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reasoning is typically Germanic, involving not only contract and property law reasoning, but having regard also to trade practice (the latter under §§ 157 and 242 BGB). Yet, the choice between the strictly formal reasoning and approaches which look more at the substance of the terms, has also occupied the minds of common lawyers, as the Butler Machine Tool case (referred to above) shows; Lord Denning’s attempt to depart from the traditional formal approach and to replace conflicting terms by reasonable implication has remained the minority view. (See generally, McKendrick, Contract Law, pp 91–128; Treitel, The Law of Contract, pp 20–1.) It should also be noted that straining to find a concluded contract between the parties is not the only way to deal with the situation: a more relaxed approach to the English offer and acceptance rules might lead to a better treatment of the messier realities of the contracting process (albeit at the cost of a degree of certainty: there is not such a range of statutory default rules in English law to fill the ‘non-material’ gaps), but it is also possible to acknowledge that no contract has been concluded and then deal with the consequences through other legal doctrines (such as restitution, where work has commenced in anticipation of a contract being concluded and expenses have been incurred: see, eg, British Steel Corporation v Cleveland Bridge & Engineering Co Ltd
[1984] 1 All ER 504).
4.FORM AND EVIDENCE OF SERIOUSNESS
(a)Formalities
Bernard, Formbedürftige Rechtsgeschäfte (1979); Boente/Riehm, ‘Das BGB im Zeitalter digitaler Kommunikation—Neue Formvorschriften’ Jura 2000, 793; Einsele, ‘Formerfordernisse bei mehraktigen Rechtsgeschäften’ DNotZ 1996, 835; Häsemeyer, Die gesetzliche Form der Rechtsgeschäfte (1971); Häsemeyer , ‘Die Bedeutung der Form im Privatrecht’ JuS 1980, 1; Holzhauer, Die eigenhändige Unterschrift– Geschichte und Dogmatik des Schriftformerfordernisses im deutschen Recht (1973); Köbl, ‘Die Bedeutung der Form im heutigen Recht’ DNotZ 1983, 207; W Lorenz, ‘Das Problem der Aufrechterhaltung formnichtiger Schuldverträge’ AcP 156, 381; Reimann, ‘Formerfordernisse beim Abschluß von Gesellschaftsverträgen’ DStR 1991, 154; Richardi/Annuß, ‘Der neue § 623 BGB—Eine Falle im Arbeitsrecht?’ NJW 2000, 1231.
German law, like most modern legal systems, is based on the principle of consensualism, which means that contracts (and unilateral juristic acts) in most cases require no formalities (Formfreiheit = freedom of form). Indeed, if anything this statement seems truer of German law than French, given the greater liberality of the rule allowing proof through witnesses and, effectively, leaving it to ‘the free appreciation of the judge’ (freie Beweiswürdigung) to decide whether a contract exists and what, in case of doubt, are its terms (see §§ 286, 373 et seq, ZPO). But this last point also serves as an excuse to make an important observation, namely that, on the whole, in German law the rules about formality are meant to protect the parties by ensuring that they enter legal transactions only after serious consideration of the consequences of their acts. As Zweigert and Kötz point out (An Introduction to Comparative Law, translated by Tony Weir (3rd edn, 1998), p 371), it is,
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[o]nly against the background of this fundamentally different point of view [that] . . . the many peculiarities of the legal rules in the German legal family become comprehensible. Thus Germany and Switzerland put in the general part the rule that a legal transaction not in the form legally prescribed is in principle void or invalid (§ 125 BGB, Article 11 OR). The precise formal requirements are to be found here and there throughout the civil codes wherever the legislator specifies in relation to each type of transaction, whether simple writing is sufficient or whether notarial attestation is required, whether the declaration of one contractor or both must be in the proper form, whether formal invalidity may be cured by subsequent performance, and so on. Such ad hoc rules are needed in the German legal family because the need for protection from surprise varies from one kind of transaction to another. Problems of proof, on the other hand, are common to all transactions. So the Romanistic legal systems can develop general clauses like art. 1341 Code civil [which curtails the means of proof in all non-commercial transactions in excess of €800 if they did not take the form of private writing].
