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Case:
RGZ 161, 330 V. Civil Senate
Date:
05 October 1939
Note:
Translated German Cases and Materials under the direction of Professors P. Schlechtriem, B. Markesinis and S. Lorenz
Translated by:
Irene Snook
Copyright:
Professor Basil Markesinis

The heirs of Z owned a big area of land ready for building development at the foot of a wooded mountain situated in an angle formed by the A and the L street. The defendant bought a strip running along L street in order to develop it. His plan, which included the area retained by the heirs of Z, provided for seven building plots on part of the land between the A and L streets, the foot of the mountain and another street to be laid out subsequently. Five plots bordered on the L street, while the remaining two were situated further back immediately at the foot of the mountains behind the two plots along the L street which were furthest to the right and to the left. The area behind the intervening three plots in the middle was to remain open. The contract of sale was approved by the local administration on the basis of the building scheme as a whole.

On 30th June 1936 the plaintiff bought from the defendant the central plot situated along the L street and built a dwelling house on it. The plaintiff contended that he had acquired this particular plot because he was anxious to have a clear view of the wooded mountain slopes and because the defendant had assured him by reference to the building scheme that no buildings would be erected between the three plots in the middle and that the central plot enjoyed the best view. The written contract did not contain any such assurance and the defendant denied having given it. The contract excluded any liability for physical defects.

On 5 January 1937, the defendant acquired from the heirs of L in addition the land up to the foot of the mountain behind the strip along the L street acquired previously, to be developed with access by a new road leading to the L street. The defendant applied for and obtained the necessary administrative approval for the alteration of the original scheme. The defendant built the road and one house together with a separate garage on one of the plots behind the plaintiff's land.

The plaintiff contended that the new building obscured his view of the mountain and that the value of his property had been reduced. He demanded that the defendant be condemned to desist from erecting another structure on the remaining plot and to pay damages of at least 6100 Reichmark. The Landgericht Bonn and the Court of Appeal of Cologne rejected the claim. On the plaintiff's further appeal the decision of the Court of Appeal has reversed for the following

Reasons

I.

The Court of Appeal holds ... that it is not a defect of the land purchased by the plaintiff (para. 459 s. 1 BGB) if the area at the rear of it can be built upon. It is unable to deduce from the pleadings that the defendant had warranted, in the meaning of the second section of the above mentioned provision, that the land sold by him was bordered by an area which could not be built upon. The Court of Appeal also holds that fraud has not been proved and that therefore the defendant can also not be held liable on the legal ground that he has fraudulently asserted a quality of the object (para. 463 BGB as interpreted by the Reichsgericht in a constant practice). Furthermore the Court of Appeal denied that the plaintiff's claims could be justified on the facts, if the principles concerning the failure of the basis of the transaction (clausula rebus sic stantibus) (para. 242 BGB) were to be applied. The Court of Appeal also could not find that a tort had been committed ...

II.

The appeal ... is directed against the rejection of the claim based on warranties and conditions under the contract of sale and for damages in tort.

As regards the claims based on warranties and conditions the appellant contends that, contrary to the opinion of the Court of Appeal, it is a defect of the land purchased, if the area at its rear can be built upon, resulting in a reduction of the value and suitability of the purchased land for normal use or at least for the use envisaged by the contract. He contends that this defect existed at the time when the risk passed ... since the defendant was already able at that time to develop the area by providing the access road. The appellant contends that the defect so defined suffices to justify his claims. In addition he contends also that the defendant has warranted as a feature of the land sold that the area at the rear could not be developed ...

1. Features of an object sold include, first of all, everything which pertains to its natural corporal nature. Thus it is a feature of land destined for development that the soil permits building. In addition, relations exist with the environment of the object which are of a factual, economic and also of a legal nature and which may constitute features of the object. This is the case if relations of this kind are based on the nature of the object itself, emanate from it and affect its value or suitability for use according to their substance or duration, having regard to the opinion of ordinary people. Thus the actual situation of the land, the relationship of one plot to others, is a feature because this relationship is relevant for its value and possible uses...

