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Case:
BGHZ 49, 56 VIII. Civil Senate (VIII ZR 150/65)
Date:
15 November 1967
Note:
Translated German Cases and Materials under the direction of Professors P. Schlechtriem, B. Markesinis and S. Lorenz
Translated by:
Mrs Irene Snook
Copyright:
Professor B.S. Markesinis

The defendants, a married couple, had had a service tenancy of a house belonging to the plaintiff at a monthly rent of DM 100. para. 5 of the tenancy agreement ran as follows: "2. The tenant must bear the cost of decorating the leased premises and of maintaining them in a decorated state: redecoration includes making good any harm caused to the finish of walls, ceilings and floors by the fault of the tenant. The landlord may require the tenant to execute any appropriate redecoration in a proper manner. 5. Should the tenant fail to execute necessary repairs without delay on the written demand of the landlord, the land- lord may have the redecoration done at the tenant's expense" para. 14 no. 1 provided that at the end of the tenancy the premises were to be delivered up in proper condition. The defendants occupied the premises for six years and moved out at the end of December 1962 without having done any redecoration at all.

By contract dated 10 and 14 February 1963 the plaintiff leased the dwelling to another married couple, Mr. and Mrs. JR., at a monthly rent of DM 200; the new tenants contracted to execute the necessary redecoration at their own expense and actually did so. The plaintiff claims the sum of DM 1,146.60 damages for breach of para. 5 no. 2 of the lease contract. Both lower courts gave judgment for the plaintiff, and the defendants' appeal is now dismissed.

Reasons

I. The Court of Appeal held that the claim must be for damages for non-performance; no claim in debt could be based on the ground that if the plaintiff had made a fruitless written demand for performance, it had the right under para. 5 no 5 of the lease to undertake the redecoration and charge the defendants with the cost. He need not decide whether this is right, since the judgment under appeal is correct in the result even if the plaintiff's claim is one for performance rather than for damages.

II.

1. The defendants argue that they were not in breach of contract, and are therefore not liable in damages. The tenanted premises had been used in a perfectly normal manner, as the experts agreed, so if there was any harm, it was not due to any use which was in breach of the contract (para. 548 BGB), and it followed that the dwelling was in proper condition as required by para. 14 no. 1 of the contract when it was vacated.

But whether or not the dwelling was used or overused by the defendants in breach of contract is neither here nor there. The Court of Appeal found, and its findings have not been attacked, that the premises urgently required redecoration when the defendants vacated them; in other words, redecoration was necessary to put them in a habitable condition as called for by the contract. This being so, the defendants were under a duty, by para. 5 no. 2 of the tenancy agreement, to make the necessary redecoration by the time they left, at the latest; when a tenant undertakes to redecorate, this agreement is designed to relieve the landlord not only of the expenses arising during the currency of the lease (in derogation of the rule laid down by para. 536 BGB), but also from the necessity of incurring the expense of redecoration when the next tenant is to move in. Simply put, it is the tenant rather than the landlord who has to maintain the premises in a habitable condition (reference omitted), a duty which is neither reduced nor elided by the sitting tenant's readiness to endure a low standard of comfort. This at any rate is the case when the landlord had a right under the contract to require the tenant to redecorate during the tenancy (para. 5 no. 2 sent. 3) and to do the redecoration himself, if necessary, on written notice to the tenant and at the tenant's expense (para. 5 no. 5). Of course the tenant's duty to redecorate does not mean that the dwelling must be in pristine condition when he moves out. The purpose of the shifting of the cost of redecoration is achieved, and the resulting duty of the tenant fulfilled, if at the end of the tenancy the rooms are such that they can properly be offered to a new tenant. Thus the dwelling does not, at least in principle, have to be completely reinstated. Questions may arise in some cases whether and to what extent the tenant has to redecorate before moving out, but in a case like the present, where it is certain that the premises were in urgent need of redecoration because no decorations at all had been done during the six years of the tenancy, the tenant cannot, by quitting, avoid the duty of redecoration which he has neglected during the currency of the contract: he must at the end of the contract pay the sums he would have spent earlier if he had conducted himself as the contract required.

2. The Landgericht started off by saying that the defendants had refused to perform their duties under para. 5 no 2 of the tenancy agreement, and the Court of Appeal agreed. The defendants have not impugned this finding of fact, indeed their appeal admits that because they had refused to redecorate, the plaintiff did not need to set a period within which they must do so.

This being so, the appellant cannot argue that the plaintiff's claim for damages must fail because it did not previously declare, under para. 326 BGB, that it would refuse to accept performance. He may leave aside the question whether para. 326 BGB, to which courts usually refer in this context (reference omitted), may not be inapplicable altogether, on the ground that redecoration is not one of the tenant's principal duties (Hauptverpflichtung) (reference omitted). Even if one agrees with the Court of Appeal and the appellant that para. 326 does apply, there was still no need for the plaintiff to declare that it would refuse to accept performance from the defendants. A conclusive refusal to perform, such as the defendants' here, is not just a special case of delay, but rather a positive breach of contract (reference omitted), and although para. 326 BGB applies to it by analogy, it does not, in the general view, require any period of time to be set for performance. The same is true of the creditor's declaration, called for by the same provision, that he will refuse performance if offered. In a case like the present, it would be sheer formalism to require any such declaration after the defendants' conclusive refusal to perform had made it clear that there was no chance whatever that contractual performance would be forthcoming. The same must a fortiori be true if redecoration is not one of the tenants' principal duties, for then para. 326 BGB would not apply at all. 3 a) The harm suffered by the plaintiff as a result of the defendants' positive breach of contract consists in the fact that when their tenancy ended, redecoration was required in order to make the dwelling lettable at the full market rent it would have commanded had the contractual redecoration been effected, that is, to avoid any reduction in the plaintiff's chances of obtaining a proper rent from the new tenant, this being the purpose of para. 5 of the tenancy agreement. Now the real property market may still be rather tense, but it runs contrary to all experience to suppose that a new tenant would pay a rent appropriate to a dwelling in proper order if the premises required redecoration and he had to bear its cost. The case might be different if the dwelling were subject to rent control and could easily be let at the highest legal rent despite the need for redecoration, but we need not decide that point now, for there is no suggestion that this dwelling was rent-controlled. It is true that the plaintiff was able to let the dwelling to Mr. and Mrs. R. at twice the rent paid by the defendants but this is no evidence that the loss did not occur, for on the one hand, the defendants' tenancy, unlike that of Mr. and Mrs. R., was a service tenancy, where the rent is characteristically affected by the existence of an employment relationship between the parties, and on the other hand, five years had elapsed since the tenancy was granted to the defendant, during which period the market had changed materially.

