The obligation of private health insurance (PKV) to pay benefits – when and for what does PKV have to pay?

January 4, 2019/in Liability law

LEGAL+ NEWS

The obligation of private health insurance (PKV) to pay benefits - when and for what does PKV have to pay?

The benefit obligations of private health insurers are essentially determined by the tariff selected in the individual case and the associated tariff conditions attached to the respective contract. A wide variety of benefits can be agreed in the individual contract. However, the usual benefits provided by private health insurers are based on § 192 VVG in conjunction with the 2009 model conditions for medical expenses and daily hospital benefits insurance (MB/KK). It should be noted that the MB/KK must have become the subject matter of the contract. As a rule, however, there is a reference to the MB/KK in the contracts, as these have been drawn up by the private health insurers themselves.

According to § 192 Para. 1 VVG in conjunction with the MB/KK, expenses for medically necessary treatment due to illness or the consequences of an accident are reimbursed. Pregnancy and childbirth are not illnesses, but a state of health. For this reason, the obligation of the health insurer to cover the costs of preventive medical check-ups, childbirth, etc. is specified separately in § 192 Para. 1 VVG and § 1 Para. 2 Sentence 4a MB/KK.

The prerequisites for the insurer’s obligation to pay benefits are in accordance with § 192 Para. 1 VVG in conjunction with § 1 Para. 1 and 2 MB/KK:

Expenses incurred
the existence of an illness or the consequences of an accident
the provision of medical treatment
the medical necessity of the measure.

The existence of these prerequisites must be determined on the basis of objective criteria. It does not depend on the subjective perception of the policyholder (BGH VersR 1987, 278, 279; OLG Hamm VersR 1997, 1342).

From the outset, costs that are conspicuously disproportionate to the service provided are not to be reimbursed (excess compensation, Section 192 (2) VVG). To determine a disproportion, the values of the service and consideration must be compared using objective criteria.

Expenses

The claim for benefits against the insurer presupposes that the policyholder has incurred expenses. There must be an effective and due claim for remuneration by the practitioner or other service provider against the insured person (BGH NJW 2003, 1596). An effective claim for remuneration and thus a corresponding obligation to pay benefits only arises if the fee regulations of the GOÄ and GOZ are observed. In principle, the insurer is only liable to pay subsequent benefits. This does not apply if the policyholder is demonstrably unable to bear the treatment costs incurred and therefore could not have a treatment urgently recommended by a doctor carried out (OLG Hamm VersR 2006, 826).

Illness or consequences of an accident

The purpose of the health insurance contract is basically only to cover the costs for the medically necessary treatment of an illness, the occurrence of an uncertain event. This makes it necessary to distinguish the concept of illness from merely subjectively perceived impairments.

Case law defines the term illness within the meaning of § 1 Para. 2 MB/KK as an abnormal physical or mental condition which entails a not insignificant disturbance of physical or mental functions (BGH VersR 1987, 278 f.; OLG Karlsruhe NJW 1986, 1552).

Case law has affirmed an illness in the following cases, although only a small excerpt is presented here:

-Alcoholism (OLG Hamm VersR 1986, 865)
-ectopic pregnancy (OLG Stuttgart VersR 1991, 646)
-Fatty liver and increased urea concentration (LG and OLG Hamburg VersR 1981, 1049).

However, no illness was assumed in the following cases:

Simple, age-related defective vision. This corresponds to the natural ageing process (LG Mannheim VersR 2008, 1200 f.)
Bag-like skin folds in the eye area (LG Cologne VersR 1983, 388)
Minor growth in a 5- or 6-year-old boy (OLG Hamm VersR 1986, 865)

Instead of illness, the insured event can also be based on an accident as a risk event. In this respect, private health insurance includes accident insurance (BGH VersR 1976, 851 f.). The insured event – just like the insured event due to illness – does not begin with the occurrence of the accident, but only with the medical treatment. The insured event presupposes that an accident has occurred and that the medically necessary treatment extends to consequences that are causally attributable to the accident.

The definition of an accident is derived from the legal definition in § 178 Para. 2 VVG. According to this, an accident occurs if the insured person suffers involuntary damage to their health as a result of a sudden external event affecting their body.

The scope of the PKV’s obligation to pay benefits in the event of accidents is limited to the medically necessary treatment of the consequences of the accident in accordance with § 1 Para. 2 Sentence 1 MB/KK.

Medical treatment

According to the recurring formula of the BGH, medical treatment is any medical activity that has been caused by the illness in question and is aimed at curing or alleviating an illness (BGH VersR 1996, 1224 ff.; VersR 1978, 271, 272).

Alleviation does not only mean the immediate improvement of a pathological condition. Rather, the alleviation of an illness through medical activity is also to be spoken of if it aims to attenuate, partially or completely prevent or eliminate the consequences of the illness (BGH VersR 1996, 1224 ff.; OLG Cologne VersR 1990, 612, 613).

There is no cure or alleviation if the treatment serves exclusively other purposes. Examples of this are sterilization for the purpose of limiting family planning or cosmetic surgery.

Services that are not directly related to the medical activity are also not part of the insured costs of medical treatment. In this sense, case law has, for example, denied a claim for reimbursement of travel and hotel costs incurred during treatment in an external clinic (LG Freiburg VersR 1986, 570, 571).

According to § 1 Para. 2 Sentence 1 MB/KK, the object of the insurance cover is the medical treatment of an illness of the insured person. In a few exceptional cases, this may also include measures carried out on other persons. This is the case if the treatment of the insured person inevitably requires the intervention of a third party, such as in the case of a transplantation (LG Oldenburg r+s 1990, 317).

Medical necessity

In practice, medical necessity in accordance with § 1 Para. 2 Sentence 1 MB/KK is the most relevant prerequisite for the assumption of costs by private health insurance. For decades, case law has developed the following assessment formula, which can now be regarded as established, for assessing whether medical necessity exists:

Treatment is medically necessary if it was justifiable to consider it medically necessary according to the objective medical findings and scientific knowledge at the time of treatment. The medical necessity of a medical treatment is justifiable if it sufficiently diagnoses the underlying ailment in a justified and comprehensible as well as well-founded procedure and applies an adequate, suitable therapy (BGH VersR 2003, 581, 584; 1979, 221 ff.; OLG Cologne VersR 1995, 1177).

If this suitability is established according to medical findings, the insurer’s duty to indemnify also exists in principle (BGH NJW 1996, 3074, 3075). Inpatient treatment is only medically necessary if the desired treatment success in the prognosis cannot be achieved to the same extent by outpatient measures (OLG Zweibrücken VersR 2007, 1505; OLG Koblenz VersR 2008, 339).

The reference to “scientific findings” does not mean that only findings that have been validated in medical science – i.e. in the field of research and teaching at scientific colleges and universities – may be taken into account when assessing the necessity of medical treatment. Rather, medical findings that have emerged in the field of so-called alternative medicine or are the result of the application of so-called “outsider methods” can also be taken into account (BGH NJW 1996, 3074, 3075; § 4 VI MB/KK). What is required here, however, is a mode of action based on medical knowledge and a successful proving of the method in practice (BGH NJW 1996, 3074; NJW 2003, 294; OLG Cologne VersR 2004, 631).

An objective standard, independent of the contract between doctor and patient, is applied to determine the insured event (BGH NJW 1996, 3074, 3075; NJW 2005, 3783, 3784). It therefore depends neither on the opinion of the policyholder nor solely on that of the attending physician (BGH NJW 1996, 3074, 3075). The fact that the therapy appears sensible, useful or justifiable to the doctor is therefore not sufficient (OLG Cologne r + s 1993, 314; LG Berlin r+s 1994, 71). In the event of a dispute, the medical necessity of a treatment measure can generally only be assessed by means of an expert opinion (BGH NJW 1979, 1250; OLG Koblenz VersR 2010, 204).

It is noteworthy that the obligation to pay benefits is not limited to the most cost-effective of several medically equivalent treatments (BGH NJW 2003, 1596, 1599 f., against the previously prevailing opinion)!

Burden of proof

The general principle also applies in private insurance law, according to which the party claiming a benefit from its contractual partner must prove the conditions of the alleged claim. As the medical necessity of the treatment is a central prerequisite for benefits in accordance with § 1 Para. 2 Sentence MB/KK, it must be proven by the policyholder in accordance with established case law. Any doubts shall be borne by the policyholder (BGH VersR 1996, 1224 ff.; 1991, 987; OLG Frankfurt/M. VersR 1981, 451 f.). Prima facie evidence is ruled out (KG r+s 2000, 120, 122).

If the insurer has examined the medical necessity of a specific measure and partially acknowledged its obligation to pay benefits, the occurrence of the insured event is undisputed on the merits. In this case, however, § 5 para. 2 sentence 1 MB/KK expressly grants the insurer the right to reduce its benefits to a reasonable amount if the treatment exceeds what is medically necessary.

As this is a regulation from which the insurer derives a legal consequence favorable to it, the insurer must now prove that the extent of the measure is no longer medically necessary (BGH VersR 1991, 987; OLG Düsseldorf r+s 2000, 429 f.).

BGH update: Correction of defective vision through LASIK surgery may be necessary (BGH ruling of 29. 3. 2017 – IV ZR 533/15)

In a ruling of 29 March 2017 (case no. V ZR 533/15), which is of great practical relevance, the Federal Court of Justice (BGH) rightly determined that the PKV cannot simply refer to the possibility of wearing glasses or contact lenses in the event of an operation to correct a visual defect. This is because (as the BGH correctly stated):

Wearing a visual aid does not constitute curative treatment with regard to the plaintiff’s defective vision!

