a member of a firm for the remaining members is as a rule to be understood as meaning that he approved for the internal relationship what he had there declared. In this connection, the question of whether there is an intention to be legally bound is not to be assessed according to the internal intention of the member making the declaration, which remained hidden, but according to whether his conduct appears in the eyes of his fellow members, according to the principle of good faith and having regard to business custom, to be the expression of a certain intention. In this judgment, avoidance under § 119 para 1 of the BGB is also regarded as possible. The principles developed there, though, have not until now, so far as is evident, been carried over to declarations which are not appropriate to alter company law relationships externally and internally.

(b) This senate, proceeding from the deliberations of the second civil senate, is of the view that the effectiveness of the security obligation does not depend on whether the defendant's agents had the intention or even the mere consciousness, in the signing and sending of their letter of the 8th September 1981, of giving a declaration in relation to a legal transaction. The following reasons are decisive for this, following [references omitted]. In §§ 116 ff of the BGB the concept of the declaration of will is not defined. In particular nothing can be derived from the wording of § 119 of the BGB against the view held here. It is not only the person who thought the content was a different legal transaction who has no intention to give 'a declaration with this content'. The same applies to the person who did not intend to give any declaration in relation to a legal transaction at all. It should not be concluded from § 118 of the BGB that lack of consciousness of making a declaration (or lack of intention to enter into a transaction) would always lead to invalidity without the need for avoidance. If the declarant, as is presupposed in § 118 of the BGB, consciously intends not to be bound, in the expectation that this will also be recognised, invalidity is what he intends. He does not need to be given the choice of making what has been declared apply both against him and in his favour, or avoiding it under § 119 of the BGB. There is no comparison between this and a declaration made without the consciousness that it will be understood to be in relation to a legal transaction. The latter is much closer to the declaration which is intended to be legally effective, but which is mistaken. A person who makes a declaration that he will buy, but who is thinking of a sale, finds himself in a quite similar situation to the person who gives the usual indications for a purchase, but is not thinking of a purchase. In both cases it appears appropriate to leave the choice to the declarant of whether he wants to avoid under § 119 para 1 of the BGB and then have to compensate in respect of the reliance interest under § 122 of the BGB, or whether he wants to stand by his declaration and receive a possible counterperformance which could put him in a better position than his unilateral obligation to compensate for harm resulting from reliance.

This possibility of choice also excludes the objection that, without the consciousness of making a declaration, there is no personal autonomous formulation by way of self determination, and this cannot be replaced by personal responsibility alone. The law about declarations of will is not only based on the right of self-determination of the holder of the right. In §§ 119, 157 of the BGB, it protects the trust of the recipient of the declaration, and certainty in the affairs of life, in that it also binds the declarant to legal consequences which were not imagined and (which is to be considered as equivalent) not consciously brought into effect. The power of the declarant, who in both cases did not intend the legal consequences actually expressed in his declaration, to annul these consequences by retrospective avoidance (§ 142 para 1 of the BGB), or leave them to apply, takes sufficient account of the concept of self determination (reference omitted).

A declaration of will when consciousness of making a declaration is lacking is only present, though, if it can be attributed as such to the declarant. That assumes that, on the application of the care necessary in the affairs of life, he could have recognised that his declaration or his conduct might have been interpreted, in accordance with the principle of good faith and having regard to business custom, as a declaration of will and avoided this consequence (references omitted).

2. The appeal in law further objects from this legal standpoint that the appeal court made no findings from which it would follow that the defendant's representatives could, exercising the care that they were under a duty to show, have recognised the interpretation of their conduct as a declaration of will. This objection does not succeed. In the light of the wording of the letter of the 8th September 1981 composed by the defendant's representatives, by which it first made contact with the claimant, no grounds were needed by the judge of fact for saying that the defendant's representatives would have been compelled to recognise that the recipient would understand their letter as a binding offer for the conclusion of a contract for giving security. This is because in the declaration, which satisfies the formal requirements of § 766 of the BGB, the creditor and debtor are described, the commitments which are to be guaranteed are sufficiently determined and the intention to guarantee is expressed objectively. In any case, a savings bank or bank which allows such a declaration to reach a creditor of its customer must, on applying the care necessary in the credit business, take into account that the recipient will interpret the declaration, according to its content, as a security obligation. The fact that the defendant, as the appeal in law has claimed in this connection, in accordance with business custom, uses a form on the taking up of a security, is not inconsistent with this. This is because it must be known, even to the managers of a branch of the defendant savings bank who are authorised to represent it, that declarations of will do not have to be given on forms to be binding, and in particular a businessman (§ 1 para 2 no 4 of the Commercial Code) can take up a security without a form (§ 350 of the Commercial Code).

