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Created on Tuesday, 30 October 2007 14:23

Last Updated on Tuesday, 03 December 2013 18:00

Savings Clause doesn't Obligate Parties to Make up for the Written Form

This article discusses the validity of a savings clause in a contract to maintain the written form of the contract. This judgment of BGH of July 25, 2007 (re XII ZR 143/05) will show if a savings clause mandates the parties of contract to make up for the written form of the contract.

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The plaintiffs are suing to be paid for outstanding rent for a business space. The parties signed a 10-year contract. Next to an unclear description of the rented space, the contract contained following stipulation in §22:

On November 27, 2002, several years before the agreed end of the contract, the renter gave notice. The tenant was of the opinion that the rented object had not been sufficiently described and therefore the written form of the contract was not valid. In consequence, the contract can be given notice following the statutory rules. The plaintiff wants to be paid for the remaining time.

The plaintiff considered it unlawful that the defendant claimed the contract to be invalid because a requirement of the written form was not met. The above savings clause was to obligate the parties to maintain the written form. The Federal Supreme Court agreed with the defendant. It saw no equitable reason to assume why the savings clause did mandate the parties to maintain this form. Any party of a contract could refer to a part not being met even though everybody while knowing of the deficiency had executed the contract without complaint over years - as is here in this case. Some one could effectively refer to the formal defect only when it is an abuse of one's rights. Reasons for such abuse do not exist here.

The "premature" orderly notice of the tenant is not therefore inequitable because the defendant was allegedly obligated to make up for the form. The mentioned savings clause has two parts: The first one regulates that in the case of invalidity of a stipulation, the remaining contract is to be executed following the contract's purpose. This is a typical savings clause to make sure that §139 BGB does not determine an invalidity of the whole contract. The second clause in the contract ties in with the first one. In the case of a partial invalidity of the contract, the existing gap is to be closed by a valid clause, which pursues the goal of the contract. Not having obeyed the actually agreed written form does not implicitly invalidate the contract. §139 BGB is not applicable because the contract is still valid. Therefore §550 cl. 1 BGB is applicable and the contract has been closed for an indefinite time. This section determines that all rental contracts wanting to have a minimum time longer than a year must be in writing. When the contact is not in writing, it has been closed for an indefinite time. The invalidity of the longer rental period is not based on the contents of this contractual clause but that the parties did not observe the written form by incomplete description of the object of rent.

Eventually, the defendant won the case, as he was not obligated to pay the rent in dispute. A savings clause does not mandate the parties of contract to make up for defects both made as they entered the contract. Such clause has the only function to keep an otherwise invalid contract in force. Not meeting the legal form as demanded by the law, has no effect on the legality of the contract.

Published on the old CMS: 2007/10/30
Read on the old CMS till November 2008: 113 reads