The defendant owned two adjoining houses in Hamburg, K. St. nos. 66 and 67. In no. 66 the plaintiff had been running a jewellery shop since 1921, when he had taken it over at a premium from a stamp dealer. At the end of 1929 the defendant rented a shop in no. 67, two shops away from the plaintiff's, to L., another jeweller, who has been selling jewellery there since then. The plaintiff now seeks an injunction against the defendant, forbidding him to allow any jeweller but the plaintiff to do business on his premises, and ordering him to make L. quit, on pain of a judicial penalty.
The Landgericht dismissed the claim, but on the plaintiff's appeal, the Oberlandesgericbt allowed it, though with no judicial penalty. On the defendant's appeal, the decision below was reversed and the case remanded.
The Court of Appeal was right to hold that the plaintiff was the defendant's tenant, even though the tenancy agreement was never put in writing as was envisaged when the plaintiff moved in. The rent of M. 6,000 per month, which was to have been put in the written contract, was agreed between the parties, and all other statutory requirements were met. The court therefore held that the question whether the defendant was free to allow competitors of the plaintiff on his premises depended on para. 536 BGB. In applying this text, one must take account of normal commercial practice and the special circumstances of the case; but the court added that it was the `correct' legal view that mattered, not the law and practice as it was at the time of the lease.
This approach, as the appellant argues, misconceives the role played in the construction of contracts by the normal commercial practice referred to in para. 157 BGB, and overlooks the fact that in the law of obligations, terms implied by statute can normally be ousted by the actual agreement which the parties, in agreement with normal commercial practice, have formed. Likewise, it was in breach of paras 133, 157 BGB, as well as para. 286 ZFO, that the Court of Appeal ignored evidence pertaining directly to the position of the parties on the matter of competition when they were concluding the contract: the defendant asserted that at the time the plaintiff moved in, he had drawn his attention to the fact that Th. had a jewellery shop in the same building, and that the plaintiff had replied that that was beneficial rather than the reverse, for there were already quite a few jewellery shops in K. St., and the customers this brought to the street always went wherever the best bargain was to be had. In saying that this evidence only showed that the plaintiff could not complain of the shop being run by Th., the court ignored its most vital part, namely the plaintiff's answer.
Furthermore we must agree with the appellant that the Court of Appeal pitched the statutory obligations of the landlord too high. The Reichsgericht has never said that the landlord's obligations to provide a thing fit for contractual use (paras 535, 537 BGB) necessarily include the duty to protect the commercial tenant from real competition, not just on the rented premises but on all premises under the landlord's control. In RGZ 119,353, the tenant had taken a 25-year lease of premises in a building under construction; he was to use it as a cigar shop, and at the time of the contract the landlord had expressly undertaken that there would be no other cigar shop in the building. The landlord's successor then built a kiosk for the sale of cigars and other commodities directly in front of the shop rented to the plaintiff, and blocking the public view of it. Although in that case the competition was taking place on land outside the rented premises, the landlord's successor was held to be in breach of his duties under para. 242 BGB in encouraging competition in this manner. This decision does not, however, justify the generalisation made by the Court of Appeal below.
In the case of a contractual licence it is quite clear that, provided it remains possible for the commercial tenant to use the premises for the permitted purposes, the landlord is not bound to promote or protect the advantage which the tenant expects from them (HGZ 91, 54; 91, 31O; 94, 267). With particular reference to competition, the judgment in LZ 1914, 1028 states that the tenant is not normally entitled to have competitors kept out of the leased premises. Only if the contract is a special one, as evidenced by its express terms, the arrangement of the premises (as in the case of a public house) or some other consideration (reference omitted) will the landlord come under any such duty under paras 157, 242 BGB, and indeed, if the circumstances are very special, as they were in RGZ 119, 353, he may be in breach of contract (in the sense of para. 242 BGB) if he permits competition, outside the leased premises. But a landlord who owns several pieces of property does not normally, in letting one of them, promise not to permit competition in any other: to hold otherwise would make for difficulties in view of the fact that on the sale of any property, the landlord's duty devolves separately to its purchaser under para. 571 BGB.
The Court of Appeal was therefore in error; the statutory duty to afford the tenant the use of the leased property does not of itself embrace an obligation to protect him from competition, although in a special case such an obligation may arise under para. 242 BGB, as well as paras 133, 157 BGB. But in applying para. 157, 242 BGB, one must take into account all the relevant circumstances and not, as the Court of Appeal did, just the needs of the contractual licensee; it would be a severe restriction on the rights of the owner of property in a street devoted to one kind of business if he could not let his property to the practitioners of that very business.
In this case we cannot establish and define the defendant's duty without a fresh evaluation of the interests of both parties, and an examination of the way the contract between them came into being. If it appears that the defendant should have taken some account of the plaintiff's interests when he was letting no. 67, then one must look into his contract with L. in order to see whether he can really be expected to terminate it, and perhaps pay L. an indemnity. While the appellant is wrong to say that such a remedy lies only for faulty breach of contract and not in specific performance, it would nevertheless be an unacceptable extension of the landlord's duty to protect his tenant from competition to hold that although the defendant was not guilty of any faulty breach of contract, he was nevertheless bound, as against the plaintiff, to terminate his contract with L., no matter what the cost. On the question of breach of contract, the appellant is right to point out that the letters of the parties in September 1929 must be taken in to account. The case must be decided afresh in the light of these observations.
This page last updated Thursday, 01-Dec-2005 11:04:43 CST. Copyright 2007. All rights reserved.