TIME AND PLACE OF PERFORMANCE 355

But the similarity does not extend any further, because here we are not dealing with synallagmatic contracts.

A good example is provided by mandate (Auftrag), ie gratuitous agency, which is classified as an imperfectly bilateral contract (see above, section 2(a)). The mandatary is bound to hand over to his mandator all that he receives for the execution of the mandate and all that he obtains from his charge of the matter (§ 667 BGB). On the other hand, he may claim reimbursement of any outlay which was necessary for the purpose of the execution of the mandate (§ 670 BGB). Both of these claims arise independently of each other, even though they originate in ‘the same legal relationship’ within the meaning of § 273 I BGB. It is this real connection (Konnexität) which justifies the right of retention with its legal effect of contemporaneous performance.

Another example of this right of retention is supplied by § 273 II BGB, which provides that a person who is obliged to hand over a particular thing to its owner can refuse to do so if he has incurred expenses in connection with the thing or if it has caused any damage to him. In commercial relations among merchants the right to retain specific things is a genuine lien combined with the right to sell the things retained and so to obtain satisfaction of the claim (§§ 369, 371 BGB; broadly analogous to the so-called ‘workman’s lien’ under English law, discussed in chapter 3, section 4(h), p 155).

3. TIME AND PLACE OF PERFORMANCE

Christiansen, Forderungsrecht und Leistungszeit (1998); Gernhuber, Die Erfüllung und ihre Surrogate (2nd edn, 1994); U Huber, ‘Zur Konzentration beim Gattungskauf’ in Festschrift Ballerstedt (1975) 327; S Lorenz, ‘Leistungsgefahr, Gegenleistungsgefahr und Erfüllungsort beim Verbrauchsgüterkauf’ JuS 2004, 105; Medicus, ‘Die konkretisierte Gattungsschuld’ JuS 1966, 297; K Schmidt, ‘Geld und Geldschuld im Privatrecht’ JuS 1984, 737; Wieacker, ‘Zum Verhältnis von Leistungshandlung und Leistungserfolg’ in Festschrift Nipperdey (1965) 783.

(a) Time of Performance

The general part of the law of obligations starts with the rule that the creditor may demand performance at once, and the debtor may perform his part at once, provided the time for performance is neither fixed nor can be deduced from the circumstances (§ 271 I BGB). (Compare the general position in English law, as stated by Treitel (The Law of Contract, p 753): ‘performance is due without demand: a debtor must seek his creditor,’ citing Walton v Mascall (1844) 13 M & W 452; 153 ER 188.) However, in German law this rule is not mandatory nor, indeed, does this represent the basic position of English law. Moreover, the BGB contains numerous special provisions dealing with the time for performance. In the present context we will only mention those provisions which may be found in the special part of the law of obligations dealing with specific contracts such as, for instance, § 556b I BGB (payment of rent in contracts of lease); § 604 BGB (time for returning a thing gratuitously borrowed for use); §§ 608, 609 BGB (time for repayment of a loan and time for payment of interest on a loan);

356 THE PERFORMANCE OF A CONTRACT

§ 614 BGB (due date for remuneration payable under a contract of service); § 641 BGB (due date for remuneration payable under a contract for work and labour), etc. It must be emphasised again however that these special provisions are not mandatory either. Indeed, the consistent (opposite) practice of the parties in many spheres of activity has made some of them quite obsolete.

This used to apply with particular force to the payment of rent in contracts for lease of residential property. Thus, § 551 BGB now repealed, stated that the rent is payable after the expiry of each of the periods if the rent is measured by periods of time. This was hardly ever applied in practice. The standard form contracts, which are in daily use in Germany in cases of residential leases, have always contained contrary stipulations. These state that the rent must be paid in advance of each of the periods of time. The reform of the contract for lease of 2001 has adapted the rule to actual practice. According to § 556b I BGB, the rent is thus due at the beginning of the period. (Compare the position in English law under section 166 of the Commonhold and Leasehold Reform Act 2002, which provides that a tenant who holds a long lease of a dwelling owes no duty to make payment of rent under that lease unless and until the landlord has served a notice on him that relates to that payment.)

