Contract Law in Austria 9789041173560

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CONTRACT LAW IN AUSTRIA WILLIBALD POSCH

Contract Law in Austria

Contract Law in Austria

Willibald Posch

This book was originally published as a monograph in the International Encyclopaedia of Laws/Contracts. General Editors: Roger Blanpain, Frank Hendrickx Volume Editor: Jacques Herbots

Published by: Kluwer Law International PO Box 316 2400 AH Alphen aan den Rijn The Netherlands Website: www.kluwerlaw.com Sold and distributed in North, Central and South America by: Aspen Publishers, Inc. 7201 McKinney Circle Frederick, MD 21704 United States of America Email: [email protected] Sold and distributed in all other countries by: Turpin Distribution Services Ltd. Stratton Business Park Pegasus Drive, Biggleswade Bedfordshire SG18 8TQ United Kingdom Email: [email protected]

DISCLAIMER: The material in this volume is in the nature of general comment only. It is not offered as advice on any particular matter and should not be taken as such. The editor and the contributing authors expressly disclaim all liability to any person with regard to anything done or omitted to be done, and with respect to the consequences of anything done or omitted to be done wholly or partly in reliance upon the whole or any part of the contents of this volume. No reader should act or refrain from acting on the basis of any matter contained in this volume without first obtaining professional advice regarding the particular facts and circumstances at issue. Any and all opinions expressed herein are those of the particular author and are not necessarily those of the editor or publisher of this volume.

Printed on acid-free paper web-ISBN 978-90-411-7356-0 This title is available on www.kluwerlawonline.com © 2015, Kluwer Law International BV, The Netherlands All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without written permission from the publisher. Permission to use this content must be obtained from the copyright owner. Please apply to: Permissions Department, Wolters Kluwer Legal, 76 Ninth Avenue, 7th Floor, New York, NY 10011-5201, USA. Email: [email protected] Printed and Bound by CPI Group (UK) Ltd, Croydon, CR0 4YY.

The Author

Willibald Posch was born on 18 August 1946 in Graz, Austria. He studied at the University of Graz and became Dr iuris there in 1969. He worked at the University of Salzburg, School of Law and taught at the McGeorge School of Law in Edinburgh and Salzburg before being appointed Assistant Professor in 1983 and Full Professor for Civil Law and Comparative Private Law in 1988 at the University of Graz. In 1991, Professor Posch became Director of the Research Institute for European Law at the University of Graz School of Law. Since 1984, he has been the head of the Department for Private International Law, Comparative Private Law and Uniform Private Law in Graz. From 2005 to 2011, he was Dean of the University of Graz School of Law. Professor Posch is the author of numerous books and articles and has contributed to several books, journals and looseleafs.

3

The Author

4

Table of Contents

The Author List of Abbreviations A. Selected Periodicals B. Other Abbreviations

3 15 15 16

General Introduction

19

§1. THE GENERAL BACKGROUND OF THE COUNTRY I. Geography II. Political System in the Past and Present III. Political System IV. Economic and Social Values

19 19 19 22 26

§2. AUSTRIAN LAW BELONGS TO THE GERMAN LEGAL FAMILY

27

§3. PRIMACY OF LEGISLATION

28

§4. THE POSITION OF THE JUDICIARY

29

§5. DISTINCTION BETWEEN PUBLIC AND PRIVATE LAW

32

§6. DISTINCTION BETWEEN CIVIL LAW AND ENTERPRISE LAW

33

Introduction to the Law of Contract

35

§1. BASIC CONCEPTS AND GUIDING PRINCIPLES I. Legal Transaction (Juristic Act) in General II. Classification of Legal Transactions III. Declaration of Intent (Willenserklärung) IV. The Definition of ‘Contract’

35 35 36 37 38

§2. HISTORICAL BACKGROUND OF THE LAW OF CONTRACT I. Sources the Draftsmen Had to Consider II. Influence of Roman Law III. Influence of the Natural Law School

38 38 39 39 5

Table of Contents IV. Confusing Heritage

39

§3. CLASSIFICATION OF CONTRACTS I. ‘Consensual Contracts’ II. ‘Real Contracts’ III. ‘Synallagmatic Contracts’ IV. Categories of Statutory Contracts V. Contracts Subject to Formal Requirement VI. Standard Form Contracts

40 40 40 41 42 43 43

§4. CONTRACTS AND TORTS I. No Clear Structural Distinction II. No Rule of ‘Non-cumul’ III. Recent Legislation IV. Third Parties

44 44 46 46 46

§5. CONTRACT, UNJUST ENRICHMENT AND OTHER LEGAL OBLIGATIONS I. Contractual and Legal Obligations II. Unjust Enrichment III. Negotiorum Gestio IV. Avoidance of a Fraudulent Transfer of Property by a Creditor

47 47 47 49 50

§6. CONTRACT AND THE LAW OF PROPERTY I. The Notion of ‘Real Rights (Rights In Rem)’ II. The Law of Ownership (Property) III. Conveyancing

50 50 51 52

§7. CONTRACT AND TRUST

53

§8. GOOD FAITH AND FAIR DEALING

54

§9. STYLE OF DRAFTING

56

§10. SOURCES OF THE LAW OF CONTRACT I. Areas of Austrian Law, Important Codes and Statutes II. Sources of the Law of Contract III. Finding the Law A. Legislation B. Case Law C. Periodicals, Commentaries, Treatises and Monographs IV. Literature on Austrian Contract Law in English

57 57 60 61 61 62 63 64

Part I. General Principles of the Law of Contract

67

Chapter 1. Formation

67

6

Table of Contents §1. AGREEMENT AND ‘DO, UT DES’ I. Offer and Acceptance A. The Offer B. Pre-contractual Fault C. Offer and Promise of a Reward D. Offer or Invitation to Treat E. The Acceptance F. Contract by Correspondence II. Intention to Create Legal Relations III. Consideration A. Consideration Is Not a Requirement of the Austrian Law of Contract B. Gratuitous Promises C. Natural Obligations

67 67 68 69 69 70 70 70 71 72

§2. FORMAL REQUIREMENTS I. Reasons for Statutory Formal Requirements II. Legal Forms in General III. Relevant Forms A. Writing B. Notarial Contract under Seal C. Formal Requirements for Consumer Transactions IV. The Notary and His Function

74 74 75 75 75 76 76 77

§3. LIABILITY AND NEGOTIATIONS I. Pre-contractual Liability II. The Legal Framework III. General Principles and Types of Pre-contractual Duties IV. The Field of Legitimate Application of Culpa in Contrahendo A. Violation of the Duty to Inform about Legal Obstacles for Valid Conclusion of Contract B. Violation of the Duty to Inform about Attributes of the Object of the Intended Contract C. Arbitrarily Breaking Off Advanced Contract Negotiations D. Acting on Behalf of Another without Having Authority to Do So V. Unsound Expansion of Culpa in Contrahendo Rules

77 78 78 81 82

Chapter 2. Conditions of Substantive Validity

88

§1. CAPACITY OF THE PARTIES I. Minors II. Insanity III. Spouses Managing the Family Household IV. Aliens V. Legal Persons

88 88 89 90 90 91

72 73 73

82 82 83 84 85

7

Table of Contents §2. DEFECTS OF CONSENT I. Mistake (Error) A. Error as to the Motive B. Error as to the Substance in a Narrow Sense C. Mistake of Expression D. Mistakes in Calculation and Errors as to the Legal Consequences E. Essential and Non-essential Errors F. Statutory Requirements for Avoidance or Correction 1. Causation of Error 2. Negligent Failure to Disclose Error 3. Prompt Disclosure II. Deceit III. Duress (Illegal and Well-Founded Fear) IV. Laesio Enormis

91 92 93 94 94 94 95 95 96 96 96 97 97 97

§3. OTHER CONDITIONS OF VALIDITY I. Cause II. Possibility III. Permissibility IV. Compliance with Public Morality (Good Morals)

98 99 100 100 104

§4. THE CONSEQUENCES OF A DEFECT OF CONSENT OR OF A LACK OF SUBSTANTIVE VALIDITY I. Avoidance or Adaptation of the Contract II. Partial Avoidance

106 106 108

Chapter 3. The Contents of a Contract

110

§1. THE DIFFERENT CLAUSES I. Express Terms II. Implied Terms III. Exemption Clauses and Limitation Clauses IV. Penalty Clauses V. Arbitration Clauses

110 110 111 111 113 114

§2. INTERPRETATION

115

§3. CONDITIONAL CONTRACTS I. Suspensive and Resolutive Conditions II. Affirmative and Negative Conditions III. Casual, Mixed and Potestative Conditions IV. Possible and Impossible, Illicit and Permitted Conditions V. The Effect of a Condition

118 119 119 120

8

120 121

Table of Contents

Chapter 4. Privity of Contract

122

§1. THE RULE OF PRIVITY OF CONTRACT I. Third Parties and the Contract II. Contract for the Benefit of a Third Party III. Contract Implying the Protection of a Third Party

122 122 122 124

§2. TRANSFER OF CONTRACTUAL RIGHTS I. The Formalities II. Effects of the Assignment III. The Transfer as against Third Parties (Other than the Debtor)

124 126 127 129

§3. DELEGATION OF CONTRACTUAL DUTIES

129

§4. TRANSFER OF AN OBLIGATION

131

§5. SUBCONTRACTING

131

Chapter 5. The End of the Contract

132

§1. FROM PERFORMANCE TO DEATH: STATUTORY REASONS FOR THE EXTINCTION OF A DEBT I. Payment A. Who may Pay? B. Whom should One Pay? C. What to Pay? D. Special Rules as to Payment of Money Debts II. Deposit of a Debt in Court III. Performance in Lieu of Payment IV. Set-off V. Waiver VI. Merger VII. Lapse of Time VIII. Notice of Termination IX. Death

132 132 132 133 134 134 137 137 137 138 138 138 139 139

§2. IMPOSSIBILITY AND FRUSTRATION I. Impossibility II. Relevance of Unforeseeable Circumstances

139 139 141

§3. NOVATION, SETTLEMENT AND RECOGNITION I. Novation II. Modification of an Obligation III. Settlement IV. Recognition

142 142 142 143 144

9

Table of Contents

Chapter 6. Remedies

145

§1. GENERAL INTRODUCTION

145

§2. REMEDIES IN CASE OF NON-PERFORMANCE BY THE OTHER PARTY I. Rescission II. Exceptio Non Adimpleti Contractus III. Debtor’s Remedies when Creditor cannot Perform

146 147 148 148

§3. REMEDIES IN CASE OF DELAYED PERFORMANCE BY THE OTHER PARTY I. Rescission II. Granting a Grace Period III. Exceptio Non Adimpleti Contractus IV. Debtor’s Remedies when Creditor is in Delay

149 149 150 151 151

§4. ENFORCED PERFORMANCE

152

§5. WARRANTY REMEDIES I. Types of Warranty II. Repair and Replacement (Primary Remedies) III. Price Reduction and Rescission (Secondary Remedies) IV. Common Characteristics of Warranty Remedies

153 153 155 155 156

§6. DAMAGES I. Damages in Case of Non-performance and Delay II. Damages for ‘Positive Violation of a Contract’ III. Concurring Remedies: Warranty and Damages

157 158 158 159

§7. REMEDIES IN CASE OF LAESIO ENORMIS: RESCISSION

161

§8. LIMITATION

162

§9. SPECIFIC REMEDIES UNDER SPECIFIC STATUTES I. Consumer Protection Act II. UNCITRAL-Convention on the International Sale of Goods (CISG)

164 164 164

Part II. Specific Contracts Introductory Remarks

167 167

Chapter 1. Donation

168

§1. THE CONCEPT OF DONATION

168

§2. DOUBTFUL AND MIXED FORMS OF DONATIONS

169

10

Table of Contents §3. FORMAL REQUIREMENTS

170

§4. DUTIES OF THE DONOR AND REMEDIES OF THE DONEE

171

§5. DONOR’S RIGHT OF REVOCATION

172

§6. DONATION CAUSA MORTIS

172

Chapter 2. Bailment

173

§1. THE CONCEPT OF BAILMENT

173

§2. OBLIGATIONS OF THE BAILEE

174

§3. OBLIGATIONS OF THE BAILOR

174

§4. LIABILITY OF THE BAILEE

175

§5. RIGHTS OF THE BAILEE

175

§6. DISTINCTION OF RELATED TYPES OF CONTRACT

176

§7. MIXED AND SPECIAL FORMS OF BAILMENT

176

§8. PROFESSIONAL LODGING OF GUESTS

176

Chapter 3. Contract of Lending

177

§1. CHARACTERISTIC ELEMENTS

177

§2. RIGHTS OF THE BORROWER

178

§3. OBLIGATIONS OF THE BORROWER

178

§4. OBLIGATIONS OF THE LENDER

179

§5. RIGHTS IN REM OF THE BORROWER

179

§6. LIABILITY OF THE BORROWER

179

§7. SHORT LIMITATION PERIOD

179

§8. PERMISSION FOR USE UPON PETITION

180

Chapter 4. Loan Contract

181

11

Table of Contents §1. CHARACTERISTIC ELEMENTS

181

§2. TYPES OF LOAN: GRATUITOUS AND FOR INTEREST

182

§3. RELATED TYPES OF CONTACTS

182

Chapter 5. Agency

184

§1. MANDATE, AUTHORITY AND AUTHORIZATION

184

§2. THE MEANING OF MANDATE

185

§3. CONCLUSION OF AN AGENCY CONTACT

186

§4. CASES OF IMPLIED POWER OF ATTORNEY

186

§5. CATEGORIES OF POWERS OF ATTORNEY

188

§6. FORMAL REQUIREMENTS

188

§7. RIGHTS AND DUTIES OF THE AGENT

189

§8. RIGHTS AND DUTIES OF THE PRINCIPAL

189

§9. EXCESSIVE USE OF AUTHORITY BY THE AGENT

190

§10. THE END OF AGENCY

190

§11. SPECIFIC FORMS OF COMMERCIAL AGENCY

191

Chapter 6. Barter

192

§1. BARTER AND SALE: RELATED CONTRACTS

192

§2. RIGHTS AND DUTIES OF THE PARTIES

192

§3. DISTINCTION OF BARTER AND SALE

193

§4. RISK OF LOSS

194

Chapter 7. Sale

196

§1. THE CONCEPT OF SALE

196

§2. TYPES OF SALES CONTRACTS I. Regular Sales

197 197

12

Table of Contents II. Commercial Sales III. International Sales IV. Interrelation of the Legal Rules on Sale

198 198 199

§3. OBLIGATIONS OF THE SELLER

199

§4. PASSING OF RISK

200

§5. OBLIGATIONS OF THE BUYER

201

§6. SELLER’S WARRANTY OF TITLE AND QUALITY I. Sale by a Non-owner II. Warranty against Defects in Quality

201 202 203

§7. REMEDIES OF UNPAID SELLER

205

§8. COLLATERAL AGREEMENTS I. The Right of Redemption II. The Right of Resale III. The Right of Preemption IV. Sale on Approval V. Sale with the Option to Resell for a Higher Price

205 206 206 206 207 207

§9. PRODUCT LIABILITY

207

§10. THE SALE ON INSTALMENT

209

Chapter 8. Tenancy, Lease and Leasing

210

§1. THE CONCEPTUAL FRAMEWORK OF THE CODE

210

§2. TENANCY IN GENERAL

210

§3. BEARING OF RISK AND WARRANTY

211

§4. RIGHTS AND DUTIES OF THE PARTIES

212

§5. TERMINATION OF THE CONTRACT

213

§6. LEASE

214

§7. LEASING

215

Chapter 9. Service Contract

216

§1. THE CONCEPT OF SERVICE CONTRACT

216 13

Table of Contents §2. RIGHTS AND OBLIGATIONS OF EMPLOYER AND EMPLOYEE

217

§3. TERMINATION OF CONTRACTS OF EMPLOYMENT

217

§4. INDEPENDENT EMPLOYMENT CONTRACTS

218

Chapter 10. Work Contract

219

§1. CHARACTERISTIC ELEMENTS I. Creation of a Result II. Consideration

219 219 220

§2. OBLIGATIONS OF THE PARTIES I. Duties of the Contractor II. Duties of the Principal

220 220 221

§3. RISK OF LOSS

222

§4. THE END OF THE CONTRACT

223

§5. THE RELATION OF WORK AND SALES CONTRACTS

223

Chapter 11. Civil Partnership

224

Chapter 12. Gambling and Wagering Contracts

226

Chapter 13. Consumer Transactions

228

Chapter 14. Commercial Transactions

234

Selected Bibliography

237

Index

255

14

List of Abbreviations

A. Selected Periodicals AcP AnwBl BGHZ DRdA Ecolex GesRZ ImmZ IPRax JAP JBl JherJB JuS LJZ NZ ÖBA ÖJZ ÖZW QuHGZ RabelsZ RdA RdW RZ VersRdSch WBl WoBl Zak ZAS ZBl ZfRV ZVR

Archiv für civilistische Praxis Österreichisches Anwaltsblatt Entscheidungen des (deutschen) Bundesgerichtshofs in Zivilrechtssachen Das Recht der Arbeit Fachzeitschrift für Wirtschaftsrecht Der Gesellschafter Österreichische Immobilienzeitung Praxis des internationalen Privat- und Verfahrensrechts Juristische Ausbildung und Praxisvorbereitung Juristische Blätter Jherings Jahrbücher für Dogmatik des bürgerlichen Rechts Juristische Schulung Liechtensteinische Juristen-Zeitung Österreichische Notariatszeitung Österreichisches Bankarchiv Österreichische Juristenzeitung Österreichische Zeitschrift für Wirtschaftsrecht Quartalshefte der Girozentrale Rabels Zeitschrift für ausländisches und internationals Privatrecht Recht der Arbeit Recht der Wirtschaft Österreichische Richterzeitung Versicherungsrundschau Wirtschaftsrechtliche Blätter Wohnrechtliche Blätter Zivilrecht aktuell Zeitschrift für Arbeitsrecht und Sozialrecht Zentralblatt für die juristische Praxis Zeitschrift für Rechtsvergleichung Zeitschrift für Verkehrsrecht 15

List of Abbreviations B. Other Abbreviations ABGB AG AGB AktG AnfO ArbVG Art AuslBG AVG AZG BAO BG BGB BGBl BGH BStFG B-VG BWG BWRG CC cf. Cic CISG CJEU Coll DaKrÄG DevG DHG EC ECG ed(s) EEA EEC e.g. EheG EO EStG et al. etc. et seq. EU EvBl FBG 16

Allgemeines bürgerliches Gesetzbuch Aktiengesellschaft Allgemeine Geschäftsbedingungen Aktiengesetz Anfechtungsordnung Arbeitsverfassungsgesetz Artikel Ausländerbeschäftigungsgesetz Allgemeines Verwaltungsverfahrensgesetz Arbeitszeitgesetz Bundesabgabenordnung Bezirksgericht; Bundesgesetz Bürgerliches Gesetzbuch (Germany) Bundesgesetzblatt Bundesgerichtshof (Germany) Bundes-Stiftungs- und Fondsgesetz Bundes-Verfassungsgesetz in der Fassung von 1929 Bankwesengesetz Bundeswohnrechtsgesetz Code Civil confer culpa in contrahendo (Vienna) Convention on Contracts for the International Sale of Goods Court of Justice of the European Union Official Collection of the decisions of the European Court of Justice Darlehens- und Kreditrechtsänderungsgesetz Devisengesetz Dienstnehmerhaftpflichtgesetz European Community E-Commerce Gesetz edition, editor(s) European Economic Area European Economic Community exempli gratia Ehegesetz Exekutionsordnung Einkommenssteuergesetz et alii, et aliae, et alia et cetera et sequentes (and following) European Union Evidenzblatt der Rechtsmittelentscheidungen Firmenbuchgesetz

List of Abbreviations FMedG FS GBG GedS Gen GenG GesBR GewRÄG GewO G1U GmbH GmbHG GUG HGB HHB Hrsg HVertrG Inc. IO IPRG i.e. JGG JN KartG KG KO KSchG KStG leg cit LG LPG MarkSchG MietSlg MRG MSchG MuSchG NATO No. NotAktsG OG OGH O.J.EC O.J.EU OLG

Fortpflanzungsmedizingesetz Festschrift Allgemeines Grundbuchsgesetz Gedächtnisschrift Genossenschaft Genossenschaftsgesetz Gesellschaft bürgerlichen Rechts Gewährleistungsrechts-Änderungsgesetz Gewerbeordnung Glaser-Unger – Sammlung von zivilrechtlichen Entscheidungen des kk Obersten Gerichtshofes Gesellschaft mit beschränkter Haftung Gesetz über Gesellschaften mit beschränkter Haftung Grundbuchsumstellungsgesetz Handelsgesetzbuch (repealed and replaced by Unternehmensgesetzbuch) Herrenhausbericht Herausgeber Handelsvertretergesetz Incorporation Insolvenzordnung Internationales Privatrechts-Gesetz id est Jugendgerichtsgesetz Jurisdiktionsnorm Kartellgesetz (former) Kreisgericht; Kommanditgesellschaft Konkursordnung (replaced by IO) Konsumentenschutzgesetz Körperschaftssteuergesetz legis citatae Landesgericht; Landesgesetz Landpachtgesetz Markenschutzgesetz Mietrechtliche Entscheidungen Mietrechtsgesetz Mutterschutzgesetz Musterschutzgesetz North Atlantic Treaty Organization Number Notariatsaktsgesetz Offene Gesellschaft Oberster Gerichtshof Official Journal of the European Communities Official Journal of the European Union Oberlandesgericht 17

List of Abbreviations p (pp) PatG PHG p.m. PreisG RAO RDB RGBl RIS RZ seq. SigG SchG SPG StGB StGBl StPO StVG SZ TNG UCC UGB UN UNCITRAL UrhG UWG VAG VersVG VfGH viz. VKrG vol. VVG VwGH WG ZPO

18

page (pages) Patentgesetz Produkthaftungsgesetz post merediem Preisgesetz Rechtsanwaltsordnung Rechtsdatenbank Reichsgesetzblatt Rechtsinformationssystem Randzahl sequentes Signaturgesetz Scheckgesetz Sparkassengesetz Strafgesetzbuch Staatsgesetzblatt Strafprozessordnung Strafvollzugsgesetz Entscheidungen des österr. OGH in Zivil- und Justizverwaltungssachen Teilzeitnutzungsgesetz Uniform Commercial Code Unternehmensgesetzbuch United Nations United Nations Commission on International Trade Law Urheberrechtsgesetz Gesetz gegen den unlauteren Wettbewerb Versicherungsaufsichtsgesetz Versicherungsvertragsgesetz Verfassungsgerichtshof videlicet Verbraucherkreditgesetz volume Verwaltungsvollstreckungsgesetz Verwaltungsgerichtshof Wechselgesetz Zivilprozessordnung

1–2

General Introduction

§1. THE GENERAL BACKGROUND OF THE COUNTRY I. Geography 1. Austria is a small country located in the centre of Europe. Dominated by the Eastern Alps, Austria covers an area of 83,871 square kilometres. It is land-locked, bordering on Switzerland, Germany, the Czech Republic, Slovakia, Hungary, Slovenia, Italy, and the Principality of Liechtenstein. The capital of Austria is Vienna with a population of 1,713,908, among them approximately 300,000 foreign citizens. On 1 January 2011, Austria had a population of 8,402.908, that is about 100 inhabitants per square kilometre. Of the entire population, about 927,565 inhabitants – that is 11% – are foreign citizens. Austria is among the Member States of the European Union (EU) which, proportionally speaking, have the highest numbers of non-EU residents. Among the foreign residents, refugees and migrant workers from the Balkans and Turkey have traditionally been predominant, with a recent increase in the number of African and Asian refugees. The ethnic composition of the Austrian citizens is quite homogenous: Native German speakers constitute a majority of 98%, while there are small minorities in the Eastern and Southern parts of the country (approximately 22,000 Croats, 16,000 Slovenes, 12,000 Hungarians). II. Political System in the Past and Present 2. The origin of present-day Austria, which was first mentioned as ‘ostarrichi’ in a document of 996, can be traced back to the medieval union of the dukedoms of Austria and Styria in 1192. When the Swiss nobleman, Rudolf of Habsburg, took possession of this union of two small regions of the former so-called Holy Roman Empire of German Nation in 1278, it became the core of an extended aggregate of areas under the hereditary rule of The House of Habsburg which made the Habsburgs for centuries one of the greatest sovereign dynasties in Europe. Habsburg rule in Austria survived until 1918. Already by the end of the Middle Ages, the Habsburg ‘hereditary lands’ had become increasingly independent of the supremacy of the Holy Roman Empire, and the administrative and legal systems began to develop separately, notwithstanding the fact that members of the Habsburg family continued to become elected German kings and emperors for centuries. Under the reign of empress Maria Theresia 19

3–3

General Introduction

(1740–1780), a comprehensive reform of the administrative and legal system was launched in the Habsburg hereditary lands which at that time had become a huge agglomeration of regions in Central-Eastern Europe inhabited by a diversity of peoples (Germans, several Slav peoples, Italians, Hungarians and Romanians). Law reform was continued by Maria Theresia’s son Joseph II and his successors to the Austrian throne. At that time, the first comprehensive codifications were prepared in the fields of civil procedure, civil law and criminal law. The General Civil Code of Austria (Allgemeines Bürgerliches Gesetzbuch, ‘ABGB’), which entered into force on 1 January 1812, is derived from drafts of that period, and the Criminal Code of 1803 had a long and lasting influence on the evolution of criminal law before the actual Criminal Code of 1975 was enacted. The Napoleonic Wars led to the formal dissolution of the Holy Roman Empire of German Nation in 1806. But already in 1804, the last Habsburgian German Emperor, Francis II, had adopted the title of ‘hereditary emperor of Austria’. As such he became Francis I of Austria. The Vienna Congress put an end to the period of the Napoleonic Wars, and the following period was characterized by absolutism. One result of this evolution was a retardation of law reform in the Austrian empire and a significant dissonance between the law in the books and in action. 3. Not until the revolution of 1848 severely threatened the absolute rule of the monarch, was any sort of constitution available for the people. An attempt for a constitution (Constitutional Bill of Kremsier, Kremsierer Verfassung) failed in that revolutionary year, however, and in March 1849, for a short period only, a constitution was forcibly put into effect (oktroyierte Verfassung) by the government. Subsequently, after wars against Italy and Prussia had been lost, the Austrian emperor could not avoid abandoning substantive portions of his absolute power. Thus, a high degree of independence had to be granted to the refractory Hungarians, and a constitution together with the system of a Dual Austro-Hungarian Monarchy (k.k.) had to be accepted in 1867. The rules on fundamental rights of the citizens which were provided by the Basic Law of the State (Staatsgrundgesetz) of 1867 are still in force today. During the following fifty years a gradual national disintegration of the Dual Monarchy took place, but it was not before the end of World War I, that The House of Habsburg was ousted and the Austrian Empire fell to pieces. Hungary, Czechoslovakia, Yugoslavia, Romania and Poland emerged as new national(istic) states from the ruins of the Austro-Hungarian Monarchy. In the remaining rump of Austria, the republic order was proclaimed on 12 November 1918. What was once a huge multi-national empire ranking among the leading powers of the world had become a tiny country with little chances to survive in a reasonable way.1 Its inhabitants were German speaking people, including some small Slavic or Hungarian minorities in southern Carinthia and in the most eastern province, the Burgenland. This province was originally part of the Hungarian half of the empire. In these districts the frontier could be fixed only after some fighting and plebiscites.