Thus, some transactions have to be in written form (Schriftform). In practice, this means that the maker of the document must sign it (or, if he cannot sign, his mark must be placed on the document and notarially authenticated (see § 126 I BGB)). Only the signature need be hand-written; and what must be used is the surname (or, in the case of a legal entity, the name of the firm: see RGZ 50, 51, 60). The use of the first name of a person will not suffice, though apparently a customary rule predating the German Code allows bishops and princes so to sign (cf Flume, Allgemeiner Teil, vol II, § 15, II, 1-a, where doubt is expressed about such a rule on the grounds that it conflicts with the equality clause (Article 3) of the Constitution).
Where a contract is concluded through the intervention of an agent, the latter must make it clear that he is acting as agent only, using such terms as in Vertretung or im Auftrag; the Reichsgericht has even allowed agents to sign such documents using the principal’s name (RGZ 58, 387, 388).
In contracts both parties must sign the same document; and if several counterparts are drawn up, it is sufficient if each party signs the copy intended for the other. Such a document is, for instance, needed for a lease for a definite period exceeding one year (§ 550 BGB) or a contract of guarantee (§ 766 BGB), whereas, however, only the guarantor’s declaration of intention needs to be in writing (a formal requirement which does not apply to merchants under § 350 of the Commercial Code). The Code contains further provisions where such signature is required. For examples from the law of obligations, see §§ 623, 761, 781 BGB.
More recently, a lesser formality has been introduced into the Code, the so-called ‘textual’ form (Textform, § 126b BGB). No signature is required, yet the statement must be in some form peremptorily incorporated (e-mail, for instance, is sufficient). This type of form is reserved for transactions which, while still perceived to be important enough to require form in the interest of security in the law, are less ‘invasive’ than the transactions requiring written form. Examples include a landlord demanding an increase in rent for a flat (§ 558a I BGB); the termination of a consumer transaction according to § 355 I 2 BGB; and the notification to the consumer of his consumer rights under § 355 II BGB.
A further new type of form is the so-called electronic form concerning electronic signatures (§ 126a BGB, § 292a ZPO), which, however, has thus far not played a significant role in practice.
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A notarial (or public) certification (ie a stricter type of formality: öffentliche Beglaubigung), on the other hand, requires that the will of the (contracting) party be expressed in writing and the signature(s) notarially authenticated (§ 129 I BGB). § 403 BGB provides an illustration. The assignor shall on demand execute in favour of the assignee a publicly certified document of assignment. (For another illustration, see § 1154 BGB.) In practice, this means that the notary will demand that the signature is affixed on the document in his presence or, at least, recognised by the signatory in his presence.
There is, finally, a very austere type of form known as the notarial authentication (notarielle Beurkundung). This, according to § 17 of the Beurkundungsgesetz of 28 August 1969, requires the notary ‘to ascertain the will of the parties, explain the content of the transaction, instruct the parties about the legal consequences of the transaction, and record their statements clearly and unequivocally’ (translation from Zweigert and Kötz, An Introduction to Comparative Law, p 367).
An interesting parallel to this need for independent advice is provided by the complex and ever-expanding English case law on undue influence exerted on one party to enter into a contractual arrangement. One key element in allowing such a transaction to stand is that independent advice must have been provided to the ‘influenced’ party. (For further discussion see Treitel, The Law of Contract, pp 408–27 and Capper, ‘Undue Influence and Unconscionability: A Rationalisation’ (1998) 114 LQR 479.) This is part of a court-developed series of rules which, while not strictly ‘formal’ in nature, fulfil a somewhat similar protective function in this area in attempting to ensure that both parties were in a position to consider carefully the consequences of entering into the contract.