Below are a few key excerpts from the judgment:

“(…) The obligation to pay benefits (…) therefore depends on whether the operation performed constituted medically necessary treatment. The BG – consistently from its point of view – did not make sufficient findings in this regard.

Medical treatment – in this case the outpatient operation on both eyes – is any medical activity caused by the illness in question, provided that the nature of the doctor’s service is aimed at curing, improving or alleviating the illness. Whether the implementation of this therapy was suitable for achieving these goals is not relevant to the existence of medical treatment within the meaning of the clause. Rather, this question is only relevant when examining whether the treatment is to be regarded as medically necessary within the meaning of § 1 para. 2 sentence 1 AVB; an objective standard is to be applied (Senatsurt. v. 10. 7. 1996 – IV ZR 133/95, BGHZ 133, 208 = r+s 1996, 457 under II 2).

Contrary to the opinion of the appellant, the medical necessity of the operation cannot be denied with reference to the customary wearing of glasses or contact lenses.

Wearing a visual aid does not constitute curative treatment with regard to the plaintiff’s defective vision . Glasses and contact lenses are merely aids that are used to compensate for physical defects over a longer period of time. Accordingly, the visual aid – which is characteristic of the use of aids – directly performs a substitute function for a diseased organ without restoring its functionality (see Senatsurt. v. 17. 12. 1986 – BGH file number IVAZR7885 IVa ZR 78/85, BGHZ 99, BGHZ volume 99 page 228 = r+s 1987, RUNDS year 1987 page 80 under II 5 and v. 19. 5. 2004 – BGH file number IVZR17603 IV ZR 176/03, NJW-RR 2005, NJW-RR year 2005 page 260 juris Rn. 21).

The average policyholder cannot see from § 1 para. 2 sentence 1 AVB that the eligibility for reimbursement of the costs of medically necessary treatment should in principle depend on whether he can (permanently) fall back on an aid that is suitable for compensating for or alleviating his existing abnormal physical condition without changing the actual ailment. There is nothing in the insurance terms and conditions to support such a general subsidiarity of the medical treatment compared to the medical aid. Nor can it be inferred from them that (financial) aspects other than medical necessity should play a role in assessing the eligibility for reimbursement of the costs of medical treatment. This is because § 1 para. 2 sentence 1 AVB expressly refers to “medically necessary” treatment, whereby “medically” refers precisely to “necessary”. This linguistic context makes it clear on a reasonable reading that the necessity of the treatment is to be assessed solely from a (purely) medical point of view and that other aspects do not play a role. (…)

The medical necessity of treatment within the meaning of the above statements is therefore to be assumed if a treatment method is available and has been applied that is suitable for curing, alleviating or counteracting the worsening of the illness (…).”

Scope of the insurance cover

Pursuant to § 1 Para. 3 MB/KK, the specific promise of benefits results from the insurance policy, the written agreements contained therein or subsequent written agreements and the General Terms and Conditions of Insurance. The latter include the MB/KK of the association, the company’s own tariff conditions and the tariff itself.

The tariff conditions can also deviate from the MB/KK – which are not binding – in terms of content. Examples of the agreement of additional benefits are the reimbursement of costs for a stay in a hospice or the possibility of using psychotherapists.

The scope of the insurance cover can also be further limited in individual contracts. As the private health insurer is generally not obliged to accept an insurance application, it is free to conclude the contract under special conditions such as the agreement of an exclusion of benefits or a risk surcharge. § Section 203 (1) sentence 2 VVG expressly grants the insurer this right with reference to any increased risk at the time the contract is concluded.

If a higher premium has been agreed due to the increased risk, the policyholder can demand that the premium be reduced appropriately in accordance with § 41 VVG if the risk-increasing circumstance no longer applies after the application has been submitted or after the contract has been concluded.

The scope of the insurance cover is also set out in detail in § 4 MB/KK.

The details are presented below:

§ 4 para. 2 MB/KK.

4 Para. 2 MB/KK grants the insured person the right to a free choice of doctor, i.e. to use any registered and licensed doctor and dentist and – if not excluded by the tariff – any alternative practitioner in accordance with the Heilpraktikergesetz. § Section 4 (2) MB/KK relates exclusively to outpatient treatment.

The tariff conditions typically provide for special features, such as the requirement of prior approval, for the use of psychotherapeutic treatment. This takes account of the fact that it is often not easy to distinguish between a disorder requiring treatment with disease value and mere life support.
§ 4 para. 3 MB/KK.

Medicines, dressings, remedies and aids must be prescribed by a practitioner within the meaning of § 4 Para. 2 MB/KK. Medicinal products must be obtained from a pharmacy, including mail-order pharmacies, provided they meet the usual German quality standards. Medicinal products are all substances or combinations of substances that can be used in or on the human body or administered to a human being in order to either restore, correct or influence human physiological functions through a pharmacological, immunological or metabolic effect or to make a medical diagnosis (BGH NJW 2006, 2630, 2634). Remedies are typically physical-medical services performed by a masseur or medical bath attendant as well as voice and speech training treatments performed by a speech therapist. Auxiliary aids are bandages, spectacles, crutches, hearing aids, etc.
§ 4 para. 4 MB/KK.

For inpatient treatment, the insured person can choose between public and private hospitals, including private clinics. The necessary medical management refers to the treatment area of the hospital and requires management, guidance and supervision by doctors who are not subject to medical directives. Furthermore, a sufficient material and personnel infrastructure is required. The demarcation must therefore be normative: If the treatment prevents the insured person from developing his usual lifestyle in a manner comparable to full inpatient admission, it is a partial inpatient treatment falling under § 4 para. 4 MB/KK (LG Köln VersR 2002, 1137).
§ 4 para. 5 MB/KK.

Pure spa and sanatorium treatments are generally excluded from the obligation to provide benefits (§ 5 I lit. d) MB/KK, for the other exclusions from the obligation to provide benefits in accordance with § 5 MB/KK, see below). However, the boundaries between sanatorium and hospital are becoming increasingly blurred if both clinical (§ 4 Para. 4 MB/KK) and spa and sanatorium treatments can take place in one establishment. In practice, the term “mixed institution” has become established for this. In addition to meeting the requirements of § 4 Para. 4 MB/KK, eligibility for reimbursement requires the insurer’s prior confirmation of benefits (§ 4 Para. 5 MB/KK). The clause is unobjectionable under general terms and conditions law (BGH NJW 2003, 598, 599).
§ 4 para. 6 MB/KK.

While methods predominantly recognized by conventional medicine are reimbursable without further ado, the obligation to pay benefits for methods of alternative medicine presupposes that these have proven to be equally promising in practice or that no conventional medical therapy is available (§ 1 para. 6 sentence 2 half-sentence 1 MB/KK). In this case, the insurer can reduce the amount to be reimbursed to the level of a conventional medical method (half-sentence 2). In this respect, the comparative therapy to be used is unclear if – as in variant 2 – no such therapy is available. For example, the following should not be reimbursable the costs of bioelectrical functional diagnostics, decoder dermography and Eichotherm therapy (OLG Saarbrücken VersR 2002, 1015), electro-acupuncture according to Voll (OLG Frankfurt NJW-RR 2003, 245) and bioresonance therapy (OLG Koblenz VersR 2002, 1367; OLG Saarbrücken VersR 2002, 1015), but reimbursable for hematogenous oxidation therapy (OLG Saarbrücken VersR 2002, 1015), acupuncture and treatment with thymus and ney preparations (OLG Stuttgart NVersZ 2007, 974).

Exclusion of the obligation to perform

The obligation to pay benefits described above may be excluded in some cases in accordance with § 5 MB/KK. For example, injuries caused by acts of war (§ 5 Para. 1 lit. a)) and intentionally caused insured events (§ 5 Para. 1 lit. b)) are excluded from the obligation to pay benefits. The service provider, usually the doctor, can also be excluded from reimbursement if his misconduct in the invoicing of services has repeatedly given rise to justified complaints by the insurer (§ 5 para. 1 lit. c); OLG Munich NJW-RR 1999, 1706; OLG Cologne VersR 1996, 490). In particular, cases of billing fraud are conceivable here.

However, withdrawal cures that aim to free the patient from an attachment to drugs, alcohol, nicotine or other addictive substances are also excluded from the reimbursement obligation (§ 5 Para. 1 lit d); BGH VersR 1988, 573, OLG Hamm r+s 1999, 84). This exclusion does not cover illnesses resulting from dependence on addictive substances, such as liver damage. In practice, this exclusion is particularly important in connection with alcohol abuse. Some tariff conditions of individual health insurers therefore include an obligation to pay benefits for withdrawal cures. This exclusion does not cover illnesses resulting from dependence on addictive substances, such as liver damage. See above for the exclusion of spa and sanatorium treatment.

Treatment by close relatives is also not reimbursable (§ 5 para. 1 lit. g)). This clause is based on the practical experience that the closer the relationship is, the greater the probability of treatment that is in reality free of charge but billed to the insurer (OLG Munich VersR 2000, 1406 ff.; LG Stuttgart r+s 1997, 169).

Finally, benefits for accommodation caused by a need for care are excluded. This can be assumed if the permanent helplessness of the person concerned for everyday activities is in the foreground, i.e. the improvement or cure of the underlying illness is not (no longer) the goal (OLG Hamm NJW-RR 1995, 1498; KG r+s 2003, 292). In this case, long-term care insurance is liable.