1. On the history of the Law in Austria, cf. Herbert Hausmaninger, The Austrian Legal System (4th ed., Manz 2011).

20

General Introduction

4–5

4. The Federal Constitution of 1 October 1920 (Bundes-verfassungsgesetz, ‘B-VG’) defines the Republic of Austria as adherent to a democratic system of government. The state’s institutional organization is that of a federal union of smaller areas. Thus, Austria is constituted by nine provinces or ‘states’ (Länder), viz. Burgenland, Kärnten (Carinthia), Niederösterreich (Lower Austria), Oberösterreich (Upper Austria), Salzburg, Steiermark (Styria), Tirol (Tyrol), Vorarlberg, and Wien (Vienna) which is at the same time a province and the federal capital of Austria. As already mentioned, the Federal Constitution of 1920 which is frequently labelled the ‘Kelsen-Constitution’, because of Prof. Hans Kelsen’s predominant influence on its drafting, was subjected to several amendments: to the first major one as early as 1929. The latest substantial modifications have been made by the Constitutional Amendment of 1988. The Constitution of 1920 is still in effect today, however, although it has not been effective all the time. After a three-day civil war between conservatives and social-democrats in February 1934 the democratic 1920/ 1929 Constitution was repealed and a new constitution enacted on 1 May 1934. It formed the basis for a short-lived ‘clerico-fascist’ authoritarian regime which suffered from economic crisis and increasing political and ideological pressure by Nazi-Germany. 5. Finally, in March 1938 Austria lost its sovereignty and independence and became part of the German Empire as a result of the German occupation (Anschluss). Austria remained a subordinate part of the so-called Third Empire (Drittes Reich) for more than seven years. Finally, on 27 April 1945, the approaching end of World War II made the Declaration of Independence by a provisional government under the leadership of the former State Chancellor Karl Renner possible. On 1 May 1945, the Federal Constitution of 1920/1929 was re-enacted in its wording of 1933. Austria did not immediately recover full sovereignty, however, as the country remained under allied occupation until 1955. The State Treaty of 15 May 1955 re-established Austria’s independence and sovereignty, and after the complete withdrawal of the allied occupation forces, the Austrian Parliament adopted the Federal Constitutional Statute on Neutrality of 26 October 1955, thereby declaring Austria a permanently neutral state. The Federal Constitution of 1920/292 is still in effect. As the traditional meaning and function of the status of a permanently neutral state has become doubtful after the collapse of communism and the obvious termination of the East–West Conflict in 1989, there has been a continuous public controversy about the impact of permanent neutrality, in particular with regard to Austria’s membership to the European Community (EC) and its association with the West European Union. Whether Austria should become a member of the North Atlantic Treaty Organization (NATO) is specifically controversial. Opposition against accession by the SocialDemocrats continues. In the early years of the new millennium, a national ‘Austria-Convention’ (Österreich-Konvent) has been working on a new Austrian Constitution which 2. Cf. BGBl 1930/1.

21

6–7

General Introduction

should replace the Kelsen-Constitution. One of the primary purposes of this convention was to integrate the various provisions of constitutional law including the European Convention of Human Rights into a single and uniform text. But these efforts remained without success and no consequences were drawn from the results of the work of the national convention. III. Political System 6. In its amended version, the Federal Constitution forms the basis for all the other statutes. Constitutional provisions are of a higher rank than those of the so-called ordinary legislation (einfache Gesetzgebung), since their modification requires the affirmative vote of two-thirds of the members of the National Council (Nationalrat) and the presence of at least 50% of the 183 representatives. However, for a so-called total revision of the Federal Constitution the approval of a national referendum is required. Thus, for instance, Austria’s accession to the EC needed the application by a majority vote of the people, since it affected the fundamental principles of the constitutional order in a way which amounted to a ‘total revision’ of the Austrian Constitution. ‘Rules of constitutional law’ are laid down not only in the Federal Constitution but also in ordinary statutes. These rules are expressly indicated as constitutional provisions. Thus, the rules of constitutional law are scattered in numerous statutes and its appearance is rather unintelligible. 7. Guiding principles of the Austrian Federal Constitution are: – – – –

the the the the

republican principle; democratic principle; federal principle; and rule of law, or principle of legality.

Together with the strictly observed separation of legislative and executive powers and a clear distinction between judiciary and administration these principles form the basis of the constitutional order, which can only be modified by a referendum. According to the democratic principle, it is the people who are the sovereign and it is their will expressed by elected representatives on which all law depends. The republican principle is laid down in Article 1 B-VG. Thereby the restoration of the monarchy is prohibited. To be allowed to return to Austria, members of the Habsburg family exiled by a constitutional statute of 3 April 1919 have to waive all imperial claims for an eventually restored Austrian throne by a formal declaration. The federal principle indicates that the Republic of Austria is formed of a union of nine states, and that a rather limited part of the legislative and executive powers is conferred to the states. Pursuant to the principle of legality or ‘rule of law’ the executive powers must be exercised in strict compliance with the law. According to Article 18 B-VG, all executive activities must be based on legislative acts, and a hierarchical chain of

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8–9

authorities to give directions exists from the top of the executive, the federal ministers, to the lowest ranks of federal civil servants. This principle governs the entire public administration of Austria on the federal level as well as on the level of the Länder and of the communities. According to Article 20 B-VG, the higher ranking authority has the power to issue directions which the lower ranking addressee has to obey even in a case where such directions violate the law. If a civil servant is faced with a direction which appears to be illegal he may ask for a direction in writing. The (Federal) Administrative Court (Verwaltungsgerichtshof) guarantees the legality of public administration in its entirety. 8. Executive acts may be of a general character or of a particular or individual nature. The typical instrument for general executive or administrative action is the decree or regulation (Verordnung). It is addressed to an indeterminate number of individuals. The typical instrument for individual administrative action is the order by decree (Bescheid). An order by decree is the decision of an actual case by an administrative authority addressed to an individual person or to a group of individuals. The procedural steps by which an administrative order by decree is issued and the rules determining whether a remedy against it is available are uniformly regulated in a number of administrative statutes. The most important one is the General Statute on Administrative Procedure (Allgemeines Verwaltungsverfahrensgesetz, ‘AVG’). 9. The federal legislative bodies are the National Council, viz. the ‘Lower House’ of Parliament, and the Federal Council (Bundesrat), viz. the ‘Upper House’ of Parliament. The members of the National Council are elected for a term of four years on the basis of an electoral statute which is governed by the principles of universal, equal, secret, direct and personal suffrage. Every national who is 18 years of age or older at the date of the election is entitled to exercise his right to vote. With regard to the selection of the delegates to the National Council the Austrian Constitution adheres to a system of proportional representation. As a result of the most recent parliamentary elections of 28 September 2008, five political parties are currently represented in the National Council: The SocialDemocrat Party of Austria (Sozialdemokratische Partei, SPÖ) is the strongest party with 57 Members of Parliament (MPs), followed by the Austrian People’s Party (Österreichische Volkspartei, ÖVP), a Christian-social, conservative party with 51 MPs. The right-wing Freedom Party of Austria (Freiheitliche Partei Österreichs, FPÖ) holds now thirty-four seats, the new liberal fraction Alliance for Austria’s Future (Bündnis Zukunft Österreich, BZÖ) occupies twenty-one seats and the heterogeneous, leftist Green-Alternative Party (Grün-Alternative Partei) twenty. Since 1987, SPÖ and ÖVP have governed the country by way of a coalition for more than a dozen of years, and the FPÖ has formed a strong and successful opposition together with the Green-Alternative Party and the so-called Liberal Forum (Liberales Forum, LIF). The latter was a 1993 split-off of the Freedom Party which finally dropped out of parliament in the 1999 general elections by missing the threshold requirement of 4% of the votes. As a result of these elections and months 23

9–9

General Introduction

of futile negotiations between the Social-Democrats and the People’s Party leading to a deadlock, a coalition government was formed between the Freedom Party led by the charismatic, sometimes rude and always populist Jörg Haider, and the People’s Party the head of which – Wolfgang Schüssel – became Chancellor. Even though Haider himself abstained from participating in the government, its formation entailed a wave of serious protests and somewhat exaggerated ‘sanctions’ were imposed on Austria by numerous states, including a declaration of bilateral noncooperation by the then remaining fourteen Member States of the EU. Regardless of the fact that these ‘sanctions’ were lifted only a few months later and Haider resigned as leader of the Freedom Party, the coalition government permanently had to face strong interior and external opposition. In September 2002, following an intra-party rebellion against the members of the Freedom Party in the government organized by loyalists of Haider, some of the Freedom Party Ministers resigned and early parliamentary elections were announced. In a landslide victory unprecedented in Austrian history, the ÖVP increased its number of votes by more than 15% and became the largest party in the National Council for the first time since 1966. The lengthy, separate negotiations between the ÖVP on the one hand, and the other three parties on the other hand, were dominated by major reform projects in the fields of pension rights, health care and tax reductions. Eventually, only the Freedom Party which had suffered a dramatic loss of more than 17% of its votes in the general elections was prepared to enter a coalition government with the People’s Party. Due to strong resistance against some of the reform projects and constant losses of the Freedom Party in subsequent elections on the provincial level, the stability of this government remained weak. Majority was lost by the ÖVP in the elections of 1 October 2006, when the SPÖ became strongest party and her candidate, Alfred Gusenbauer, chancellor. Due to limited success of his coalition government with the ÖVP, Gusenbauer was forced to resign and elections were scheduled after only two years. In the 2008 elections, the two coalition parties had to suffer serious losses to the Freedom Party and the new Alliance for Austria’s Future. Many voters blamed the political incompetence of the government to be responsible for the economic and financial crisis. The members of the Federal Council are elected by the nine Parliaments of the provinces (Landtage). The number of delegates a province may nominate for the Federal Council depends on the population of the province. By the end of 2011, the number of the members to the Federal Council is sixty-two: twenty-two SocialDemocrats, twenty-seven Conservatives from the People’s Party, seven representatives of the Freedom Party, three of the Green-Alternative Party, two of a Carinthian variation of the Freedom Party and one of a Tyrolian split-off of the People’s Party. Together the two parliamentary chambers constitute the Federal Assembly (Bundesversammlung). Its most important constitutional functions are the administering of the Federal President’s (Bundespräsident) oath of office at his inauguration and the potential bringing of an indictment against the head of state. As the great majority of legislative competences are attributed to the federal legislative bodies, the two Houses of the Federal Parliament are clearly the most important legislative institutions in Austria. It is the National Council which creates new

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General Introduction

10–11

federal laws and modifies existing ones, approves the government and has the ability to oust the Federal Government as a whole, or individual members of the cabinet by a vote of no confidence. After the National Council has adopted a bill it must be introduced into the Federal Council. The second chamber of the Austrian Parliament cannot impede the coming into effect of a statute by rejecting the bill. It can only cause a delay. If the National Council insists upon its original draft, the Federal Council has no right to a conclusive veto. That illustrates that the Federal Council which should represent the federal element of the Austrian constitutional system is in fact a rather powerless institution. 10. The Federal President, the Federal Government, and the Federal Ministers are the supreme executive authorities of the federal government. The Federal President is the head of state. He is elected by general vote of the Austrian people for a period of six years and may be re-elected one time only. It is he who acts as supreme representative of the Republic of Austria vis-à-vis the outside world. The Federal President is entitled to enter into international treaties, notwithstanding the requirement of approval of the National Council in all cases of some importance. Apart from a limited number of extraordinary powers in a state of crisis, the President’s governmental rights are very limited. He is not more than a mere figurehead who has to execute the vast majority of his acts upon the proposition of the Federal Government. The head of the Federal Government is the chancellor. In fact, it is he who exercises the highest executive powers in the state together with the vice-chancellor and the ministers. The political composition of the Federal Government is the result of parliamentary elections, which are held every four years. One of the most important rights of the government is the right to initiate legislation in parliament. The Federal Government exercises the supreme administrative powers insofar as they are not a reserved privilege of the Federal President. Each Federal Minister may be assisted by a subordinate Secretary of State (Staatssekretär). Decisions of the Federal Government must be unanimously made and the Government is dependent on the support and confidence of a majority in the National Council. The members of the cabinet are legally and politically responsible to the National Council. The Federal Government can object to any draft bill of a state parliament as well as lodge an appeal against any statute of a Land with the Constitutional Court. 11. The government of a state is composed of a governor (Landeshauptmann), his deputies, and other state councillors (Landesräte). The government is elected by the state parliament. It is legally and politically responsible to and depends on the confidence of the parliament of the state. The number of representatives in the state parliaments ranges from 36 in the smaller states (Burgenland, Kärnten, Salzburg, Tirol, Vorarlberg) to 56 in the bigger states (Niederösterreich, Oberösterreich, Steiermark) and 100 in Vienna, which

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General Introduction

here as in several other instances, enjoys an exceptional position among the Austrian states. The members to the provincial parliaments are elected by separate votes (Landtagswahlen). The function of the governor of a province in administrative matters is a dual one. On the one side, it is he who is the highest executive officer of the province and it is his function to represent the province to the other provinces of Austria. The governor also chairs the provincial government. At the same time, on the other side, he is also an authority of the whole Republic of Austria and responsible for the execution of the so-called indirect federal administration (mittelbare Bundesverwaltung). The governor takes the oath from the Federal President. 12. The smallest units in the Austrian system of administration are the communities. Communities are of various sizes. A limited number of bigger ‘cities with separate status’ (Städte mit eigenem Statut) have particular powers. Local government is executed by the mayor (Bürgermeister) together with a directing board of the community (Gemeindevorstand). Its members and the mayor are responsible to and dependent on the confidence of the local council (Gemeinderat) whose members are elected in municipal elections. IV. Economic and Social Values 13. Austria’s economy is based on a developed mixed system of private and state-owned enterprises. In particular, mining, heavy-manufacturing industries, and energy production, were subjected to nationalization measures after World War II. As a result of the accession to the EU and due to the stronger influence of liberal market ideology under the Schüssel Administration, a clear tendency to privatization and a reduction of state subsidies to specific economic sectors has emerged cutting back immediate state influence on the economy. Austria adheres to the traditional values of a free market system combined with government intervention. These values find expression in a number of principles such as the guaranteed right of an individual to ownership of every type of personal and real property, including in principle all means of production, freedom of association, or in the emphasis the Austrian codification of private law puts on ‘private autonomy’. The principle, that everyone is free to conclude contracts, or to start business enterprises is the basis for freedom of trade and commerce. The carrying out of certain businesses is subject to specific limits set out by the Industrial Code.3 In addition to the market-oriented economy, there is particular focus on a developed system of social security and public welfare. Thereby, approximately 99% of the citizens are granted a basic protection in the case of accident and illness, and sufficient old age pensions are provided for nearly every inhabitant.

3. The Industrial Code (Gewerbeordnung, ‘GewO’) was amended on 18 Dec. 1992 and a number of restrictions on the freedom of trade principle were eliminated. In 1994, shortly before Austria became a Member State of the EU, a new and uniform version of the GewO was adopted by the Austrian legislator and in 2002, it had to be amended again to comply with the fundamental freedoms of EU law.

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14–15

14. The Austrian economic situation mirrors that of a developed industrialized state of Western Europe. As approximately two-thirds of Austrian exports used to be addressed to the other Member States of the EU, and three-fourths of the imports generate thereof, membership to the European Economic Area (EEA-) Treaty and subsequent accession to the EU were estimated by the Austrian Government of being of the highest importance for future economic prosperity in Austria. Already the membership to the EEA Treaty, which was ratified by the Austrian Parliament by a majority vote on 22 September 1992 and which finally entered into force on 1 January 1994, required a far-reaching approximation of the Austrian legal and economic system to EU-standards and entailed the amendment of numerous statutes on the federal and state level in the 1990s. The full membership to the EU completed this evolution: Austria became a Member State on 1 January 1995 and has been participating in the law making process of the Brussels European Institutions since then. With a GNP per head of approximately EUR 35,000 Austria is one of the rich Member States of the EU. §2. AUSTRIAN LAW BELONGS TO THE GERMAN LEGAL FAMILY 15. As outlined above, Austria used to be an important part of the Holy Roman Empire of German Nation. And for centuries, the legal development in Austria, in particular that of private law followed basically the same lines as the evolution of law in Germany. Thus, the laws of the two neighbouring countries are based on Roman Law, which by way of ‘reception’ became the dominant legal source. The creation of a separate Austrian Empire in 1804 and further separate evolution did not substantially change this situation. Therefore, Austria qualifies as a member of the German legal family. Private law in Austria became codified earlier than in Germany or in other European areas. Already in 1811 a comprehensive code dealing with matters of civil law was enacted. The General Civil Code of Austria which became effective by the beginning of 1812 is still in force today, however, more than half of its provisions in an amended version. Thus, customary law lost much of its former importance as a source of law at an early date. Today, usages are only relevant in trade and commerce. The codification was the result of comprehensive and lasting preparatory activities initiated by Maria Theresia as early as 1753. Therefore, the Austrian General Civil Code mirrors the traits of a pre-industrial society and is a late product of the period of the predominance of natural law doctrine, which is particularly reflected by numerous provisions of the Code. Though not a revolutionary codification, the Austrian code resembles the French code civil in several aspects. This can be explained by the fact that the French and the Austrian civil codes belong to the same ‘pre-pandectistic’ generation of codifications, influenced by Enlightenment and late Natural Law. Both codes adhere to a tripartite structure of civil law developed by classical Roman law,4 whereas modern codifications such as the German, Greek or Portuguese Civil Codes adhere to the 4. So-called Institutions system by Gaius distinguishing personae – res – actiones.

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so-called pandect system, which was developed in the nineteenth century and divides civil law into five parts.5 16. Changing social realities required numerous modifications of the rules of the General Civil Code. In particular, important changes in the law were adopted during World War I, when the so-called Three Partial Amendments (Drei Teilnovellen) reshaped great parts of the Austrian General Civil Code, thereby introducing concepts and rules of the German Civil Code of 1900 into the Austrian private law tradition. A second wave of German legal influence occurred after the German occupation in 1938, when e.g., the German Commercial Code and the German Statute on Marriage were introduced into Austrian law. Several of the statutes introduced by the Nazi regime between 1938 and 1945 were indeed invalidated or modified as soon as Austria regained independence after World War II. Nevertheless, the influence of German law never disappeared during the last forty-five years, as Austrian legislators as well as the courts and the doctrine have been looking quite often to German law for orientation and solution of legal problems. However, numerous and serious differences in the civil laws of Austria and Germany remained unaffected. And virtually all statutes that were enacted to supplement or amend the Austrian General Civil Code after 1945 exhibit no strict conformity with respective German statutes, but rather indicate some consonance in their basic structures and principles. This is also true with the results of another reform period in private law, which dominated the 1970s, has not ended yet, and focused on family law. The early statutes of this era have put an end to the obsolete patriarchal family model by adapting the legal provisions to the new values of equality of husband and wife and of partnership and care within domestic relations. 17. Most recently Austria’s membership first to the EEA and later to the EU has been requiring numerous legal amendments in those fields of private law which have some impact on economic relations. The accession to the EC had a considerable impact on additional areas of Austrian law which has to comply with European Community Law. Since EC-Law has long been wilfully neglected in the study of law, initially, Austrian lawyers appeared for some time to be insufficiently prepared for the significant changes in the law. In the meantime, the situation has improved considerably as courses in EU Law have become mandatory subjects in the study of law. §3. PRIMACY OF LEGISLATION 18. The Austrian Constitution adheres to the idea, that misuse of political power may be most easily prohibited by separation of powers. Thus, legislation is separated from the executive powers, viz. judiciary and administration. Moreover, legislative power is superior, as judiciary and administration must be executed in strict 5. General part, law of obligations, law of property, family law, and law of inheritance.

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19–20

adherence to the law. The legislative power determines in a binding way, how judiciary and administration have to act. This is the main feature of the ‘rule of law’ principle, or principle of legality (Legalitätsprinzip),laid down in Article 18 (1) B-VG: ‘The entire administration of the state must be carried out on the basis of the laws’. Judges and administrative officers must consult the statutory provisions and have to proceed in compliance with the law. They are bound to interpret the statutes according to well-established rules, and must not create ‘legal rules’ of their own. 19. Particularly in the field of private law correct interpretation of the law by the judge is often crucial for the outcome of a case. Therefore, corresponding to the importance of the ‘rule of law’ principle, the General Civil Code of Austria includes two famous provisions, dealing with the interpretation of statutory rules, which are binding upon the courts. According to section 6 ABGB, ‘[n]o other interpretation shall be attributed to a particular provision of the law than that which is apparent from the plain meaning or the language employed and from the clear intention of the legislator’. Thus, the judge has to focus on the literal meaning and the context in which a provision is stated, and he has to inquire into the intentions behind a legal rule. Such intent is documented in the explanations to the drafts of the statutes, and in the published stenographic protocols of the discussions in Parliament. However, if a case cannot be decided from the language or from the ‘natural sense’ of a provision, the judge has to refer to related legal rules concerning similar situations by way of analogy.6 Should the case still remain doubtful, then, according to section 7(2) ABGB, ‘it must be decided upon the carefully collected and wellconsidered circumstances in accordance with the natural principles of justice’. This reference to ‘natural law’ illustrates the influence of the Natural Law School on the Austrian codification of civil law. With the exception of this obsolete reference, section 6 and section 7 ABGB served as a model for rules of interpretation in other codifications, such as the Italian Codice Civile of 1942,7 and Latin American civil codes.8 §4. THE POSITION OF THE JUDICIARY 20. According to Article 94 B-VG, the judiciary is strictly separated from public administration. Its characteristic feature is complete independence from other state powers. Thus, judges are independent in their judicial activities. They cannot be dismissed or transferred from one court to another against their will. Judges in Austria must be graduates of one of the five law schools of the country9 and they must have passed a particular examination after clerkship which corre6. Cf. §7(1) ABGB: ‘If a case can be decided neither from the language nor from the natural sense of a law, similar situations which are determined by reference to the laws and the purpose of related provisions must be taken into consideration.’ 7. Cf. Art. 12 of the general provisions on the law introduced into the Italian civil code. 8. Cf. Art. 4 of the Codigo Civil de Venezuela, as amended in 1982. 9. Located in Vienna, Graz, Innsbruck, Salzburg and Linz.

