The power of the condition - a comment on the car toll investigation committee Andreas Scheuer

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For one thing, my contribution today does not concern real estate law but the civil law general part. The mechanics involved are, of course, also applicable to rental, purchase or service contracts.

BGB AT - Fundamentals of Civil Law

Imagine, you are one of two owners of a property and want to build something there. It is unclear, however, whether your co-owner agrees or not. Would you conclude a contract with a building contractor and subject it to a penalty of 500 million euros if the deal breaks?

I suppose you would not.

Lawyers work in such cases with conditions. Whenever there is a potential risk in a thing, we try to find rules that cushion or eliminate it. It is our job to anticipate and prevent risks. This is the real, valuable core of our activity when we design contracts. Our clients pay us good money for that. It is part of the basic tools of the trade.

In the general part of the Civil Code offers itself for it Civil Code § 158 on. It provides for suspensive and dissolving conditions:

  • If you have a suspensive Condition, then the contract will not take effect until the condition occurs. In the above example case one could have regulated: "The effectiveness of the work contract depends on the fact that the co-owner approves." As long as he does not approve, the contract is pending ineffective, ie it does not yet exist. Therefore there is no contractual penalty or claims for damages.
  • If you have a rese agree condition, then the contract is indeed only once concluded. But it dissolves again when the condition occurs. In the example above, such an agreement would read as follows: "The contract for work will be retroactively terminated without notice if the co-owner does not give its approval within 2 weeks of being requested to do so." In any case, no damage can be caused to the future non-existence of the contract because that was contractually so provided.

The car toll contract: a business with risks

When Minister Andreas Scheuer signed the contract for the awarding of the car toll at the end of 2018, the court proceedings at the European Court of Justice were long since pending. It carries the Az. C-591 / 17, ie it started in the year 2017. The verdict of the 18. June 2019 you will find here . It was known when the contract was signed that such a procedure existed, and it was known that if the outcome of the litigation was negative, the deal would fail.

Would one agree in such a case damage risks of 500 million euros in case the deal bursts?

I suspect that if you had to do this with your own money, you would not, at least not without appropriate provision / protection.

Now, for political or other reasons, it seems to have been necessary or opportune for Mr. Scheuer to sign the contract before the verdict. What would have been nearby?

The simple solution: a condition

With a single sentence in the contract, there would be no today's problem. It is:

"This contract is subject to the suspensive condition of the ECJ's action in C-591 / 17."

To conclude the contract without such a simple risk provision, in my personal opinion frankly quite stupid.

Who is liable?

I do not know whether Minister Scheuer or the Federal Government were advised on the contract negotiations or the signing by an external law firm. If that is the case, colleagues have hopefully pointed out the possibility of a condition. Otherwise you would have to think about legal liability. Since I have not yet dealt with such major contracts, I am unable to say whether it is even possible to obtain cover at this level through a professional indemnity insurance. If so, I hope that colleagues will not refrain from looking at the premium.

Either way, I can not understand how such a disaster is possible if the parties have a rudimentary basic legal understanding. Unless the result that has now occurred was so intentional. Or there are regulations in public procurement law that do not allow such provision. Maybe a colleague who knows about it can comment on that.