In the result the appeal is justified. The circumstance that the strip between the purchased land and the wooded slope of the mountain was not to be built on was only the means of retaining for the purchased land the advantage of its beautiful situation without restriction. This situation constitutes the essential feature. According to the pleadings both parties assumed at the time of the conclusion of the contract that the situation created the relationship between the purchased land and its environment. Having regard to the assumption that the strip in question would remain open land owing to lack of access and the building scheme approved by the authorities, this relationship between the purchased land and its environment was of such duration in the contemplation of the parties as to constitute according to the opinion of ordinary people one of the factors determining the value and suitability for use of the purchased plot. Accordingly it was a feature of the purchased land that it should provide an unimpeded view of the wooded slopes of the neighbouring mountain and that this view could not be curtailed by the erection of buildings on the intermediate strip.

2. A purchased object is defective, if it lacks a quality essential for normal use, or for a different use, stipulated by the contract. The seller is liable for such a defect, if the usefulness or value of the object is thereby extinguished or not insignificantly reduced (para. 459, s. 1: paras 462, 463, s. 2, 480 BGB).

According to the appellant the fact alone that the strip behind his land can be developed has reduced significantly the value or the suitability of the purchased land for normal use. This is not so ...

Different considerations apply if, so the appellant contends, the parties provided in the contract that the strip behind (the appellant's land) was to remain permanently free of structures which obstruct the view. According to the recent practice of the Reichsgericht [references] ... a defect exists only if the object is unsuitable for its contractual purpose, and if the contract assumes a certain use, it is this use which determines the features of the object which the buyer can demand.

An object is therefore defective if it lacks a feature or even an advantage which the parties assumed to exist when they concluded the contract ...

Contrary to the opinion of the courts below the fact that the strip behind the appellant's land can be developed, may well constitute a defect of the purchased land ... the possibility that it might be developed, as it was subsequently, existed already at the time when the risk passed.

However, the claims cannot be founded on the sole ground that the purchased land was defective. This would only lead to a claim for rescission or for a reduction of the price (para. 462, 472 BGB), and no such claim has been made.

3. A claim for damages, as raised by the plaintiff, could only be based on the seller's duty of warranty, if the seller had fraudulently concealed the defect or if he had given an assurance or had fraudulently asserted falsely that the area behind (the plaintiff's land) could not be developed (para. 463 BGB). Fraud need not be considered ...

As regards the question of an assurance ... the Court of Appeal states correctly that the plaintiff has not explained satisfactorily why the written contract is silent about the assurance, alleged to be almost fundamental, that no development would take place and why this assurance should only have been given in the preliminary negotiations, but, as is undisputed, was not raised when the contract was concluded before the notary. It is true that tacit assurances are legally possible, but in fact they are only rarely presumed to exist; in any case, features which are assumed by the contracting parties to exist are not deemed to have been assured, seeing that the law distinguishes between them [references] ...

III.

If the liability of the defendant, asserted the plaintiff, falls within the area of liability of a seller for defects of the object sold, it cannot be examined whether the claim could be supported totally or in part on the ground that the basis of the contract had disappeared (para. 242 BGB) or that the defendant had been at fault in the course of the conclusion of the contract [references]. However, if - as is the case here - no claim to the same effect exists according to para. 463 BGB, a claim for a positive breach of contract may lie (para. 276 BGB) [references] and, irrespective of any contractual liability for defects, a claim in tort (para. 826 BGB) ...

