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eg, Ulrich Huber, Leistungsstörungen, vol 1 (1999), p 680.) Furthermore, the degree of care required in relation to the subject-matter of the contract differs from that applicable under the contract of sale. While a seller is normally not under a duty to inspect the goods before he delivers them to the buyer, as a general rule it is the contractor who must perform such duties of inspection (for details, see Staudinger-Peters, § 634 Rn. 119 et seq).
4. CONTRACT OF SERVICES
Däubler, ‘Die Auswirkungen der Schuldrechtsmodernisierung auf das Arbeitsrecht’ NZA 2001, 1329; Henssler, ‘Arbeitsrecht und Schuldrechtsreform’ RdA 2002, 129; Katzenmeier, Arzthaftung (2002); Richardi, ‘Leistungsstörungen und Haftung im Arbeitsverhältnis nach dem Schuldrechtsmodernisierungsgesetz’ NZA 2002, 1004; Schiemann, ‘Der freie Dienstvertrag’ JuS 1983, 649; Spindler and Rieckers, ‘Die Auswirkungen der Schuldund Schadensrechtsreform auf die Arzthaftung’ JuS 2004, 272; Vollkommer and Heinemann, Anwaltshaftungsrecht (2nd edn, 2003).
(a) Preliminary Observations
The contract of services is governed by §§ 611 et seq BGB and a number of special statutes. (For general provisions of English law, see sections 12–17 of the Supply of Goods and Services Act 1982.) Its main difference from the contract for work is that the provider of the service does not promise that he will ensure that a certain result comes about but merely that he will perform the service as promised (see also chapter 3, p 153, for this and other aspects of this type of contract).
The foregoing is easily apparent in the paradigm case of a contract with a medic. The latter owed the performance of an activity but normally does not promise to bring about a certain result, namely that the patient recovers. This contract is accordingly analysed as a contract for services. (Prior to the extension of damages for pain and suffering to contractual claims there was an incentive in German law to phrase claims in tort. However, see now § 253 II BGB which makes such damages available also in a contract claim. Typically, medical treatment will fall under the law of tort in England where the service is provided under the National Health Service, unless there is a contract for private treatment: see Grubb (ed), Principles of Medical Law (2nd edn, 2004), para 5.06 and Grubb & Kennedy, Medical Law (3rd edn, 2000), pp 272–7. On this ‘guarantee’ point in contracts for services, see the view of Nourse LJ in Thake v Maurice [1986] QB 644 (finding the usual position to be no more than a warranty that due care and skill would be used) and compare it with two cases on cosmetic surgery, where (respectively) US and Canadian courts have been prepared to find that a particular result was guaranteed, so that failure to achieve it amounted to a breach of contract: Sullivan v O’Connor (1973) 296 NE 2d 183 (Cal Sup Ct) and LaFleur v Cornelis (1979) 28 NBR (2d) 569 (New Brunswick).)
If the contract involves the management of the affairs of another person, § 675 BGB declares certain provisions from the law of mandate to be applicable. For instance, according to § 667 BGB the service provider must hand over everything he obtains in
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the course of and in connection with his service to the employer. A typical example of this type of contract (Geschäftsbesorgungsvertrag) is the contract to provide legal services. It will also be remembered that the contract of ‘labour’ (Arbeitsvertrag) is analysed as a contract of services. The great practical significance of the contract of services is therefore evident.
For the English position on employment contracts, which started from a common law development of a set of default rules via implied terms in the contract of employment, see Deakin, ‘The Evolution of the Contract of Employment, 1900–1950: The Influence of the Welfare State’ in Whiteside and Salais (eds), Governance, Industry and Labour Markets in Britain and France (1998) 212 ff and Collins, Ewing and McColgan, Labour Law: Text and Materials (2nd edn, 2005), chapter 2. One key element is the extent to which company rule-books and handbooks become incorporated as contract terms via the operation of implication of terms at common law: this may have significant consequences for the employee’s contractual duties (see Secretary of State for Employment v ASLEF (No 2) [1972] ICR 19), although certain restrictions on the employer’s freedom to change those rules without consultation may also result from the status of the rule-book under the contract (French v Barclays Bank plc [1998] IRLR 646). (For comparable US case law, see Toussaint v Blue Cross & Blue Shield 292 NW 2d 880 (Mich 1980), which is the leading case. The employee received oral assurances of job security and the manual said dismissal would only be ‘for cause’. On the other side is Fleming v AT&T Information Services, Inc 878 F 2d 1472 (DC Cir 1989) (the presumption that an employee is hired ‘at will’ is not overcome by a written manual stating that employees will be treated fairly and will receive post-termination counselling).) Another important aspect is the extent and enforceability of collective agreements (see sections 179 and 180 of the Trade Union and Labour Relations (Consolidation) Act 1992 and cases such as Alexander and Wall v Standard Telephones & Cables Ltd (No 2) [1991] IRLR 287 (for employee attempts to enforce the agreement) and Camden Exhibition & Display Ltd v Lynott [1966] 1 QB 555 (for the employer’s efforts to do likewise).