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sponds with the bar exam of the attorneys. The judges are career judges, starting their profession usually in their late twenties at a District Court. Lay-judges have an important function primarily in criminal procedure where a jury sits in proceedings concerning serious crimes. In subject matter jurisdiction concerning commercial matters, the professional judge is assisted by experienced businessmen only in the lower instances. In labour disputes, two lay-judges, one representing the employers, the other the working force, assist the professional judges on all court levels. However, in a regular civil lawsuit no lay-judge takes part in the decision. 21. Under Austrian law, no ‘doctrine of precedent’ is acknowledged. According to section 12 ABGB, ‘the decisions issued in individual cases and the opinions handed down by the courts in particular litigations never have the force of a law; they cannot be extended to other cases or to other persons’.10 Decisions of the Austrian Supreme Court (Oberster Gerichtshof, hereinafter ‘OGH’) are not binding on the inferior courts. In deciding the cases brought before them they are bound only by the law. Nevertheless, decisions of the Supreme Court do have a considerable impact on the evolution of the law, in particular of private law. They are of authority but do not constitute a source of the law. Usually, without being bound to do so, lower courts tend to orient themselves by the holdings of the Supreme Court in cases deciding similar factual situations. 22. All courts are federal courts. There is no dual system of federal and state courts in Austria. An important distinction is made, however, between courts of ‘ordinary’ and ‘extraordinary’ jurisdiction. ‘Ordinary courts’ are the courts which sit in civil, commercial and criminal cases. The lowest courts in the hierarchy are the District Courts (Bezirksgerichte). They are small claims courts located in approximately 140 communities11 all over the country. At a District Court the judge sits alone. The eighteen State Courts (Landesgerichte)12 hear more important cases. On this level, the decision is rendered either by a single judge or by a panel of three judges. However, it is always a tribunal of

10. Quotations of sections of the General Civil Code are taken from: The General Civil Code of Austria – Translated from the German edition of 1 Aug. 1966 with the assistance of the 1866 translation by Prof. Dr Joseph Ritter von Winiwarter. Revised and brought up to date and annotated by Paul L. Baeck. Published for The Parker School of Foreign and Comparative Law, Columbia University in the City of New York by OCEANA Publications, Inc. Dobbs Ferry, New York (1972). This translation may not always appear to be perfect, but that impression is caused by the antiquated language and legal terminology of the Austrian code. The translator is aware of these problems, and tries to explain the difficulties of translating certain provisions. Moreover, no other actual translation of the General Civil Code of Austria is available. 11. There is currently a tendency to reduce the number of District Courts and a permanent process of court concentration. 12. By a recent statute which became effective on 1 Mar. 1993, BGBI 1993/41, the former Circuit Courts (Kreisgerichte) which had existed at the same level as the State Courts in the hierarchy of the court system since 1853 and had their location in a number of major cities (which, however, were not Capitals of a Land) were renamed. Their official name is now also ‘State Court’ (Landesgericht).

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23–24

three judges that renders the decision in one of the four ‘Superior State Courts of Appeal’ (Oberlandesgerichte) in Graz, Innsbruck, Linz, Vienna. The court on the top of the system of the Courts of Ordinary Jurisdiction is the Austrian Supreme Court which is situated in Vienna. Its existence is guaranteed by the Federal Constitution (cf. Article 92 (1) B-VG). Decisions of the Supreme Court are rendered by a panel of five highly qualified supreme judges. A particular subject matter jurisdiction exists for commercial matters, family matters and labour disputes. Outside Vienna the courts of first instance in commercial matters are either the District Courts, or the State Courts dependent on the value of the case. In Vienna a special Commercial District Court and a Commercial State Court exists. In family matters the District Courts serving as Family Courts have to apply specific rules of procedure. Labour disputes are heard by special Labour and Social Courts (Arbeits- und Sozialgerichte). Outside Vienna the Labour and Social Court is identical with the Circuit or State Court having local jurisdiction. In Vienna a separate Labour and Social Court is established. 23. In the Austrian civil procedure there are three instances. The party to a lawsuit feeling itself aggrieved by the decision of the trial court has the right to appeal. If the trial court is a District Court the appeal will be decided by the State Court having local jurisdiction. If the trial court is a State Court the appeal will be decided by the Superior State Court of Appeal having local jurisdiction in the case. The decision of the appellate court may be reviewed by the Supreme Court. The admission of an appeal for review has been restricted by a far-reaching amendment of the Civil Procedure Code in 1983. This reform was aiming at an improved access of citizens to the law and the courts and guarantees that only a limited number of notices of appeal for review are finally accepted for decision by the Supreme Court. The Supreme Court is concerned only with questions of law and relies on the finding of facts by the lower courts. In criminal cases, however, there is only a two-tier system of judicial review. In addition to the general courts of the regular hierarchy, special courts exercising jurisdiction in juvenile criminal matters exist. 24. The courts of ‘extraordinary jurisdiction’ are the Administrative Court (Verwaltungsgerichtshof, ‘VwGH’) and the Constitutional Court (Verfassungsgerichtshof, ‘VfGH’), both having their seat in Vienna. The Administrative Court exercises legal control over the entire administration of the state. Currently, the Court consists of some seventy-five professional judges who are appointed by the Federal President on the proposal of the Federal Government. The Court is headed by a president and a vice-president. Appeals to the Administrative Court are open to those persons who have exhausted all the other available remedies of administrative procedural law. The Administrative Court reviews the conformity of the acts of administrative authorities with the relevant law to be applied. Powers and functions of the Administrative Court are determined in Articles 130 et seq. B-VG.

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Since the amendment of the Constitution of 198813 the Administrative Court is assisted in respect of the examination of certain subject matters by the Independent Administrative Senates in the Provinces (Unabhängige Verwaltungssenate in den Ländern). The main function of the Constitutional Court is to review the compatibility of the legislation with the constitution. The Court was created to ensure that conflicts concerning questions of constitutional law be decided by an independent judicial body. In particular, it lies with this Court to examine whether a regular statute complies with the constitutional order, and to scrutinize in a given case if a constitutionally protected fundamental right is violated by a state authority. The Court is composed of a president and a vice-president, twelve regular, and six additional members, who have to be graduates from a law school and, in fact, are usually practitioners or academics of particular reputation. The members of the Constitutional Court are appointed by the Federal President upon nomination by the Federal Government, the National Council, or the Federal Council. To be sure of their strict impartiality a Constitutional Court judge must neither be, at the same time, a Member of the Federal Government or of a provincial government, nor a Member of Parliament, nor a functionary or employee of a political party. The extensive judicial power of the Constitutional Court as a state court is determined in a comprehensive and detailed way by Articles 137–148 B-VG. §5. DISTINCTION BETWEEN PUBLIC AND PRIVATE LAW 25. Austrian law makes a basic distinction between public law and private law. Private law is, according to section 1 ABGB, constituted by those statutes which determine the private rights and obligations of the inhabitants of the State towards one another, whereas public law is the entirety of statutes which regulate the activities of public authorities exercising sovereign power (hoheitliche Gewalt). Whereas rules of private law are characterized by addressees who are meeting on an equal footing, public law is based on authority and subordination. 26. Legislation and judiciary are characteristic areas in which state authorities act in a sovereign function. In administrative matters, however, the state may act either in a sovereign or in a non-sovereign function. Sovereign administration (Hoheitsverwaltung) means the exercise of ‘imperium’, viz. official authority; nonsovereign administration concerns the administrative activities of the state as a subject of private rights. Whether an activity of the state belongs to the field of sovereign or of nonsovereign administration depends on the legal categories which are employed for carrying out such activity. Typical of a sovereign activity is e.g., the enactment of a regulation, the issuance of an administrative instruction (Weisung), or of an order by decree etc. Typical of a non-sovereign activity is the conclusion of a contract, or the exercise of a right to possession or ownership by the state.

13. Cf. Art. 129a, 129b B-VG, as introduced by BGBI 1988/685.

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27–28

Whenever the state acts in a non-sovereign function it has to resort to the legal instruments which are employed among private citizens. If, e.g., the state wants to buy a building for government purposes, it has to conclude a contract of sale with the owner. No particular type of ‘administrative contract’ is known in Austrian law. §6. DISTINCTION BETWEEN CIVIL LAW AND ENTERPRISE LAW 27. As already mentioned a separate code has been existing in Austria dealing with commercial law, viz. the Commercial Code (Handelsgesetzbuch, ‘HBG’).14 As this Code was introduced after Austria’s occupation by the German Empire in 1938 it is another important evidence of the great consonance of Austrian and German private law which is particularly high in the field of mercantile and company law. Meanwhile, the code became comprehensively amended in 2005 and since 1 January 2007 the Code has been renamed ‘Business Code’, or (rather) ‘Enterprise Code’ (Unternehmensgesetzbuch, ‘UGB’).15 Whereas the rules of ‘commercial law’ form an integrated part of the codifications of private law in some European states, viz. Italy, Switzerland, which appears to be a preferable solution, Austrian private law adheres to a dual system of codified law. This system is based on the strict distinction of general private law and commercial law, which is characteristic for many systems of codified law, such as the French or German one. According to a frequently used definition, commercial law is ‘concerned with rights and duties from the supply of goods and services in the way of trade’.16 In a wider sense the notion ‘commercial law’ also covers the law of partnerships and companies and the law of ‘securities for money’, in particular, the law of ‘bills of exchange’ and ‘cheques’. In Austria, like in other European states, these particular fields of commercial law are regulated by way of specific statutes. 28. Formerly the Austrian Commercial Code focused on the concept of ‘merchant’ as a person, who carries on a commercial business.17 The application of the Commercial Code depends on whether a merchant is involved or not. As Austrian commercial law concentrates on a special kind of persons (subjects of law), viz. once ‘merchants’, now ‘entrepreneurs’ or ‘businessmen’, and not on certain types of transactions, it follows the ‘subjective method’ of determining the field of application of the Commercial Code. In a way, contract law is the closest link connecting general civil law and enterprise law, as ‘commercial transactions’, viz. ‘transactions entered by an enterprise 14. For a recent, but due to subsequent comprehensive amendments of the UGB (especially BGBl I 2005/120) nevertheless partially obsolete, English translation see, The Austrian Commercial Code (Markus Andreewitch trans., Manz 1987). 15. BGBl I 2005/120. 16. Cf. Goode Commercial Law (1982) 35. 17. Former §§2 et seq. UGB made a distinction between several types of merchants: ‘regular merchants’ who must be registered, merchants who have the option whether to register and ‘small merchants’ who are not registered. These distinctions have been abandoned in the enterprise code which focuses on the person engaging in an enterprise.

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or entrepreneur in the course of his commercial business’,18 usually are based on contractual agreements. Such transactions may consist in business-to-business (b2b) or in business-to-consumer (b2c) transactions. In particular with regard to a contract of sale two bodies of statutory provisions are relevant and have to be considered: One body of rules is of a rather general character and may be found in the General Civil Code;19 the other body taking care of the necessities of trade and commerce is included in the Enterprise Code. Nevertheless, there is a close relationship between ‘civil sales’ and ‘commercial sales’, as the civil law provides the basis for the specific provisions of the Enterprise Code. The provisions on commercial sales20 apply if at least one of the parties is an entrepreneur or businessman.21 However, some rules, in particular section 377 UGB,22 apply only if both parties are merchants.

18. Cf. §343(1) UGB. 19. Cf. §§1052 et seq. ABGB. 20. The title of former §§373–382 UGB has been changed from ‘commercial sale’ (Handelskauf) to ‘sale of goods’ (Warenkauf). The respective rules are now stated in §§ 373–381 UGB, BGBl I 2005/120. 21. Need not be a ‘merchant’ in its former narrow meaning. 22. According to this important provision, a merchant buyer has the duty to examine the purchased good and give notice of a detected defect within a reasonable period of time.

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§1. BASIC CONCEPTS AND GUIDING PRINCIPLES I. Legal Transaction (Juristic Act) in General 29. Private autonomy is one of the guiding principles of Austrian private law. In the law of obligations private autonomy finds clear expression in freedom of contract. This fact illustrates how the concept of contract law of the original code was already determined by the ideas of liberal natural law. The Third Amendment of 1916 puts even more emphasis on this aspect. Therefore, in principle, everybody is free to decide whether to conclude a contract of whatever type, and with whom. The legal instrument of private autonomy is the so-called legal transaction (Rechtsgeschäft), which is also translated by ‘juristic act’.23 This notion was created by the German Pandectistic Doctrine of the nineteenth century and designates an abstract concept covering bilateral transactions such as a contract, as well as unilateral transactions such as a promise of a reward or a last will. 30. The notion ‘legal transaction’ was not yet known to the draftsmen of the General Civil Code of 1811, but became part of the Austrian private law no sooner than 1916 when it was introduced by the Third Amendment. Since that time the seventeenth chapter of the second part of the General Civil Code is entitled ‘Contracts and Legal Transactions in general’24 and includes general rules on the concept of ‘legal transaction’ in sections 861–886, 897–901, 914–916 and 937 ABGB. 31. This chapter of the Austrian codification is rather badly arranged within the system of the codification, as the concept of ‘legal transactions’ does not easily fit into the obsolete structure of the ancient code. The draftsmen of the 1916 amendment adhered to German legal thought and terminology, and therefore, either replaced the term ‘contract’ by ‘legal transaction’, or added provisions dealing with the new term to the traditional rules of the code. The amendment of section 859 23. Whereas the leading German-English Dictionary of Legal, Commercial and Political Terms by Dietl et al., translates ‘Rechtsgeschäft’ as ‘legal transaction’ as does Baeck in his translation of the Austrian General Civil Code of 1972, other English and American translators prefer the notion of ‘juristic act’ for ‘Rechtsgeschäft’. The first author to use this term for ‘Rechtsgeschäft’ was Wang, The German Civil Code (Stevens and Sons 1907); Zweigert – Kötz, An Introduction to Comparative Law II: The Institutions of Private Law (Tony Weir trans., 3d ed., Oxford University Press 1999); Horn – Kötz – Leser, German Private and Commercial Law – An Introduction 74 (Tony Weir trans., Clarendon Press 1982). 24. Before 1916 the heading to this chapter (§§859 et seq.) simply read: ‘Of Contracts in general’.

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ABGB may serve as an example: The original version of this introductory provision to the general chapter on contracts and legal transactions which said, ‘[p]ersonal rights in property, under which one person is obliged to some extent to accomplish something for another, are based either directly on a law, on a contract or on damage suffered’, was modified so that the word ‘contract’ is now replaced by ‘legal transaction’ (Rechtsgeschäft). Even though the majority of legal transactions appear to be contracts, it is a term that applies to all types of activities entailing legal consequences, whether in the law of obligations, property law, law of inheritance, or family law. This explains why the German Code provision on this key notion are to be found in its general part.25 To understand the notion of ‘contract’ in Austrian law, the term ‘legal transaction’ as used and understood in Austrian legal terminology and doctrine requires some explanation. II. Classification of Legal Transactions 32. Austrian doctrine distinguishes between several types of ‘legal transactions’: (1) Unilateral legal transactions, involving only one person, whose declaration of intent creates a legal consequence all by itself, such as a promise of a reward,26 a notice of termination of a contract for the performance of a continuing or recurring obligation,27 or a last will; and bilateral or multilateral legal transactions where the corresponding declarations of intent of two or more parties create rights and duties. Typical of this category is the contract. (2) Unilaterally binding legal transactions, such as a donation, imposing legal duties on only one party thereby giving the other party only rights; and bilaterally binding transactions, imposing duties and corresponding rights on both parties, such as contracts of sale, barter etc. (3) Non-gratuitous (onerous) legal transactions, or ‘transactions based upon consideration’,28 which are entered by the parties under a ‘do, ut des’ assumption, such as most contracts (sale, loan, lease, employment etc.); and gratuitous legal transactions, or ‘transactions not supported by consideration’,29 which are intentionally based on altruism by one party such as a donation. (4) Legal transactions inter vivos, such as a contract of sale; and legal transactions mortis causa, such as a last will or a contract of inheritance.

25. §§104 et seq. of the German Civil Code. 26. In German, Auslobung. This is, according to §§860, 860a and b ABGB, a public promise of a reward for achieving a specific result. Such promise is not directed to certain persons. Everybody having achieved the result can claim the promised reward, even if he did not know of the promise and acted independently of the expectation of a reward. 27. Such as a contract for lease or employment. 28. Cf. the translation of the term ‘entgeltliche Verträge’ in §901 ABGB by Baeck (supra). Indeed, Anglo-American lawyers are inclined to use the phrase ‘for a consideration’ to characterize a transaction which is bargained and entered for exchange. However, that may be misleading. Under Austrian law of obligation no consideration requirement exists. 29. Cf. the translation of the ‘unentgeltliche Verträge’ in §901 ABGB by Baeck (supra).

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(5) Obligational transactions (Verpflichtungsgeschäfte) giving rise to duties, such as the seller’s duty to deliver the sold good, and the buyer’s duty to pay the agreed price; and dispositional transactions (Verfügungsgeschäfte), viz. ‘real transactions’ by which the duties are performed so that the buyer acquires ownership of the purchased object and the seller acquires ownership of the money constituting the purchase price. (6) Causal legal transactions versus abstract legal transactions. This distinction can be made with regard to obligational as well as to dispositional transactions. In contrast to German law, Austrian law is based on the principle that transactions must have a cause. Thus, the question of whether a transfer of ownership be effective or not, depends, as a rule, on the existence of a valid title, viz., a valid obligational transaction. This is expressed by section 380 ABGB stating that ‘[n]o property can be acquired without title and without a legal manner of acquisition’. Therefore, a valid obligation must provide the economic reason for the ‘real disposition’. If e.g., a contract for the sale of goods proves to be invalid,30 the transfer of ownership is also ineffective. Under Austrian law, a cause (Rechtsgrund) explaining the purpose of the transaction is also required for the valid conclusion of most obligational transactions. As a rule, abstract obligational transactions have no effect. Important exceptions are payment orders, in particular bills of exchange and cheques.31 Apart from these specific transactions, the reason for somebody’s promise to give something to another or to behave in a certain way must be made clear to satisfy the cause-requirement of Austrian law. III. Declaration of Intent (Willenserklärung) 33. For the creation of a legal transaction the making of one or more declarations of intent by the involved persons is crucial. By such declarations the legally relevant will of a person to create an obligation is expressed. Either by itself or in combination with corresponding declarations of will such declaration constitutes a legal transaction. The intention of a person to create certain legal consequences must be disclosed in some way. According to section 863(1) ABGB, an ‘[i]ntention is manifest not only expressly by words and generally adopted signs but also tacitly by acts which in regard to their circumstances reveal an intention beyond substantial doubt’. From that provision follows the important distinction between ‘express declarations of intent’ on the one side, and ‘implied’, ‘tacit’, or ‘conclusive declarations’ on the other. Whereas the meaning of an express declaration needs no further clarification, the significance of an ‘implied’ declaration does not ensue directly from the

30. For example, when public morality is violated, or when one party concluded a contract under the influence of a relevant error, or deceit, etc. 31. Cf. Art. 17 of the Law on Bills of Exchange (Wechselgesetz, ‘WG’, BGBl. 1955/49); Art. 22 of the Law on Cheques (Schequegesetz; ‘SchG’, BGBl. 1955/50).

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words or acts of a person, but may only be inferred from the circumstances. According to section 863(2) ABGB,32 even omissions may qualify as conclusive declarations of intent, but, as a rule, simple silence to an offer does not bear any legal consequences as it is not deemed to be a valid acceptance. IV. The Definition of ‘Contract’ 34. Section 861 ABGB provides in its first two sentences a definition of ‘contract’, by stating that: [w]hoever declares that he will transfer his rights to another, that is, that he will permit him to do something, will give him something, will do something for him, or will omit to do something on his account, makes a promise. If the other accepts the promise validly, a contract is created by the mutual consent of both parties.33 35. Under Austrian law as well as under virtually any other system of contract law, the meeting of minds of the parties is essential for the creation of a ‘contract’. And the Austrian Code assumes that in principle such meeting of minds results in just agreements, if only the parties may enjoy the gifts of freedom of contract. Consequently, the freedom of the parties to fix the terms of their agreements is only limited by statutory provisions and by public policy considerations.34 However, such a position presupposes equal economic and intellectual power of the involved parties, and this is too often an unrealistic assumption. Therefore, the liberal concept of freedom of contract became substituted in part by the idea that the law should take care of the weaker party. Particularly, in situations where there is no balance of economic and intellectual powers between the parties to a contract, the legislative bodies resorted to interventions in favour of the weaker party. Thus, the freedom of a businessman to use standardized contract terms in a consumer transaction35 is significantly limited. §2. HISTORICAL BACKGROUND OF THE LAW OF CONTRACT I. Sources the Draftsmen Had to Consider 36. When ‘empress’ Maria Theresia ordered a commission to start preparatory works for a civil code in 1753, some thirty-six years before the French Revolution

32. §863(2) ABGB: ‘The custom and usage prevailing in honest transactions must be taken into consideration in determining the meaning and the effect of acts and omissions’. 33. This definition is in consonance with similar definitions in other codifications of civil law; cf. Art. 1101 Code civil. 34. According to §879 ABGB, ‘[a] contract which violates a legal prohibition or public morality (gute Sitten) is null and void’. 35. Cf. §6 KSchG.

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should give rise to the elaboration of the French code civil, she directed the members of the commission to base the future codification on three sources: (1) the Roman Common Law (Gemeines Recht) as applied in central Europe throughout the seventeenth and eighteenth centuries in the modified form of the so-called usus modernus pandectarum; (2) the laws of other countries; and (3) the ‘general law of reason’ (Allgemeines Recht der Vemunft). The law already applied in those days should be left in force as far as possible, and the laws of the provinces should be brought into harmony. II. Influence of Roman Law 37. In particular, in the field of contract law the influence of traditional Roman law is still strongly felt, and this influence became even more accentuated by the amendments of 1916, which borrowed from pandectistic German contract law. Nevertheless, the draftsmen did not adopt the system of contracts, which according to the systematization of Gaius distinguished between contracts created re, verbis, litteris, and consensu. Neither did they adhere to the distinction of contractus and pacta, nor did they introduce the distinction of ‘nominate contracts’ and ‘innominate contracts’ into the code.36 III. Influence of the Natural Law School 38. It is clearly visible that the draftsmen of the General Civil Code of Austria were strongly influenced by the ideas of Enlightenment and the Natural Law School of the seventeenth and eighteenth century. With regard to the concept of contract, Pufendorf’s emphasis on the parties’ consent as the relevant factor to create contractual rights and duties has clearly impressed the draftsmen. Nevertheless, they abstained from adopting Pufendorf’s tripartite system of beneficiary, onerous and mixed contracts.37 IV. Confusing Heritage 39. Due to the fact that the Austrian codification employs an excessively expanded concept of ‘thing’ (Sache) and therefrom derives an obsolete concept of ‘law of things’ (Sachenrecht), viz. ‘law of property’, and due to the subsequent 36. Arthur Taylor von Mehren – James Gordley, The Civil Law System (2d ed., Little Brown and Company 1977), 14 et seq. 37. In contrast to the General Land Law of Prussia of 1794, which distinguished between ‘onerous’ and ‘beneficiary contracts’, the system of Austrian contract law does not follow the distinction suggested by Pufendorf between ‘contractus onerosi’, ‘contractus benefici’, and ‘ contractus mixti’.

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interpolation of the concept of ‘legal transaction’ into the original codification, the system and structure of the law of contract of the General Civil Code cannot easily be conceived by lawyers of states with more recent codifications. General contract law is the topic of the introductory part of the second subdivision of the second part of the Code which is devoted in its entirety to the ‘law of property’ (Sachenrecht). Strangely enough, this subdivision is designated in outdated German ‘von den persönlichen Sachenrechten’, which can only be translated insufficiently by ‘of personal rights in property’. The confusing expressions used in the chapter on general contract law are good illustrations of the pre-pandectistic character of the General Civil Code of Austria and the absence of a modem structure as well as a modem terminology. What is meant by the obsolete term ‘personal right in property’ is simply ‘obligation’, as a legally relevant relation from one person to another person, in contrast to absolute rights in rem, such as ownership, which have effect and may be enforced against everybody. §3. CLASSIFICATION OF CONTRACTS 40. As the Third Amendment of 1916 introduced the concept of ‘legal transactions’ into the ABGB, thereby creating a superior category that covered contracts, the usual classifications of legal transactions and contracts are partially identical. Remaining are a few concepts of contract terminology which need some introduction. I. ‘Consensual Contracts’ 41. Most contracts are concluded simply by the fact that parties have reached an agreement by congruent declarations of intent. It is the informal meeting of the minds brought about by the acceptance of an offer that creates rights and duties among the parties to a contract. Only in exceptional cases, when policy considerations so suggest, a contract may be subjected to a statutorily imposed formal requirement. II. ‘Real Contracts’ 42. Austrian contract law still acknowledges the rather anachronistic form of conclusion of a contract, which needs more than the mere meeting of minds of two or more persons and its disclosure to be valid. Certain contracts require that in addition to the consent of the parties the contractual duties must be performed by a party. Under Austrian law, the contracts of loan for use, the contract of deposit, and the contract of ‘order to sell’ according to section 1086 ABGB38 are ‘real contracts’. Therefore, the promise to lend someone a certain thing for use in the future, without 38. So-called Trödelvertrag, or Kaufauftrag.