The BGB makes a distinction between the date when an obligation is due (Fälligkeit der Forderung) and the date at which the debtor may tender performance (Erfüllbarkeit der Forderung). This distinction is inherent in § 271 II BGB: if a time is fixed it is to be presumed, in case of doubt, that the creditor may not demand the performance before that time, but the debtor may perform earlier. However, a debtor who pays a non-interest-bearing debt before it is due is not entitled to any reduction on account of interim interest (§ 272 BGB: kein Abzug von Zwischenzinsen). This is confirmed by another provision laid down in the context of unjust enrichment: if an obligation due on a certain date is fulfilled in advance, the right to demand return is barred and a discount of interim interest may not be demanded (§ 813 II BGB). Payment of a debt before it falls due can be attractive to a debtor of an interestbearing debt. But there is authority for the proposition that the creditor need not accept such a premature performance which would deprive him of part of the interest (BGHZ 64, 278, 284). The position is different only under § 504 BGB, which states that a consumer who has bought goods or has received other benefits against payment of the price by instalments may pay the remaining debt before it falls due. In this case the instalment price is reduced by the amount of interest which would have to be paid if the credit had been used for the full length of the stipulated period.

Occasionally, no date will have been fixed for the performance of the obligation. In such a case, its maturity depends on the giving of notice (Kündigung) by the creditor or the debtor. Thus, if the time for repayment of a loan is not fixed, notice must be given either by the creditor or the debtor (§ 488 III 1 BGB). The term of notice is three months (§ 488 III 2 BGB), although the parties remain free to agree a different period. If interest is not stipulated for, the debtor is entitled to make repayment even without notice (§ 488 III 3 BGB). In this context, the so-called ‘requirement’ contract—where a party has agreed to deliver certain quantities of goods ‘on call’ (auf Abruf)—should be noted. In a situation like this, both Fälligkeit and Erfüllbarkeit are postponed, viz, the debtor must not tender performance until the creditor has requested delivery of the goods. It goes without saying that the creditor must do so within the period of time which the parties had in mind when making such a contract.

TIME AND PLACE OF PERFORMANCE 357

If the debtor does not tender performance at the stipulated time, or at the time to be deduced from the circumstances, he has violated his main obligation under the contract. The creditor may, of course, insist on performance by the defaulting debtor whose primary obligation is not extinguished by the delay. This does not however apply to the case where the contract states a time which is regarded as of essence to the transaction (‘mit der zeitgerechten Leistung soll das Geschäft stehen und fallen’: eg, BGHZ 110, 96). Thus, § 323 II Nr. 2 BGB lays down that in a situation like this the creditor shall be entitled to terminate the contract if performance is not made at the fixed time or within the fixed period (so-called relatives Fixgeschäft). The Commercial Code contains a rule to essentially the same effect (§ 376 HGB, Fixhandelskauf). This may be compared with those cases which in English law entitle the aggrieved party to terminate the contract because performance at the stipulated time goes to ‘the essence of the contract’ (see the following charterparty cases: Glaholm v Hays (1841) 2 Man & G 257 = 133 ER 743; The Mihalis Angelos [1971] 1 QB 164 and Universal Cargo Carriers v Citati [1957] 2 QB 401).

German law also recognises what is referred to as absolutes Fixgeschäft. In this case, performance beyond a certain date no longer constitutes performance of the obligation. With the passage of time, the performance becomes impossible in the sense of § 275 I BGB. For instance, if a taxi is ordered to carry a passenger at a certain time to the airport, punctual arrival is so important that a delay will result in the ex lege extinction of the obligation. The same applies to the obligation of the employee in a contract of labour (eg, BAG NJW 1986, 1832). If it is not performed during the stipulated time it cannot be repeated at a later time. It has become impossible. Thus, unlike the simple Fixgeschäft (discussed previously), in this case no notice of termination is necessary.

Leaving aside such special fact-situations, the consequences of the debtor’s default are dealt with in § 286 BGB et seq in conjunction with § 280 II BGB. This requires fault on the part of the debtor (§ 287 BGB), and generally speaking a warning of the debtor that performance is due (§ 286 I BGB). (Delay by the debtor is considered in more detail in chapter 9 below. For a comparable situation in English law, see Behzadi v Shaftesbury Hotels Ltd [1992] Ch 1: where one party has failed to perform by the date fixed by the contract, the other party can immediately serve a notice making time of the essence. But the time limited by the notice must be reasonable.)

(b) Place of Performance

In German law, the place of performance (Erfüllungsort) is the place at which the debtor ultimately acts in order to bring about the result which he owes to the creditor. Suppose the seller of goods, at the request of the buyer, dispatches the goods sold to a place other than his place of business. In such a case, he has performed the last act owed (Leistungshandlung) as soon as he delivers the goods to the forwarder, freighter or other person designated to carry out the consignment. However, since property in the goods has yet to pass to the buyer by virtue of the contract, the desired result of this act of performance is not achieved until the goods are handed over to the buyer at their destination. While the goods are in transitu, they travel at the buyer’s risk (§ 447 BGB; the rule does not apply to consumer sales, see § 474 II BGB). Strictly speaking, in our case Erfüllung, in the sense of extinction of the obligation by performance (§ 362

358 THE PERFORMANCE OF A CONTRACT

BGB), is achieved at the moment when the buyer acquires possession and ownership of the goods. Nevertheless, when speaking of the Erfüllungsort, this usually designates the place at which the debtor takes the last and decisive step in order to bring about this result. For all practical purposes, therefore, the Erfüllungsort means the Leistungsort. It is this last-mentioned place with which the BGB deals in § 269 and in § 270 IV. This also applies to § 447 BGB (referred to above), even though this provision uses the term Erfüllungsort.