Subsidiarity clause

5 Para. 3 MB/KK provides for a limitation of benefits in the event that the policyholder is also entitled to benefits from the statutory accident insurance (SGB VII) or pension insurance (SGB VI) or statutory military welfare (in particular for soldiers, police officers, members of the professional fire department) outside of the medical expenses insurance.

In this case, the health insurer’s obligation to pay benefits is limited to the reimbursement of expenses that remain necessary despite the statutory benefits mentioned.

The benefit obligations of private health insurers are essentially determined by the tariff selected in the individual case and the associated tariff conditions attached to the respective contract. A wide variety of benefits can be agreed in the individual contract. However, the usual benefits provided by private health insurers are based on § 192 VVG in conjunction with the 2009 model conditions for medical expenses and daily hospital benefits insurance (MB/KK). It should be noted that the MB/KK must have become the subject matter of the contract. As a rule, however, there is a reference to the MB/KK in the contracts, as these have been drawn up by the private health insurers themselves.

According to § 192 Para. 1 VVG in conjunction with the MB/KK, expenses for medically necessary treatment due to illness or the consequences of an accident are reimbursed. Pregnancy and childbirth are not illnesses, but a state of health. For this reason, the obligation of the health insurer to cover the costs of preventive medical check-ups, childbirth, etc. is specified separately in § 192 Para. 1 VVG and § 1 Para. 2 Sentence 4a MB/KK.

The prerequisites for the insurer’s obligation to pay benefits are set out in § 192 Para. 1 VVG in conjunction with § 1 Para. 1 and 2 MB/KK:

Expenses incurred
the existence of an illness or the consequences of an accident
the provision of medical treatment
the medical necessity of the measure.

The existence of these prerequisites must be determined on the basis of objective criteria. It does not depend on the subjective idea of the policyholder (BGH VersR 1987, 278, 279OLG Hamm VersR 1997, 1342).

From the outset, costs that are conspicuously disproportionate to the service provided are not to be reimbursed (excess compensation, Section 192 (2) VVG). To determine a disproportion, the values of the service and consideration must be compared using objective criteria.

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Tax advisor liability – statute of limitations in the case of basic rulings

January 3, 2019/in Liability law, Nicht kategorisiert

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Tax advisor liability - statute of limitations in the case of basic rulings

If tax consultants make mistakes and clients suffer losses as a result, the question of whether and to what extent a limitation period has already expired is not easy to answer in legal terms. This applies in particular in the case of so-called basic assessments:

Claims of the client arising from a tax consultancy agreement are time-barred in accordance with §§ 194 ff. BGB. The principles developed for Section 68 StBerG, which applied until December 15, 2004, regarding when the claim arose, continue to apply.

Principles for the start of the limitation period

According to supreme court case law, the limitation period begins when the claim arises. The claim arises as soon as the financial situation of the person concerned deteriorates objectively due to the breach of duty by the consultant (BGH WM 2007, 801). This start of the limitation period was also decisive for Section 68 StBerG (BGH WM 2009, 1376, 1379). In particular, damage has not yet occurred as long as there is only the risk of a financial disadvantage (BGH WM 2008, 611, 612, para. 10 a). The possibility of also bringing an action to establish an obligation to pay future damages does not determine the time at which the damage arises (BGH WM 2009, 1376, 1379). However, ignorance of the damage and thus of the claim for compensation does not prevent the commencement of the limitation period (BGH WM 1992, 1738).

The relevant point in time is generally the time at which a negative tax assessment notice is issued. The financial situation of the person concerned only deteriorates as a result of incorrect tax advice when the tax authority concludes its decision-making process by issuing the tax assessment notice and in this way substantiates the tax claim under public law (BGH judgement of 05.03.2009, case reference: IX ZR 172/05, BeckRS 2009, 10225).

Legal situation in the case of the so-called basic decision

In the case of negative tax assessment notices, there is usually no negative tax assessment notice to begin with. For this reason, in my opinion, material damage only occurs if a negative tax assessment is issued at some point on the basis of the basic assessment. The BGH case law is differentiated here and has gaps:

According to the case law of the Federal Court of Justice, the limitation period for claims for damages by the client against his tax advisor begins, as described, with the notification of the tax assessment notice. This principle initially applies to tax assessment notices that request the payment of a tax or order the absence or discontinuation of a tax benefit.

However, according to the BGH, the limitation period also begins with the notification of the tax assessment notice if this does not yet contain a tax assessment, but merely independently determines a basis for taxation, which is binding for the subsequent tax assessment in accordance with Section 182 AO (BGH NJW-RR 2008, 1508, 1509; BGH NJW 1993, 2799; in this respect also OLG Frankfurt am Main, Urt. v. 21.02.2006, Ref.: 8 U 90/04, BeckRS 2011, 25589).

Special case: Determination of the existence of a so-called tax contribution account

The question raised in the case of determining the existence of a so-called tax contribution account is unclear and has not yet been answered by the BGH.

In my opinion, the aforementioned principles do not apply here, as the decisions tend to deal with tax assessment notices and profit assessment notices (see, for example, OLG Frankfurt am Main, Urt. v. 21.02.2006, Ref.: 8 U 90/04, BeckRS 2011, 25589). Based on such a tax assessment amount, the tax is set and levied at a rate to be determined by the municipalities entitled to levy the tax. The tax assessment notice therefore has a binding effect on the trade tax assessment notice. Objections to the assessment can therefore only be asserted against the assessment notice and not against the trade tax assessment notice (BGH NJW-RR 2008, 1508, 1509). The damage occurs because the tax authority concludes its main decision-making process to the detriment of the taxpayer by issuing the tax assessment notice and substantiates the tax claim under public law by creating the basis for the realization of the claim in accordance with Section 218 AO (BGH NJW-RR 2008, 1508, 1509; BGH NJW 1995, 2108). The decisive factor is when the taxpayer’s determination and assessment risk first materialized into a loss as a result of an administrative act by the tax authority. However, separate determinations pursuant to § 182 AO are binding. The determination of a tax deposit account constitutes a separate determination within the meaning of Section 179 (1) AO (Frotscher in Schwarz AO, before Section 179, para. 17; Brandis in Tipke/Kunze AO/FGO, Section 179, para. 2). Therefore, the binding effect of § 182 para. 1 AO also applies in principle to this type of assessment notices.

It therefore does not seem completely absurd that the BGH would consider the determination of the existence of the tax deposit account as the occurrence of damage.

Conclusion

The question of the limitation period for liability claims against tax advisors is always complex and requires detailed examination, and not only in the case of the existence of so-called basic notices described above.

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Every company claiming credit should check claims for repayment! – On the inadmissibility of so-called processing fees in loan agreements with companies.

November 7, 2018/in Commercial law, Liability law, Nicht kategorisiert

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Every company claiming credit should check claims for repayment in good time before the end of the year due to the impending statute of limitations! - On the inadmissibility of so-called processing fees in loan agreements with companies.

According to recent rulings by the Federal Court of Justice (judgments of 4 July 2017, case no. XI ZR 562/15 and case no. XI ZR 233/16), processing fees that have been customary for a long time are also inadmissible for loans to companies and thus corresponding agreements in loan agreements – even in the case of overdraft facilities – are invalid. Consequence:

The companies concerned may therefore be able to reclaim the fees paid from their banks within the applicable limitation periods. With the end of the year approaching and the impending statute of limitations for claims arising from 2015, the key findings of the BGH are recalled as follows:

The guiding principles

The guiding principles of the BGH are as follows:

1. the formal clause contained in loan documents of a credit institution for the conclusion of loan agreements with entrepreneurs

“Processing fee for conclusion of contract €10,000”

is subject to judicial review of content pursuant to Section 307 (3) sentence 1 BGB and is invalid pursuant to Section 307 (1) sentence 1, (2) no. 1 BGB.

2 The knowledge-dependent limitation period of Section 199 (1) BGB for claims for repayment due to ineffective formally agreed processing fees also began to run at the end of 2011 for loan agreements with entrepreneurs in accordance with Section 488 BGB (continuation of Sen.Urt. v. 28.10.2014 – XI ZR 348/13, BGHZ 203, 115 RdNr. 44 ff.).

Processing fee = ancillary price agreement

In the proceedings decided by the BGH, the borrowers were each entrepreneurs within the meaning of Section 14 BGB. The loan agreements concluded with the respective banks contained standard form clauses according to which the borrower had to pay a “processing fee” or a“handling fee” irrespective of the term of the loan. The subject of the lawsuits is the repayment of this fee because, in the opinion of the plaintiffs, the clauses in question are invalid.

In its reasoning, the BGH clarified that the challenged clauses are so-called ancillary price agreements, which are subject to content control in accordance with Section 307 BGB.

Unreasonable disadvantage

The BGH considered these ancillary agreements to be an unreasonable disadvantage to the contractual partner.

Such term-independent processing fees are not compatible with the essential basic ideas of the statutory provision, which is why, in accordance with Section 307 (2) No. 1 BGB, an unreasonable disadvantage to the contractual partner can be assumed in case of doubt.