In such cases a number of duties of information and control are thus imposed on the notary in German law (Prüfungsund Belehrungspflichten) and these include an obligation on the part of the notary to inform the parties that their transaction is subject to foreign law, even though clearly he is under no duty to advise them on this foreign law. (The preceding comments help underline a terminological point which is well known, namely that a German notary is a member of a highly skilled and regulated profession and should thus not be confused with the American or English ‘notary public’.)
The following transactions are those that must be subjected to these rigid formalities. First, the promise of a gift must take this form (see § 518 I BGB). It should be observed, however, that a promise lacking the required form is deemed valid retro-
actively if it is actually carried out (see § 518 II BGB).
Secondly, one must note § 311b BGB, which envisages a contract whereby one person promises to assign his present property (or a fraction of it) to another or to charge it with a usufruct. § 311b I BGB deals with a contract to transfer ownership of land and is most important in practice. This contractual obligation is, as already stated, known as the Verpflichtung, whereas the actual disposition of the right (by means of delivery (traditio) if it is a chattel, or transcription into the Land Register (Grundbuch) if it concerns land) is known as the Verfügung, which attracts a lesser degree of formality. § 925 BGB stipulates that the contract to transfer title must be declared in the simultaneous presence of both parties before a notary. (We remind the reader that the distinction between the two is known as the principle of abstraction (Abstraktionsprinzip) and has been discussed in chapter 1, p 27.) For other transactions requiring such notarial intervention, see §§ 1410, 2276, 2348, 2371 BGB.
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Formal requirements are introduced on the basis of three policy considerations. First, the form is meant to warn the parties (or one of the parties) that they are
about to perform an important act; this is usually referred to as Warnfunktion. Accordingly, we find that normal requirements are usually associated with a potentially ‘dangerous’ transaction. Falling into this category are, for instance, guaranteeing the payment of a debt owed by another person, surety, § 766 BGB (exempting certain groups of persons who are deemed ‘capable’ of overseeing the consequences of such transactions, cf § 350 of the Commercial Code); or the sale of land (§ 311b I BGB).
Secondly, requiring form also serves to secure—usually written—evidence, which can later be used to establish the intention of the parties more easily (Beweisfunktion). This aspect is particularly obvious where the person uttering the statement is no longer around to explain it; hence, in relation to wills § 2247 I BGB demands even more than simple written form (signature): the whole text must be in the handwriting of the testator.
Finally, where notarial authentication is required, it is hoped that this will provide a basic level of legal advice before the agreement is concluded (Beratungsfunktion). The first two of these policy factors are well illustrated by BGH NJW 1996, 1467, case no 20, a case concerning the question whether a so-called ‘blanc signature’ (ie one which leaves the text to be completed) suffices to meet the requirements of § 766 BGB. (The decision is also noteworthy in a number of other respects. Involving the ‘overruling’ of previous decisions, it contains one of the rare statements of the Bundesgerichtsshof as to the ‘binding’ nature of its previous pronouncements and as to whether it is the task of the courts to discover the law or to make it. As a matter of general interest one observes that even though the doctrine of stare decisis (in the strict English sense) is unknown in German law, German courts do not easily depart from existing constant case law. Yet, as this decision indicates, sometimes even constant case law cannot be relied on.)
Where form is required, its absence will typically make the transaction void (§ 125 BGB). But the Code itself provides some derogations from this principle. This, for instance, is the case where the invalidity would harm that person whose interest the formal requirement is meant to protect or where it would be contrary to legal certainty (Rechtssicherheit) to hold certain transactions invalid even though they were actually carried through.
An instance of the first type is § 550 BGB mentioned above. Entering into a lease for a specific period over one year can be accomplished only in written form, but in the absence of the required form it will be valid but will be treated as a lease for an indeterminate time. In this category, the consequence of failing to comply with the required form is a valid contract yet with a content that is assumed to be in the best interest of the lessee. (For a possible English law parallel in questions of the statutory illegality of particular terms not operating to the detriment of the party to be protected by the statute, see Kiriri Cotton v Dewani [1960] AC 192, discussed in some detail in chapter 15, section 3(b), p 243.)