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handing the thing over, does not qualify as a contract of loan for use, but is no more than a preliminary agreement to conclude a contract of loan.39 Until recently even a contract of loan by which a certain amount of money should be credited to another person for some time needed the transfer of the money to be valid as a contract of loan. The original character of a loan as a form of ‘real contract’ was changed no sooner than in 2010 by a statutory amendment of the law of credit.40 III. ‘Synallagmatic Contracts’ 43. Legal transactions in general and contracts in particular, may be either unilaterally binding, such as a donation, or bilaterally binding, such as a contract for the sale of goods. Pursuant to Austrian legal terminology a contract is by its nature always bilateral, as it is created by the meeting of the minds of at least two persons, but it may not necessarily create duties for either party. If a contract imposes only duties on one party, and only rights on the other, the contract is unilaterally binding (or obligating). As only the donee is entitled to claim performance, whereas only the donor has a duty to perform, the contract of donation is unilaterally binding. Nevertheless, it is a bilateral transaction as both parties have to agree. Moreover, a contract creates rights and duties for either of the contracting parties. 44. Among the bilaterally binding contracts two categories have to be distinguished: The so-called synallagmatic contracts, forming the ‘perfect category’; and another type of contract, which is characterized by a limited bilaterally binding effect. 45. Synallagmatic contracts are characterized by strict reciprocity of the respective contractual duties of the parties: Only reciprocal duties shall be created among both sides. Therefore, one party performs in exchange for the performance of the other party. A party to a synallagmatic contract insisting upon delivery by the other must either have performed his obligation or be prepared to perform it instantaneously,41 otherwise the other party may resort to the defence of lack of performance of the contract (Einrede des nichterfüllten Vertrages, exceptio non adimpleti contractus). It is evident that synallagmatic contracts are at the same time non-gratuitous transactions. The vast majority of contracts and all economically important transactions belong to that type, such as the contracts of sale, barter, lease, work and services, and employment. 46. The category of contracts with ‘limited bilaterally binding’ effect concerns contracts which normally create for one party a duty and for the other a right, but 39. Cf. §§936, 983 ABGB. 40. BGBl I 201/28, Act to Amend the Law of Loan and Credit (Darlehens- und KreditrechtsÄnderungsgesetz, ‘DaKrÄG’). 41. Cf. §1052 ABGB.

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may create in an exceptional situation rights and duties for both parties. These rights and duties are not reciprocal, however. For instance, if a mandate is concluded without providing for a remuneration of the mandatary, it is only the mandator who acquires a right, whereas the mandatary is subjected to a duty only, viz. to carry out the mandate. There is no reciprocity of rights and duties of the involved persons. However, if the mandate is carried out, the mandator has the duty to refund the expenses of the mandatary. IV. Categories of Statutory Contracts 47. The General Civil Code of Austria provides in sections 938 et seq. a number of provisions for some types of contracts, viz. donations, contracts of bailment (deposit), contracts of lending (loan for use) and credit, loan agreements, mandates, contracts of barter, contracts of sale, contracts for the order to sell, rental and tenancy agreements (contracts of tenure and for tenancy and lease), contracts of employment, contracts for work and services, partnership contracts, gambling and wagering contracts etc. This rather unsystematic and ambiguous list of statutorily regulated contracts which also includes marriage settlements (Ehepakte)42 would certainly require a better structured grouping. 48. Today, those contracts for which the General Civil Code provides positive rules may be divided into five groups: (1) Contracts for the acquisition of items of property43 such as contract of sale, barter, and donation. (2) Contracts permitting the use of items of property44 such as rental and tenancy agreements, loans for use, and loans. (3) Contracts aiming at the carrying out of certain activities45 such as contract of employment, contract for work and services, and contract of deposit. (4) Partnership contracts46 or, as the Code puts it, ‘contracts establishing a community of goods’. (5) Gambling and wagering contracts.47

42. 43. 44. 45. 46.

Cf. §§1217–1266 ABGB: these provisions would better fit into the part on family law. In German, Veräusserungsverträge. In German, Gebrauchsüberlassungsverträge. In German, Verträge, die auf die Erbringung einer bestimmten Tätigkeit gerichtet sind. In German, Gesellschaftsverträge which are called in the obsolete language of the Code: ‘Verträge über eine Gemeinschaft der Güter’. The General Civil Code provides only rules for a insignificant form of partnership. Detailed rules on commercial partnerships are included in the Commercial Code. For companies specific statutes exist. 47. In German, Glücksverträge.

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V. Contracts Subject to Formal Requirement 49. Austrian contract law adheres to the principle of informality. This corresponds with the emphasis of Austrian private law on private autonomy and freedom of contract. A contract can be made, as a rule, either orally or in writing. The parties may call in witnesses, they may go to a court, or to a public notary to have the contract formed or documented. The difference in the form has no legal effect on the creation of the obligation. However, in some cases a contractual agreement may be subjected to a formal requirement by the law.48 50. Thus, the General Civil Code itself and a number of other statutes such as the Consumer Protection Act of 1979 provide for a written form of contracts in certain circumstances. Moreover, the Law on Compulsory Notarial Contracts of 187149 as amended includes a list of contractual agreements which require a so-called notarial contract under seal (Notariatsakt) to be valid. After the expiration of section 350 HGB by 1 January 200750 all declarations of suretyship require a writing, even if the guarantor is a businessman.51 The rule of section 943 ABGB, which requires that a donation that is not accompanied by a simultaneous transfer of the present, must be made in writing to entail legal consequences, has been superseded by the Law on Compulsory Notarial Contracts of 1871. According to section 1(d) leg. cit. a contract of donation without simultaneous performance must be established as a notarial contract under seal.52 51. Apart from those legal transactions enumerated in section 1 NZwG,53 the creation of the articles of association and the transfer of shares in a limited liability company requires a notarial contract under seal.54 VI. Standard Form Contracts 52. As in every other industrialized state the use of standard form contracts is crucial for the functioning of the distribution of goods in Austria as well. As standardized contract terms (allgemeine Geschäftsbedingungen) are always used by businessmen, who are in a stronger position than private consumers who often have no real choice and are forced to accept the contract terms presented by their partner,

48. 49. 50. 51. 52. 53.

Cf. §883 ABGB. Notariatsaktgesetz, ‘NAktsG’, RGBl 1871/76. BGBl I 2005/120. According to 1346(2) ABGB. §1(d) NAktsG. In addition to promises of a gift, the statute enumerates e.g., marriage settlements, contracts of sale or barter and credit agreements between spouses, contracts concluded by blind persons, deaf or mute illiterates. 54. Cf. §§4(3), 52(4), 76(2) of the Statute on Limited Liability Companies (‘Gesetz über Gesellschaften mit beschränkter Haftung’, RGBl 1906/58).

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the danger of misuse exists. Therefore, the Austrian Consumer Protection Act55 established significant restrictions of the power of a businessman to dictate the terms of a contract with a consumer, by enlisting a number of standardized clauses which cannot detrimentally affect the position of a private consumer. The Austrian law of contracts provides a three-prong test whether a particular standard term becomes part of a contractual agreement: – Incorporation of the standard terms:56 This prong focuses on the standard form as a whole and whether it has become part of the contract. What is crucial here is whether at the time of conclusion of a contract, it is foreseeable that the contracting partner wants to contract only under the standard terms. Otherwise, the terms contained in a standard form do not become part of the contractual terms. However, it is not required that the other party actually knows the precise content of a standard form – it suffices that he could at least theoretically get knowledge of it. – Appearance of a standard term:57 Under this prong, an individual standard term is tested whether it is uncommon to a certain type of contract, whether it is to the disadvantage of one party, and whether it is surprising on its surface. Only if all three requirements are met does the standard term in question not become part of the contract. – Contents of a standard term:58 As a matter of principle, if an individual contract term runs counter to what is permitted by law or the good morals, it is invalid and consequently, it does not become part of that contract. For standard form contracts, however, this principle is modified so that a term is ‘knocked-out’ of the contract if it grossly discriminates against the contracting partner. Further, for consumer transactions, the Consumer Protection Act provides for an exemplary ‘black list’ and ‘grey list’ of invalid standard terms.59 In the first case, this invalidity is absolute, in the latter case, it depends on whether the standard term in question has been expressly bargained for, which has to be demonstrated by the businessman. §4. CONTRACTS AND TORTS I. No Clear Structural Distinction 53. The General Civil Code makes no clear distinction between contractual liability and tortious (or delictual) liability. Chapter 30 of the second part of the

55. Cf. §6 KSchG. For its wording the German Statute on the Regulation of Standardized Contract Terms of 1976 served as a model. 56. In German, Einbeziehungskontrolle. 57. In German, Geltungskontrolle; cf. §864a ABGB. 58. In German, Inhaltskontrolle; cf. §879(3) ABGB. 59. Cf. §6(1) and §6(2) KSchG.

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Code covering sections 1293 to 1341 and entitled ‘on the law of damages and full satisfaction’60 includes rules on delictual as well as on contractual liability. Section 1295 ABGB states that ‘[a] person is entitled to demand indemnification for the damage from a person causing an injury by his fault; the damage may have been caused either by the violation of a contractual duty or without regard to a contract’. Liability for damages, whether resulting from a breach of a contractual duty or from the violation of a non-contractual duty, is equally based on fault. 54. There are, however, important differences between contract and tort as far as the rules of proof of fault and vicarious liability are concerned. The burden of proving fault of the wrongdoer normally lies with the person claiming recovery for damages he suffered, provided that there is no contractual relation between the victim and the wrongdoer.61 The burden of proof of fault is reversed if there is a contractual relation between the person who caused the damage and the victim. In this case it lies with the defendant to establish that the damage is not attributable to his fault.62 As a result, the law substantially alleviates the victim’s burden of evidence with regard to the fault requirement in a contractual setting. 55. Another important difference between contractual and delictual liability concerns vicarious liability. Damage caused by a wrongful act of an employee can be made the object of a successful lawsuit against the employer only if the wrongdoer was employed by the defendant in the performance of an obligation emerging from a contractual relation between the victim and the employer.63 In the absence of a contractual relation the employer can only be held liable if the employee is a dangerous or unqualified person.64 In Austrian tort law there is no such rule as ‘respondeat superior’. Therefore, chances for the injured party to succeed in a lawsuit are very low, as long as the victim can base his claims on delictual grounds only. The courts have developed a number of figures such as ‘pre-contractual liability’ or ‘contract implying the protection of a third party’ simply to put the victim in a better position by enlarging the field of application of contractual liability. Another difference concerns the recoverability of a so-called pure economic loss. Whereas negligently caused ‘pure economic loss’ cannot be recovered, if a claim is

60. The language is highly antiquated: ‘Von dem Rechte des Schadenersatzes und der Genugtuung’. Unlike the French code civil, the ABGB does not resort to the obsolete categories of ‘delict’ and ‘quasi-delict’. 61. Cf. §1296 ABGB: ‘In case of doubt, the presumption prevails that damage has arisen without any fault on the part of another’. 62. Cf. §1298 ABGB: ‘A person who asserts that he has been prevented from the performance of a contractual or legal obligation without any fault on his part must bear the burden of proof thereof.’ 63. Cf. §1313a ABGB: ‘A person who is under a obligation of performance to another is liable to the latter for the fault of his legal representative and of persons whom he has employed for the performance, in the same manner as for his own fault.’ 64. Cf. §1315 ABGB: ‘A person who employs an unfit person for the care of his own affairs, or who knowingly uses a dangerous person therefor, is liable for any damage caused by such persons acting in such capacity to third persons.’

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based on a delictual cause of action, contractual liability extends to the compensation of pure economic loss. This difference may have severe consequences for the result of a lawsuit, in which only compensation for lost earnings and loss of production is claimed. Therefore, the courts tried to expand the field of application of contractual liability by excessive adherence to concepts such as ‘culpa in contrahendo’, ‘contractual duties to protect a third party’, or ‘contracts implying the protection of a third party’. II. No Rule of ‘Non-cumul’ 56. Austrian law finds no problem whatsoever in the simultaneous bringing of claims based on contractual as well as on delictual grounds. As no rule of ‘noncumul’ exists, the victim of an injury may raise a contractual claim for recovery together with a delictual claim. So usually a lawyer will resort to all possible causes of action, leaving it to the court to decide which of these causes of action may entail a decision for the plaintiff. Of course, the possibility of bringing a contractual and a delictual claim at the same time in one case cannot lead to a double recovery of the victim. III. Recent Legislation 57. Statutes such as the Product Liability Statute of 21 January 198865 neglect the distinction between contractual and delictual liability. The rules of this statute have been established in adherence to the model of the EC-Directive of 25 July 1985.66 The EC-Product Liability Directive submits the claims of all victims of a defective product, irrespective of whether a direct or indirect contractual relationship exists between the claimant and the defendant manufacturer, to one and the same strict liability regime. The Austrian products liability law complies with this approach. IV. Third Parties 58. As mentioned above, Austrian doctrine and courts have been very ingenious in expanding the field of application of the rules of contractual liability in favour of third persons. Since 196067 the existence of contractual duties of care and protection in favour of third parties has been generally acknowledged. And since then it has been an accepted principle, that persons, such as family members, employees and visitors of a party to a contract may be protected as if they themselves had concluded the contract, when suffering damage as a result of a violation of contractual duties of the partner of their guarantor. 65. Produkthaftungsgesetz, ‘PHG’, BGBI 1988/99; as amended by BGBI 1993/95. 66. O.J.EC L 210, 7 Aug. 1985, 29. 67. F. Bydlinski, Vertragliche Sorgfaltspftichten zugunsten Dritter, JBl, 359 (1960).

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59–63

59. Under the traditional law, the Austrian Supreme Court resolved the problem of manufacturer’s liability on the basis of a sophisticated doctrine by assuming that a ‘contract implying the protection of a third party’ is concluded between the manufacturer and the wholesaler, in favour of the ultimate buyer falling victim to the defect of the product.68 It was F. Bydlinski who, as early as 1960, had drawn the attention of the courts to the existence of contractual duties of care and protection in favour of third persons.69 As a result of the new court practice under the traditional law in product liability cases, the burden of proof of fault was shifted from the plaintiff to the defendant manufacturer, who is also responsible for the negligent wrongdoing of his employees, since his liability vis-à-vis the victim ‘sounds in contract’, irrespective of whether there is a contractual relation to the victim or not. §5. CONTRACT, UNJUST ENRICHMENT AND OTHER LEGAL OBLIGATIONS I. Contractual and Legal Obligations 60. According to section 859 ABGB, obligations are based either directly on a statute, on a legal transaction, or on damage suffered. This provision entails the distinction between obligations created by agreement or exceptionally by unilateral declarations of will (contractual obligations), and obligations directly derived from statutory law (‘legal’ or ‘statutory obligations’).70 61. The Austrian code does not employ the term ‘quasi-contracts’ as does e.g., the French Civil Code. Indeed it knows certain ‘legal obligations’ in addition to ‘liability for damage’. Such legal obligations are concepts which are quite similar to those known as ‘quasi-contracts’ in French law, viz. unjust enrichment and negotiorum gestio. Another category of ‘legal obligations’ acknowledged by Austrian law is the avoidance of a fraudulent transfer of property by a creditor (Gläubigeranfechtung). Rules on this category are to be found in Austrian bankruptcy laws.71 II. Unjust Enrichment 62. A person who acquires assets without legal justification at the expense of another, either by a performance rendered by the other person, or in any other way, has the duty of restitution. The party who has suffered a loss may bring an enrichment claim. 63. The general Civil Code of Austria does not provide for a single general rule on the law of unjust enrichment, but distinguishes between two categories of claims 68. 69. 70. 71.

Cf. the breakthrough-decision: OGH 4 Feb. 1976, SZ 49/14 = EvBl 1976/168 = JBl 1977, 146. F. Bydlinski, Vertragliche Sorgfaltspftichten zugunsten Dritter, JBl, 359 (1960). In German the respective terms are ‘vertragliche’ and ‘gesetzliche Schuldverhältnisse’: Cf. §§28, 29 IO (Insolvenzordnung),§§2, 3 AnfO (Anfechtungsordnung).

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for restitution: the first category concerns the ‘claims arising from a performance’ (in this quite insufficient way the term ‘Leistungskondiktionen’ may be translated); the second is the ‘claim for profitable utilization’ (Verwendungsanspruch). 64. Claims of the first category, which are also called ‘condictiones’, presuppose that the person suffering loss has transferred assets to a person who has no right to acquire them. Several types of enrichment claims of this categories are to be distinguished: (1) Claim for restitution because of erroneous payment of a non-existent debt: If, according to section 1431 ABGB, ‘a thing or an act which was not due has been performed by mistake, even if an error of law, the thing can generally be demanded back and a reward can be demanded for the act which is in proportion to the advantage procured.’ (2) Claim for restitution because of subsequent lapse of the purpose of the transfer of assets: This type of ‘condictio’ applies to cases in which a validly concluded contract is subsequently avoided and is based on section 1435 ABGB.72 (3) Claim for restitution because of the failure of the intended transaction: In analogy to section 1435 ABGB such a claim may be raised by a person who has made a performance in the expectation that a certain goal be reached, if the intended goal proves to be unattainable. (4) Claim for restitution because of absent legal cause: This claim, which is based on section 877 ABGB,73 may be raised by the party having already delivered to the other, if a contract is void because of error, deceit or duress (cf. sections 870, 871 ABGB). (5) Claim for restitution because of an unjust or objectionable cause: This claim may be brought by the person who transfers assets to another in order to prevent the recipient from carrying out a prohibited activity.74 65. A claim of the second type of enrichment action is not dependent on a transfer of assets by the claimant. Here it is crucial that somebody has utilized a thing belonging to another without legal justification. The statutory basis of the claim is section 1041 ABGB which states: Where property has been used for the benefit of another, not in the management of a business,75 the owner can demand the return thereof in kind or, if such return can no longer be made, the value thereof at the time of its use, even though no advantage was received therefrom. 72. §1435 ABGB: ‘Any person who delivered property for an actual debt can demand it back from the payee if the legal ground for keeping it no longer exists.’ 73. §877 ABGB: ‘Any person who demands the avoidance of a contract for lack of acceptance must return everything that he has received to his advantage in consequence of such a contract.’ 74. Cf. §1174(1) ABGB: ‘Any amounts paid by any person for the performance of an impossible or illegal act cannot be reclaimed. To what extent the treasury may seize such amounts is determined in the public ordinances. However amounts given to prevent a person from committing such an act which he was about to commit may be reclaimed.’ 75. A more accurate translation would be: ‘without conducting the affairs of another’.

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66–69

Under Austrian law, enrichment claims are of significant importance. They have to be raised, e.g., by the victims of a breach of warranty having rescinded the contract, or by persons having successfully avoided a contract because of a relevant error, in order to get those assets and payments back that they had already delivered in expectation of a counter-performance by the other party. III. Negotiorum Gestio 66. Sections1035 et seq. ABGB provide detailed rules for the legal consequences caused by a person’s conducting of another’s affairs without authority to do so (negotiorum gestio). The obligations arising from such unauthorized conduct depend on whether it was carried out either in a case of emergency, or for the profit of the concerned, or against his will. 67. If a person conducts another’s affairs without authorization in order to prevent imminent damage, he is, pursuant to section 1036 ABGB, ‘entitled to demand therefrom compensation for the necessary and useful expenses so incurred, even if his endeavors have been fruitless, without fault on his part’. 68. If a person conducts another’s affairs without authorization merely to promote the other’s profit, he has to ask for the consent of the other. Where a negotiorum gestor failed to request such consent, but has acted at his expense to the evident, paramount advantage of the other, the other must refund the expenses he has incurred.76 Section 1038 ABGB deals with the case, where the paramount advantage is not evident.77 In such circumstances, ‘the other is not bound to give any compensation in regard thereto; on the contrary, the other may demand that the manager restore the property at his own expense, or if restoration is not possible, provide full satisfaction therefor’. 69. A person who attempts to conduct another’s affairs: against the validly declared will of the owner, or who prevents an authorized agent from managing the business by such an attempt is liable not only for any damage which arises therefrom and the profit lost, but also loses the claim for any amount of expenses which he paid, insofar as such amounts cannot be returned in kind.78

76. Cf. §1037 ABGB. 77. The same consequences are provided by § 1038 ABGB, if the negotiorum gestor has arbitrarily made important alterations of property belonging to another, so that the other may not further use it for the purpose he had employed it. 78. Cf. §1040 ABGB.

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70–72

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IV. Avoidance of a Fraudulent Transfer of Property by a Creditor 70. If a creditor has not secured the debt either by surety79 or by mortgage or pledge on movables,80 he has to accept dispositions by the debtor resulting in a decrease of the debtor’s fortune which endanger the satisfaction of the creditor’s claims. In certain circumstances, specified by bankruptcy law, the creditor may avoid transactions of the debtor, if the assets of the debtor appear not sufficient to satisfy the creditor’s claims, provided that such transactions are performed within certain periods,81 and are either aiming at the creditor’s disadvantage, or are gratuitous transfers to a third person. The avoidance enables the creditor to seize from a third person by way of execution those assets, of which the debtor’s fortune would have been deprived as a result of the debtor’s dishonest transaction. Thus, the bankrupt’s estate is augmented to the favour of the creditor(s). As no contract exists between the third person and the creditor this relation amounts to a legal obligation. §6. CONTRACT AND THE LAW OF PROPERTY I. The Notion of ‘Real Rights (Rights In Rem)’ 71. Austrian law makes a clear distinction between absolute rights such as ownership, having effect against everyone, and relative rights such as contractual obligations, which create legal effects only for the parties. Rules on these absolute ‘real rights’ or ‘rights in rem’ granting a person direct control over movable or immovable property constitute the law of property, as the German term ‘Sachenrecht’ may be aptly translated. The antiquated Austrian Civil Code refers to this field of the law by the notion ‘dingliches (Sachen)recht’, as contrasted to ‘persönliches Sachenrecht’ which means ‘law of obligations’. 72. In contrast to obligations the number of real rights is limited. The creation of a new type of real right by the meeting of the minds of two persons or by unilateral act is not possible. The perfect real right is the ownership or the right of property. The other types are limited real rights: This category as acknowledged by the General Civil Code includes pledge and mortgage and servitudes or easements. Another real right is provided by the General Land Register Act,82 viz. the charge on land (Reallast) imposing certain recurring obligations in favour of the holder of the charge. Finally, a statute of 1912 introduced the right to erect and use a building for a certain period on the real estate of another person (Baurecht). In addition, section 1095 ABGB provides that a lease may be registered in the public records thereby apparently transforming the right of the lessee into a ‘real 79. 80. 81. 82.

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Cf. §§1346–1367 ABGB. Cf. §§447–470 ABGB. For example, within two years before the insolvency became obvious; cf. §§28, 29 IO, §§2, 3 AnfO. Cf. Allgemeines Grundbuchsgesetz, ‘GBG’, BGBl 1955/39 as amended by BGBl I 2012/30.

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73–74

right’.83 However, this is misleading as a lease which has been entered in the land register has only the effect that a new owner of the real estate may not terminate the lease by simple notice thereof, and that in case of an auction sale the registered lease is treated like a servitude. 73. Simple ‘possession’, viz. the holding of a thing in custody with the intention to keep it as one’s own,84 does not qualify as real right. Nevertheless, ‘possession’ is a key concept of the law of property. A possessor may be in good or in bad faith, correspondingly he may enjoy specific legal protection or not.85 The distinctive feature of possession is the temporary control over a thing combined with the intention to deal with it in an ownership-like manner. Not only tangible things may be the object of possession, but also rights. Thus, lessees, borrowers and usufructuaries are possessors of a right. With regard to the tangible object they have leased, borrowed etc. they have no intention to keep it as their own, therefore, they are simple holders of the tangible thing. II. The Law of Ownership (Property) 74. According to section 354 ABGB, the owner of a thing has the right to dispose of it at his discretion and to exclude every other person therefrom.86 This may lead to the conclusion, that ownership entails an absolute and unlimited power of disposition. However, the owner’s freedom to exploit an asset of property is limited by statutory provisions imposing on the owner the duty to take care of the interests of third persons and of the society as a whole. Even expropriation is possible if the ‘common best interest’ so requires.87 Under the rules of civil law compensation must be paid to the person being forced to surrender ownership. Under Austrian law, the owner of a thing is entitled to peculiar actions which the law grants to protect the right of ownership in a very efficient way. These actions are a part of the Roman law heritage and derived from the ancient ‘rei vindicatio’.

83. §1095 ABGB. ‘If a contract for tenure is entered in the public records, the right of the grantee is to be considered as a right in rem to which even a consecutive possessor must submit for the remaining term of the contract.’ 84. Cf. §308 ABGB. 85. According to §454 et seq. Code of Civil Procedure possessors in good faith enjoy particular legal protection against any interference with the possession. 86. §354 ABGB. ‘Considered as a right, property is the ability to dispose arbitrarily of the substance and the produce of owned property and to exclude everyone else from it.’ 87. Cf. §365 ABGB.

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75–78

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III. Conveyancing 75. The existence of a valid title and a legitimate mode of delivery of the object to be transferred, e.g., a physical or a symbolic conveyance,88 are requisites for the acquisition of a ‘real right’ to movable or immovable property.89 The title on which the conveyance of property is most frequently based is a contract of sale. This illustrates the interrelation of contract law and the law of property in the context of conveyancing ‘real rights’. 76. In Austria the creation, transfer, encumbrance or cancellation of an absolute ‘real right’ in respect of an immovable property requires an entry into the land register (Grundbuch) to be effective against everyone. Already in the eighteenth century, during the reign of Maria Theresia, an efficient and workable system of land registration was established. In 1980, the land register, which is administered by the local District Courts, was turned into a computerized data bank system.90 Thus, the right of ownership, mortgages, servitudes, charges on land and rights to erect a building require registration. In addition, the leases and the rights of repurchase and of preemption are capable of registration.91 Finally, pursuant to section 364c ABGB a restraint of encumbrance and alienation (Belastungs-und Veräuβerungsverbote) in favour of close relatives may be registered.92 Registration of contractual rights is impossible. 77. Dispositions of a ‘real character’ (dingliche Verfügungsakte) in respect of immovable property require registration. As long as no entry into the register has been made, the party having contracted for the disposition is not sufficiently protected against attachments by third persons, as only a claim against the other party is available. Registration is crucial in several aspects. It gives the disposition binding effect on everybody. It also guarantees that the party on whose application the entry has been made has priority to the claims of another person. Moreover, everybody can rely on the Land Register’s accuracy and completeness. In contrast to other systems of registration the entry into the Austrian Land Register procures public confidence in its correctness and legal validity. 78. An application for the entry of a disposition into the Land Register must be made in strict observance of formal requirements. In order to be registered the contract on which the disposition is based must be established in a written form. It must be free from obvious defects, and the structure of its contents must strictly adhere to the usual traditional scheme. The contracting parties must have signed the contract, and either a notary or a court must have legalized the signatures. 88. 89. 90. 91. 92.