Tax advantages no justification

In the cases to be decided, the BGH was unable to identify any reasons for a deviation from this legal presumption. In particular, the reasonableness could not be justified by any resulting tax advantages for the company concerned. Only those advantages that were originally granted by the user of the clause (in this case the bank) could be taken into account, as was not the case in the decided cases. The Federal Court of Justice (BGH) stated in this regard – summarized by me:

“(…) It is recognized that a deviation from the dispositive statutory law which is disadvantageous to the contractual partner can be compensated for by granting other legal advantages (Sen.Urt. v. 23.4.1991 – XI ZR 128/90, BGHZ 114, 238, 242 f. and 246). However, the imbalance in the content of a clause that unilaterally favors the user can only be compensated for by advantages for its contractual partner that are granted to it by the user of the clause (see also Sen.Urt. v. 21.4.2015 – XI ZR 200/14, WM 2015, 1232 RdNr. 18). It is therefore irrelevant whether individual traders can succeed in passing on the financial disadvantages they suffer as a result of the challenged clause to their customers through over-obligatory efforts. (…)

For the same reason, the appropriateness of a term-independent processing fee cannot be justified by any resulting tax advantages on the part of the entrepreneurial borrower – combined with a lower contractual interest rate….

(2) Irrespective of this, an inappropriate disadvantage to customers due to fees agreed in general terms and conditions is not offset by a lower interest rate within the scope of the content review pursuant to Section 307 BGB simply because individual customers are able to immediately deduct a larger part of the processing fee incurred for tax purposes (…).

No justifiable commercial practice

Furthermore, it is also not apparent that such fees appear to be justified if reasonable consideration is given to the customs and practices applicable in commercial transactions (Section 310 (1) sentence 2 half-sentence 2 BGB). In any case, in the cases to be decided, the banks were unable to prove a corresponding commercial practice.

Finally: Entrepreneurs are also worthy of protection

According to the BGH, the protective purpose of Section 307 BGB, which is to limit the use of unilateral drafting power, also applies in favor of an informed and experienced entrepreneur. The fact that an entrepreneur can better estimate an overall burden resulting from various fee components is not suitable to prove the appropriateness of such clauses when used against entrepreneurs. The review of the content of general terms and conditions is generally intended to protect against clauses in which the dispositive statutory law aimed at a mutual balance of interests is overridden by the unilateral power of the user of the clause. The BGH was – in my opinion rightly – not able to recognize any indications that credit institutions could not claim such unilateral creative power vis-à-vis entrepreneurs. In my opinion, the BGH correctly stated:

“(…) There is also no indication that credit institutions could not claim such unilateral power to shape the contract in relation to entrepreneurs – unlike in relation to consumers – as the situational inferiority of entrepreneurs is generally lower than that of consumers. On the contrary, the economic situation of entrepreneurs, whose business success depends on the granting of a loan, may well show a higher degree of dependence on the credit institution than is the case with consumers who apply for a real estate loan for the purpose of building their own home or even just for a consumer loan (…).”

Conclusion:

Every entrepreneur who claims loans should check their loan agreements against the above case law and, if necessary, assert claims for repayment. In view of the impending statute of limitations for claims from 2015, haste is required.

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Enforcement order legally binding – What else can help?

November 6, 2018/in Commercial law, Liability law, Nicht kategorisiert

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Enforcement order legally binding - What else can help?

Enforcement orders are enforceable titles just like a regular court judgment. The special feature compared to a judgment is that both the first order for payment (Section 692 (1) no. 2) and the enforcement order issued without a timely objection are issued on a unilateral application without any substantive examination. The claimant does not have to substantiate his (alleged) claim. Even a conclusiveness test by the court is not required.

There are many conceivable reasons why you may find yourself in the extreme situation of having missed the deadlines for taking action against the default summons and subsequent enforcement order:

Extended vacation absence,
Office oversight
Last but not least: simply not accepting the notices

Now the question arises: Is there anything that can be done about a legally binding enforcement order? The short answer is: Very rarely, especially not in the aforementioned cases (such as vacation absence, for example). The situation may be different in the case of fraudulent actions that led to the enforcement order in the first place.

Starting point: 2-week objection period

An objection must be lodged against an enforcement order within two weeks of service in order to avoid its legal force (Section 700 ZPO in conjunction with Section 339 ZPO). Legal remedies against this are then generally no longer available.

If this deadline is missed, there are only a few options left:

Very rarely: Reopening of the proceedings

A so-called reopening of the proceedings pursuant to Sections 578 ff ZPO would be conceivable.

The few reasons for a resumption are e.g:

Incorrect composition of the court
a forged document as the basis for the enforcement order.

Counterclaim for enforcement – substantive legal force of the enforcement order?

In any case, according to the Higher Regional Court of Cologne, an enforcement order has no substantive legal force. Objections can therefore be asserted in special cases by means of a counterclaim for enforcement.

The prominent background to this case law were numerous lawsuits in which private borrowers had defended themselves against legally binding enforcement orders (Section 700) issued by lending banks. They claimed that they had suffered immoral damage as a result of the enforcement, because the banks had obtained the enforcement orders in the knowledge that the underlying installment loan agreements were immoral and void.

The Higher Regional Court of Cologne denied the enforcement order any substantive legal effect due to the lack of judicial review (NJW 1986, 1350):

Despite the reference in Section 700 I ZPO, an enforcement order does not become legally binding.

If the requirements of an immoral installment loan are met, the enforcement orders can be challenged with an enforcement counterclaim under Section 767 ZPO, or alternatively under Section 826 BGB, and enforcement can be declared inadmissible. (unofficial guidelines)

The Cologne Higher Regional Court explained its reasoning:

The occurrence of formal (external) res judicata (§ 705 ZPO) of the enforcement order due to the fruitless expiry of the objection period (§§ 339, 700 I ZPO) does not necessarily mean that the enforcement order also becomes substantive res judicata. Formal res judicata is a prerequisite for substantive res judicata, but not vice versa (see Rosenberg-Schwab, § 150, 2, p. 919). Rather, substantive legal force is to be assessed according to independent criteria. According to § 322 I ZPO, not only judgments are capable of res judicata, but also, according to the prevailing opinion in the literature (Rosenberg-Schwab, § 153 I; Stein-Jonas-Schumann-Leipold, ZPO, 19th ed., § 322 note V 1; Thomas-Putzo, § 322 note 2a), court orders, provided that they are capable of formal res judicata and decide on a legal consequence whose effect extends beyond the proceedings. These requirements no longer apply in full to the enforcement order.”

Action for immoral fraudulent evasion of the enforcement order pursuant to Section 826 BGB

The prominent case of enforcement notices from lending banks described above is also the basis for further higher court rulings, according to which an action based on Section 826 BGB is possible in special circumstances. In this case, it would have to be argued and proven that the claim on which the enforcement order is based is unjustified and that the creditor has obtained the order unjustifiably or by deception or unlawful threat.

Similar to the Higher Regional Court of Cologne, the Higher Regional Court of Stuttgart considers a softening of the res judicata effect in special cases. The debtor should not be definitively cut off from his objections by merely “remaining silent”. At the very least, he should be granted an application to make up for the conclusiveness test in accordance with Section 826 BGB. The Higher Regional Court of Stuttgart stated(NJW 1985, 2272):

“It is doubtful whether the rule of law is sufficiently taken into account by the fact that the debtor could have defended himself in the order for payment proceedings and that an official review would then “automatically” have taken place. Whether the debtor’s objections and defenses (of which the court cannot know anything without a factual submission) are definitively cut off if he does not defend himself in good time is of a different quality than if the debtor is to be definitively denied the right to assert that the plaintiff’s own factual submission already shows that no title should have been issued at all if the court had only carried out this examination. Nowhere else – other than in the new order for payment proceedings – does the debtor’s concealment lead to the court making an incorrect decision “with its eyes open”.”

The BGH also considers an action under Section 826 BGB against legally binding enforcement orders to be possible:

The starting point of the BGH is that the enforcement order is issued without judicial review. The first prerequisite for a successful claim under Section 826 BGB is that the enforcement order in question is, in the opinion of the deciding court, legally incorrect and therefore materially incorrect.

Furthermore, the defendant must have been aware of the incorrectness of the title. When this can be assumed is a question of the individual case. Finally, the enforcement of the enforcement order in question would have to be immoral. This may result, for example, from such a “serious inaccuracy” that any enforcement from it appears to be “intolerable”.

Conclusion:

In the case of a supposedly legally binding enforcement order, it is worth examining its contestability if and to the extent that special circumstances justify the (provable) assumption that “something has not been done properly”.

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BGH eliminates widespread misunderstanding of its case law on the application of warranty law for material defects when purchasing shares (judgment of 26.09.2018, case no. VIII ZR 187/17)

October 23, 2018/in Commercial law, Liability law, Nicht kategorisiert

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Landmark BGH ruling from September 26, 2018 (case no. VIII ZR 187/17) on the liability rules for company acquisitions: BGH eliminates widespread misunderstanding of its case law on the application of the law on warranties for material defects when purchasing shares.

In my article from October 9, 2018, I already reported on the ruling of the VIII. Civil Senate of the Federal Court of Justice, which sets the course for liability in so-called share deals. The reasons for the judgment have now arrived, which is the reason for continuing my article.

In the share purchase case in question, I have been fighting since the first instance for the seller to be liable for the company’s over-indebtedness, which was not recognized by either party, not according to the rules of warranty for material defects, but under the aspect of frustration of contract. The reason why the case went all the way to the BGH is a fundamental misunderstanding in case law and literature regarding the case that in a so-called share deal the buyer holds all shares in the target company at the end of the transaction.

The ruling of the BGH now clarifies when, in the sense of its case law and solely in accordance with applicable law, an acquisition of the “whole” company exists, with the consequence that application of the law on warranties for material defects is justified.