Examples of the second type take a different form. If the parties have carried the contract out then the defect in form is cured. As already noted, the defect of a promise of a gift made other than in notarial authentication is cured if the chattel which is the object of the gift is handed over to the donee (§ 518 II BGB). The same is true of an
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oral guarantee—once the guarantor has fulfilled the principal obligation, the defect of form is cured (§ 766 sentence 3 BGB)—and of a contract involving the obligation to transfer the title in land: once it is carried out (by entering into a separate contract transferring the title and entering the new owner in the register, §§ 873, 925 BGB) the contract is deemed to be valid, § 311b I BGB.
The above instances, where the effects of the lack of form are mitigated by the Code itself, are seen as exceptional derogations from the basic rule of nullity contained in § 125 BGB. Both the legislator and the case law have not departed from this position of principle though a considerable case law has developed since the inter-war years which has tried to mitigate the rigour of the basic rule in deserving cases.
This litigation has been mainly concerned with the absence of form in the context of § 311b I (ex-313) BGB where the vendor intentionally or, even negligently, induced the purchaser to believe that no form was needed. In such cases, to allow a vendor to reclaim the property, or conversely to deny the purchaser his claim to performance because of the lack of the written form, could be contrary to good faith. The older case law took this view fairly consistently, starting with the famous Edelmann decision of 1927 which allowed for the possibility of awarding damages to such a purchaser under the heading of culpa in contrahendo or § 826 BGB, damages for non-conveyance of the sold land (RGZ 117, 121, case no 21, though the claim failed on the facts of that case; see also, RG JW 1938, 1023 using the dangerous term ‘allgemeines Volksempfinden’ which was abused during the Nazi years to justify some outrageous results in other contexts. See, for a confirmation of this line of reasoning: BGH NJW 1965, 812). Later decisions went a step further and even ordered specific performance of the contract despite the absence of form, where invalidity would lead to an ‘extremely harsh’ (‘schlechthin untragbar’) result. In BGHZ 48, 396, case no 22, the Bundesgerichtshof took the next step in a case which shows how and when § 242 BGB can successfully be invoked. In that case the defendant company sold the plaintiff a plot of land. The transaction was in writing; and it bore the signature of the managing director of the defendant who, at one time, had been the plaintiff’s boss. When the plaintiff asked for the agreement to be properly notarised, the defendant brushed the request aside on the grounds that it was his ‘habit to honour his obligations no matter whether they were made orally, in writing, or were in notarial form.’ To the plaintiff’s reply that they were both mortal and that the director’s assurances, though convincing, might not bind the company, the latter replied that he had signed the document in the name of the company and that ‘the contract was equivalent to a notarial act.’ The Bundesgerichtshof took the view that insistence on formal requirements would be unduly ‘harsh’ where it could be shown that ‘one party has assumed a new way of life or given up his own way of life in reliance to the promises made by the other party.’ The contract was thus specifically enforced. The decision is remarkable because in this case the abuse of rights argument serves to justify a cause of action, initially for recovering the reliance interest, yet in BGHZ 48, 396, case no 22, the performance interest itself is protected and this, as we will see in the section on good faith in the next chapter, is not the way good faith arguments usually operate. While a reliance-based measure may be explained on the basis of the duty-creating aspect of good faith discussed also in conjunction with culpa in contrahendo, as a judicial parallel to provisions such as § 122 BGB in the context of a failed contract for lack of form, or alternatively be explained as liability in tort under § 826 BGB, it is more difficult to see
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why the expectation interest ought to be protected. Good faith is here used to create full contractual obligations where according to § 125 BGB there are none. (See, Medicus, Bürgerliches Recht, Rn. 181 et seq, objecting that these judgments have created significant insecurity in the law; and Flume, Allgemeiner Teil, vol 2, § 15 III 4c, bb; both however argue that where one party was deceived as to a formal requirement he may elect to have the contract enforced; this case has apparently not yet been decided.) However, such a solution would only be sanctioned where not to do so would create an ‘absolutely unbearable result’ (ein schlechthin untragbares Ergebnis) for the ‘innocent’ party and not merely a ‘harsh’ one (nicht bloß ein hartes Ergebnis: see BGHZ 85, 315, 319).