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By the use of a document representing the good to be conveyed. Cf. §380 ABGB. Cf. Grundbuchsumstellungsgesetz 1980, ‘GUG’, BGBl 1980/550; amended by BGBl I 2008/100. Cf. §9 GBG. Cf. §364c ABGB: ‘A contractual or testamentary prohibition against selling or encumbering binds only the first owner, but not his heirs or other legal successors. It is effective against third persons only if it was established between spouses, parents and children, and adopted or foster children or their spouses and was entered in the public registers.’

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79–81

§7. CONTRACT AND TRUST 79. The Austrian law of ownership does not provide for a dual concept of ‘legal’ and ‘equitable title’, which is characteristic for laws of the Anglo-American legal family. Therefore, the concept of ‘trust’ (Treuhand) has a very limited meaning in Austrian law and does not correspond to the famous concept of ‘trust’ in AngloAmerican law. Neither in the law of contract nor in the law of property, the General Civil Code of Austria includes an express provision on ‘trust’. However, a ‘trust’ is understood as a concept of the law of obligations. Notwithstanding the absence of a rule defining the trust agreement, it has a considerable practical importance in commercial settings. The trust is conceived by doctrinal writers93 and the courts94 as a particular type of contract which is closely related to the contract of agency. 80. It is the characteristic feature of a ‘trust of the Austrian type’ that rights are transferred by a person, called trustor (Treugeber) who may be (and often is) at the same time the beneficiary, to another person, called trustee (Treuhänder). This transfer is accompanied by an agreement which binds the trustee to act in his own name in a particular way on behalf of the trustor. The relationship between the trustor/ beneficiary and the trustee has no external effect and cannot be entered into the Land Register. If the trust is of the ‘open’ type, the trustee may inform third persons of the fact that he is not acting in his own interest. In most cases, however, the persons involved in a trust have no reason to disclose their relation and to resort to a ‘silent’ trust. The trustee may dispose of the right which was transferred to him as if he was the original owner. However, if he exceeds the power assigned to him by way of a trust he will become responsible to the trustor for damages. This situation is characterized by the statement: ‘A trustee may do more, than he is allowed to’. 81. A distinction is made between a ‘trust in self-interest’ (eigennützige Treuhand), and a ‘trust to the interest of another’ (fremdnützige Treuhand), also called ‘administrative trust’ (Verwaltungstreuhand). The latter is more frequently resorted to. To give an example: If somebody wants to disclose his ownership of an asset of property he may transfer this good to another person, the trustee, who is put in the position of an owner, but is obligated by the agreement with the trustor to keep the good in custody for a certain time. Here the trustee acts exclusively in the interest of the transferor. On the contrary, a ‘trustee in self-interest’ acts also in his interest when agreeing to the transfer of a good ‘in trust’. Typical of this type of trust is the ‘transfer of ownership for security’ (Sicherungsübereignung’).95 Here the transfer is 93. Cf. Kastner, Die Treuhand im österreichischen Recht, JBl, 305 (1948), JBl 1949, 90, 420, 537; Kastner, ‘Die Treuhand im österreichischen Recht’, in FS-Hämmerle (1972) 163; Apathy (ed.), Die Treuhandschaft (1995). 94. Cf. OGH 11 Feb. 1973, SZ 44/13; 1 Dec. 1982, EvBl 1983/26; 6 Oct. 1982, JBI 1984, 85; 15 Mar. 1988, JBI 1988, 513; 23 Feb. 1989, WBI 1989, 196; 5 Apr. 1990, RdW 1990, 375; 22 Feb. 1990, RdW 1990, 409. 95. In contrast to German law a ‘chattel mortgage’ is not accepted by Austrian law. If somebody wants to transfer his ownership of a movable as a security for a debt, he must hand over the good.

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also in the interest of the recipient, who gets a security for his claim against the transferor. Anyhow, his right to make use of the transferred property is strictly limited. 82. From a functional point of view, a number of legal concepts serve the same purposes in Austrian law as the trust does in Anglo-American law.96 Thus, e.g., foundations (Stiftungen) and funds (Fonds), viz. specific legal entities established according to the rules of the Federal Statute on Foundations and Funds97 correspond to charitable trusts. Alternatively, Austrian law will often find a contract conferring rights on a third person,98 where an English or American lawyer would resort to a trust. 83. If a creditor of the trustee wants to carry out an execution against the trust property (Treugut) the ‘beneficiary’ has a statutory right to make an objection.99 If bankruptcy proceedings were commenced against the trustee, the ‘beneficiary’ would be entitled to a claim for separation.100 Thus, the Austrian Supreme Court granted the beneficiary a claim for separation of the trust property from the bankrupt trustee’s estate.101 The position of the trustor as ‘economic owner’ is thereby given priority to that of the legal owner viz. trustee. If litigation as to the ownership of the object of the trust is initiated, only the trustee may function as plaintiff or defendant. 84. Austria has neither signed nor ratified the Hague Convention on the Law Applicable to Trusts and its Recognition of 20 October 1984, and there is no indication that the Austrian legislative bodies might have any intention in this direction. §8. GOOD FAITH AND FAIR DEALING 85. In contrast to the German Civil Code, which provides in its section 242 that ‘[t]he debtor is bound to perform according to the requirement of good faith, ordinary usage being taken into account’, the Austrian General Civil Code does not include a general clause that would make good faith (Treu und Glauben) a general requisite for the performance of contractual duties. However, among Austrian lawyers the opinion prevails that the principle of good faith is a characteristic and fundamental feature of Austrian contract law.

96. Konrad Zweigert – Hein Kötz, An Introduction to Comparative Law II: The Framework (Tony Weir trans., 3d ed., Clarendon Press 1999) §21, ‘The Trust – A Distinctive Feature of the Style of the Anglo-American Legal Family’. More recently: The Oxford Handbook of Comparative Law 1087 (Matthias Reimann – Reinhard Zimmermann eds., Oxford Universität Press 2006). 97. Bundes-Stiftungs- und Fondsgesetz, ‘BStFG’, BGBI 1975/11. 98. In German, Vertrag zugunsten Dritter, cf. §§881 and 882 ABGB. 99. Cf. §37 EO (Law of Enforcement, Exekutionsordnung). 100. Pursuant to §10(3) KO. 101. OGH 22 Feb. 1990, RdW 1990, 409.

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86–87

86. This opinion is based on two provisions of the Code, viz. section 863(2) ABGB stating that ‘[t]he custom and usage prevailing in honest dealing must be taken into consideration in determining the meaning and the effect of acts and omissions’,102 and section 914 ABGB saying that the ‘customs of honest dealing’ are the prevailing criterion for the interpretation of unclear contracts. In particular, it is the reference to the expression ‘customs of honest dealing’ (Übung des redlichen Verkehrs) employed in these provisions, which gave rise to the assumption by doctrinal writers and the courts, that Austrian contract law is determined by the ‘general principle of good faith’. The Supreme Court went so far as to ascertain that the principle of good faith would even take priority over express statutory rules.103 It is not purely accidental, however, that no general rule complying with section 242 BGB was introduced by the Third Amendment. The draftsmen examined this question and strictly and expressly rejected the adoption of a ‘general principle of good faith’.104 They believed that the courts would excessively resort to arbitrary rules of equity if ‘good faith’ should be the ultimate criterion for the examination of the conclusion of contracts. 87. Nevertheless, there are virtually countless decisions of the Supreme Court which refer to ‘good faith’ as if section 242 BGB would also be a part of Austrian law.105 In particular, many decisions searching for the real intentions of the parties to a vague contract either expressly use the words ‘Treu und Glauben’, or resort to phrases with a similar meaning such as ‘according to honest generally accepted view’ (nach redlicher Verkehrsanschauung). Thus, the Supreme Court asserted in recent decisions106 that the exchange of goods by a legal transaction must not be abused by a party to a contract to cause the other damage, but has to be carried out ‘in accordance with the customs of honest dealing’.107 Whether the conduct of the parties to a contract is honest or not is to be concluded from the accepted view of the involved groups of the population. If this opinion is not evident, expert-witnesses may be employed to clarify what the predominant common opinion of the involved group of the population is. By supplementing aspects which the parties in fact neglected when they drew up their agreement, ambiguous and incomplete contracts can be rightly interpreted in reference to ‘good faith’.

102. Thus, the intention of a party to conclude a contract may be revealed and thereby the express declaration of intent substituted. 103. Cf. OGH 7 Oct. 1974, SZ 471104. 104. Cf. Herrenhausbericht (‘HHB’; Report of the Senat on the amendments of the Civil Code), 275. 105. Cf. OGH 14 Jun. 1971, JBl 1972, 200; 17 Mar. 1978, EvBl 1979/3; 10 Jan. 1973, EvBl 1973/112; 3 Sep. 1979, SZ 52/130; 12 Jan. 1983, SZ 56/3; 1 Feb. 1983, SZ 56/17; 29 Feb. 1984, SZ57/45; 8 Mar. 1988, WBl 1988, 240 etc. 106. Cf. OGH 28 Mar. 1985, JBl 1985, 547; 23 Jul. 1987, JBl 1988, 38. 107. Cf. §914 ABOB.

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88–89

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§9. STYLE OF DRAFTING 88. The draftsmen of the General Civil Code of Austria were quite aware of the fact that neither statutory law nor a contract can provide a perfect and complete text, which might give an answer to every question that may occur in the application of the statute, or in the performance of a contract. Therefore, they included rules of interpretation for either category in the Code. Whereas section 6 and section 7 ABGB set up the relevant standards for the interpretation of statutory law,108 sections 914 et seq. ABGB concern the interpretation of contracts in general. In addition, section 346 UGB provides a specific rule for the interpretation of commercial contracts between businessmen. According to section 914 ABGB, ‘[t]he interpretation of contracts shall not be based upon the literal meaning of the expressions used but rather upon the true intention of the parties, and the contract shall be construed in accordance with the customs of honest dealings’. However, in unilaterally binding contracts it is, according to section 915 ABGB, in case of doubt presumed ‘that the person bound intended to take upon himself a lighter rather than a heavier charge; in bilaterally binding contracts a vague declaration shall be interpreted to the prejudice of the person who has made it’. Section 346 UGB states that ‘the customs and usages prevailing in commerce shall be taken into consideration among entrepreneurs in respect of the meaning and effect of acts and omissions’. 89. From these provisions can be derived that the law does not assume that contracts are always worked out in a detailed and perfect way covering every aspect of the transaction. And it is made clear that terms of a contract of sale must not be interpreted simply by focusing on their narrow literal meaning, but by searching for the ‘true intention’ of the parties, and that in doing so, ‘the customs of honest dealing’ have to be considered. Thereby, the law presupposes that the parties usually fail to use unequivocal language when drafting a contract. That implies that the style of drafting a contract is characterized by some generosity and a tendency to rely on the models established by the code for most types of contracts. The parties are used to focusing on the crucial points of the agreement and on those points which they want to have fixed in a way different from that of the statutory law. There is no need for the parties to aim at a detailed completeness of the contents of their agreements, for the judge is familiar with using statutory contract law as gap-filling device in the case of a controversy, and the rules of interpretation enable the judge to supplement an incomplete contract by searching for the hypothetical intention of the parties, and taking the ‘customs of honest dealings’ into account.

108. The German Civil Code includes no provision on statutory interpretation. Its draftsmen were obviously convinced that they had created an absolutely clear and complete codification.

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Introduction to the Law of Contract

90–91

§10. SOURCES OF THE LAW OF CONTRACT I. Areas of Austrian Law, Important Codes and Statutes 90. As every other legal system which is based on the principles of priority of statutory law and codification, the Austrian law consists of a complex system of separate areas. This is documented by the areas of law which are taught at the five public Austrian law schools. Even though they are now autonomous in what courses they offer, there is a core curriculum which is common to more or less all law schools.109 The statutes defining the conditions for acceptance in the professions of judge, public prosecutor and lawyer110 provide minimum numbers of ECTS points to be acquired in certain expressly mentioned fields of the law. Thus, the common mandatory subjects are: (a) private law and civil procedure, (b) criminal law and criminal procedure, (c) constitutional law, human rights and administrative law and procedure, (d) enterprise law, labour and social law and tax law, (e) law of nations and European law and (f) basics of the law and economic sciences. 91. The complexity of the law requires a systematic division into separate areas, in particular: (1) Constitutional law: Its main sources are: the Federal Constitution of 1920/29 (B-VG),111 the Statute on the Neutral Status of Austria of 1955,112 the Basic Law on the General Rights of the Citizens of 1867,113 the European Human Rights Convention114 etc. (2) Administrative law: This wide area of the law is not codified and is laid down in countless statutes and decrees. The topics concerned range from School Organization Laws, the Industrial Code, Drug and Food Laws to the Road Traffic Act. Of particular interest is the General Statute on Administrative Procedure,115 as it provides an uniform procedure for this extremely complex field of the law. (3) Civil law: In this area of law the General Civil Code of Austria is the central codification, but changing values and the evolution of the technical and social environment required many modifications and supplements during the 180 years having passed since its enactment. Among the numerous statutes enacted in 109. This applies to advanced students of law in their second, third or fourth year. In the first introductory year of studies, Austrian students should become familiar with the basic principles of law. Thus, they have to take courses such as Introduction to the Law, Roman Private Law, Austrian Legal History within the framework of European Legal Developments, and Introduction to the International Dimensions of the Law. Under the new University Law of 2002 there is a pressure to implement the so-called Bologna-Salamanca curriculum also in the field of the study of law. By the end of 2011, no Austrian law school has implemented the Bologna curriculum, however. 110. BGBl I 2010/111 and BGBl I 2008/68. 111. Cf. BGBl 1930/1. 112. Cf. BGBl 1955/211. 113. Cf. RGBl 1867/142. 114. As ratified by BGBl 1958/210. 115. Allgemeines Verwaltungsverfahrensgesetz, ‘AVG’, BGBl 1950/172.

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more recent times modifying or supplementing the General Civil Code of Austria, important ones are e.g.: (a) The Marriage Act.116 Originally a statute of the German Empire, it was introduced in 1938 after Austria’s occupation by Germany and remained in effect, after the elements of national-socialist ideology had been eliminated. In 1978 it was substantially amended to guarantee equal positions of wife and husband, and to introduce a liberalized system of divorce law. (b) The General Land Register Act of 1955 (GBG), and (c) the statute introducing a computerized system of land registration of 1980 (GUG). Of particular importance in respect to contract law are the Consumer Protection Act of 1979117 and the Statute on the Law of Lease (of apartments and offices) of 1981.118 A common feature of the two statutes is their aiming at a better protection of the typically weaker party, viz. the consumer and the lessee. Whereas the Consumer Protection Act has recently been amended to make it comply with EC-law pursuant to the EEA Treaty, the Law of Lease Act together with other statutes on the law of dwelling has been amended twenty-five times so far (most recently, BGBl I 2010/29). (4) Commercial and economic law: The central codification in the field of commercial law used to be the Commercial Code of 1897 which became the ‘Enterprise Code’ in 2007.119 In addition, there exist numerous statutes concerning e.g., companies such as the Statute on the Public Limited Company,120 the Statute on the Private Limited Company,121 or the Statute relating to Cooperatives122 etc. Other statutes concern negotiable instruments, in particular bills of exchange and cheques,123 the credit and bank system,124 credit banks,125 private insurance126 etc. Economic law is not clearly defined. It is a mix of statutes belonging either to public law or to private law. Important statutes of this area are in particular: the Act on Unfair Competition,127 the new Act on Cartels,128 the Price Control Act,129 the Patent Act,130 the Trademark Act,131 the Copyright in Designs Act,132 the Copyright Act133 etc. 116. 117. 118. 119. 120. 121. 122. 123. 124. 125. 126. 127. 128. 129. 130. 131. 132. 133.

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Ehegesetz, ‘EheG’, DRGBl 1938 I, 807. Konsumentenschutzgesetz, ‘KSchG’, BGBl 1979/140. Mietrechtsgesetz, ‘MRG’, BGBl 1981/520. Unternehmensgesetzbuch, ‘UGB’, BGBl I 2005/120 (already 9 amendments in 2012). Another translation would be Stock Company Act, Aktiengesetz, ‘AktG’, BGBl 1965/98. Gesetz über Gesellschaften mit beschränkter Haftung, ‘GmbHG’, RGBl 1906/58. Genossenschaftsgesetz, ‘GenG’, RGBl 1873/70. Law on Bills of Exchange, Wechselgesetz, ‘WG’, BGBl 1955/49; and Law on Cheques, Scheckgesetz, ‘SchG’, BGBl 1955/50. Bank System Act, Bankwesengesetz, ‘BWG’, BGBl 1993/532. Saving Banks Act, Sparkassengesetz, ‘SpG’, BGBl 1979/64. Cf. Insurance Control Act, Versicherungsaufsichtsgesetz, ‘VAG’, BGBl 1978/569; Insurance Contract Act of 1958, Versicherungsvertragsgesetz 1958, ‘VVG’, BGBl 1959/2. Gesetz gegen den unlauteren Wettbewerb, ‘UWG’, BGBl 1984/448. Kartellgesetz 2005, ‘KartG’, BGBl I 2005/61. Preisgesetz 1992, ‘PreisG’, BGBl 1992/145. Patentgesetz, ‘PatG’, BGBl 1970/259. Markenschutzgesetz, ‘MarkSchG’, BGBl 1970/260. Musterschutzgesetz, ‘MuSchG’, BGBl 1990/496. Urheberrechtsgesetz, ‘UrhG’, BGBl 1936/111; most recently amended by BGBl I 2010/58.

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(5) (6)

(7)

(8)

134. 135. 136. 137. 138. 139. 140. 141. 142. 143. 144. 145. 146. 147. 148. 149. 150.

91–91

As a result of the entering into effect of the EEA Treaty and the accession to the EU the need for harmonization has been particularly strong in these areas of the law. Therefore, amendments to numerous statutes relating to topics of economic law have been enacted since 1993. Tax Law: This area of the law consists of several highly complicated statutes fully understood only by specialists, such as the Federal Fiscal Code,134 Income Tax Act,135 Corporate Tax Act136 etc. Labour and social security law: Again we are confronted with a mix of statutes belonging either to public law or to private law. Numerous statutes have been enacted, mainly after 1919, aiming at the protection of employees. Examples are the Constitution of Labour Act,137 the Hours of Employment Act,138 the Statute Protecting Working Mothers139 etc. Collective labour agreements do not qualify as legal sources. Their statutory foundation is the Constitution of Labour Act. Judicature and Civil Procedure: The Austrian Code of Civil Procedure of 1895140 was subject to an extensive amendment in 1983.141 It ‘has influenced procedural law in many other countries and is generally acclaimed as an enlightened piece of legislation’.142 Other important statutes in this area of the law are: the Statute on Jurisdiction;143 the Law of Execution (concerning enforcement of judgments);144 the Regulation Brussels I on Jurisdiction and the Recognition and Enforcement of Judgments in Civil and Commercial Matters145 and other European Regulations in that field; finally the recently amended insolvency laws.146 Criminal law, criminal procedure: Austria has a modern Criminal Code, which was drafted without any dependence on previous codification and became effective after intensive preparation in 1975.147 The Code of Criminal Procedure dates from the same year and is an overhauled version of an older code.148 In addition, numerous statutes exist regarding e.g., juvenile justice,149 execution of sentences150 etc.

Bundesabgabenordnung, ‘BAO’, BGBl 1961/194. Einkommensteuergesetz 1988, ‘EStG’, BGBl 1988/400. Körperschaftssteuergesetz 1988, ‘KStG’, BGBl 1988/401. Arbeitsverfassungsgesetz, ‘ArbVG’, BGBl 1974/22. Arbeitszeitgesetz, ‘AZG’, BGBl 1969/461. Mutterschutzgesetz, ‘MSchG’, BGBl 1979/221. Zivilprozessordnung, ‘ZPO’, RGBl 1895/113. BGBl 1983/135. This is the evaluation in Rudolf Schlesinger – Hans Baade – Mirjan Damaska – Peter Herzog, Comparative Law 338 (5th ed., The Foundation Press 1988). Jurisdiktionsnorm, ‘JN’, RGBl 1985/111. Exekutionsordnung, ‘EO’, RGBl 1896/79; most recently amended by BGBl I 2005/68. Regulation 44/200/1EC of 22 Dec. 2000, O.J. EC L 12, 16 Jan. 2001, 1; BGBl III 1999/3. The most important insolvency law is: the Insolvency Act (Insolvenzordnung, ‘IO’) as comprehensively amended by BGBl I 2010/29 (effective 1 Jul. 2010). Strafgesetzbuch, ‘StGB’, BGBl 1974/60 (frequently amended). Strafprozessordnung, ‘StPO’, BGBl 1975/631; as comprehensively amended by BGBl I 2004/19. Cf. Statute on Juvenile Justice (Jugendgerichtsgesetz 1988, ‘JGG’), BGBl 1988/599. Cf. Execution of Sentences Act (Strafvollzugsgesetz, ‘StVG’), BGBl 1969/144 and BGBl 1974/424.

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(9) Private International Law: A modern conflicts statute entered into effect on 1 January 1979.151 However, with regard to the law to be applied to contractual obligations, non-contractual obligations, divorce proceedings,152 and maintenance duties, European Regulations have meanwhile replaced the relevant provision of the IPRG. II. Sources of the Law of Contract 92. Austria’s internal rules governing the law of contract are set out in two codifications, viz. the antiquated General Civil Code of Austria and the Enterprise Code. In addition, there exist a number of specific statutes for specific contracts, such as labour contracts, contracts of lease and tenancy, and consumer transactions, which were mentioned earlier. 93. Contracts may have a transnational character, and this is particularly true with regard to contracts for the sale of goods in a country where the businessmen are very much involved in foreign trade. Therefore, attention must be paid to the fact that for this most important contract type an international source of law is in effect, viz. the United Nations Commission on International Trade Law (UNCITRAL)-Convention on Contracts for the International Sale of Goods (CISG) of 1980.153 This convention became effective for Austria on 1 January 1989.154 Thus, in contemporary Austria there exist three different statutory sources dealing with the contract of sale, viz. the General Civil Code, the Enterprise Code and the (Vienna) CISG. The practical importance of the Convention is underlined by the vast number of cases in which the Austrian Supreme Court had to deal with its application and interpretation.155 94. As mentioned earlier, the General Civil Code of Austria adheres to an obsolete tripartite system. There is no introductory general part, only some fourteen provisions including the rules of statutory interpretation are placed in front of the first part, which is entitled ‘Of the Law of Person’ and extends from section 15 to section 284. The second part, entitled ‘Of the Law of Property’, extends from section 285 to section 1341 and is divided into two subdivisions. The first subdivision is entitled ‘Of the laws concerning property rights’, extends from section 284 to section 858 and includes – strangely enough – the rules on inheritance law. The second subdivision of the second part of the Code, covering section 858 to section 1341, is

151. Gesetz über das Internationale Privatrecht, ‘IPRG’, BGBl 1978/304; for a translation of the original Act into English, see, E. Palmer, The Austrian Codification of Conflicts Law, 28 Am. J. Comp. L. 197 (1980). 152. Rome Regulations I, II and III. 153. Abbr. ‘CISG’; this Convention was adopted on 10 Apr. 1980, at the end of an international conference in Vienna sponsored by UNCITRAL and opened for signature on 11 Apr. 1980. Therefore, CISG is also labelled the ‘Vienna Sales Convention’. 154. BGBl 1988/96. 155. Posch/Petz, Austrian Cases on the UN Convention on Contracts for the International Sale of Goods, Vindobona J. Int. Com. L. Arb., Vol. 6/1, (2002).

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mainly concerned with obligations. It is entitled in an outdated manner: ‘On personal rights in property’. The last and shortest part on ‘rules which are common to the law of person and to the law of property’ includes provisions on surety, modification and termination of rights and obligations, and on limitation and similar concepts. It extends from section 1342 to section 1502 ABGB. It should be repeated, that this structure is obsolete and the employed terminology confusing. 95. The second part of the Code includes in its second subdivision a number of general provisions for all types of contracts. For examples: sections 883 et seq. on form of contracts; sections 903 et seq. on time, place and method of performance; and sections 918 et seq. on delayed performance and non-performance etc. It also provides a set of general rules for all types of sales contracts, viz. sections 1053 et seq. 96. The former Commercial Code included and the Enterprise Code includes a number of provisions, viz. sections 343–372, dealing with commercial transactions in general. In addition, some specific rules concern commercial sales, viz. sections 373 et seq. The provisions of this Code on commercial transactions in general, and on contracts for the sale of goods in particular, are based on the general rules of the Civil Code which apply subsidiarily. III. Finding the Law 97. The number of law books in Austria has not been too numerous until recently. Things have changed and new legal journals have been created and new commentaries and treatises published. Therefore, some information about how and where statutes, court decisions, and literature can be found, may be helpful for foreign lawyers. At each of the five schools of law a collection of Austrian legal literature is accessible to the public. A. Legislation 98. Legislation (laws, decrees) and international treaties used to be published in a printed official journal, the Bundesgesetzblatt (BGBl).156 Since 2004, federal and provincial legislation is available only in an electronic version from the official RISdata bank: www.ris.bka.gv.at157 free of any charge. The legislative acts are cited as follows: name of statute (often in abridged designation), date of parliamentary adoption, BGBl year/number; for example: ‘Product Liability statute of 21 January 1988, BGBl 1988/ 99’. Usually all but the most familiar statutes, such as the ABGB, UGB etc., are cited in this way.