The case: Shareholder A acquires the shares of shareholder B and holds 100% of the target company as a result of the transaction

The case that led to the elimination of the misunderstanding is summarized again as follows:

A and B were equal shareholders in a GmbH as part of a joint venture. Following the decision to terminate the joint venture, A acquired all shares in the GmbH from B, with the result that A has held all shares alone since the transaction. The parties agreed a comprehensive exclusion of warranty in the purchase agreement. After the transaction was completed, it turned out that the GmbH was already insolvent at the time the contract was concluded and was therefore no longer able to operate in the market. A then demanded a refund of the purchase price paid from B on the grounds of frustration of contract because – in principle undisputed – both parties assumed that the GmbH was solvent and that the purchase price had been determined on the basis of a jointly agreed valuation. B objects that, due to the priority of liability for material defects, application of the rules on frustration of contract is excluded. Liability for a material defect was in turn excluded because a comprehensive exclusion of warranty had been agreed. A quality agreement had not been made.

The guiding principles of the BGH

The main principles of the BGH are as follows:

In the case of a purchase of membership rights in a GmbH, which as such is a legal purchase pursuant to Section 453 (1) Alt. 1 BGB, in the event of defects in the company operated by the GmbH, the warranty rights of Sections 434 et seq. BGB apply if the object of the purchase agreement is the acquisition of all or almost all of the shares in the company and the purchase of the shares therefore constitutes a purchase of the company itself and therefore a purchase in kind, both in the minds of the contracting parties and objectively from an economic perspective (continuation of BGH, judgments of February 27, 1970 – 1 ZR 103/68, WM 1970, 819 under II; of November 12, 1975 – VIII ZR 142/74, BGHZ 65, 246, 248 et seq, 251; of November 24, 1982 – VIII ZR 263/81, BGHZ 85, 367, 370; of March 25, 1998 – VIil ZR 185/96, BGHZ 138, 195, 204; of April 4, 2001 – VIII ZR 32/00, NJW 2001, 2163 under 111; in each case on §§ 459 et seq. BGB aF).

Such an acquisition of all or almost all shares in the company does not exist if a buyer who already holds 50% of the membership rights in a GmbH acquires a further 50% of the shares in this company.

The legal assessment of the BGH

The BGH gave the following reasons:

Priority of the warranty right when purchasing shares

In order for warranty law to take precedence over the rules on frustration of contract, the relevant circumstance – in this case, over-indebtedness – must be capable of triggering claims for defects: over-indebtedness – is at all suitable for triggering claims for defects.

According to the BGH’s analysis, this is not the case here. The “hook” of the BGH’s reasoning is the correct indication that in the case of the acquisition of – as here – 50 % of the shares in a GmbH, the object of purchase is not a company, but no more and no less a 50 % shareholding. In detail:

The Higher Regional Court was still correct in assuming that, until the reform of the law of obligations came into force, case law in the case of the purchase of GmbH shares, which is basically a purchase of rights, applied the rules on the purchase of goods in the event of defects in the company operated by the GmbH if

“the acquisition of this right was both according to the conception of the parties and objectively as a purchase of the company itself and thus, from an economic point of view, as a purchase in kind (…)”

Such a case was assumed in particular if the object of purchase was all or almost all shares (see BGH ruling of June 2, 1980, VIII ZR 64/79).

Furthermore, the OLG correctly assumed that even after the reform of the law of obligations came into force, the aforementioned principles for transferring the rules on the purchase of goods to the purchase of shares had not lost their justification. The BGH explained:

“However, liability for defects in the company itself is still appropriate and in the interests of the company if the “entire” company is basically sold, i.e. the share purchase in question is in fact a purchase of the “entire” company assets and thus, from an economic point of view, a purchase in kind (see Grunewald, loc. cit. p. 372 f.; BeckOK-BGB/ Faust, loc. cit.). Therefore, it remains – in continuation of the previous case law of the Federal Court of Justice described above – even after the entry into force of the Modernization of the Law of Obligations Act that in the case of a share purchase, which as such is a legal purchase pursuant to Section 453 (1) Alt. 1 BGB, in the event of defects in the company, the warranty rights of Sections 434 et seq. BGB (only) apply if the buyer acquires all or almost all of the shares in a company and the purchase of shares therefore constitutes a purchase of the company itself and therefore a purchase in kind, both in the minds of the contracting parties and objectively from an economic point of view (see Senate judgment of November 12, 1975 – VIII ZR 142/74, loc. cit. p. 248 f., 251 mwN [on §§ 459 ff. BGB aF] (…).”

However, it is not a “whole” company – according to the error in the considerations of the OLG – if 50% of the shares in a company are transferred. The only correct thing about the OLG’s view was that it was not important whether 100% of the shares really formed the object of the purchase. It is also sufficient for the application of the rules on the purchase of goods if

“the purchaser does not acquire all the shares in the company, but the shares remaining with the seller or a third party are so insignificant that they do not significantly impair the purchaser’s power of disposal over the company, provided that only the intention of the contracting parties is to purchase the company as a whole (…).”

However, such a case does not exist – as here – if

“the purchaser – such as the plaintiff in this case – only has a claim to the transfer of half of the shares. Under such circumstances, according to the conception of the parties and the public opinion, there is no objective of the contract – which is decisive for the corresponding application of liability for material defects in accordance with the principles described above – aimed at the acquisition of the company as a whole (…).”

According to the BGH, the Court of Appeal had “lost sight of the fact that the only relevant connecting factor for the warranty for defects under Sections 434 et seq. BGB (…) is the respective object of purchase .”

The view held – in various forms – in the literature since the Modernization of the Law of Obligations Act came into force that Sections 434 et seq. BGB would also apply to items and other objects to which a right relates was rejected by the BGH:

“However, these views, which are primarily based on considerations of economic fairness, ignore the fact that the object of purchase determined by the parties in agreement and within the scope of their contractual freedom is not a thing, but a right (see also Huber, AcP 202 [2002], 179, 213 f.). However, even after the entry into force of the Law of Obligations Modernization Act (and the abolition of the provision of § 437 para. 1 BGB aF), the seller of a right is, according to general opinion (see Staudinger/Beckmann, loc. cit. para. 7 f.; BeckOK-BGB/Faust, loc. cit. para. 16 ff.; in each case with further references), still only liable for the existence of the right (verity), but not for the collectability of the claim (creditworthiness) and accordingly also not for the quality of the object to which the right relates. Rather, such a liability for creditworthiness only exists if it is specifically assumed by contract (Huber, loc. cit. p. 214, 229 et seq.; BeckOK BGB/Faust, loc. cit. para. 20 et seq.; MünchKommBGB/Westermann, loc. cit. para. 11; in each case with further references).”

With regard to the provision of Section 453 (1) Alt. 1 BGB, which was erroneously interpreted in the literature as meaning that the rules on the purchase of goods would now also apply in the case of the purchase of rights, the BGH has also clearly rejected this view. A legal purchase is still different from a purchase in kind. The BGH stated:

“However, neither the wording of the law nor the legislative materials of the Modernization of the Law of Obligations Act even hint that the legislator intended the provision of § 453 BGB to abolish the difference between the purchase of a right and the purchase of an object to which this right relates. of an object to which this right relates.”

In this context, the BGH pointed out a circumstance that is often overlooked, which results from § Section 453 (3) BGB follows. This provision reads:

§ Section 453 (3) BGB:
If a right has been sold that entitles the buyer to possession of an item, the seller is obliged to hand over the item to the buyer free of material defects and defects of title.

The BGH rightly concludes from this legal provision that the resulting liability for material defects and defects of title should only apply to a right that entitles the holder to “possession of a thing”. The provision would be superfluous if this liability applied generally to the purchase of rights.

After all, there was no case in the present case that could be resolved according to the rules of the law on warranties for material defects.

No practical need for an extension of the warranty when purchasing shares

The BGH also correctly pointed out that there was no compelling need for an extension of the (material defect) warranty right to the purchase of shares.

In addition to the possibility of entering into corresponding contractual agreements (e.g. guarantees), the rules of culpa in contrahendo and frustration of contract would be available to resolve share purchase cases.

Finally, the exclusion of statutory warranty claims does not fundamentally preclude the application of Section 313 BGB (frustration of contract)!

With regard to the claims I am pursuing in the present proceedings from the point of view of interference with the basis of the transaction, the BGH ultimately correctly and very welcome pointed out that the mere fact that the parties have agreed a (comprehensive) exclusion of warranty does not preclude the application of Section 313 BGB. This applies – as in this case – in any case if the share purchase agreement in question does not contain any statements on the economic situation of the company and thus on the question of who should bear the risks in this regard.

My rating

In its ruling, the BGH convincingly rejected a purely pragmatic approach according to which it should be sufficient for the buyer to hold (almost) all of the shares as a result of a transaction in order for the law on material defects to apply to the purchase of shares, pointing out not least that such an approach is incompatible with applicable law. In my view, however, one aspect in particular should be emphasized, which the Chairwoman of the Senate pointed out at the oral hearing:

As a rule, the law on warranties for material defects simply does not apply in cases in which the object of purchase is merely company shares. This is exemplified by the present case: What should “subsequent performance”, which is primarily provided for under the law on material defects, look like in cases such as this? Furthermore:

Cases such as this one show that legal institutions such as the frustration of contract have by no means become obsolete. It is undisputed and also bindingly established by the Higher Regional Court that the basis of the transaction in the share purchase in question was that the company whose shares were acquired was solvent. In my opinion, it is not possible to allocate the risk with regard to this basis of the transaction in a way that is appropriate and in the interests of the parties by means of a standard simple exclusion of warranty. This is a matter for Section 313 BGB.