The present section can be comparatively short for the simple reason that, unlike many other specific contracts, the rules on the contract of services do not contain a selfcontained system of remedies for defective performance. This entails that the general principles described in the previous chapter are also applied in respect of nonconforming performance. Nevertheless, it may be of interest to give a brief overview of the main aspects of liability for breach of a contract of services, because the application of the general principles is nevertheless qualified in certain respects and has been, to some extent, controversial in practice.
(b) Enforced Performance
The personal obligation to provide services cannot be specifically enforced (§ 888 III BGB: for details, see chapter 9, p 405). This corresponds to the basic position in English law: see Johnson v Shrewsbury and Birmingham Railway (1853) 3 DM & G 358 and section 236 of the Trade Union and Labour Relations (Consolidation) Act 1992, although note that the services must be of a personal nature—it will not suffice simply to claim that the contract is one for the provision of services. (See generally, Treitel, The Law of Contract, pp 1029–33.) As a general rule, the contract is to be performed
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personally and not by another on the promisor’s behalf: § 613 BGB (see also chapter 8, section 4, p 361).
If the obligation to provide the service is impossible to perform, the promisee is released from that obligation by § 275 BGB. This may be the case in particular where the obligation has to be performed at a pre-defined time. For instance, under a contract of ‘labour’ the employee is required to be at the place of work and to provide the service as laid down in the contract during working hours. Lapse of time thus causes the provision of the service to become impossible. The service that was to be provided yesterday cannot be provided today. This is also presupposed by § 615 sentence 1 BGB, which—contrary to the general rule in § 326 I 1 BGB—preserves the right of the employee to demand remuneration if the employer is in delay of acceptance of the service. In cases in which the service must be personally performed, § 275 III BGB acquires special importance (see chapter 9, p 418; see § 616 BGB for the right to remuneration if the employee is personally unable to perform for ‘insignificant’ periods of time). The English approach to withholding pay will depend very much on the nature of the obligation undertaken by the employee: eg, under a time-service contract, the obligation is to be available and willing to work as directed during the relevant hours under the contract. See Miles v Wakefield Borough Council [1987] AC 539, where partial failure to perform may entitle the employer either to refuse all work offered and refuse to pay wages or to accept such performance as has been rendered and then pay for it on a pro rata basis. There are also certain statutory provisions that protect against such deductions being made by employers: see sections 13 (restrictions on deductions), 24 (statutory remedy of compensation for deductions) and 27 (definition of ‘wages’ and how this affects the notion of a ‘deduction’ therefrom) of the Employment Rights Act 1996 (‘ERA 1996’) (discussed in Collins, Ewing and McColgan, Labour Law: Text and Materials, chapter 2).
(c) Termination
Termination of a contract of service does not as a general rule have retroactive effects (contrast the effect of termination by Rücktritt in § 346 BGB). The contract of services is a so-called ‘continuous contract’ (Dauerschuldverhältnis), which means that it is not consumed in a singular exchange of performance. As a result, it is terminated by giving notice (Kündigung), ie a unilateral declaration which brings the contract to an end with effects for the future. The contract comes to an end either at the stipulated time or by ordinary notice of termination, which normally has to respect certain time limits (§ 620 BGB, see also chapter 3, p 154). (In the US however the ‘employment at will’ rule remains the governing principle in this area.)
In the present context of liability for breach of contract, the right to terminate the contract by notice ‘extraordinarily’ is of central importance (außerordentliche Kündigung). As we have seen previously (in chapter 9, p 436), the right is defined in abstract form in § 314 BGB, but in relation to the contract of service this provision is completely replaced by § 626 BGB. The provision applies to both parties and requires that the termination is justified by a reason of considerable weight (‘wichtiger Grund’): clearly, this right is available only in exceptional cases and only in relation to serious breaches of contract. This accords with the default position under English employment law, where summary dismissal can only be justified (in the face of common law
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implied terms concerning reasonable notice; see, eg, Nokes v Doncaster Collieries Ltd [1940] AC 1014) and statutory protection (eg, section 86 of the ERA 1996) if the employer can show a serious breach of contract by the employee: see Laws v London Chronicle (Indicator Newspapers) Ltd [1959] 1 WLR 698 and Wilson v Racher [1974] ICR 428. Naturally, express terms as to dismissal, complaints and notice may also be included in the contract. Finally, at common law a different basic approach was taken to fixed-term contracts, but section 86(4) of the ERA 1996 prevents circumvention of the statutory minimum notice period by such devices.
Normally the parties are expected to terminate the contract by observing the relevant time limits or to await its agreed end. In the previous chapters we have also already mentioned the restrictive construction given to the provision by the labour courts and also referred to the many other specialised statutes, which must be complied with in relation to contracts of labour. It suffices here to mention that, according to § 628 I 2 BGB, the employee is deprived of the remuneration if, as a result of the breach of contract and the termination, the employer no longer has an interest in the services provided up to that moment.