II. The appeal court's decision that the defendant had not effectively avoided its declaration of the 8th September 1981 does not, contrary to the challenges of the appeal in law, reveal any mistake of law.

1. The defendant's letter of the 24th September 1981 does not fulfil the prerequisites of a declaration of avoidance in the sense of § 143 para 1 of the BGB. A declaration of avoidance is any declaration of will which lets it be known unambiguously that the legal transaction is to be retrospectively set aside. In this connection, the express use of the word 'avoid' is not necessary. According to the circumstances, it can completely suffice if an obligation, taken up according to the objective declaratory value of the expression of intention, is disputed, or not acknowledged, or if it is contradicted. But in each case it is necessary that the intention is unambiguously revealed that the transaction is not intended to be left in existence simply because of the absence of intention (references omitted).

Starting from this point, the appeal court correctly emphasises that the letter of the 24th September 1981 does not satisfy these requirements because it contains no sort of reference to an absence of intention. The judge of fact correctly understood absence of intention as including the lack of consciousness of making a declaration. The appeal in law considers, on the other hand, that in the special case of avoiding an act undertaken without the consciousness of making a declaration, the letter of the 24th September 1981 was sufficient as a declaration of avoidance. But that is not so. Even if a person who is the subject of a claim based on a statement has acted without consciousness of making a declaration, a lack of intention, however described, must be recognisable in the avoidance, as in other cases of avoidance for mistake. This is because the honest recipient of the declaration has an interest worthy of protection in discovering without delay whether the other party wants to set aside his declaration retrospectively because of an absence of intention (reference omitted). The appeal in law does not claim that the defendant's letter of the 24th September 1981 had done more than merely deny the taking up of a security.

2. The appeal court assumes that the defendant, by its letter of the 6th October 1981, had avoided belatedly, ie not without culpable delay (§ 122 para 1 of the BGB). This only happened 15 days after knowledge of the ground for avoidance. Admittedly the mistaken party had as a rule to be allowed a reasonable period for consideration. It facilitated sensible consideration of the question of whether the mistaken party really wanted to avoid or to be content with the declaration given in spite of the mistake. But as the defendant did not in any case want to adhere to the security obligation, it did not need a longer period to consider whether it wanted to avoid or not. Therefore the defendant had delayed. This delay had been at least negligent. The defendant had neither explained nor proved a defence. Its answering letter of the 24th September 1981 showed that its considerations had been concluded at this point in time.

Against this, the appeal in law objects that the defendant should have been given a longer period for consideration than was allowed by the appeal court, because it had not been conscious of having entered into a security obligation in favour of the claimant. It was therefore necessary for it to examine the factual and legal situation thoroughly. The avoidance in the letter of the 6th October 1981 was accordingly in time.

The objection is unfounded. The defendant has itself stated in the grounds of appeal that it recognised the ground for avoidance from the claimant's letter of the 17th September 1981, which arrived on the 21st September 1981. The appeal in law accordingly proceeds on the basis that the defendant obtained knowledge by this letter of the ground for avoidance, that is to say that it discovered that, contrary to its impression, the claimant had interpreted the letter of the 8th September 1981 as a security declaration and was also permitted to interpret it in this way. There is therefore no evident reason why the defendant, which had concluded its considerations by the compositon of the answer of the 24th September 1981 at the latest, should have waited until the 6th October 1981 for the sending of the avoidance declaration. Under these circumstances, the accusation of the judge of fact that the defendant had negligently delayed cannot be objected to. He has not exaggerated the requirements for an avoidance without delay.

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