156. During the Monarchy the name of the Official Journal was Reichsgesetzblatt (RGBl), and after 1919 for a short period Staatsgesetzblatt für die Republik Österreich (StGBl). 157. RIS stands for ‘Rechtsinformationssystem’ which means legal information system.

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Statutes are either drafted in articles or, particularly in the field of private law, in ‘§§’ (sections, Paragraphen). If a legal provision consists of several subsections, this is indicated either by ‘Abs.’ (Absatz), or by a number in brackets, e.g.,: ‘§863 Abs. 2 ABGB’ or ‘§863 (2) ABGB’. 99. The well organized RIS-data bank has made the consultation of the traditional Indices which are edited by the Federal Chancellorship unnecessary if a statute or decree is in demand: (1)Index (number of year) – Systematisches Verzeichnis des geltenden Bundesrechts. This index of the actually effective federal law is published every year and is systematically structured in ‘subject areas’, and ‘primary’ and ‘secondary groups’ (Sachgebiete, Haupt-/Nebengruppen). (2)Index (looseleaf) zum österreichischen Reichs-, Staats- und Bundesgesetzblatt. This index is structured by a system of subject matter key words and is being kept up to date. In addition, JUS-EXTRA, a monthly service published by verlagoesterreich, provides a survey of recent legislation, court decisions and literature. This service includes abstracts of the rationes decidendi of the decisions of the Supreme Court, Constitutional Court and Administrative Court, and of the content of some of the indicated articles and books. The leading publishing firm in Austrian law, Manz of Vienna, has been establishing a computerized ‘Legal Data Bank’ (Rechtsdatenbank, ‘RDB’; www.rdb.at) providing articles, court decisions etc., which can be subscribed for a moderate fee. B. Case Law 100. Primarily, decisions of the Austrian Supreme Court of Justice in matters of civil law are published in a quasi-official collection of decisions of the Austrian Supreme Court in civil matters, generally called ‘SZ’ (Sammlung zivil), published in annual volumes since 1919 (with the exception of 1939–1945). Citation of decisions published in SZ must at least indicate the volume and number of the decision. Volume and number are connected by a slash indicating that a number, not a page, is cited (e.g., SZ 51/14). Whereas the date of the decision should be added, the docket number of a published decision may be omitted. A collection of decisions rendered by the imperial Supreme Court had been founded by Glaser and Unger: There are two series designated by the names of the founders: ‘Glaser – Unger’ (GlU) and ‘Glaser – Unger, Neue Folge’ (GlUNF). The collection covers the period from 1853 to 1918. 101. Case law and commentaries to decisions are published in a number of legal journals. Decisions rendered by the Supreme Court and by the Superior Courts of Appeal in contract cases can be found particularly in Juristische Blätter (JBl), cited by year and page; Evidenzblatt der Rechtsmittelentscheidungen (EvBl), cited by year and number; and in three (recently established) journals focusing on economic law: ecolex, Recht der Wirtschaft (RdW), Wirtschaftsrechtliche Blätter (WBl), ecolex, zak, each cited either by year and page, or by year and number. 62

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102. The Index der Rechtsmittelentscheidungen und des Schrifttums (Index to appellate court decisions and legal literature) founded in 1946 by Hohenecker and published annually used to be a valuable help in the search for court decisions, as is the already mentioned JUS-EXTRA. However, due to the excellent electronic services of the Federal Chancellorship ‘RIS’ and the ‘RDB’ of MANZ publishers the traditional surveys and indices have lost its practical importance, since all decisions of the Supreme Courts (OGH, VwGH, VfGH) may be found in RIS and many of them with case notes in RDB. 103. In addition to the date and the place where it can be found, the citation of a published decision must indicate the court having handled the case. The abbreviations used are: – – – –

‘OGH’ for Supreme Court of Justice (Oberster Gerichtshof). ‘OLG’ for Superior Court of Appeal (Oberlandesgericht). ‘LG’ for Court of Appeal (Landesgericht). ‘KG’ for the former second type of Court of Appeal, the ‘Circuit Court’ (Kreisgericht).158 – ‘BG’ for District Court (Bezirksgericht). In contrast to the practice in Anglo-American laws the names of the parties to a published case are never specified. Only their capital letters are indicated. The names of the judges constituting the Senate who has rendered the decision are published in RIS, however. C. Periodicals, Commentaries, Treatises and Monographs 104. Scholarly writings are to be found in the already cited journals, and in additional journals addressed to specific legal professions (Österreichisches Anwaltsblatt, ‘Anw’; Österreichische Notariats-Zeitung, ‘NZ’; Österreichische Richterzeitung, ‘RZ’) or focusing on specific fields of the law (Das Recht der Arbeit, ‘DRdA’ – labour law; Wohnrechtliche Blätter, ‘WoBl’ – law of lease and tenancy etc.; Zeitschrift für Arbeits-und Sozialrecht, ‘ZAS’ – labour and social security law; Zeitschrift für Rechtsvergleichung, ‘ZfRV’ – comparative law; Zeitschrift für Verkehrsrecht, ‘ZVR’ – traffic law; etc.). 105. Encyclopaedias are a form of legal publication which is unknown in Austrian legal writing. In their place commentaries to the codes are published. Several actual commentaries and a historical one exist in respect of the General Civil Code: – FENYVES/KERSCHNER/VONKILCH, Kommentar zum ABGB, 3rd ed. (of former Klang-Kommentar), 12 vol. (since 2006); cited: Name of contributor in Klang3 § Marginal Number (Randzahl, ‘Rz’).

158. As mentioned earlier, the Kreisgericht was abandoned by BGBl 1993/41, effective on 1 Mar. 1993.

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– KLETECˇ KA/SCHAUER (Hrsg), ABGB-ON–Kommentar (2010); cited: Name of contributor in Kletecˇ ka/Schauer, ABGB-ON, nr. of electronic update, § Rz. – KOZIOL/BYDLINSKI/BOLLENBERGER, ABGB–Kommentar 3rd ed. (2010); cited: Name of contributor in KBB3, § Rz. – RUMMEL, Kommentar zum ABGB, vol. I. 3rd ed. (2001), vol. II. 3rd ed. (2003); cited: Name of contributor in Rummel,3 Marginal Number (Randzahl, ‘Rz’). – SCHWIMANN/KODEK, Praxiskommentar zum ABGB, 4th ed., 8 vol. (since 2011); cited: Schwimann/name of contributor, ABGB Band § Rz. – ZEILLER, Commentar über das allgemeine bürgerliche Gesetzbuch, 4 vol. (1811–1813); e.g., cited: Zeiller, ABGB Commentar, note to §. An edition of the text of the General Civil Code of Austria providing comprehensive citations of case law and literature and including the most important specific private law statutes is: Dittrich/Tades, ABGB Manz’sche Groβe Ausgabe 37th ed. (2009); whereas Dittrich/Tades, ABGB Manz’sche Taschenausgabe 20th ed. (2002) includes brief notes on the way the provisions are applied by courts. 106. Actual treatises on general Austrian civil law are the following: – APATHY et al., Bürgerliches Recht, 7 vol. 4th ed. (2010). – BYDLINSKI P., Grundzüge des Privatrechts, 8th ed. (2010). – EHRENZWEIG, System des österreichischen allgemeinen Privatrechts, 3rd ed.: Erbrecht, by Kralik (1983); Familienrecht, by Schwind (1984); Recht der Schuldverhältnisse–Allgemeine Lehren, by Mayrhofer (1986). – GSCHNITZER, Lehrbuch des österreichischen bürgerlichen Rechts, 2nd ed., 6 vol. by Faistenberger/Barta/Call/Eccher et al., Allgemeiner Teil des Bürgerlichen Rechts, Schuldrecht, Allgemeiner Teil. Schuldrecht, Besonderer Teil und Schadenersatz, Sachenrecht, Familienrecht, Erbrecht (1979–1992). – KOZIOL/WELSER, Bürgerliches Recht, vol. I: Allgemeiner Teil/Sachenrecht/ Familienrecht 13th ed. (2006), vol. II: Schuldrecht Allgemeiner Teil/Schuldrecht Besonderer Teil/Erbrecht 13th ed. (2006). 107. Actual treatises on Private International Law are the following: – POSCH, Internationales Privatrecht, 5th ed. (2010). – SCHWIMANN, Internationales Privatrecht einschlieβlich Europarecht, 3rd ed. (2001). – SCHWIND, Internationales Privatrecht, Hand–und Lehrbuch (1990). – VERSCHRAEGEN, Internationales Privatrecht (2012). IV. Literature on Austrian Contract Law in English 108. As was correctly stated in an article of 1988 on Austrian legal research159 ‘[o]nly relatively few sources are available in English’ with regard to the entire legal 159. James R. Fox, A Guide to Austrian Legal Research, 80 L. Lib. J. 99 (1988).

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system of Austria. Not much has changed meanwhile. Whereas some articles on topics of commercial law exist, virtually no relevant recent literature on Austrian contract law in English can be made available. The main reference is a rather sketchy survey of Austrian Business Law which is offered by a team of attorneys160 including a chapter on contract law by Heller, pp. 66–93. The second edition which has been offered in a looseleaf version161 includes an even briefer look at Austrian contract law, again by Heller, Chapter V, pp. 1–23. It must also be mentioned that this publication completely abstains from quoting any provisions. Similarly, the more recent introduction to the Austrian legal system by Hausmaninger devotes in its 5th edition of 2011 no more than fifteen pages to the law of contracts, so that it may only serve to provide a general overview.162 Even the rare reports to the congresses of the International Academy of Comparative Law by Austrian lawyers are, as a rule, published in German. Thus, the report on ‘pre-contractual liability’ presented to the 13th Congress in Montreal in 1990 is rather an exception.163 Studying Austrian contract law in more detail, thus, requires at least a working capacity of German.

160. Cf. Heller/Loeber/Bahn et al., Austrian Business Law (Kluwer and Manz 1984). 161. Cf. Heller/Loeber/Bahn et al., Austrian Business Law (Kluwer and Manz eds., 2d ed., 1992) looseleaf. 162. Herbert Hausmaninger, The Austrian Legal System (3d ed., 2011). 163. Posch, ‘Austria’, in Hondius (ed.) Pre-contractual Liability. Reports to the XIIIth Congress – International Academy of Comparative Law – Montreal, Canada 18–24 Aug. 1990 (1991).

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Part I. General Principles of the Law of Contract

Chapter 1. Formation §1. AGREEMENT AND ‘DO, UT DES’ I. Offer and Acceptance 109. According to section 861 ABGB, a contract is created by the mutual consent of two or more parties. In the Austrian, as in virtually every other system of contract law, the technical instruments by which the ‘meeting of the minds’ is achieved are offer and acceptance. These two notions designate corresponding declarations of intent which are communicated among competent persons, and the difference between these two notions is one of timing only, in that the offer is made prior to the acceptance. It follows from the prevailing principle of private autonomy, that everybody may make an offer to whomever he chooses on whatever subject matter he selects, provided the offer is neither objectively impossible to carry out nor prohibited by the law. Usually, the offer is addressed to a certain other person. However, a proposal which is not directed to a specific addressee, but to everybody who might be interested, may qualify as a ‘public offer’ on a ‘first come first served’ assumption. The first person who accepts such an offer by performing the corresponding duties becomes the contracting partner. 110. In the same way, everybody is free to accept or refuse an offer directed to him, with the exception of some rather rare cases in which an ‘obligation to contract’ is imposed on the offeree. Such a compulsion to enter into a contractual relation (Kontrahierungszwang) is imposed in particular on public utilities or transportation enterprises which have the position of a monopoly in the supply of goods or services of vital interest. Here, the duty to enter into a contract may be enforced, and if a public utility should refuse to supply, it may be subjected to a claim for damages. The addressee of an offer may also modify the proposal of the offeror. In this case, however, the declaration ‘accepting’ the offer in a modified version does not qualify as an ‘acceptance’ in the legal sense, but constitutes a ‘counteroffer’ requiring acceptance by the original offeror to create a contractual obligation.

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A. The Offer 111. The offer is a proposal addressed to another person to enter into a contract. It has to be sufficiently determined and must clearly demonstrate the intention of the offeror to consider himself bound by his proposal. An offer is sufficiently determined if it indicates the relevant contents of the intended contract, the essential respective rights and duties of the parties. Thus, an offer to enter into a purchase or sale must determine the object and the price. In principle, an offer should be phrased in such a distinct way that it could be accepted by a simple ‘yes’. The serious intention of the offeror to consider himself bound must emerge from his acts in an unequivocal manner. As a rule, the mere consignment of catalogues and price lists, as well as the display of goods in a shop-window cannot constitute a ‘public offer’ as it is obvious that these activities do not express any serious intention of entering into contracts with everyone who might take notice thereof. A particular example of the creation of a contract by ‘real’ acceptance of a ‘public offer’ is the purchase from a penny-in-the-slot-machine which a businessman has located in a public place. Here, the contract is perfect as soon as the money has been put into the slot and the product released by the machine. 112. Binding effect is attributed to the offer as soon as it arrives with the offeree. A revocation has to reach the offeree at an earlier date than the offer itself. After the arrival of the offer with the addressee it cannot be revoked by the offeror at his own discretion. It now lies with the offeree whether the contract will be concluded or not. The offeror is bound until the expiration of the period set forth by him for the answer.164 If the offeror failed to set a time limit for the acceptance by the offeree, he is bound for a reasonable period of time, allowing the offeree to consider whether to accept the proposal. Insofar as the question of the binding effect of an offer is concerned, Austrian law is different from Anglo-American contract law. As a consequence of the consideration requisite, English and US contract laws adhere to the rule that the offer may be withdrawn as long as the offeree has not dispatched the notice of acceptance to the offeror. The two legal traditions are not as disparate as it appears at first sight. Thus, a ‘firm offer’ is acknowledged in exceptional situations in English law,165 and in respect of a merchant’s written and signed offer for a maximum period of three months in American law.166 On the other side, Austrian legal practice accepts a form of a ‘non-binding proposal’. By using the clause ‘ohne obligo’ (without obligation) or the word ‘freibleibend’ (meaning ‘subject to modification’) in a declaration which otherwise would be an offer, an offeror can make either a reservation of revocation, or specify that his declaration shall be treated as an invitation to the addressee to enter into 164. Cf. §862 ABGB, first sentence: ‘The promise (offer) must be accepted within the period set forth by the offeror.’ 165. Cf. Dickinson v. Dodds (1876) 2 Ch.D. 463. 166. Cf. §2-205 UCC (Uniform Commercial Code).

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negotiations. In such a case, the consonant reaction of the addressee is not a declaration of acceptance but an offer, which requires acceptance by the person who initiated the bargain to create a contract.167 B. Pre-contractual Fault 113. Whereas there is no obligation of the offeree to react to an offer it is for him to decide whether to enter into negotiations or to break up the bargaining process. He is nevertheless bound to behave in good faith. Any deceitful or negligent act committed by the offeree in the course of negotiations, which creates the false impression with the offeror that the contract will be certainly concluded, may result in the offeree’s liability for pre-contractual fault.168 C. Offer and Promise of a Reward 114. A promise of a reward (Auslobung) is, according to section 860 ABGB, a unilateral legal transaction. It is not directed to certain persons and becomes binding through the public announcement that whoever may perform an act or accomplish a certain task as specified in the promise will receive a reward. According to section 860a ABGB, the promise ‘may be revoked in the same manner as published, in a manner which would have the same effect, or through special notification, unless such revocation was waived in its publication, either expressly or by specifying a certain period of time therein’. Everybody having accomplished the specified task can claim the promised reward, even if he did not know of the promise and acted without any expectation of a reward. Likewise, a person who has accomplished the task set forth in a promise after its revocation may claim the reward ‘if he can prove that he was unaware of the revocation without his fault at the time of his full performance’. The difference between a promise of reward and an offer is clearly delineated. Whereas the former unilaterally creates an enforceable obligation, the only legal effect an offer entails is derived from its binding character. The offeror may not revoke his proposal for the period fixed by him, or for a reasonable period of time. By a mere offer no contractual rights and duties can be created, as long as it is not accepted. It is the meeting of the minds brought about by an offer together with a corresponding declaration of acceptance by the offeree that creates the obligation. Because of these fundamental differences between a promise of a reward and an offer, the translation ‘general offer’ for ‘Auslobung’ should not be employed.169

167. If the party who initiated the exchanges of declarations intends to reject this offer, he has to notify the offeree of his revocation immediately; his silence entails the formation of the contract. 168. Cf. §869 ABGB, third sentence. ‘Any person, who in order to obtain an advantage over another, uses indistinct expressions or undertakes a deceitful act is liable for damages suffered thereby.’ 169. Cf. however the translation of §§860 and 860a ABGB by Baeck.

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D. Offer or Invitation to Treat 115. A person’s intention to be bound is not sufficiently demonstrated if he merely invites another person to preliminary negotiations, or presents vague proposals for discussion. The forwarding of catalogues and price lists as well as the display of goods and an ordinary advertisement do not qualify as offers. Such declarations may be considered preliminary proposals inviting offers by other persons in the same way as an ‘offer without obligation’, indicated by the use of words such as ‘ohne obligo’ or ‘freibleibend’. E. The Acceptance 116. Acceptance is the corresponding declaration to the offer, by which the offeree expresses his full consent to every aspect of the proposal, without changing any terms of the offer. Under Austrian law, a contract is concluded at the moment when the offeree’s declaration of acceptance is brought to the knowledge of the offeror, so that he has the opportunity to take notice thereof. ‘The acceptance of an offer must be declared freely, seriously, precisely and intelligibly’,170 and timely, viz. within the period set forth in the offer. Section 862 ABGB provides that, if no period was set forth, an offer made inter praesentes or by telephone must be accepted immediately. No contract is created if the declaration of acceptance is unintelligible or indeterminate, or if it ‘is made under other conditions than those under which the offer was made’.171 F. Contract by Correspondence 117. If the offer is mailed, faxed, e-mailed etc. to a person, the contract will be concluded as soon as the acceptance reaches the sphere of influence of the offeror, provided that it arrives in due time, which may be assumed in certain circumstances.172 It is not necessary that the acceptance actually reaches the offeror himself. He must only be given the opportunity to take notice of it. An offer which is made in writing to a person staying at another place than the offeror and fails to fix a period for acceptance ‘must be accepted not later than at the time when the offeror may expect the answer, provided that his offer reached

170. Cf. §869 ABGB, first sentence. The German original version employs the word ‘Einwilligung’, thereby referring to both types of declaration – acceptance and offer – required for a consent. 171. Cf. §869 ABGB, second sentence. 172. Cf. §862a ABGB.: ‘The acceptance is considered timely made if its declaration has reached the offeror within the period assumed therefor. However, the contract is made despite a delay in delivery of the acceptance to the offeror if the offeror was, or should have been, aware that the acceptance was timely forwarded by the offeree but the offeror nevertheless failed to notify the offeree of his revocation immediately upon the lapse of the period for acceptance.’

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the offeree in due time and the latter reasonably and promptly forwarded his answer. In default thereof, the offer lapses’.173 118. However, ‘[i]f an express declaration of acceptance cannot be expected due to the specific nature of the transaction or pursuant to custom and usage, a contract is formed if the offer was complied with within the period set forth therefor or within a period suitable in the circumstances’. This provision, laid down in section 864 ABGB, is highly practicable, as it takes into account the realities of direct mail selling: If a person orders a good from a businessman, he does not expect to receive a formal declaration of acceptance, rather he expects that the businessman will send the good without any delay. Pursuant to the rule of section 864 ABGB, the dispatching of the good by the businessman creates the contract. 119. The consignment of a good for which no order has been made may qualify as an offer. Nobody has to accept such a ‘real offer’ (Realangebot). Further, section 864(2) ABGB provides that keeping, using or disposing of a consigned good does not constitute an acceptance, provided that the consignment has not been initiated by the consignee.174 Only if it is obvious that a consignment was received erroneously, the consignee is obliged to inform the consignor within a reasonable period of time or to send it back. Section 864(2) ABGB implements Article 9 of the EU Directive on the protection of consumers in respect of distance contracts. This Directive aims at making such distribution practices economically inefficient for the offeror.175 This effect is reached if the offeror is not only deprived from contractual remedies as keeping, using or disposing of a consignment does not amount to an acceptance, but also from unjust enrichment causes of action. II. Intention to Create Legal Relations 120. It has been mentioned already, that an offer must demonstrate the serious intention of the offeror to consider himself bound to his proposal, and that, according to section 869 ABGB, the acceptance of an offer as well as the offer itself must be declared freely, seriously, precisely and intelligibly. An agreement is not binding if it is made up by declarations lacking seriousness. The seriousness requirement is met if a declaration is clearly aiming at the creation of legal consequences. This must be judged by way of an objective test. Accordingly, a declaration is serious if it so appears to its honest addressee. Declarations apparently made as a joke, on stage, or for teaching purposes cannot create an obligation. In these cases the person making the declaration may rely on the addressee’s ability to recognize the lack of seriousness. However, if he realizes that the addressee erroneously takes the declaration seriously, he has to disclose the truth. Otherwise he might become responsible for pre-contractual fault. 173. Cf. §862 ABGB, second sentence. 174. Introduced by BGBl I 1997/6; in effect from 1 Jan. 1997. 175. Directive 97/7/EC on the Protection of Consumers in respect of Distance Contracts of 20 May 1997, O.J. EC. L 144, 4 Jun. 1997, 19.

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121. According to the last sentence of section 861 ABGB, no contract is created as long as negotiations last and the promise is not yet given or has not been accepted. Indeed, the parties have the ‘legal duty’ to take into account the interests of their respective negotiating partners, but a ‘contractual duty’ cannot occur as long as the minds have not met. It may well be, however, that during running negotiations for a contract, when the positions of the parties are converging, common positions may be fixed by way of so-called gentlemen’s agreements which cannot be legally enforced. The only sanctions imposed on a person violating such ‘agreements’ are of a social character. Similarly, certain social engagements and, in particular, agreements concerning inter-family relations are in most cases not enforceable. The parties to such arrangements do not intend to create formal contractual obligations. 122. The ‘letter of intent’, viz. a written non-committal preliminary understanding of parties intending to conclude a contract, which plays an important role in business transactions within the Anglo-American legal family,176 is a concept which is not expressly acknowledged in Austrian law. Indeed, such a statement of policy must not be confounded with the legal concept of Punktation177 in Austrian contract law. This virtually untranslatable word is defined by section 885 ABGB, as ‘a memorandum but no formal document [which] has been drawn up in regard to principal items and has been signed by the parties’. As according to the law ‘such a memorandum establishes those rights and obligations which are expressed therein’, it has the effect of a contractual agreement and may be enforced as such. III. Consideration A. Consideration Is Not a Requirement of the Austrian Law of Contract 123. In Austrian law, as in every other law of the civil law tradition, the concept of consideration is no requisite for the creation of a valid and enforceable contract. Instead, another type of prerequisite for the validity of a contractual promise must be met, viz. a ‘cause’ explaining the economic background of the obligation. Austrian contract law refers to ‘cause’. This notion is in accordance with the respective concept of the French Civil Code,178 but if compared with ‘consideration’ it is a different concept.179 However, viewed from a functional comparative perspective the requirement of a valid cause to explain the goal of a contract serves

176. Cf. Garner v. Boyd, 330 F.Supp. 22 (N.D. Tex. 1970). 177. This word has no corresponding term in English language as well as in Anglo-American laws. 178. Cf. Art. 1131 CC. ‘An obligation without cause or one based on a false or an illicit cause cannot have any effect’. 179. Cf. Konrad Zweigert – Hein Kötz, An Introduction to Comparative Law II, §6: ‘Indicia of Seriousness’ (Tony Weir trans., 3d ed., Clarendon Press 1999).