1. A positive breach of contract exists when, in consequence of a culpable violation of his duty to perform, the debtor causes damage to the creditor which exceeds the amount equal to the value of the performance or if he endangers the performance of the contract to such an extent that the creditor cannot be required to continue with the contract [references]. The second case is excluded here since it is principally concerned with continuing contractual relations, but in both cases the debtor has violated his obligation; liability arises under the contract. However, normally at least, a contractual obligation terminates with the performance of the contract; in the present case the defendant's acts, which the plaintiff regards as a positive violation of the contract, occurred at a time after the contract had been completely performed. For when the defendant acquired the area in the rear, opened it up for development by building an access road and obtained administrative consent, the purchased land had been paid for, handed over and conveyed. Thus no contractual obligation existed any longer which the defendant could still violate. However, even if a contract has been brought to an end by complete performance, certain after-effects may remain, just as at the initiation of negotiations for a contract may have pre-contractual effects. The requirement that a contract must be performed according to good faith and in accordance with common practice (para. 242 BGB) may impose upon the debtor the duty to carry out, or to desist from carrying out, certain acts ... Thus ... a lessor who has let a flat to a medical practitioner must permit a notice of change of address during an adequate period after the tenancy has come to end [references]. Where the transaction involves a single, quickly executed exchange of goods, the continuation of a duty on the part of the debtor to act constantly in agreement with the contractual purpose of the other party cannot normally be assumed without further reasons and for an indefinite period ... Matters are different, however, when land is sold and conveyed. There the special circumstances of the individual case must be determining. In the present case the plaintiff ... has bought his plot precisely on the assumption, shared by the defendant, that the land at the rear would not be developed. Consequently, the defendant is not necessarily relieved of the charge that he has acted positively in contravention of duties as a debtor according to good faith in as much as he proceeded to develop the area at the rear as early as one year after the plaintiff, relying on the assumption that this area would not be developed, had built a dwelling house on the purchased land. According to para. 276 BGB even a clause in the contract of sale exempting him from any liability under the warranty would not, according to para. 276 s. 2 BGB relieve the defendant from liability for an intentional contravention.

It might be objected against the legal conclusions advanced here that the defendant (who did not act fraudulently or gave an express warranty) is at most liable to reduce the purchase price, on the ground that the possibility of development and not the subsequent building operation constitutes a defect of the object sold but that he is not liable to pay damages for having failed to perform his obligation or even to pay more ... Such an approach would, however, underestimate the effects of the contract concluded between the parties and would equate to a great extent the factual consequences that the area can be developed with those that it has been developed. It is true that if, in agreeing on the sale, the parties proceeded from the assumption that the area in the rear could not be developed, the absence of the feature assumed by the contract to exist constituted a defect of the plot sold and if a third party without the assistance of the defendant had developed this area and placed a building on it, the plaintiff would not have been able to sue either the defendant or the third party for compensation of the damage not made good by the reduction of the price - leaving aside the remedies available under para. 226, 826 BGB. However, in relation to the plaintiff, the defendant was not in the position as any third party. Between the two the contract created a legal relationship, the binding obligation of which based on the general conviction, rooted in morals, that a word, once given, must be kept. As long as the area in the rear remained in fact undeveloped, the plaintiff could only be said to suffer damage exceeding the reduction due to defect, due to the danger that the area might be developed one day. As long as the defendant continued to adhere to the contract, this danger ... was not to be treated seriously. Only because the defendant acted contrary to the spirit of the contract, a mere danger became ... actual damage. It would be contrary to the natural sense of justice if a contracting party were not to be held liable for the damaging effects of such a conduct which is contrary to the contract and cannot be excused on legally relevant grounds. Of the provisions on tort only para. 826 could be applicable. This states that a person who intentionally causes damage to another contra bonos mores is liable to pay compensation. The Court of Appeal has accepted that the plaintiff has suffered damage. The pleadings, which the Court of appeal found not to be untrue, show that the damage was caused intentionally. The duty of the defendant to pay damages depends therefore upon the answer to the question whether his conduct at the time of the conclusion of the contract or the fact that he subsequently built upon the area at the rear is contrary to bonos mores. As to the former, the defendant is absolved, since the Court of Appeal did not find any fraud. As to the latter, any act contra bonos mores could only be founded on any previous activities of the defendant at the time when the contract was concluded. For the pleadings do not show conclusively that the defendant, in developing the land proceeded with the considered intention of damaging the plaintiff, and the findings of the Court of Appeal refute it. The violation of a contractual duty, considered by itself, does not, however, constitute an act contra bonos mores [references] ... In these circumstances the justified interests of the plaintiff re satisfied by referring him to his remedy based on a positive breach of the contract.

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