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What do so-called media agencies do? – An analysis of the usual contractual relationships in the media business.

October 21, 2018/in Commercial law, Liability law

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What do so-called media agencies do? - An analysis of the usual contractual relationships in the media business.

The contractual relationship between media agencies and advertising clients has long been the subject of controversial debate. The main issue is whether media agencies are on a separate economic level or whether they should be classified as business agents of advertising clients. The most prominent case that led to this is Alexander Ruzicka, who was sentenced to a long prison term for allegedly pocketing discounts and other benefits received from the media at the expense of the media agency (and thus ultimately also at the expense of the advertising clients) whose management he was managing at the time. This high-profile lawsuit has made the practice of media agencies as a whole, in particular the scope and treatment of benefits (“kickbacks”, freespots etc.) granted by the media, a major topic of discussion. Against the backdrop of the conspicuous lack of transparency of the “system”, the type and scope of the discounts granted and, not least, the question of who is entitled to these discounts is being discussed.

The following section provides an overview of how the existing contractual relationships in the media business are to be assessed under civil law.

Preliminary consideration of the activities of media agencies

The main object of the media agency/media contractual relationship is the placement of advertising by advertising customers. Consequently, the media agencies “broker” advertising between the advertising client and the media – at least in purely factual terms. In view of the above, it seems conceivable that the contractual relationship between advertising client/media agency has an influence on the contractual relationship between media agency/media. It therefore seems reasonable in the present case to first consider the contractual relationship between the media agencies and the advertising clients:

Contractual relationship advertising client/media agency

State of opinion: agency agreement within the meaning of Section 675 BGB versus “own economic level” (proprietary trader)

Agency agreement within the meaning of § 675 BGB

With regard to the content of the contractual relationship, namely media buying and media processing, media planning, media consulting and media analysis, it is conventionally assigned to the law of agency (Section 675 BGB): The advertising client does not advertise itself, but has advertising done for it. This activity corresponds to the (still) prevailing opinion on the concept of “agency” within the meaning of Section 675 BGB, according to which the agent is obliged vis-à-vis the principal to carry out an independent activity of an economic nature to safeguard the financial interests of third parties (see BGH judgment of June 16, 2016, case no. III ZR 282/14, NJW-RR 2016, 1391; Münchener Kommentar zum BGB, 5th edition, Section 675, para. 3 et seq. with further references).

The above definition still corresponds to the activities of media agencies today, which are carried out independently by media agencies in the sense of the above definition of the prevailing opinion – namely in the absence of a deviating agreement in their own name and for their own account – in any case also in the perception of the financial interests of the advertising clients (see Martinek, Mediaagenturen und Mediarabatte, 2008, p. 27; jM 2015, 6, 9 f., 13f.). This classification is also confirmed in the opinion of former BGH judge Dr. Gerhard Schäfer of 31.1.2009.

Depending on their content, these agency agreements are classified as service contracts (Section 611 BGB) or contracts for work and services (Section 631 BGB). A contract for work and services is likely to exist if an individual measure is the subject of the contract – in terms of success – and a contract for services is likely to be involved if it is a purely temporally and/or objectively defined contract.

“Own economic level”

The prevailing opinion described above contrasts with the view held by the media agencies themselves and supported by not unimportant voices in the literature (in particular Prof. Michael Martinek, loc. cit.), according to which the provisions of contract law, and thus also the law on the provision of agency services, have led to an “alienation” from the model of the agent with a view to the practice of the media agency business that has developed over decades, with the consequence that the law on the provision of agency services should remain inapplicable. This view is primarily based on the fact that media agencies now represent a “separate economic level”, meaning that the classification of media agencies as “intermediaries” is no longer appropriate.

This view is essentially based on the following circumstances of media business practice:

Acting in their own name and for their own account: entrepreneurial riskUnless otherwise agreed in individual contracts, media agencies act in their own name and for their own account. This means that they also bear the entrepreneurial risk arising from the placement of advertising measures in the media, such as payment of placement costs even in the event of insolvency or refusal to pay on the part of the customer. They are liable to their client for errors made by the medium, for example if the advertisement is not printed on time or is printed incorrectly.
Remuneration system: relying on non-tariff discountsIn practice, advertising clients require media agencies to hand over or pass on the media commission received from the media (agency commission). In practice, this is usually done by means of an offsetting process: the advertising client agrees a remuneration with the media agency amounting to a certain percentage of the media placement volume; in reality, the percentage is between 0.8% and 2.0%. The advertising client uses the remainder of the 15% agency commission to pay the creative agency (around 7%) and keeps the rest for itself, leaving the media agencies with only a small fraction of the agency remuneration granted to them by the media. In order to achieve their commercial goals for their company, they therefore see themselves obliged to generate additional income from the media in the form of non-tariff discounts, bonuses or remuneration for additional services or for bundling the budgets of several clients. Thus, the agency’s own brokerage activities in the business of media agencies tend to take a back seat today.

Appreciation

If the subject matter of a service contract or a contract for work is an “agency”, the agent is obliged to return to the client everything that he obtains from the agency (Section 675 (1) in conjunction with Section 667 BGB). This is the relevance of the dispute:

The view that media agencies, as a separate economic level, no longer act as an agency in accordance with the model of the German Civil Code deserves consideration. For the most part, media agencies operate their own business at their own economic level. The operation of this own business can in fact be described as a necessity resulting from the fact that advertising customers regularly successfully enforce the passing on of the tariff discounts. Against this background, the media agencies can only generate their own income in other ways, e.g. by negotiating customer-independent discounts that only they are entitled to.

Nevertheless, according to the current ruling of the Federal Court of Justice from 16.6.2016 cited above (case no. III ZR 282/14, NJW-RR 2016, 1391), in case of doubt a duty to forward is to be assumed because, in its opinion, the media agency is a “typical business agent”. The guiding principles of the BGH are as follows (NJW-RR 2016, 1391, beck-online):

1. media agency contracts are, by their legal nature, generally to be qualified as agency contracts in which one party (media agency) undertakes to carry out an independent economic activity to safeguard the financial interests of third parties (in particular media planning and buying) and the other party (advertising client) undertakes to pay a fee.

2. if the media agency makes media bookings in its own name but for the account of the client, it shall initially also receive all discounts and other benefits as the media’s contractual partner; however, due to its status as a media agency, it shall not be entitled to any discounts or other benefits. However, as a typical managing agent, it is subject to the duties of disclosure and surrender pursuant to Sections 666, 667 Alt. 2 BGB.

3 The fact that a special benefit is not paid directly to the contractor but to a third party does not preclude the contractor from being liable for restitution. The decisive factor is whether an overall assessment of the circumstances of the individual case shows that the contractor is to be regarded as the beneficial owner of the asset (following BGH, NJW 1987, 1380).

It follows from guiding principle 3 that the obligation to disclose must be assessed on the basis of the circumstances of the individual case. In line with this, the Higher Regional Court of Munich expressly stated in its ruling of December 23, 2009 (case no. 7 U 3044/09) that the obligation to pass on (obligation to surrender) discounts and benefits can be regulated in individual contracts. The parties should do this in order to avoid the dispute described above.

Contractual relationship media agency/media (publisher)

Starting point: Independence of contractual relationships/freedom of organization

It follows from the above that the contract between the media agency and the media (publishers, TV stations, etc.) is independent of the contract between the media agency and the advertising client. Apart from so-called direct business, there is no contractual connection.

Consequently, the so-called “advertising implementation contract” or “media purchasing contract” is generally subject to the unlimited contractual freedom of the parties.

“Advertising implementation contract”/”Media purchasing contract”: Contract for work or service

Unless otherwise stated in the individual contract, the following shall apply:

In the past as well as today, “advertising implementation contracts” or “media purchasing contracts” are to be classified as service contracts or – probably more frequently – contracts for work within the meaning of Sections 611, 631 of the German Civil Code (BGB) without the character of an agency agreement:

The medium is obliged to place the advertisement (= success), the agency is obliged to pay the agency net of the list prices.

The fact that the agencies take on various other tasks vis-à-vis the media (in particular: consulting tasks) does not give the advertising implementation contracts or media purchasing contracts the character of an agency, as the media agencies, which always engage various media, keep the option of becoming active. Consequently, there is basically no obligation to act.

These contracts are also not contracts in favor of a third party within the meaning of Section 328 of the German Civil Code (BGB), as claims of the advertising customers are not established.

However, it should be noted that these (mostly) contracts for work and services have the following special features:

(Traditional) obligation of agencies to adhere to the price list via Section 242 BGB
Obligation of agencies to respect the sales interests of the media via Section 242 BGB
Payment of the so-called AE commission to the agencies as remuneration for the agency services (increasingly rejected by publishers)

Overall assessment

Unless otherwise stipulated in the contract in individual cases – which is possible according to case law – media agencies are business agents of advertising clients, from whom they purchase advertising in their own name and for their own account and place it with the media in their own name and for their own account.

Both – independent – contractual relationships are to be qualified as contracts for work or service contracts (depending on their structure), whereby the media agency only acts as a business agent vis-à-vis the advertising customers.

Whether the agency is a “typical” agency within the meaning of Section 675 BGB is particularly relevant with regard to the typical agent’s obligation to surrender what has been obtained from the agency, see Section 667 BGB.

If the parties want something else to apply with regard to the obligation to surrender, this should and can be agreed in individual contracts, as explained above.

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The hurdles to an individual contract are high: when is a provision “negotiated” and therefore not subject to the restrictions of GTC law?

