The defendant sold to the plaintiff a parcel of land by a contract in writing, but not before a notary or court, as required by para. 313 BGB. The plaintiff's claim that the defendant be condemned to convey the premises was allowed by the Landgericht Bielefeld and the Oberlandesgericht Hamm. A second appeal by the defendant was rejected to the following
The plaintiff contends, first of all, that since both parties were aware of the need for the written contract of 20 June 1958 to be in proper form, and therefore had both knowingly failed to observe the statutory provisions on form, neither of them could assert that it was contrary to good faith to claim that the contract was void for lack of form. With this argument the plaintiff relies on the practice of the Reichsgericht, affirmed by this Division, that no party may raise the defence of malice, if the facts show only that knowingly or unknowingly the parties acted contrary to para. 313 BGB [references]. As the Court of Appeal has found, these prerequisites are not present in this case. It is true that the plaintiff, too, knew that the contract had to be in proper form, because he suggested that it should be drawn up by a notary. On the other hand, the defendant did not act knowingly in contravention of para. 313 BGB.
He attempted, and attempted successfully, to persuade the plaintiff not to insist on notarial form for inasmuch as by referring to his signature and thereby to his commercial reputation he declared that the written contract was equivalent to a notarial contract. In these circumstances and also because the managing partner of the defendant who had been his chief in the past, was in his eyes endowed with special authority, it was practically impossible for the plaintiff to insist on compliance with the statutory formalities.
The defendant contends further, as regards the substantive law, that the arguments set out in the decision if the court below do not rule out the possibility that the Court of appeal was not aware of the difference between a harsh and an unbearable result, as developed by the practice of this Division. Since the Court of Appeal mainly supports its opinion that the defendant may not rely on the absence of form by a general reference to the practice of this court, the defendant's criticism provides the occasion for setting out this practice in brief. Faced with the question as to whether in certain circumstances the seller of land is bound according to good faith by a contract of sale which is void for lack of form, the practice is that this is only the case if not to recognise the contract as valid would lead to a result which would be unbearable for the purchaser and would not only affect him harshly [references]. These conditions were regarded as fulfilled by this Division, if one contracting party has given up his own way of life in reliance on the promise by the other party or has assumed a new way of life, which he would have to give up, if the existence of contractual ties were to be denied. Such is the case if a special fiduciary relationship or duty of protection exist (e.g. in connection with a contract for a homestead) or if the seller who has spent the purchase price is no longer able to repay with the result that the purchaser cannot recover his money [references]. Moreover, the practice of the Reichsgericht already admitted the plea of bad faith, if the party which opposes the invalidity of the contract for lack of form was mistaken regarding the legal need to comply with formalities and if this mistake was caused culpably, or at least negligently, by the other party to the transaction [references], if the party who relies on the violation of the provisions on form has adopted an attitude which is incompatible according to good faith with his previous behaviour [reference] or if a party, albeit unintentionally, has induced the other party to disregard the need for the necessary conclusion of a contract which is formally invalid, with the result that the latter assumed that informal agreements were sufficient [references].
In the present case the principle expressed by the Reichsgericht [reference] must lead to the conclusion that according to good faith the defendant is bound by the written contract of 20 June 1958. As the Court of Appeal has found, the managing partner of the defendant, with whom the plaintiff had served his commercial apprenticeship, had brushed aside the doubts of the plaintiff at the time when the contract was concluded as to the need to call in a notary by pointing out with a certain pride that the contract bore his signature. When the plaintiff reminded him that every person is mortal, the representative of the defendant stated in addition that he had also signed the contract in the name of the defendant firm and that therefore the contract was equivalent to a notarial contract. Similarly the defendant stated also in its subsequent letter of 15 February 1963 addressed to the plaintiff that it was his custom to honour his obligations no matter whether made orally, in writing, or in notarial form. Thus the defendant has announced in such an emphatic manner his intention to perform the contract, which was invalid in form, by pledging his status and reputation and by referring to his business practice that he cannot resile free from contract without offending against good faith. Reliance subsequently upon the formal invalidity of the contract, constitutes an admissible exercise of his right, irrespective of the fact that the plaintiff was not in error as to the formal requirements.
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