The facts of the later decision of the BGH NJW 1972, 1189, case no 23, give a good illustration of what the courts have in mind when making such pronouncements for in that case the plaintiff, an old man purchased (without observing the necessary formalities) what he intended to use as his retirement home. His advanced years, the purpose of the transaction, and the fact that an action for damages might be an inadequate remedy given the possibility of imminent death, all weighed heavily on the court which finally allowed him to insist on a conveyance of the property. These illustrations however also show that the new case law can give rise to difficult demarcation problems and thus, not surprisingly, it has not earned many supporters, at least among academic writers. (For further discussion, see the section on culpa in contrahendo, below, and on good faith in chapter 3; Medicus, Allgemeiner Teil, Rn. 630 et seq and W Lorenz, AcP 156, 381.)
A useful comparison can be drawn here with the English cases on estoppel. This nuanced case law only seems to allow the avoidance of strictly ‘formal’ requirements in the context of proprietary estoppel (where the court’s order appears to provide sufficient formality to effect a transfer of real property, thus avoiding the formal strictures Law of Property (Miscellaneous Provisions) Act 1989, which requires such transfers to be in writing: see Gillett v Holt [2001] Ch 210 and the references in section 3(e), above). (Although cf Shah v Shah [2001] 4 All ER 138 at [31], where an estoppel by representation was held to prevent reliance on a small defect of form in the contract as a ground for avoiding the agreement.) Nevertheless, the broader run of the estoppel case law responds to very similar motivating factors to those discussed above in relation to the German law that derogates from formal requirements: the English case law gives great weight to reliance on conduct or representations by one of the parties, leading to a refusal to allow the other party to rely on his strict legal rights as against the relying party. While this does not typically relate to the stage of forming the first (contractual) link between the parties (again, except in the case of proprietary estoppel), the result is to vary the application to the relying party of otherwise binding terms, because to apply the original terms would not be appropriate in the circumstances (eg, the result would be ‘unconscionable’ or it would be ‘inequitable’ to allow the other party to go back on his promise). (See generally, Treitel, The Law of Contract, pp 105–24.)
(b) Evidence of Seriousness
Gehrlein, ‘Vertragliche Haftung für Gefälligkeiten’ VersR 2000, 415; Grundmann, ‘Zur Dogmatik der unentgeltlichen Rechtsgeschäfte’ AcP 198 (1998), 457; Hau,
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Vertragsanpassung und Anpassungsvertrag (2003); Hirte and Heber, ‘Haftung bei Gefälligkeitsfahrten im Straßenverkehr’ JuS 2002, 241; Pallmann, Rechtsfolgen aus Gefälligkeitsverhältnissen (1971); Willoweit, ‘Schuldverhältnis und Gefälligkeit’ JuS 1984, 909 ff.; Willoweit, ‘Die Rechtsprechung zum Gefälligkeitshandeln’ JuS 1986, 96.