October 18, 2018/in Commercial law, Liability law, Nicht kategorisiert

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The hurdles to an individual contract are high: when is a provision "negotiated" and therefore not subject to the restrictions of GTC law?

GTC law, i.e. the law governing general terms and conditions, represents a restriction on contractual freedom because it limits the possibilities for freely and effectively structuring the content of contracts. If a provision is subject to GTC law, it must comply with the requirements of GTC law, otherwise it is invalid. In order to avoid the restrictions of GTC law, the contracting parties must have negotiated the provision in question.

The legal hurdles to such “negotiation” are very high:

Starting point: Section 305 (1) sentence 3 BGB

Section 305 (1) sentence 3 BGB expressly states that a negotiated contractual provision is not subject to the law on general terms and conditions:

“General terms and conditions do not exist if the terms of the contract have been negotiated in detail between the contracting parties.”

What is “negotiation”?

What “negotiation” means is not clear from the law. A now well-established case law of the Federal Court of Justice provides clarification. For example, a fairly recent ruling by the Federal Court of Justice from March 26, 2015 (AZ VI ZR 92/14) is quoted as follows:

[33] (1) According to the case law of the Federal Court of Justice , negotiation requires more than negotiation. Negotiation in this sense can only be said to have taken place if the user first negotiates the non-statutory core content contained in his general terms and conditions, i.e. the provisions that amend or supplement the essential content of the statutory provision, seriously puts the content of the contract up for negotiation and gives the negotiating partner freedom to protect its own interests with at least the real possibility of influencing the content of the contractual terms. He must therefore clearly and seriously declare his willingness to make the desired changes to individual clauses (BGH, judgments of March 20, 2014 – VII ZR 248/13, BGHZ 200, 326 para. 27; of November 22, 2012 – VII ZR 222/12, BauR 2013, 462 para. 10). The user must explain the relevant circumstances (BGH, judgment of April 3, 1998 – V ZR 6/97, NJW 1998, 2600, 2601). As a rule, such willingness is also reflected in recognizable changes to the pre-formulated text. At most, under special circumstances, a contract can also be considered the result of “negotiation” if, after thorough discussion, the draft remains in place (BGH, judgment of November 22, 2012 – VII ZR 222/12, loc. cit.; default judgment of January 23, 2003 – VII ZR 210/01, BGHZ 153, 311, 321 with further references). N.). Even if the text is amended, a clause only loses its character as a General Terms and Conditions if the subsequent amendment is made in such a way that it justifies treating it as an individual agreement made from the outset. This is not the case if the user has not granted the contractual partner any freedom of design even after conclusion of the contract and has not put the non-statutory core content of the clause at disposition and the parties reach an agreement on this basis with which the detrimental effect of the clause is merely mitigated (see BGH, judgment of March 7, 2013 – VII ZR 162/12, BauR 2013, 946 marginal no. 30 = NZBau 2013, 297).

The following key criteria can be inferred from the aforementioned statements of the BGH:

Negotiating is more than negotiating!
The person proposing a regulation must seriously question its content. This must include the non-statutory core content of the regulation. It is therefore not sufficient if there is a willingness to adapt something (insignificant) in the regulation.
The other contracting party must be granted recognizable – and demonstrable (!) – freedom of action to safeguard its interests.
If the original content remains in the end, “special circumstances” may justify the assumption that a negotiation nevertheless took place.

Conclusion

The requirements for the existence of a negotiation are significantly higher than is commonly assumed.

If possible, you should therefore avoid drawing up the first draft of a contract. Because then you are the “user” of the provisions contained therein, which means that the contractual partner benefits from the law on general terms and conditions. Conversely, it is better: because then you yourself are the protected party.

In any case, good negotiation documentation should be ensured so that the negotiation can be proven in the event of a dispute.

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Overview: Law on general terms and conditions (GTC)

October 13, 2018/in Commercial law, Liability law

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Overview: Law on general terms and conditions (GTC)

General terms and conditions (GTC) affect everyone: whether commercial enterprises, which try to make their respective GTC the basis of the business relationship in their business dealings with each other, or private individuals, who are confronted with GTC in every situation in life – for example when boarding public transport, shopping on eBay or amazon or even when entering a department store. The importance of general terms and conditions is therefore immense.

With this in mind, I would like to try to provide a brief overview of this extremely important topic in this article:

What are general terms and conditions?

Sections 305 et seq. of the German Civil Code (BGB) contain regulations on general terms and conditions:

In detail:

Why General Terms and Conditions?

AGB are mainly used for the following reasons:

Simplification of the business process (e.g. reduction of the time required to negotiate the contract)
GTC create uniform and detailed regulations for legal relationships in mass contracts (simplification of legal transactions)
make it possible to further develop inappropriate laws through new regulations or to concretize undefined legal terms (e.g. if the law states a “reasonable” period, this can be precisely defined in the GTC)
Often even indispensable if there are no statutory regulations for the type of contract
Strengthen your own legal position in relation to the respective contractual partner

Inclusion of general terms and conditions

In order to be effective at all, general terms and conditions must be effectively included in a contractual relationship:

Limits of admissibility (content control) of general terms and conditions

The user cannot make unlimited provisions (in his favor) in the GTC. The law provides for very specific prohibitions of regulation in this regard, particularly when used in relation to consumers. However, T&Cs between entrepreneurs are also subject to a so-called content review, in particular the prohibition of unreasonable disadvantage to the contractual partner also applies here. The following chart provides an overview:

Accordingly, the following principles in particular apply to the limits of the admissibility of GTC:

§ Section 307 I sentence 2 BGB Transparency requirement

= According to this, an unreasonable disadvantage to the customer can also result from the fact that a GTC clause is not clear and comprehensible

§ 305 c BGB surprising clauses

= GTC clauses are not part of the contract if they are “so unusual that the user’s contractual partner need not expect them”

§ 305 b BGB individual contractual agreements take precedence over the GTC

= Individual agreements between the parties shall always take precedence. GTCs that conflict with such individual agreements have no effect.

Conflict of general terms and conditions

In business transactions between entrepreneurs, it is more the rule than the exception that both parties attempt to make their respective GTCs an integral part of the contract. The question then arises, particularly in the event of conflicting provisions, as to what should then apply. The following diagram illustrates the case where neither party has considered the possibility of such a conflict in their respective GTCs:

The situation is different if so-called defense clauses are used:

Defense clause: “These General Terms and Conditions of Purchase (Terms and Conditions of Purchase) shall apply exclusively; deviating, conflicting or supplementary General Terms and Conditions of the Supplier shall only become part of the contract if and to the extent that the Purchaser has expressly agreed to their validity in writing. This requirement of consent shall also apply if the Purchaser accepts the Supplier’s services without reservation in the knowledge of the Supplier’s General Terms and Conditions of Business .”

In the event that one or both parties have included a so-called defense clause in their GTC, the following applies:

Variant 1 (one party has included a defense clause)

Variant 2 (both parties have included a defense clause)

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Landmark ruling by the BGH on the law of company acquisitions (judgment of September 26, 2018, case no. VIII ZR 187/17, reasons for judgment pending):

October 9, 2018/in Commercial law, Liability law, Nicht kategorisiert

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Landmark ruling by the BGH on the law of company acquisitions (judgment of September 26, 2018, case no. VIII ZR 187/17, reasons for judgment pending)

A landmark new ruling by the BGH (case no. VIII ZR 187/17) removes a fundamental misconception regarding liability in company acquisitions:

The ruling in brief (BGH ruling from September 26, 2018, case no. VIII ZR 187/17)

The purchase of shares is a legal purchase to which the rules on liability for material defects generally do not apply. An exception only applies if the object of purchase is the entire company or, in the case of the purchase of shares, (almost) all shares. Contrary to a long-standing misconception in legal literature and the courts of lower instances, it is not sufficient if the purchaser holds all or almost all of the shares in a company as a result of the transaction.

The case

In its ruling of September 26, 2018, the VIII. Civil Senate of the BGH buried a decades-old error in legal practice. The subject of the judgment is the following, very abbreviated case, which I have been personally involved in on the plaintiff’s side since the first instance:

A and B were equal shareholders in a GmbH as part of a joint venture. Following the decision to terminate the joint venture, A acquired all shares in the GmbH from B with the result that A has held all shares alone since the transaction. The parties agreed a comprehensive exclusion of warranty in the purchase agreement. After the transaction was completed, it turned out that the GmbH was already insolvent at the time the contract was concluded and was therefore no longer able to operate on the market. A then demanded a refund of the purchase price paid from B on the grounds of frustration of contract because – in principle undisputed – both parties assumed that the GmbH was solvent and that the purchase price had been determined on the basis of a jointly agreed valuation. B objects that, due to the priority of liability for material defects, application of the rules on frustration of contract is excluded. Liability for a material defect was in turn excluded because a comprehensive exclusion of warranty had been agreed. A quality agreement had not been made.

The error of the lower courts (OLG Karlsruhe, judgment of 02.08.2017, Ref. 13 U 44/15)

Both courts of first instance dismissed A’s corresponding claim on the grounds that the rules on the warranty for material defects would apply. As a result, there was no claim due to the agreed exclusion of warranty. The rules on the frustration of contract had no scope in addition to the warranty for material defects.