Since sale of goods is the ‘paradigmatic contract,’ it might be helpful to use this type of contract as a model for explaining the possible places of performance and the legal consequences connected therewith. Two types of risk must be distinguished. (See BGH NJW 2003, 3341, case no 109, discussed below, and also in chapter 9, section 3(e)(ii), p 410.)

First, if the goods are accidentally destroyed before the buyer has obtained possession and ownership, the question then arises whether the seller has to make a second attempt at delivery. The answer to this question depends on whether the seller bears the so-called Sachgefahr (risk of the thing: risque de la chose).

Secondly, if the seller is relieved from his obligation to deliver, the further and independent question arises whether the buyer is equally relieved of his obligation to pay the price. This would be the case if, at the moment of destruction of the goods, he bears the ‘risk of counter-performance’ (Preisgefahr or Gegenleistungsgefahr). The general rule, contained in § 326 I 1 BGB, is that he does not bear this risk. But there are exceptions to this rule. (See, for instance, § 447 BGB.)

The concept of ‘risk of the thing’ needs to be explored further. The content and nature of the seller’s promise determines whether the seller is under an obligation to make a second attempt of delivery. If a specific thing has been sold (Stückschuld), its destruction will automatically relieve the promisor of the obligation to deliver (impossibility, § 275 I BGB: this is irrespective of the responsibility for the destruction or when the impossibility to deliver occurred). If generic goods have been sold, ie, objects that are described by class (§ 243 I BGB: Gattungsschuld), the destruction of one object of this class does not render performance impossible in the sense of § 275 I BGB. The seller remains liable to deliver an object of the respective class. (Beschaffungsrisiko, § 276 I BGB, previously § 279 BGB.) The obligation becomes impossible to perform only if it has been reduced to an obligation to deliver the particular object that perished. This is referred to as Konkretisierung and, according to § 243 II BGB, this depends on whether the seller had already complied with his duties under the contract when the destruction occurred. The duties of the seller depend in turn on whether his obligation is a Holschuld, Bringschuld or Schickschuld, as explained in the following paragraphs.

So far as the seller’s main obligation is concerned, the following three ‘delivery points’ (§ 269 BGB) may be distinguished.

The minimum obligation of the seller would be merely to hold the goods available for collection by the buyer (Holschuld). Apart from keeping the goods available for collection during normal business hours, the seller may be under an additional obligation to notify the buyer that the goods are ready for collection. This is important in cases where no exact time for delivery has been fixed by the contract. The last and ‘maximum’ obligation of the seller would be to deliver the goods to the buyer’s own premises or to those of a third party such as, for instance, a warehouseman or a

TIME AND PLACE OF PERFORMANCE 359

sub-buyer (Bringschuld). Between these two extremes lies the case already dealt with above: the seller, on the request of the buyer, delivers the goods to a carrier for onward transmission to the buyer (Schickschuld). The degree of movement for which the seller is responsible determines the point at which the risk passes to the buyer.

In the case of a Holschuld, this would mean that the goods were ready for collection and, if necessary, the buyer had been notified accordingly. Speaking in terms of risk (Gefahrtragung), this means that the goods are no longer at the seller’s risk. This type of risk is called Sachgefahr (risk of the thing—risque de la chose). Therefore the seller need not deliver substitute goods, for he is relieved of his obligation (§ 275 I BGB). But it is an entirely different question whether, in a case like this, the seller could still insist on payment of the price. This aspect of the risk involved is the aforementioned Preisgefahr. Always provided that the buyer had not been in default of acceptance (Gläubigerverzug) when the accidental destruction of the goods occurred (§ 326 II 1 BGB), this question must also be answered in the negative (§ 326 I 1 BGB). In other words, the risk of being obliged to pay the purchase price without receiving anything had not yet passed to the buyer.

The case may be contrasted with the Schickschuld (where, it will be remembered, the seller delivers the goods to a carrier for onward transmission to the buyer). If the goods perish during transmission, both the Sachgefahr (regulated by §§ 269, 243 II BGB) and the Preisgefahr (regulated by § 447 BGB) are risks that have been transferred to the buyer. This means that the buyer has to pay for the price even though he does not receive the goods, while the seller’s obligation has been extinguished (§ 275 I BGB). The buyer may, however, be able to recover for the loss of the goods from the carrier, or compel the seller to assign his rights against the carrier. (The intriguing third party loss issues raised by this tripartite situation have been discussed in chapter 4, p 220.)