The question of deciding which promises are legally binding is one that has occupied all developed legal systems; and all agree on according greater attention to the promise that was ‘bought’ by some kind of counter-performance. Thus, gifts are enforceable in the common law only if they are under seal; and in both the Romanistic and Germanic families they are subject to special requirements of form, some of which have already been briefly noted. Where the systems differ is as to the criteria they use to determine the seriousness (and binding nature) of a declared human will. The common law’s prime test is, of course, consideration; but, as Zweigert and Kötz correctly observe, ‘[b]y taking counterperformance as the sole indication of seriousness . . . the Common law renders it impossible to do justice in all cases.’ Decisions such as Stilk v Myrick (1809) 2 Camp 317; 170 ER 1168), Foakes v Beer (1884) 9 App Cas 605 and Brawn v Lyford 103 Me 362; 69 A 544 (1907) thus represent to continental eyes the unfortunate side effects of the doctrine of consideration. (Yet perhaps the result of some of these decisions may also be sustained on different grounds—eg, duress, etc— in civil law systems. See, for an evaluation of these cases, Treitel, Some Landmarks of Twentieth Century Contract Law (2002), chapter 2; Hau, Vertragsanpassung und Anpassungsvertrag, pp 87 et seq.) The merits and demerits of the English doctrine of consideration (for in America the concept has been considerably weakened over the years) are still discussed in its country of origin, but happily we do not have to consider them in this work. Here, it is sufficient to say that in German law the seriousness of the parties is not determined by any doctrine even remotely akin to that of consideration. Nor is there any recourse to the notion of causa—a concept that only comes into its own in the context of the German law of unjust enrichment (§§ 812 et seq BGB.) § 118 BGB provides that a declaration that was not intended to be taken seriously is void; it should be noted that this is an exception applied narrowly by the courts. It is fair to say, however, that an agreement involving a counter-performance (eg, § 433 BGB, sale of goods) will hardly ever prompt an inquiry by the court into whether the declarations of intention were meant to be taken seriously and if on occasion one party actually raises such a defence he is very likely to be judged by the objective meaning of his declaration. (See chapter 1 for a discussion of this objective approach, which need not be repeated here. We will also return to the topic in the next chapter, section on interpretation.) One can safely conclude that, so far as promises supported by consideration are concerned, there is little difference between the common law and German law.
It has been argued that there is, or should be, no separate requirement in the common law to show an intention to create legal relations before a contract can be said to exist (see, eg, Williston, Contracts (1990), Section 21 and Furmston (ed), Butterworths Common Law Series: The Law of Contract (1999), para 2.165). Yet it seems clear that (in English law at least—see Treitel, The Law of Contract, chapter 4 and McKendrick, Contract Law, chapter 7) such an intention must still be found (see, for recent confirmation of this position, Baird Textile Holdings Ltd v Marks & Spencer plc [2002] 1 All ER (Comm) 737, at [30] and [59]). The variety of fact scenarios, situations and
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contexts in which no such intention can be shown is huge, but classic examples include arrangements relating to social or domestic occasions (a famous, and perhaps famously borderline, example being Balfour v Balfour [1919] 2 KB 571, at 627, where a husband’s promise to pay a £30 per month allowance to his wife while he was working abroad was held to be unenforceable ‘because the parties did not intend that [it] should be attended by legal consequences’), letters of intent and letters of comfort (such as stating a company policy on a particular matter: Kleinwort Benson Ltd v Malaysia Mining Corpn Berhad [1989] 1 WLR 379, where no binding promise was found that this was an undertaking not to change that policy at a later date).
It also seems clear that, while consideration and the intention to create legal relations are often closely linked—either on the facts used to prove their existence or in the language used in the reasoning of the judges—they nonetheless remain distinct. (On the latter point, see the judgment of Pollock CB in the case of White v Bluett (1853) 23 LJ Ex. 36 and the discussion in McKendrick, Contract Law, pp 299–300.) Similarly, common elements may be relevant to the decision whether an agreement has been reached between the parties at all and whether, even if such an agreement can be shown, it was intended to create legal relations (see Baird Textile Holdings, above, at [30]). All three elements must be present if a binding contract is to exist. In the requirement that there be shown an intention to create legal relations, English law clearly has a further means of assessing ‘indications of seriousness’ that can be quite subtle in its operation. It places a heavy burden on a party to a proved or admitted express agreement to demonstrate that there was no intention to create legal relations as a result of that agreement (Edwards v Skyways Ltd [1964] 1 WLR 349, at 355) while requiring strong evidence the other way if an attempt is being made to imply a contract in the circumstances (Blackpool and Fylde Aero Club Ltd v Blackpool Borough Council [1990] 1 WLR 1195, at 1202).