The Higher Regional Court of Karlsruhe (judgment of 02.08.2017, ref. 13 U 44/15) justified the applicability of the law on warranties for material defects in the belief that it was based on a clarified legal situation in this regard as follows:

According to general opinion (overview of the current state of opinion in Beisel/Klumpp, Der Unternehmenskauf, 7th edition 2016, Section 4 para. 10), the purchase of company shares (“share deal”) is also a legal purchase under the new law within the meaning of Section 453 Para. 1 Var. 1 BGB and, in particular with regard to the warranty, continues to be treated like a company purchase by way of an “asset deal” (sale of an embodiment of legal and material entities including intangible assets such as “good will”, see BGH, judgment of 02.03.1988 – VIII ZR 63/87, juris para. 16) if the purchase agreement extends to the acquisition of all shares in the company (Staudinger/Beckmann, BGB, Neubearbeitung 2013, § 453 para. 90) or the shares remaining with the seller or third party are so insignificant that they do not significantly impair the purchaser’s power of disposal over the company, provided that the parties’ intention is to purchase the company as a whole (BeckOK BGB/Faust BGB Section 453 para. 32 with further references to the current state of opinion).

(…)

The purchase of 50% of the shares in the target company as part of a so-called share deal is also undoubtedly to be classified as a purchase of the entire company, as the plaintiff, by virtue of the purchase, acquired all shares in the target company and, as the sole owner of the business, was now solely responsible for the fate of the target company. Therefore, even under the new law of obligations, the law on warranties for material defects applies to defects in the company.

The OLG’s major error lies in the following:

Contrary to the Higher Regional Court, it is not sufficient for the applicability of the rules on the warranty for material defects that the purchaser combines all shares in the target company with the purchase as intended.

The clarification of the BGH in the oral hearing on September 26, 2018

The Chairwoman of the XIII Civil Senate of the BGH explained in the oral hearing:

“The Federal Court of Justice has probably been misunderstood in the past.”

As the Senate then clarified in the further course of the oral hearing, the application of the law on warranties for material defects is only justified if the object of purchase itself represents the company as a whole – or at least almost as a whole. Accordingly, there can be no question of a purchase of goods subject to the law on material defects if the object of the purchase – as in the present case – is only 50% of the shares in a company. Contrary to a widespread misconception for decades, it is not sufficient if the buyer holds all shares in a company as a result of the transaction.

The consequence for the case in question was, in particular, that the rules on the discontinuation or disturbance of the basis of the transaction were not superseded. I fought for this from the first instance…

For the reasons stated, the BGH overturned the decision of the Higher Regional Court of Karlsruhe and referred the case back for further proceedings.

Reasons for judgment still outstanding

An update of this article will follow as soon as the reasons for the judgment of the BGH are available.

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The handling agent in the transport chain

September 24, 2018/in Commercial law, Liability law, Transportation law

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The handling agent in the transport chain

The legal position of so-called handling agents is always an extremely relevant question in transport law practice. As will be shown shortly, this is difficult to classify in the classic system of parties involved in a transport chain.

What do handling agents do?

In simple terms, handling agents are responsible for ensuring that freight is transported from carrier A to carrier B at freight transshipment points.

Their business is, for example, to receive, store and process air freight shipments arriving at or being sent from airports. The handling agent collects the goods directly from the arriving aircraft, takes them into its warehouse and finally hands them over to the respective recipient or freight forwarder. The individual services offered by the handling agent depend on the type of shipment.

Usually, a sender commissions an air freight carrier, usually an airline, to carry out an air transport. Frequently, freight forwarders who have taken over the overall execution of a transport also act as the sender in the sense of transport law. In order to actually carry out the air transport, the airline is dependent on the respective shipment being received at the departure airport, loaded onto the respective aircraft, unloaded at the destination airport and finally handed over to the respective recipient. The airlines do not perform these services themselves, but use the services of the plaintiff.

It is easy to understand why such handling agents are needed, especially with regard to the airport example. Airports in particular are subject to special control and security regulations. If a cargo plane lands, the onward carrier cannot simply drive up to the plane with its truck to pick up the goods. The same applies vice versa if a carrier delivers goods for onward transportation by air. This is where the handling agents come into play with their core activity, which typically consists of acting as an agent (vicarious agent) of the air freight companies to ensure that the freight is transported onwards in the respective direction as intended, which regularly also includes interim storage.

Classification of the handling agent in the transportation process

Looking at the activity described above, the question arises as to how the position of the handling agent is to be classified in the transport chain. The only thing that is clear is that he is regularly contractually linked to the cargo airlines and, in this respect, claims of various kinds between the handling agent and the airline naturally come into consideration.

But what about the legal relationship between the handling agent and the other participants in the transport chain, with whom there is usually no contractual relationship?

In the case of a contract of carriage within the meaning of Section 407 HGB, the sender of goods commissions a freight forwarder or a transport company as carrier to carry out transportation. The sender and the carrier are the parties to the contract of carriage. The aim of the freight contract is delivery to the recipient. The handling agent itself has no contract with the sender, recipient or carrier. Rather, the handling agent is paid by cargo airlines, which provide the air transportation of the goods for the sender and are dependent on the services of the handling agent.

After all, the fact is that the handling agent is not to be regarded as a carrier under transport law – not even as a sub-carrier or actual carrier – as there is no contractual relationship with the sender.

Claims against the handling agent?

Conceivable claims of a delivering carrier against the handling agent are explained using an example case:

An employee of the handling agent accepts freight from a delivering carrier for onward transportation by the handling agent’s client (= air freight carrier) and “kindly” takes over the labeling of the shipment for the carrier’s driver, during which he makes a mistake, which leads to the misrouting of the goods.

This raises the question of whether the handling agent is liable to the delivering carrier? The answer is no, because there is no basis for a claim:

For a possible claim for damages in accordance with Sections 311 1, II No. 3, 280 1, 241 II, 278 BGB, the criterion of a similar business contact is missing. This is because case law only covers special relationships that give rise to duties of protection and loyalty in accordance with Section 242 BGB. Very special cases such as the sale of a common object (BGH NJW 1980, 2464), void contracts (BGH NJW 2005, 3208, 3209), provision of services by a monopoly association (BGH NZG 2015, 1282) have been recognized. However, the mere transfer of goods to the next company in the transport chain does not constitute such a similar business contact, which the legislator had in mind when creating the standard. If this group of cases were to be included, the scope of application of the standard, which is only exceptional in nature and covers special constellations in which quasi-contractual liability for damages without a contract should apply, would be extended too far.

Conceivable claims under §§ 426 1, II BGB would presuppose that handling agent and the respective carrier involved are jointly held liable by a common principal.

There is also no claim under Sections 677, 670, 683 sentence 1 BGB. There is already no third-party or third-party business. In case of doubt, the handling agent acts solely in the interests of its client.

A claim under Section 831 of the German Civil Code (BGB) is also unlikely, as the objective facts of a tortious act are unlikely to be present.

Finally, a claim under Section 437 HGB is also ruled out. It is not apparent to what extent a handling agent could be the actual carrier within the meaning of this provision. Even if the handling agent performs the task of labeling for a participating carrier, this obligation has nothing to do with a change of location of the freight, but serves to mark or label the goods.

Claims of the handling agent?

Again, this will be explained using an example:

Handling agent notifies the carrier commissioned under the contract of carriage for onward transportation from the airport of the arrival of the goods. The carrier does not pick up the goods until two weeks later and has thus actually used the handling agent’s location services.

A contractual claim comes into consideration here first. Handling agents regularly have price lists of the services they offer, which they also make available to forwarders with whom they have regular contact.

If a contractual claim is ruled out in an individual case, a statutory claim to storage charges pursuant to Section 354 (1) HGB must be assumed: Both parties are merchants, whereby the handling agent acted for the carrier in the exercise of his trade, § 354 para. 1 HGB. Due to the carrier’s fundamental interest in having someone take care of its customer’s goods, the handling agent is probably also entitled to perform within the meaning of the provision by way of the principles of agency without authority.

Conclusion: Handling agent is exotic in the transport chain

The handling agent is exotic in the transport chain. As a rule, claims for/against handling agents cannot be resolved using the traditional legal bases for claims under transport law.

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CONTACT

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About Daniel Meier-Greve

Entries by Daniel Meier-Greve

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Illness or consequences of an accident

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Burden of proof

BGH update: Correction of defective vision through LASIK surgery may be necessary (BGH ruling of 29. 3. 2017 – IV ZR 533/15)

Scope of the insurance cover

§ 4 para. 2 MB/KK.

§ 4 para. 3 MB/KK.

§ 4 para. 4 MB/KK.

§ 4 para. 5 MB/KK.

§ 4 para. 6 MB/KK.

Exclusion of the obligation to perform

Subsidiarity clause

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Principles for the start of the limitation period

Legal situation in the case of the so-called basic decision

Special case: Determination of the existence of a so-called tax contribution account

Conclusion

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The guiding principles

Processing fee = ancillary price agreement

Unreasonable disadvantage

Tax advantages no justification

No justifiable commercial practice

Finally: Entrepreneurs are also worthy of protection

Conclusion:

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Starting point: 2-week objection period

Very rarely: Reopening of the proceedings

Counterclaim for enforcement – substantive legal force of the enforcement order?

Action for immoral fraudulent evasion of the enforcement order pursuant to Section 826 BGB

Conclusion:

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The case: Shareholder A acquires the shares of shareholder B and holds 100% of the target company as a result of the transaction

The guiding principles of the BGH

The legal assessment of the BGH

Priority of the warranty right when purchasing shares

No practical need for an extension of the warranty when purchasing shares

Finally, the exclusion of statutory warranty claims does not fundamentally preclude the application of Section 313 BGB (frustration of contract)!

My rating

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