It should not be concealed that it is controversial whether, in addition to termination by notice, the right to declare termination by Rücktritt under § 323 BGB is also available. (In this sense, eg, Oetker and Maultzsch, Vertragliche Schuldverhältnisse, p 412, although with the proviso that the contract is terminated with effects for the future. This runs contrary to § 346 BGB.) During the time before the performance has commenced, there seems no compelling reason not to apply § 323 BGB: here, no difficulties in winding up performance are to be expected. However, once the contract has been carried out, the right to terminate by notice (Kündigung) takes priority. (This also seems to be the view of the legislator, so far as it can be discerned from the preparatory works; cf Bundestags-Drucksache 14/6040, p 177. See Münchener Kommentar- Ernst, vol 2a, § 323 Rn. 35–6, with references, who points out however that termination with retroactive effects may be appropriate in exceptional cases.)
(d) Damages
The right to recover damages for breach of contract follows the general principles examined in chapter 9 (see p 437 ff). If the employer is late with the payment of remuneration, he will become liable for interest and for damages for delay according to § 288 and § 280 II BGB respectively (for the calculation of interest in relation to contracts of labour see, eg, Richardi, NZA 2002, 1009: the matter is somewhat controversial). If the employee is late in providing the service, the classification of the right to recover damages depends on whether, due to the lapse of time, the performance has become impossible (then § 283 BGB applies, see above) or whether the service can be still performed, in which case the loss is likely to result out of the delay of the debtor and may be recovered under § 280 II BGB. Furthermore, if the contract was terminated according to § 626 BGB, § 628 II BGB stipulates a right to recover damages if the termination was due to a breach of contract by the other party (for an illustration, see BGH NJW 1984, 2093).
As mentioned previously, the provisions on the contract of service do not contain a special regime of rules for bad performance. The practical upshot of this is that the right to recover damages (as provided for in §§ 280–283 BGB) becomes central for the
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‘innocent’ party. In particular, the employer cannot exercise a right to price reduc- tion—which, it will be remembered, is independent of fault—if the service provided is not in conformity with the contract. This was recently confirmed in a case concerning the services of a lawyer (BGH NJW 2004, 2817). The court pointed out that a reduction in the remuneration could only be considered, by analogy to § 654 BGB, if the lawyer betrayed his client (in the sense of § 356 of the Criminal Code). Since this had not occurred in the instant case, the only way for the client to defend himself against the claim for the fees was to set off a claim for damages. Such a claim requires first, that the client suffered loss and secondly, that his loss was due to a non-conforming performance of the lawyer for which the latter was answerable (§ 280 I 2 BGB). (On the specific issue of wages deductions by employers under English labour law, see the discussion in sub-section (b), above.)
The standard of care required of professionals is determined objectively by reference to what is required in the respective trade or profession (§ 276 II BGB). This is generally regarded as a demanding standard. The breach of duty however must be proved by the innocent party, as the presumption of fault contained in § 280 I 2 BGB concerns only the question whether the guilty party can exonerate himself. Consider the following example (cf Ernst, (cited above), § 280 Rn. 158). If a medic negligently performed an operation and this resulted in injury to the patient, the patient may be able to recover damages according to § 280 BGB. As a general rule, it would be for the patient to show that the operation was not executed lege artis (this is the breach of contract founding liability, § 280 I 1 BGB) and for the medic to show that, nevertheless, he had not acted negligently (§ 280 I 2 BGB). Alternatively, the patient may seek to rely on a failure of the medic to obtain informed consent. Again, this would entail liability. Finally, it should be noted that after recent developments, damages for pain and suffering are also available in contract actions (§ 253 I BGB). This may shift the theoretical explanation of many medical malpractice cases from tort to contract (Spindler and Rieckers, JuS 2004, 272). For details on the standard of care required and the remarkable degree of ‘strictness’ of liability, see chapter 9, section 5(b); The German Law of Torts, p 330 et seq: legal malpractice; 536 et seq: medical malpractice (on which see further, Grubb & Kennedy, Medical Law, chapter 4).
More generally, under English law it should be noted that section 13 of the Sale and Supply of Goods Act 1982 provides that in ‘a contract for the supply of a service where the supplier is acting in the course of business, there is an implied term that the supplier will carry out the service with reasonable care and skill’. However, section 16(3)(a) of the same Act makes clear that the Act does not exclude ‘any rule of law which imposes on a supplier a stricter duty.’ Thus, the final standard of care to be satisfied will depend on whether any pre-existing and stricter common law duty might apply to the provision of such services: if not, then we fall back on the section 13 fault standard. See chapter 9, p 447 ff, Treitel, pp 840–2 and Powell and Stewart (gen eds),
Jackson & Powell on Professional Negligence (5th edn, 2001), paras 2-116– 2-124 for further details. The last of these commentators suggest that the appropriate formulation for the test of the standard or ‘reasonable care and skill’ (whether expressed under the law of tort, the law of contract or statute) is: ‘that degree of skill and care which is ordinarily exercised by reasonably competent members of the profession, who have the same rank and profess the same specialisation (if any) as the defendant’ (para 2-120 (footnote omitted)). As the learned authors also point out