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the same purpose as consideration as it ‘indicates the seriousness of an agreement’.180 Moreover, a parallel to the Anglo-American ‘quid pro quo’ principle following from the consideration requirement may be seen in the ‘synallagmatic’ element which is characteristic of the great majority of types of contracts.181 Synallagmatic contracts are characterized by the rule of ‘do, ut des’ which expresses the principle of reciprocity of performance and counter-performance. In a synallagmatic contract the performance of the obligation by one party is a condition for demanding the other party’s performance. This follows from section1052 ABGB which provides that ‘[a] person who insists upon delivery must either have performed his obligation or be ready to perform it’. As most types of contracts are synallagmatic contracts, the ‘do, ut des’ rule is determinative for Austrian contract law. B. Gratuitous Promises 124. Altruism in daily business life is a rather deviant behaviour. It can be assumed that in normal circumstances no rationally acting person wants to dissipate his fortune or abilities without expecting something in exchange. Granting a gift to another person is deemed by the law to be a dangerous and an irrational behaviour. Therefore, a promise to make a gift without simultaneous performance must be made in a specific form. Whereas the Code requires only a written form, the comprehensive reform of the legal rules on the profession of public notaries in 1870/ 1871 submitted such promises to a mandatory notarial deed.182 Thus, the position of Austrian law is in functional correspondence with the rule of Article 931 of the French Civil Code. C. Natural Obligations 125. Austrian law acknowledges the notion of ‘natural obligation’. This is an obligation which cannot be enforced by the creditor. According to section 1432 ABGB, claims barred by limitation and claims which are invalid only because of non-compliance with a formal requisite are natural obligations. Another category of natural obligations are gaming and betting debts.183 A natural obligation is a true debt and the debtor who performs such an obligation does not act gratuitously, but is performing an obligation. If he was not aware of the non-enforceable character of the debt, the debtor having erroneously performed his duties emerging from a natural obligation has no claim for restitution.184

180. 181. 182. 183.

Ibid. Supra, n. 44. According to §1(d) NAktsG. Cf. §1271 ABGB: ‘Fair bets and bets which are otherwise permitted are binding insofar as the stipulated sum is not just promised but actually paid or deposited. The sum, however, cannot be demanded in court.’ 184. Cf. §1432 ABGB.

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§2. FORMAL REQUIREMENTS I. Reasons for Statutory Formal Requirements 126. According to section 883 ABGB, ‘[a] contract can be made orally or in writing, before the court or extra-judicially and with or without witnesses’. And the same provision continues by stating that ‘[t]he difference in the form makes no difference with regard to the obligation, except in cases specified by the law’. This provision corresponds with the idea of freedom of contract. Contract law is dominated by the general principle of informality, and, therefore, as a rule no written form is required for contractual agreements. 127. Whereas there is no doubt that the parties to a contract have the power to stipulate for specific formal requirements to which their actual bargain should be submitted, statutorily imposed legal requirements are based on policy considerations: e.g., the protection of one of the contracting parties or of a third person affected thereby, such as a creditor, may require a particular legal form for a contract. There must always be a justification explaining why a certain type of contract is expressly subjected to a formal requirement by a statute. In particular, such requirement may have either an evidentiary function, or a warning function, or a disclosing function. 128. The avoidance of difficulties in establishing evidence of the existence of contractual rights and duties is the reason why e.g., all documents in regard of a contract to which a blind person is a party185 must be established in the form of a notarial contract under seal. 129. The requirement of a form in writing for suretyship agreements serves a warning function.186 It should demonstrate to the guarantor that such an agreement may be dangerous for him if the debtor fails to perform his debt himself and shall give him the opportunity to examine the rights and duties to which he might be exposed. 130. The requisite of a notarial deed for contracts of sale, barter, etc. between spouses187 is thought to disclose transfers of property between husband and wife, thereby protecting the creditor of one of the spouses. Another reason for the requirement of a particular form may be seen in the intention of the law to give the parties the chance to benefit from the legal advice of a legal expert, in particular of a public notary. Thus, an entry into the Land Register

185. Cf. §1(e) NAktsG. No notarial deed is necessary any longer in respect of contracts of a deaf person unable to read or a mute person unable to write: BGBl I 2007/111. 186. Cf. §1346 ABGB. 187. As provided by §1(b) NAktsG.

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requires the presentation of a document which is authenticated by a public notary.188 II. Legal Forms in General 131. In regard to contracts the law provides for two formal requirements, viz. simple writing, or a notarial deed. Even though the term ‘Notariatsakt’ may be translated by ‘notarial contract under seal’, it should be noted that the AngloAmerican concept of a ‘contract under seal’ is unknown in Austrian law. The General Civil Code provides formal requirements for a number of legal transactions, not only for contracts. Thus, in the law of succession strict observance of one of the legal forms is necessary for the establishment of a last will.189 In family law the Code provides, e.g., that ‘[a]n adoption is accomplished by a written contract between the adopting and the adopted party’.190 Within the fields of private law dealing with contracts and obligations sections 1346 and 943 ABGB provide for an agreement in writing. The written form of promises to make a gift to another person as provided by section 943 has been replaced by the form of a notarial deed under the Notariatsaktsgesetz.191 III. Relevant Forms A. Writing 132. A written form is required by section 1346(2) ABGB192 for a contract of suretyship.193 The former exception for merchants has been abandoned as of 1 January 2007.194 If a promise of surety is made only orally by a normal citizen it cannot be enforced. The rule of section 943 ABGB, according to which ‘[n]o right of action accrues to a person accepting a donation made only orally without actual delivery’ because ‘[s]uch right of action must be based on a document in writing’, lost its legal effect when it was superseded by the Law on Compulsory Notarial Contracts of 1871. According to section 1(d) of this law contracts of donation without simultaneous performance require a notarial contract under seal to be valid. Numerous other statutes require that certain agreements be in writing; thus, e.g., pursuant to section 583 of the Code of Civil Procedure (ZPO) as amended by BGBl I 2006/7 an arbitration agreement must be established in a written form, or by telefacsimile, e-mail or other means of communications provided that the agreement is 188. 189. 190. 191.

Cf. §31 GBG. Cf. §§577 et seq. ABGB. Cf. §179a ABGB, first sentence. The German name has been changed from Notariatszwangsgesetz to Notariatsaktsgesetz: Cf. BGBl I 2001/98; most recently amended by BGBl I 2009/75. 192. §1346(2) ABGB. ‘To be valid, the contract of suretyship must be in writing’. 193. The German word is ‘Bürgschaft’, which is also (misleadingly) translated by ‘guarantee’. 194. §350 UGB was repealed by BGBl I 2005/120.

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susceptible to proof. Other examples for transactions requiring to be documented in writing are specific agreements in the vast field of labour law and a number of consumer transactions such as a hire-purchase.195 133. Section 886 ABGB defines what ‘written form’ means. According to this provision, a: contract which the law or the mutual agreement of the parties requires to be in written form is validly made with the signature of the parties or, if they are ignorant of writing or unable to write because of corporal defect, with the fixing of their mark certified by a court or a notary or added in the presence of two witnesses, one of whom must write out the name of the party. This provision also makes clear, that ‘[a]n instrument drawn in court or by a notary satisfies the requirements of a written contract’, and that ‘[a] printed signature is only sufficient where it is customary in commercial transactions’. In the light of this detailed provision which was inserted into the General Civil Code in 1916 and reflects the situation of that period, the use of telefacsimile and e-mail which became frequent in recent years entails problems that need clarification. Analysis of the purpose of a written form requirement in each single case will more frequently result in favour of the validity of an agreement concluded by way of signed documents transmitted by telefax. For electronic communications the Signature Act of 1999196 provides detailed rules in its section 4 stating the conditions under which the effects of qualified signatures comply with those of writing. B. Notarial Contract under Seal 134. Pursuant to the above mentioned statute of 1871, several other critical contracts, viz. marriage settlements, contracts of sale or barter and credit agreements between spouses, contracts concluded inter vivos by blind persons must be made up in the form of a notarial contract under seal. The form of a notarial contract under seal is also necessary for the creation of the articles of association and for the transfer of shares in a limited liability company.197 C. Formal Requirements for Consumer Transactions 135. Specific formal requirements are imposed on some transactions involving a businessman on the one side and a consumer on the other.198 Thus, the rescission of 195. Infra, C., no. 135. 196. Signaturgesetz, ‘SigG’, BGBl I 1999/190 most recently amended by BGBl I 2010/75. 197. Cf. §§4(3), 52(4), 76(2) of the Statute on Limited Liability Companies (Gesetz über Gesellschaften mit beschränkter Haftung, RGBl 1906/58). 198. Pursuant to §1 KSchG.

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a consumer from a door-to-door selling contract,199 the formation of a hirepurchase transaction,200 the agreement for a consumer credit,201 or the agreement for time-sharing of a property202 must be in writing. 136. However, section 6(1) N. 4 KSchG aims at the protection of consumers against formal requirements dictated by businessmen. According to this provision, a contractual term in standard form contracts requiring a consumer’s declaration to comply with a stricter formality than the written form is void. IV. The Notary and His Function 137. Austrian law adheres to the so-called Roman type of notary. Therefore, a notary is much more powerful than, e.g., a public notary in the United States.203 An Austrian notary is a public official entitled to exercise certain sovereign authority and appointed by the minister of justice after a formal procedure. Only notary candidates who have been preparing to become a full member of the profession can apply to succeed to a vacant notary’s office. The number of notary’s offices is strictly limited.204 Only a graduate of a law school may be accepted as a notary candidate. The notaries play an important role in the life of the law in Austria as it is their task to act as public registrar and to wind up estates. The members of the notaries’ profession assist the courts in several ways. In the field of contract law, their main task is to create solemn deeds with high evidential power, to authenticate signatures and documents as a whole, and to establish complex written contracts. §3. LIABILITY AND NEGOTIATIONS 138. If two persons intend to conclude a contract they usually enter into negotiations. During that pre-contractual period the involved persons are bound to act honestly and in good faith. They have to be aware of the fact that each of them may create certain impressions and expectations with the other partner which need to be taken into account for further proceeding. The other partner of the negotiations may incur expenses in respect of the prospective contract, and he may suffer damage.

199. Cf. §3(1) KSchG. 200. Cf. §24 KSchG. 201. This formal requirement had been introduced by the consumer provisions (§§33 et seq.) of the Statute for the Adaption of the Financial Market, BGBl 1993/532 (Finanzmarktanpassungsgesetz). Meanwhile the relevant law is stated in § 9 VKrG, BGBl I 2010/28. 202. §6(1) TNG 2011, BGBl I 2011/8. 203. This difference in the power and function of a notary in American law and in the legal systems of the Civil Law tradition, has frequently been observed in the literature on comparative law; cf. e.g., Schlesinger/Baade/Damaska/Herzog, Comparative Law 18–22, 873–875 (5th ed. 1987). 204. For all Austria no more than approximately 360 notary’s offices exist.

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In systems of civil liability law providing significant differences between stricter contractual liability and a less far-reaching delictual liability, it is of crucial importance whether the rules of contractual liability should apply to pre-contractual fault. Should the principle ‘no contractual responsibility without a contract’ prevail, or should the negligently caused disillusion of a justified expectation that the intended contract will be formed with certainty permit the application of the rules of contractual liability to pre-contractual damage? I. Pre-contractual Liability 139. The General Civil Code of Austria contains no specific provision dealing with pre-contractual liability or liability for culpa in contrahendo205 in general, and this legal problem has been neglected by the Austrian doctrine for quite a long time. Indeed, this concept was ‘detected’ by the German scholar Rudolf von Jhering206 no sooner than half a century after the Austrian codification had become effective. Thus, a rule on culpa in contrahendo could not be provided by the draftsmen of the General Civil Code. Today pre-contractual liability is an acknowledged concept in Austrian legal practice and its doctrinal basis has been clarified by valuable analysis.207 The doctrine of culpa in contrahendo is frequently and consciously applied by the courts which, by resorting to this legal concept, resolved cases which seem to have little in common with those factual situations which once gave rise to the propositions by von Jhering. II. The Legal Framework 140. The reason for the adoption of a pre-contractual liability theory by Austrian doctrine and courts is attributable to several shortcomings of the noncontractual protection of victims of injurious activities. Unlike the German codification of 1900,208 the antiquated General Civil Code of Austria abstains from making a clear distinction between contractual liability and non-contractual or delictual liability. Nevertheless, there exist a number of differences which make it more favourable to a victim having the choice to bring a claim which is based on contractual liability rules.

205. Abbr. ‘c.i.c.’. 206. Von Jhering, Culpa in contrahendo oder Schadensersatz bei nichtigen oder nicht zur Perfection gelangten Verträgen, 4(1) JheringsJB (1861). 207. Cf. Frotz, Die rechtsdogmatische Einordnung der Haftung für culpa in contrahendo, GschnitzerGedS, 163 (1969); Welser, Vertretung ohne Vollmacht – Zugleich ein Beitrag zur Lehre von der culpa in contrahendo (1970); and: Das Verschulden beim Vertragsschluβ im österreichischen bürgerlichen Recht, ÖJZ 281 (1973); cf. also: Welser, Die culpa in contrahendo im österreichischen Recht, LJZ 101 (1984). 208. In the German Civil Code, contractual liability is regulated in §§276 et seq., whereas the rules concerning delictual liability are to be found in §§832 et seq. BGB.

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A first difference between contractual liability and delictual liability exists in the field of vicarious liability. According to section 1313a ABGB,209 the respondeat superior rule applies only to violations of contractual duties by servants. In the absence of a contractual relation between the master and the victim of the servant’s action the master according to section 1315 ABGB,210 will only be liable for injury caused by his servant if the victim proves that the servant is either ‘incompetent’, or that the master has knowingly employed a dangerous person. A second important difference exists with regard to the burden of proof of fault. Pursuant to the rules of contractual liability, the burden of proof is reversed: the person who by breaching a contractual duty causes damage to another has to prove, according to section 1298 ABGB211 that he was not at fault, whereas section 1296 ABGB212 imposes on the victim the burden of establishing the injurer’s fault in a non-contractual injury case. The third difference concerns the scope of liability for ‘pure economic loss’. In particular, losses such as frustrated expenses caused by negligent misstatements by another are only recoverable if the rules on contractual liability apply. The law of non-contractual liability offers no protection for a victim sustaining such pure economic loss. 141. The fact that basing a claim for damages on the law of contractual liability entails three considerable advantages213 for the injured person has created what may be characterized as ‘contract shopping’. Persons either suffering pure economic loss, or having been injured by employees or servants of a master,214 are trying to bring their claim for liability on contractual grounds even if their case has only a slight relationship to a contract. Thus, contractual liability was not only expanded to the ‘pre-contractual stage’ of a contract as a result of the adoption of the culpa in contrahendo concept, but also to injuries suffered by a group of persons who, without being contracting parties, were closely related to the contract and affected by its breach. Under a recent theory,

209. §1313a ABGB was inserted by the 3rd Amendment in 1916 and corresponds to §278 BGB. It reads: ‘A person who is under an obligation of performance to another is liable to the latter for the fault of his legal representative and of persons whom he has employed for the performance, in the same manner as for his own fault.’ 210. §1315 ABGB. ‘A person who employs an unfit person for the care of his own affairs, or who knowingly uses a dangerous person therefor, is liable for any damage caused by such persons acting in such capacity to third persons.’ This translation is not fully satisfactory. In particular, the translation of ‘untüchtig’ by ‘unfit for the care of one’s own affairs’ appears to be insufficient. 211. §1298 ABGB. ‘A person who asserts that he has been prevented from the performance of contractual or legal obligation without any fault on his part must bear the burden of proof thereof.’ 212. §1296 ABGB. ‘In case of doubt, the presumption prevails that damage has arisen without any fault on the part of another.’ 213. Unlike German law the Austrian code makes no distinction with regard to prescription. The common prescription period for delictual and for contractual claims for compensation is three years. 214. Whereas servants and employees are often neither insured, nor wealthy enough to bear responsibility, it is their master or employer who has the ‘deep pocket’ and the ‘risk spreading capacity’, viz. he is the one in the best position to insure himself against the risk of causing damage.

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the protection of these persons is assumed to be an ‘implied’ consequence of the contract.215 During the last four decades, the doctrine of culpa in contrahendo has achieved significant importance in practice. By way of deduction from a number of provisions of the civil code, the Austrian courts advanced a general principle of precontractual liability. 142. These provisions are: (a) Section 874 ABGB: ‘In any case, any party who has induced a contract by fraud or coercion is liable for damages (another person) suffered thereby.’ (b) Section 878 ABGB, third sentence: ‘A person who, when entering into the contract was or should have been aware of (the) impossibility of (its performance),216 is liable to the other innocent party for any damage suffered by him through his reliance upon the validity of the contract.’217 (c) Section 1019 ABGB: This provision, introduced by BGBl I 2005/120, states that an agent entering into a contract on behalf of his principal without sufficient authority, shall be held liable for the damage, the other party suffers in reliance on the agent’s power to represent the principal. (d) Prior to 1 July 2001 when BGBl I 2000/135 lowering the age of majority to 18 years entered into effect, section 866 ABGB which is now repealed provided another case of culpa in contrahendo.218 (e) BGBl I 2001/48, effective on 1 January 2002. introduced section 933a (1) ABGB stating that a person who is at fault in breaching warranty will be liable for damages219 may be seen as another case for pre-contractual liability.

215. Like culpa in contrahendo the related concept of ‘contract implying the protection of a third party’ (Vertrag mit Schutzwirkung für Dritte) is a product of the influence of German doctrine. After its adoption by the Austrian courts in the 1970s, this concept has been the basis for a judge-made theory of stricter liability of the manufacturer of a defective product. Cf. the breakthrough decision of the Austrian Supreme Court of 4 Feb. 1976, SZ 49/14. The new Austrian Statute on Products Liability of 1988, BGBl 1988/99, which entered into effect on 1 Jul. 1988 introduced a strict liability theory. 216. Pursuant to §878 ABGB, first sentence, ‘[a] clearly impossible matter cannot become the subject of a valid contract’. 217. This provision corresponds to §307 of the German Civil Code. 218. The former §866 ABGB stated: A person having attained the age of 18 ‘who represents fraudulently that he is able to conclude contracts, and in doing so deceives another who cannot easily make inquiries in regard thereto is liable for damages suffered thereby’. §866 was repealed by BGBl I 2000/135. Thus, it cannot longer serve as a basis for the deduction of a general principle of pre-contractual liability. 219. As will be explained infra, the regular remedies for a breach of warranty under Austrian law (§932 ABGB) are primarily the right to repair (Verbesserung) and the right to replace (Austausch). Subsidiary, that is, if repair and replacement are impossible or disproportionate, a reduction in price (Preisminderung) or, in case of a not only minor mal-performance, the right of rescission (Wandlung) is granted. Fault is no requirement for these claims which must be brought within certain limitation periods (two years for moveable, three years for immovable property).

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III. General Principles and Types of Pre-contractual Duties 143. According to Prof. emerit. Welser of the Vienna University School of Law,220 the underlying idea for the deduction of the general rule of ‘precontractual’ liability for culpa in contrahendo from these provisions is the need for the establishment of an economic and functional framework for legal transactions which prohibits inconsiderate conduct during negotiations for a contract. Each of the prospective partners acts in accordance with duties of mutual forbearance among the negotiators. If the violation of such duties results in damage to the other party, the stricter rules of contractual liability apply. 144. Pre-contractual duties of the one partner in the negotiations vis-à-vis the other one may have a direct impact on the intended contract insofar as their violation affects its conclusion and performance. Pre-contractual duties of this type are: (a) the duty to disclose legal obstacles that may result in the invalidity of the contract; (b) the duty to correctly inform about all attributes of the object of the intended contract, the knowledge of which may be relevant for the other party’s decision to conclude the contract. From section 878 ABGB stems the recognition of a general ‘pre-contractual duty to inform’221 by the courts. The negligent violation of this pre-contractual duty by one of the negotiating parties results in a claim for ‘reliance damage’ (Vertrauensschaden) by the other; (c) the duty to abstain from breaking off the negotiations arbitrarily, if a state of confidence that the contract will be concluded with certainty has been created; and finally (d) the duty not to pretend to act as a representative of another in the absence of the respective authority. 145. Another type of pre-contractual duties refers to legally protected interests such as life, body, health, freedom, and property. Their violation normally entails delictual sanctions. By expanding the culpa in contrahendo concept these interests obtain the higher protection offered by contract law. Whether this expansion is legitimate is doubtful, however. Whereas Welser222 has been supporting the excessive application of culpa in contrahendo by the Austrian Supreme Court, others have argued against it:223 These authors understand the application of culpa in contrahendo to these cases as an illegitimate correction of the rules of delictual liability and, in a way, as a usurpation of legislative power by the courts.

220. Welser, Vertretung ohne Vollmacht, 73 et seq., thereby influenced by ideas of Frotz, in: GschnitzerGedS, 172 et seq. 221. In German, Vorvertragliche Aufklärungspflicht. 222. Cf. Welser’s statement to this effect in his essay, LJZ 1984, 101, 104. 223. Posch, Zur Haftung des Kaufhausunternehmers für seine Angestellten, ZfRV 165 (1974); Ostheim, Zur Haftung für culpa in contrahendo bei grundloser Ablehnung des Vertragsabschlusses, JBl 522, 570 (1988); Schuhmacher, Verbraucherschutz bei Vertragsanbahnung (1983) 180 et seq.

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IV. The Field of Legitimate Application of Culpa in Contrahendo A. Violation of the Duty to Inform about Legal Obstacles for Valid Conclusion of Contract 146. According to section 878 ABGB, a party to a contract who has, or ought to have, knowledge of the invalidity of an intended legal transaction, and who by failing to inform the other of this fact causes damage, will be liable. The precontractual duty to disclose obstacles impeding the valid conclusion of an intended contract224 has been significantly amplified by the Supreme Court as it imposes on the negotiating parties not only a duty to inform, but also a duty to make all possible and reasonable efforts to remove obstacles entailing the invalidity of a contract. Thus, a prospective employer of a foreign migrant worker has the pre-contractual duty to procure a working permit if he promised that his employment would cause no problems. If he fails to keep his promise he will be liable for the worker’s reliance damage.225 B. Violation of the Duty to Inform about Attributes of the Object of the Intended Contract 147. A more important group of cases generally acknowledged as constituting the legitimate field of the application of culpa in contrahendo consists of precontractual violations of a party’s duty to inform the other about important characteristic features of the goods to be delivered, or the services to be performed by him. In a decision of 1975226 which some authors believe to be the Austrian breakthrough decision in the field of culpa in contrahendo,227 the Austrian Supreme Court held that prospective parties to a contract enter into a mutual pre-contractual obligation and must, as a result, correctly inform one another about the attributes and characteristics of the object of the bargain.228 If this obligation is negligently violated by one of the parties the other is entitled to reliance damage on grounds of culpa in contrahendo, whereas under the rules of delictual liability no compensation would be available.

224. This duty is a consequence of §878 ABGB; cf. the important decision of the OGH 8 Oct. 1975, SZ 48/102. 225. Cf. the ‘Migrant worker’-decision, OGH 28 Nov. 1978, DRdA 1979, 390. 226. OGH 8 Oct. 1975, SZ 48/102. 227. For example, Welser, LJZ 1984, 101. 228. In this case the plaintiff, a businessman who needed a data processor, informed the defendant about the required functions of the processor. The defendant asserted his ability to deliver appropriate equipment. Nevertheless, the delivered processor was not conforming and did not perform satisfactorily. As a result the contract was declared void from the beginning, and the plaintiff was awarded the reliance damage he suffered as a result of expenses for the installation of the processor.

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148. In a decision of 1979, the Supreme Court held that no general legal duty to inform a business partner about all circumstances which might have an impact on his decision to conclude a contract exists. Only if, according to the principles of fair commercial practice, the partner would be entitled to expect specific information, would the failure to give this information result in pre-contractual liability.229 The same line of reasoning has since been followed by the Austrian Supreme Court in a number of decisions concerning similar cases.230 C. Arbitrarily Breaking Off Advanced Contract Negotiations 149. A third group of cases legitimately resolved by the Supreme Court with the help of culpa in contrahendo is characterized by the arbitrary breaking off of advanced negotiations by one party, at a time when the partner had reason to believe that the contract would certainly be concluded.231 150. The leading case is the ‘bungalow-decision’ of the Supreme Court in 1976.232 The defendant had advertised in a newspaper that he wanted to sell a bungalow for a certain price. The plaintiff entered into negotiations with the advertiser and, after some meetings, when the conclusion of the contract seemed to be at hand, decided by himself to sell his collection of coins to raise the money necessary for the payment of the purchase price. However, when he met the defendant for the last time to conclude the bargain, the defendant refused to sell. The repurchase of the coins had caused the plaintiff considerable expense for which he claimed compensation. The Supreme Court held that, notwithstanding the existence of a duty of forbearance during pre-contractual negotiations, it is to be recognized that the idea of freedom to conclude a contract would be impaired if a pre-contractual relationship would too generously be qualified as a stage of intensified mutual duties, the violation of which would result in an application of the rules of contractual liability. The Court held that, under the circumstances, the plaintiff in the ‘bungalow-case’ acted ‘on his own risk’ and turned down his claim for compensation of the loss he suffered from the sale of his collection. Therefore, this decision is important as indicating the borderline between freedom and obligation of persons bargaining for a contract. Three years later, the Austrian Supreme Court rendered a second decision on the question of pre-contractual liability for the arbitrary rupture of negotiations for the

229. OGH 20 Feb. 1979, SZ 52/22; On this case, see F. Bydlinski, Über listiges Schweigen beim Vertragsschluβ, JBl 393 (1980). 230. OGH 30 Jan. 1980, SZ 53/13: (Acknowledgment of certain pre-contractual duties of banks to inform their prospective customers); 12 Jan. 1983, JBl 1984, 41: (Pre-contractual duty of seller to inform about unfitness of good for intended use by buyer); 8 May 1985, SZ 58/69: (Duty of bank using general contract terms to advise unexperienced customer about their prospective contractual obligations); cf. most recently OGH 22 Mar. 2005, JBl 2005,716. 231. Cf. Ostheim’s elucidatory essay on this type of culpa in contrahendo cases, JBl 1980, 552, 570. 232. OGH 6 Jul. 1976, SZ 49/94.