So far as promises not supported by consideration are concerned, the situation is more complex. Two observations are called for.
First, as has already been pointed out, most of these transactions are regarded as potentially ‘dangerous’ by German law and therefore subjected to strict requirements of form. It will be recalled that the making of a gift will not enable the promisee to claim the gift unless the contract was notarially authenticated. Thus, the general theoretical approach could not be more different. Yet at the level of application the results converge. At the same time, certain characteristics of the development and current state of English law should be borne in mind, which underline the similarities behind the reasons for such rules relating to ‘seriousness of intention’ and the need for apparently strict rules to be given flexible interpretation. The English legislature took the decision in 1677 to pass the Statute of Frauds, the broad policy of which ‘was to require written evidence of important legal transactions as a prerequisite to their enforcement, to insist, that is, on a measure of formality in areas in which wholly informal transactions had come to be legally effective’ (AWB Simpson, A History of the Common Law of Contract—The Rise of the Action of Assumpsit (1975, reprinted 1996), pp 599–600; see also, generally, chapter XIII). Sections 4 and 16 of the Statute gave the six categories of contract to be covered and, while many such formalities were later removed, some still remain today in particular areas (even outside the field of real property): eg, ‘regulated consumer credit agreements’ (under the Consumer Credit Act 1974—see Treitel, The Law of Contract, p 178), bills of sale (Bills of Sale
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Act 1878 (Amendment) Act 1882) and promissory notes (sections 3(1) and 17(2) of the Bills of Exchange Act 1882)—the last two requiring a contract in writing.
Also, while many commentators (such as Zweigert and Kötz, cited above) have criticised the doctrine of consideration for its inflexibility and consequent inability to do justice in many cases, it should be noted that the English courts have proved creative on occasion in ‘discovering’ consideration by reinterpreting what counts as being of sufficient value in the eyes of the law to amount to valid consideration. The well-known case of Williams v Roffey Bros & Nicholls (Contractors) Ltd [1991] 1 QB 1 seems best interpreted as allowing a practical (or factual) benefit rendered by performing a pre-existing contractual obligation owed to the other party to amount to sufficient consideration to allow the enforcement of a promise to make extra payments in return for that performance. Such an analysis is understandable only when coupled with an appreciation that the courts are becoming more (although still not very) willing to consider separately any claims that such promises have been extracted by duress, rather than using the earlier requirement that a legal (rather than merely factual) benefit was required to prevent such duress. Further, the English courts have proved able to allow certain promises to suspend the enforcement of strict contractual rights against the promisee, even where that promise was not supported by consideration: as discussed above, this has been achieved through the doctrine of (promissory) estoppel (stemming from the leading case of Hughes v Metropolitan Railway Co (1877) 2 App. Cas 439). Indeed, such suspension of rights might become definitive where the course of events means that it would be highly inequitable to demand performance as per the original contract, even if reasonable notice of an intention to return to the original deal were given. (A similar argument concerning practical benefit could be applied in cases regarding the part-payment of a debt, but as yet this practical benefit approach has not been applied by the English courts to relax the rule that a creditor’s agreement to accept part of a debt in satisfaction for the whole is not binding: see Foakes v Beer (1884) 9 App Cas 605 for the House of Lords’ endorsement of the rule and Re Selectmove Ltd [1995] 1 WLR 474 for the Court of Appeal’s refusal to use the Williams v Roffey Bros reasoning in such a situation. See Treitel, The Law of Contract, p 125 ff, where the application of estoppel principles to such part-payment questions is also discussed, particularly the (in)famous case of Central London Property Trust Ltd v High Trees House Ltd [1947] KB 130 (an extemporary judgment of Denning J, as he then was: see Denning, The Discipline of the Law (1979), Part 5—The High Trees case).)