In the case of a Bringschuld (seller obliged to deliver the goods to the buyer’s own premises or to those of a third party), then both risks will still have to be borne by the seller. This means that the seller is not discharged according to § 275 I BGB from his obligation under § 433 I 1 BGB to deliver the goods. The seller’s attempt at performance fails if a Bringschuld was agreed and the goods are destroyed before they reach the destination agreed in the contract.

The above lead us to a critical question: how, in each case, is the Leistungsort to be determined?

German law is in basic agreement with section 29(1) of the Sale of Goods Act 1979. The answer to the question whether it is for the buyer to take possession of the goods, (Holschuld) or for the seller to send them to the buyer (Schickschuld), or to deliver them to the buyer’s own premises (Bringschuld) must, in each case, depend on the express or implied terms of the contract concluded by the parties. In the absence of an express stipulation, the courts will look at the circumstances of the particular case, having regard to the nature of the obligation. In German law the Code is explicit: if no clear answer can be found as a result of applying these criteria, ‘performance shall be effected in the place where the debtor had his residence at the time the obligation arose’ (§ 269 I BGB). In the normal case where the obligation arose in the course of the debtor’s business, and if the debtor’s business is located in another place, that place is substituted for the residence (§ 269 II BGB). It may be derived from this provision that, in case of doubt, there is no Bringschuld. This is confirmed by § 269 III

360 THE PERFORMANCE OF A CONTRACT

BGB, The mere fact that the debtor has assumed the cost of delivery does not mean that the place to which delivery is required to be made is the Leistungsort. In a case like this, it must be presumed that the parties have agreed on a Schickschuld. In all other cases we are dealing with a Holschuld which may, therefore, be regarded as the normal content of the obligation.

A useful illustration of these principles can be found in BGH NJW 2003, 3341, case no 109; a case which, since the lower courts erroneously applied the new version of the BGB instead of the version in force until end of December 2001, contains a first and authoritative commentary on the new law. (See for an annotation of this decision S Lorenz, JuS 2004, 105, and also chapter 9, section 3(e)(ii), p 410.)

In that case the plaintiff ordered a video camera from the defendant. The goods were dispatched by courier to the buyer, who, however, contended that he did not receive the goods. He accordingly demanded the delivery of a (new) camera by way of specific performance. His claim failed.

A correct analysis of this case must start with a meticulous classification of the nature of the obligation of the seller. Such contracts between a consumer and a dealer who maintains a system of distance selling (Versandhandel) are commonly treated as involving merely an obligation to dispatch (Schickschuld). In other words, the place of performance (Leistungsort, § 269 I BGB) is the seller’s place of business. It follows that the seller’s obligation is fulfilled once he has handed over the goods to the carrier provided that he has apportioned the goods to the respective contract (§ 243 II BGB). The risk of having to deliver the goods afresh (Sachgefahr) passes at this very moment. If the goods perish subsequently, the seller is according to § 275 I BGB relieved from his obligation under § 433 I 1 BGB to transfer ownership in the goods and hand them over to the buyer. As a result the buyer has no claim for specific performance of that obligation. So far the—correct—reasoning of the BGH.

The lower courts arrived at the ‘correct’ result (ie, rejected the claim) but for the wrong reason. They applied § 447 BGB. This was wrong because this provision concerns the question whether the buyer must pay the price even though he has not received the goods (Preisgefahr). The seller’s claim for the price, however, was not the object of the actual proceedings. The court thus confused the two types of risk which must be strictly separated in German law. This fundamental misconception of the issue of risk obviously irritated the judges of the BGH who did not spare the lower court their harsh criticism.

Nevertheless, it is worth considering—hypothetically—whether the seller would have been able to claim the price even though the goods were destroyed during transport. According to § 447 BGB this would indeed be the case. However, this provision is, according to § 474 II BGB, excluded if the contract of sale is a ‘consumer sale’. Instead, the general rule of § 326 I 1 BGB applies: since the seller is relieved from his obligation to perform under § 275 I BGB he loses his right to demand the counterperformance from the buyer. In a nutshell: the buyer (provided he is a consumer) does not have to pay the price for the perished goods nor does the seller have to deliver afresh. We shall return to many of these points in chapter 9, below where we shall analyse the consequences of irregularities in performance.

So far we have concentrated on the obligation of the seller to deliver the goods sold. It is now necessary to add a few words about the buyer’s obligation to pay or, generally speaking, about the place of payment of a money debt (Geldschuld). In § 270 I and