The plaintiff's claim for damages for non-performance is a money claim so the defendant tenants must bear in full the necessary cost of redecoration. b) The appellant argues that the fact that Mr. and Mrs. R. did the redecoration neutralise the harm, and that the plaintiffs therefore have no claim for damages. Some courts and commentators are indeed of the view that the landlord has no claim for damages if the incoming tenant contracts to do the redecoration and actually does it (references omitted), but this view has been criticised by other courts and commentators, and this court finds it unacceptable (references omitted).

Once economic harm has occurred and arguably been offset, the question whether the claim for damages subsists is to be determined on the principle of what is called 'balance of advantages' (Vorteilsausgleich), whereby a circumstance is only to be taken into account if it stands in an adequate causal relationship with the cause of the harm. Here it suffices if the advantage which later arises is of a kind which the harmful event was generally apt to trigger. The Court of Appeal in this case found that there was no such causal relationship: the new tenants undertook the work of redecoration not because the defendants had failed to do it but because they themselves had contracted in the tenancy agreement to do it. Whether the reasoning is sufficient to justify the conclusion need not be decided now, for the existence of an adequate causal relationship between the event which causes the harm and the event which neutralises it is not a sufficient, but only a necessary condition of its relevance to the continued existence of the claim for damages. Only if it would not be inequitable to absolve a defendant from his duty to repair the harm he has caused can he be absolved by an event which diminishes or neutralises that harm (BGHZ 10, 107, 108; 30, 29, 33). But the party causing the harm would certainly be receiving an unjustified bonus if one credited him with an action which a third party took by reason of a contractual agreement with the victim with which the party causing the harm had nothing to do (BGHZ 7, 30, 49; NJW 1963, 1051). That is the case here. It was the plaintiff, and not the defendants, who found the new tenants. As the Court of Appeal expressly found, Mr. and Mrs. R. undertook the redecoration in their own interests and without any intention of conferring a benefit on the defendants (compare para. 267 BGB). The same is true of the plaintiff: in making his agreement with Mr. and Mrs. R. he had no intention of relieving the defendants. Thus the defendants cannot be credited with the contract between the plaintiff and the new tenants whereby the latter undertook to redecorate, even if in economic terms their redecoration made good the loss in value of the dwelling. To decide otherwise would be unfair to the plaintiff, for to make the agreement with Mr. and Mrs. R. regarding the redecoration was an act in reduction of the damage which it was no part of the plaintiff's duty to do (reference omitted) and it would presuppose that he had exacted a rent from the new tenants which was not warranted by the condition of the dwelling as well as an undertaking to bear the cost of its renovation. We have already said that no tenant can be expected to do this, so if the plaintiff had insisted on an undiminished rent plus an obligation to redecorate, he would have had a very restricted choice of new tenants.

It follows from what we have said that a landlord who succeeds in finding new tenants who are ready to undertake the necessary redecoration at their own expense is not simply performing his duty to mitigate his loss under para. 252 par. 2 BGB; this provision therefore does not justify his having to account for the new tenants' act. III. The outcome would be the same on the view, put forward by the plaintiff in oral argument, that para. 5 no. 5 of the tenancy agreement gave rise to a claim in debt, and that this debt claim had not been changed into a claim for damages. A claim for performance can lapse if its object has been achieved and the creditor's interest has disappeared (references omitted), but that would not have occurred here.

There is some dispute about the circumstances under which a claim lapses by this doctrine of achievement of object, but Lehmann is certainly right to say that the creditor's claim only lapses if the result achieved is really the same as if the debtor himself had performed properly. Now here the plaintiff had only acquired the right, as against the defendants, to have the property reinstated under the contract at the cost of performing his own contractual obligation, namely maintaining the use of the premises for many years, so there would only have been a true achievement of the object if third parties had gratuitously reinstated the dwelling. But the performance by Mr. and Mrs. R. resulted from a new contract under which the plaintiff assumed new obligations of his own. Thus this is not a case of achievement of the object which makes the claim for performance lapse. Just as in the balancing of advantages in the case of a claim for damages, what is decisive here is that the new tenants which undertook the redecoration were found by the plaintiff. It would be unjustifiable to absolve the defendants just because the plaintiff was lucky in his further contractual negotiations. In view of the fact that the defendants here refused to perform, we need not decide whether the decision would be different if the defendants had been ready to perform and the plaintiff had anticipated their performance by getting the new tenants to redecorate quickly, nor whether the plaintiff's claim for performance would have lapsed if the new tenants had been introduced by the defendants, especially if they had taken over the old tenancy arrangements and had done the redecoration on the basis of the obligation contained therein.

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