Secondly, outside the reach of formal requirements, one finds the problem whether the performance of an act not supported by any counter-performance may give rise to liability. As far as gifts are concerned the problem is expressly dealt with in the Code. First, the lack of form is cured by the performance of the act promised (§ 518 II BGB). If, accordingly, the object presented as a gift causes damage to the donee then his liability is contractual; § 521 BGB reducing the standard of care of the donor.
In relation to liability for the performance of ‘unpaid for’ services the situation is more difficult to ascertain. German law distinguishes legally binding declarations of intentions (usually mandate, § 662 BGB) from mere acts of kindness or generosity (Gefälligkeiten) by trying to discover the true intention of the parties. ‘This method of abandoning specific indicia of seriousness and leaving the matter in the hands of a qualified judge’ is, according to some comparatists, ‘the best way of dealing with the
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problem’ (cf Zweigert and Kötz (2nd edn), p 427). On the whole, this seems a convincing comparative observation, but it should not conceal two further facts.
First, at the end of the day the solutions the different legal systems reach are, in many situations, similar even if the routes by which they are reached are different. Secondly, and this is the point that will detain us in this exposition, the German preference for construing the transaction in order to discover the true intention of the parties is not free of difficulties and ambiguities.
Thus, to say that the declared intention will prevail and, in its absence, the objective intention of the parties will form the basis of the determination of any disputes that may arise between them, is often a way of leaving it to the judge to determine the issue after the conclusion of a trial; raising interesting issues about the need to go to court to resolve such questions and the costs (both in time and money) of having to resort to this approach. The above, may also give courts the power to attribute intentions to the parties which may not have been there in the first place. Two decisions may help provide illustrations to these points without distracting from the basic merit of the German position, which is flexibility.
In the first of these cases (BGHZ 21, 102, case no 24) a transport company (‘A’) placed at the disposal of another company (‘B’) a chauffeur-driven car, without A having the intention to make a charge for this service or enter into a further contractual relationship with B. The chauffeur was inexperienced and injured his passengers. The court took the view in this leading case that, although there was no contractual obligation on A’s part to provide the service, if it nevertheless did provide the service then it undertook a contractual obligation to select a dependable driver for the job. Judging by the objective significance of its actions and good faith, therefore, company A could be said to have assumed legal responsibility (Rechtsbindungswille) towards B leading to contractual liability in damages if it breached that obligation. It is not difficult to see why liability was rationalised in contractual terms. The tort route was essentially blocked because pure economic loss (in the form of liability loss) was at stake (an interest clearly not protected under § 823 I BGB: see The German Law of Torts, pp 52–69 and 203–356 for cases and discussion). Interestingly enough, the obligation identified by the court and purportedly ‘assumed’ by the defendant, the selection of a careful driver, mirrors in all other respects exactly the duty of care imposed by § 831 BGB. So it does not seem far-fetched to contend that we are dealing here, once more, with an exception to the rule that pure economic loss is not recoverable in German law outside the realm of contract. Indeed, some writers have raised the objection against the approach in this decision that the attribution of a legally relevant undertaking of responsibility is fictitious and thus amounts to imposing liability in law (see, in particular, Flume, Allgemeiner Teil, vol 2, § 7, 7, p 91: ‘reine Fiktion’).
Despite this criticism, this formula of liability for carrying out non-obligatory acts used in that judgment has been repeated since by other cases and represents the present position of German law. The criteria applied in arriving at liability are frequently referred to in judgments. (See especially, BGHZ 21, 102, 106–8, case no 24, where the court emphasised, inter alia, the nature of the transaction, the prospective gains made by the parties and the economic value it represented for them, as well as the danger one party might be running by accepting the services of the other.) Apart from the question whether the parties intended to assume responsibility by carrying out the altruistic act, the court had also to consider whether the normal or a reduced standard