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conclusion of a contract. This time, however, it was a case for the plaintiff.233 The Court held that the final refusal of a bank to conclude a credit agreement which had been bargained for by a customer and an authorized agent of the bank, may result in the bank’s pre-contractual liability for the customer’s foreseeable damage, if the agent had created in the customer the strong confidence that the credit agreement would certainly be concluded. 151. The creation of a strong confidence that negotiations will certainly result in the conclusion of the contract and its arbitrary disappointment appear to constitute a violation of the duty to bargain in good faith, and entail responsibility for reliance damage resulting therefrom.234 Answering the crucial question whether a sufficiently great confidence in the perfection of the negotiations has been created, calls for a case-by-case evaluation. In general, the courts obviously are putting considerable emphasis on the liberty to negotiate and to break off negotiations and are inclined to employ stringent criteria in evaluating a party’s pre-contractual reliance on the future conclusion of the contract. This position appears to be reasonable.235 D. Acting on Behalf of Another without Having Authority to Do So 152. A particular fact situation to which culpa in contrahendo rules apply is to be found in the so-called falsus procurator-cases, where an unauthorized agent causes damage to a confident person who neither knew nor ought to have known of the fictitious character of the agent’s authority. In German law, the express provision of section 179 BGB deals with this problem in a general way. This German provision had been implemented into Austrian commercial law in 1939 with regard to commercial transactions and was applicable to this type of contracts only: Article 8 No. 11 4. EVUGB (4th Regulation Introducing Commercial Rules in Austria).236 153. As a result of the reform of commercial law, the enactment of the Enterprise Code by BGBl I 2005/120 has changed the relevant law, the 4th Regulation has been repealed and a new section 1019 ABGB introduced into the General Civil Code providing for the liability of the ‘falsus procurator’. Thus, earlier suggestions by Welser237 to establish the unauthorized agent’s liability on the solid doctrinal foundation of culpa in contrahendo have become obsolete. 233. OGH 30 May 1979, SZ 52/90. 234. The same line of reasoning was followed by the Austrian Supreme Court in a decision of 1987, where an action aiming at the official responsibility of the state was brought on the basis of the Austrian Governmental Liability Act (Amtshaftungsgesetz): OGH 4 Mar. 1987, JBl 1987, 529. 235. Thus, the fundamental importance of ‘private autonomy’ in Austrian private law is adequately respected. 236. On this former article, cf. Welser, ‘Zur Haftung des handelsrechtlichen Scheinvertreters nach Art. 8 No. 11 EVUGB’, GesRZ 1975, 2. For decisions, see OGH 6 Nov. 1974, JBl 1975, 595; OGH 19 Nov. 1975, JBl 1978, 32; OGH 6 Feb. 1980, GesRZ 1980, 144; OGH 9 Mar. 1983, SZ 56/39. 237. For details, cf. Welser, Vertretung ohne Vollmacht, 156 et seq.

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V. Unsound Expansion of Culpa in Contrahendo Rules 154. The most disputable cases in the field of ‘pre-contractual liability’ are the so-called warehouse-cases,238 where persons entering a department store are injured by a negligent employee before having purchased a good. Because of the restrictive rule of vicarious liability under section1315 ABGB the law of delictual liability can offer only an insufficient protection to such victims. In most cases the victim would only be able to sue the employee, who, as a rule, has neither insurance coverage nor a ‘deep pocket’, and may not be able to compensate. Whereas in the vast majority of legal systems239 a master is fully responsible for the torts committed by his employees during the scope of their employment, only the German Civil Code240 and to a certain degree the Swiss Law of Obligations241 provide for similarly restrictive rules on delictual vicarious liability as the Austrian Civil Code does. 155. The German Imperial Court was confronted with the problem much earlier and decided in favour of an expansion of culpa in contrahendo when soon after the enactment of the German Civil Code a claim was brought against the owner of a department store by a prospective customer who fell victim to a negligent employee during negotiations.242 For decades, the German doctrine has been separated in its opinion of whether this practice is sound or not, with a current clear tendency to challenging the solution of the courts. Austrian adherents243 of the expansion of the pre-contractual liability to ‘warehouse-cases’ and similar fact situations support their view by referring only to the criticizable German case law.244 Thereby they promote an objectionable attitude among victims and their attorneys which may be characterized as ‘contract shopping’. 156. Originally, the Austrian Supreme Court abstained from applying the rules of contractual liability to claims of injured visitors of stores against the shop-owner. Thus, decisions were rendered in favour of the defendant245 unless the Court found a way to interpret the rules of non-contractual liability, in particular section 1315 ABGB, in a correct way for the plaintiff.246 238. 239. 240. 241. 242.

243. 244. 245. 246.

In German, Warenhausfälle. Like in French and English Law. §831 BGB as compared to §278 BGB. Article 55 OR as compared to Art. 101 OR. RG (Reichsgericht = Imperial Court) 7 Dec. 1911, RGZ 78, 239; the BGH (Bundesgerichtshof = Federal Court) expanded this liability to victims who had not yet entered into negotiations, and to companions of customers: BGH 26 Sep. 1961, NJW 1962, 31 ‘banana peel-decision’; BGH 28 Jan. 1976, BGHZ 66, 51 ‘vegetable leaf-decision’. Cf. in particular, Welser, LJZ 1984, 104. The German doctrine’s strong criticism of this approach is neglected by these writers. OGH 23 Oct. 1957, EvBl 1958/19: A visitor of a bakery fell on the slippery steps at the entrance and sustained injury. An employee was responsible for the slipperiness. OGH 18 Dec. 1973, EvBl 1974/109: A ceiling lamp fell onto a visitor of a department store and caused injury. The way the lamp had been fixed caused the Court to accept prima facie evidence that the employee having installed the lamp was incompetent.

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In those decisions, the Supreme Court held that contractual rules, and in particular section 1313a ABGB, would not apply in such factual situations as the owner of a store would not violate a contractual obligation, but a general duty of care vis-àvis the public if he fails to provide security for the visitors of his shop. 157. Unfortunately, the Austrian Supreme Court has abandoned this reasonable approach in two decisions of 1978.247 In both cases, the Supreme Court held that the owner of a department store owes a pre-contractual duty to a person who enters a store with the ‘intention to purchase’. As a result, section 1313a ABGB which imposes vicarious liability on the businessman, and section 1298 ABGB which shifts the burden of proof from the victim to the defendant, apply. For the Austrian Supreme Court it does not matter whether the injury was caused in the course of negotiations between an employee of the store and the victim. It is sufficient for the victim to show that he might have become a customer of the shop. The Court did not realize the problem that a policeman or a postman entering a store for professional reasons, but without the wish to become a customer, would not be protected under this rule. The true motive for the courts to resort to culpa in contrahendo principles in these factual situations is the conviction that this approach is the easiest way to overcome the shortcomings of the law of delicts. For this reason, duties which by their nature are clearly delictual have been qualified as ‘precontractual’ by the courts.248 The expansive application of culpa in contrahendo principles to ‘warehousecases’ and similar fact situations, as practiced by the Austrian Supreme Court, is highly unsound and should be discarded as an illegitimate method of ‘contract shopping’.249 158. Whereas prior to the 1970s the concept of ‘culpa in contrahendo’ and the corresponding German notion of ‘Verschulden beim Vertragsschluβ’ played no significant role in the Austrian law of obligations, pre-contractual liability has become an important feature of the Austrian law of civil liability. In particular, this was due to Welser who drew the attention of scholars and judges to the usefulness of the doctrine of pre-contractual liability. Unsound, however, is the Austrian court practice with regard to the so-called warehouse-cases. Here, the application of culpa in contrahendo principles is clearly inadequate. It would be the task of the legislator, not of the courts, to amend obsolete legal rules of delictual liability, particularly the useless vicarious liability provision of section 1315 ABGB. This is one of the motives why currently proposals for a comprehensive reform of the outdated law of civil liability are intensively discussed.

247. OGH 7 Jul. 1978, SZ 51/111: A visitor of a department store fell into an open and unprotected pithead. The same line of reasoning was followed by the Supreme Court in: OGH 12 Oct. 1978, JBl 1979, 654: A window fell onto the leg of a customer of a shop. 248. Cf. also OGH 12 Nov. 1979, EvBl 1980/83. 249. A clean solution lies with the legislative bodies: they should abrogate the obsolete §1315 ABGB, as has been discussed for decades already.

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159. Thus, the impact on the evolution of the Austrian law of liability of the rediscovery of the concept of culpa in contrahendo is an ambiguous one. Whereas the general imposition of a higher degree of care on the parties negotiating for a contract appears to be an improvement, toleration of ‘contract shopping’ has to be rejected. It results in a confusion of contract and delict categories and constitutes an excuse for the legislative bodies’ failure to launch necessary reforms in the field of civil liability, which is still based on legal provisions tailored for the realities of a pre-industrial society.

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Chapter 2. Conditions of Substantive Validity §1. CAPACITY OF THE PARTIES 160. According to section 16 ABGB, ‘[e]ach (human) being has inborn rights, apparent from reason, and is accordingly to be regarded as an individual’. From this antiquated language it can be derived that to every natural person irrespective of his or her age and status of mind has legal capacity, viz. the capacity to possess legal rights and be subject to obligations. This capacity is awarded to a human being at the very moment of birth and it ends with death. Even unborn children are protected by the law from the time of their conception, and they may acquire rights during this stage under the condition that they will not be stillborn. The legal capacity must be distinguished from the capacity to act which is composed of the capacity to enter into legal transactions, or capacity to contract, and the capacity to become liable for tortious acts.250 These two capacities are dependent on age and state of mind, whereas sex is of no concern. The parties to a contract must have the capacity to enter into legal transactions. Such capacity is presumed to be present in an adult person having attained majority age. However, a person may be declared incapable of conducting his or her own affairs by reason of a mental disease. These incapable adults and minors are given special protection by the laws. I. Minors 161. Under Austrian law, a minor is a person who has not yet attained the age of 18. The majority age which used to be higher than in most European states, viz. 19 years, has been linked to the age of 18 as late as 2001.251 The legal effects of minority are not uniform but depend on the age that a minor has actually reached. Austrian law attributes major changes in the legal abilities of a person to the attainment of the age of 7 and 14. Children under 7 years of age have, in principle, no power to create legal rights or to subject themselves to legal duties. According to section 865 ABGB, they are ‘incapable of making or accepting promises’. They can only act through their statutory representatives, viz. through their parents or a guardian. There is one exception however, as, according to section 151(3) ABGB, even a minor under 7 years of age is capable of concluding contracts usually entered into by children of his or her age provided they concern insignificant business of everyday life, such as, e.g., buying a piece of chocolate or an ice cream. Such contracts enter into effect retrospectively as soon as the boy or girl has actually performed his or her part of the transaction, viz. has paid the price for the chocolate or ice cream. 250. As a rule, if minors under the age of 14 cause damage to another, no responsibility for damage caused by them occurs. Only under very limited circumstances, e.g., if the minor is wealthy, partial or full compensation may be awarded to the victim by the judge (cf. §1310 ABGB). The age of 14 is named by the law the ‘age of discretion’ (Mündigkeit). 251. Cf. §21 (2) ABGB as amended by BGBl I 2000/135, effective 1 Jul. 2001.

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162. Minors between 7 years and the age of discretion, viz. 14 years, have a limited capacity to contract. According to section 865 ABGB, they are allowed to accept promises made to their advantage. Contracts by which such minors are subjected to duties are ‘provisionally invalid’,252 however, since these contracts require the consent of the statutory representative to become valid. If the statutory representative refuses to consent, the contract is void from the beginning. Minors having attained the age of discretion, but having not yet completed 18 years of age, may autonomously enter into contracts of employment, they may dispose of their belongings by last will, and they are entitled to dispose of their salary, provided they will not endanger their living conditions thereby.253 If a minor is retarded in his development so that the rules providing a limited capacity to act do not fit, a court may hold so by decree, with the effect that only the statutory representative is entitled to act.254 Due to a change of law, a prolongation of minority until the age of 21 as provided for such cases until 1 July 2001 is no longer possible.255 Only in the case of marriage, a minor may be awarded majority with regard to his personal affairs before the legal age of 18.256 II. Insanity 163. Persons suffering from mental illness and unable to take care of themselves have restricted or no capacity to contract depending on how serious their mental handicap is. Austrian law originally provided some stiff proceedings and radical instruments such as a formal declaration of legal disability based on a statute of 1916.257 A person declared legally disabled lost the capacity to contract and was placed under curatorship. As the language of this statute had a discriminatory effect and showed little concern for the needs of an insane person it no longer corresponded to the requirements of a modern law aiming at an efficient safeguard of the interests of a handicapped. Therefore, a statute was enacted in 1983 amending this field of the law, viz. the Administrator (of mentally ill persons) Act.258 Due to a significant increase in the number of insane people, in particular of seniors suffering from dementia, it was necessary to modernize this field of the law comprehensively. Since 1 July 2007, a new chapter of the Code provides detailed rules on what is designated in German as ‘Sachwalterschaft.’259 252. In German, schwebend unwirksam. 253. Until 1 Jul. 2001, as soon as a minor had attained the age of eighteen, but not yet completed his nineteenth year of age, he may have become liable for the damage he caused to another person to whom he fraudulently asserted his capability to conclude every contract whatsoever. However, when the age of discretion was lowered to 18, this provision – which had been considered a case of culpa in contrahendo – was abolished, cf. BGBl I 2000/135. 254. §154b ABGB as introduced by BGBl I 2000/135. 255. Child Custody Amendment Act of 2000, BGBl I 2000/135 (Kindschaftsrechtsänderungsgesetz 2000). 256. §175 ABGB; §1 of the Marriage Act requires a minimum age of 16 years and sufficient maturity for marriage. 257. Entmündigungsordnung, RGBl 1916/207, repealed by BGBl 1983/136. 258. The first Sachwaltergesetz, BGBl 1983/136, repealed and replaced by BGBl I 2006/92. 259. §§ 268–284h ABGB.

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The administrator is appointed by a court decree. He or she has the duty to represent the mentally ill person. The extent of his or her power of representation depends on the degree to which the represented person’s mental incapacity impairs the ability to conduct his or her own affairs. The new law also provides certain variations of statutory agency for close relatives of insane persons. Apart from insignificant business of everyday life, the mentally ill person has no capacity to enter into legal transactions without consent of the administrator. III. Spouses Managing the Family Household 164. The obsolete patriarchial model of marriage provided some restrictions for the wife in regard to her capacity to contract. She was assumed to stay at home, raise the children and carry out the affairs of a household, while her husband was earning the money needed for the maintenance of the whole family. Equality of the partners required a fundamental change which was brought about by the Statute on the Reform of the Effects of Marriage of 1975.260 This statute included a new section 96 ABGB. This provision states that the spouse (irrespective of the sex), who is carrying out the affairs of the family household and does not earn any money herself (or himself), is representing and obligating the other partner when concluding contracts of everyday life to meet the necessaries of keeping the family household. The contracts must be in correspondence with the family’s standard of life. The other partner has the option of informing a third person that he or she would not want to be represented by his or her spouse. This authority of both spouses to enter into contracts to meet the appropriate necessities of the family is known as ‘Schlüsselgewalt’. IV. Aliens 165. ‘Aliens are generally entitled to equal civil rights and obligations as citizens, provided that citizenship is not expressly required for the enjoyment of such rights.’261 As a rule, citizens of a foreign state are treated by the law in the same way as Austrian citizens, with the exception of the ability to purchase real property. Each of the nine Austrian provinces has a law of its own imposing restrictions on the acquisition of real property by aliens. This field of the law has been amended in the mid-1990s as a reaction to Austria’s entrance into the EEA Treaty and the Austrian accession of the EU. Thus, any discrimination of citizens of an EU- or European Free Trade Association (EFTA)-Member State in their private sphere is prohibited, e.g., with regard to their right to buy real property in Austria.

260. Eherechtswirkungen-Gesetz, BGBl 1975/412. 261. Cf. §33 ABGB, first sentence.

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V. Legal Persons 166. In addition to human beings, artificial persons may have the capacity to possess rights and be subject to obligations. Whereas the draftsmen of the General Civil Code of Austria employed the terms ‘moral person’,262 or ‘permitted company’ and ‘community’, the modern terminology uses the notion ‘legal person’ (or ‘legal entity’).263 Such legal persons may either be unions of persons, such as associations and companies,264 or entireties of certain assets which are organized to realize a specific common aim, e.g., foundations. Because such legal entities cannot act by themselves, physical persons must have the power to act on their behalf. Specific statutory provisions, e.g., in the statutes on public and private limited companies, deal with the modalities of representation by ‘organs’. These companies are represented by the board of management265 or the (business) manager(s).266 167. Thus, section 71 AktG states that the managing board has the power to represent the company in court and elsewhere. In representing the company the members of the board must act jointly, unless the company contract provides otherwise. The members of the board of management have to be registered and their signatures have to be deposited with the court.267 According to section 74(2) AktG, the scope of the managing board’s power to represent cannot be limited vis-à-vis third persons. As Austrian law has not adopted the doctrine of ultra vires, no limitation of the power to represent may be derived from the purpose of the company. Regarding their internal relation to the company, the members of the board of management are bound to respect the limitations imposed on their scope of business activities by the company contract.268 Associations are represented by the executive committee. The number of members, their composition and function are fixed in the articles of constitution, which may provide that single members of the committee may be empowered to represent the association.269 §2. DEFECTS OF CONSENT 168. A contract must be based on a ‘free meeting of the minds’ of the parties. Their declarations of intent must be free from mistake, and must not be made in a situation of deceit or fear. The law assumes that no declaration of will is made at all

262. Cf. §26 ABGB on the ‘rights of a moral person’. Here, the terminology employed by the General Civil Code of Austria and the contemporary Code civil is the same. 263. In German, Juristische Person. 264. In German, Vereine und (Kapital-)Gesellschaften. 265. In German, Vorstand. 266. In German, Geschäftsführer. 267. Cf. §73 AktG. The members of the board of management sign with the firm of the company and their own name (§72 AktG). 268. For similar provisions in regard to the private limited company, cf. §§18 et seq. GmbHG. 269. The new Law Relating to Associations, BGBl I 2002/66, became effective on 1 Jul. 2007.

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by a person who is forced to enter into an agreement by direct physical violence. Such a declaration made in a situation of vis absoluta has no legal effect whatsoever. Section 870 and section 871 of the Austrian General Civil Code refer to three types of defects of consent which are common to nearly all legal systems of the world. In particular in the codified laws of the civil law tradition categories can be found which are based on respective concepts of ancient Roman law. These are: mistake or error; deceit or (civil) fraud; and duress or, as the Austrian law puts it in section 870 ABGB,270 ‘illegal and well-founded fear’. In addition, the Austrian law of obligations acknowledges the concept of laesio enormis which is related to the French lésion, but has not been adopted by the German Civil Code. Under Austrian law, these three forms of defects of consent – mistake, deceit and duress – entail significantly different legal consequences. If a person has entered into a contract because he or she was induced through deceit or illegal and wellfounded fear the contract is always invalid and no duty to perform such a contract will exist for the threatened person.271 In contrast to deceit and duress, a mistake by a contracting party does not always entail the avoidance of a contract, but it must meet a number of requirements as to the character of the mistake and the circumstances under which a person is mistaken. I. Mistake (Error) 169. The two central provisions of the General Civil Code of Austria dealing with mistakes and their legal consequences are sections 871(1) and 872 ABGB. Section 871 (1) ABGB concerns essential mistakes and reads: If a party was mistaken with respect to the contents of a declaration given or received by him, and this defect affects the essence or the fundamental nature of that to which the intention of the declaration was principally directed and expressed, no duties arise thereform for the mistaken party, provided that this mistake was caused by the other party, should reasonably have been clear to him from the circumstances, or was promptly explained to him. Section 872 ABGB provides for the legal consequences of a mistake which ‘does not affect the principal element of a declaration or an essential condition of it, but only a secondary matter’. In this case, the contract ‘remains valid insofar as both parties have consented to the principal element and have not declared the secondary matter as their chief intention; however a suitable indemnification shall be paid by anyone who has caused the mistake to a person deceived thereby’.

270. In the antiquated German of the Code, the relevant phrase reads ‘ungerechte und gegründete Furcht’. 271. Cf. §870 ABGB.

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170. It follows from these provisions together with section 871(2) and 901 ABGB,272 that a distinction must be made between different types of mistakes, and that one out of three conditions must be met to bring a claim for avoidance or adaption of the contract concluded by one party in the case of error. According to section 871(1) ABGB these conditions are: that the mistake was either caused by the other contracting party; or ought to have been recognized by the other party from the circumstances; or was promptly disclosed and notified to the other party.273 The categories to be distinguished are errors as to the motive and errors as to the substance in a broad sense. The latter category is subdivided into errors as to the substance in a narrow sense274 and mistakes of expression.275 With regard to errors as to the substance the distinction of ‘essential’ and ‘non-essential’ errors entails important legal consequences. A. Error as to the Motive 171. An error about the motive to conclude a contract which is based upon consideration, or is non-gratuitous, does not affect the validity of the contractual agreement. This follows from the second sentence of section 901 ABGB. However, the parties may expressly add the motive as a condition or final purpose of their agreement. In this case, a party’s error in the motive to conclude a contract is relevant in the same way as in the case of a gratuitous contract.276 Indeed, the borderline between errors as to the motive and errors as to the substance is not always clearly drawn. Rough and ready tests such as the one expressed by the rule that a relevant error as to the substance is indicated by the question ‘what does the party want’, whereas an error in the motive is concerned if the question to be clarified is ‘why does the party want’,277 may be helpful in simple factual situations, but cannot always provide clear answers. Also unclear is the second paragraph of section 871 ABGB which has been inserted in 1979.278 It provides that an error about a circumstance of which the other party ought to have given notice under the applicable law, always qualifies as an error as to the substance. An error about the motive refers to circumstances and contexts which occur at an early stage of the psychological process of making up one’s mind to conclude a contract but do not form a part of the contractual agreement.

272. Infra, these provisions concern the error as to the motive. 273. This feature of the Austrian law is evaluated by Zweigert/Kötz, Introduction to Comparative Law, Vol. II, §8 II, as ‘a most original, attractive and satisfactory solution’ for the mistake problem. 274. In German, Geschäftsirrtum. 275. In German, Erklärungsirrtum. 276. Cf. §901 ABGB. ‘If the parties have expressly added as a condition the motive or the final purpose of their agreement, such motive or purpose is to be considered as any other condition. However, such conditions shall not be considered in determining the validity of contracts based upon consideration. In regard to contracts not supported by consideration, the provisions set forth for the last dispositions are to be applied.’ 277. Cf. OGH 23 Jan. 1975, EvBl 1975/205. 278. By §33 KSchG.

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B. Error as to the Substance in a Narrow Sense 172. In the case of an error about the substance of a contractual agreement, the person making a declaration of consent correctly assesses the objective meaning of his or her declaration. However, his or her understanding of the nature and contents of the concluded contract is based on a misjudgment. A contracting party may also be mistaken about a circumstance which is relevant for the transaction and of which the other party ought to have given some explanation.279 173. According to section 873 ABGB,280 an error about the person of the contracting partner qualifies as an error as to the substance, provided that it concerns an essential property or the identity of the partner, and that the contract would not have been concluded in the absence of such mistake. Indeed, an error about the partner’s capability to fulfil the contract281 would amount to an error about a substantive aspect of the contract. C. Mistake of Expression 174. In the case of a mistake of expression, the person making a declaration of consent is either erring about the objective significance of his or her declaration, or is not aware of the fact that an utterance of himself or herself must appear to be a declaration of intent entailing legal consequences. Other cases of mistakes of expression concern situations in which a person is not aware of the true meaning of the words he or she uses, or makes a slip of the tongue or pen. Finally, it is also possible that the transmission of the declaration is defective. D. Mistakes in Calculation and Errors as to the Legal Consequences 175. Mistakes in calculation constitute a specific category of errors. Such mistakes are often nothing but mistakes of expression. If, e.g., a party misspells the figures of the price, he or she may be entitled to avoid the contract under the same conditions as in other cases of mistakes of expression. If, however, a party making an offer submits a miscalculated account such mistake qualifies only as an error as to the motive,282 unless the basis of the calculation has been disclosed to the partner who agreed that the contract should be concluded on the ground of this calculation.

279. Cf. §870(2) ABGB, supra. 280. Cf. §873 ABGB. ‘The same principles are applicable to an error concerning the person to whom a promise has been made, provided that if the error had not taken place the contract would not have been concluded.’ 281. For example, if the other party discloses the absence of a governmental license necessary to carry out the business activities he or she is involved in. 282. Cf. OGH 6 Nov. 1986, WBl 1987, 62; 26 Jan. 1988, JBl 1988, 714; 15 Jun. 1988, JBl 1988, 783.

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176. Whether an error about the market value of the object of a contract amounts to an error as to the substance is not clear. The crucial question is whether the market value is a property of a good. By referring to section 934 and section 935 ABGB which provide a remedy only in the case of a blatant disproportion in the values of performance and counter-performance,283 the courts conclude284 that an error about the market value is not legally relevant.285 177. An error of a party as to the consequences which the law attributes to a declaration of consent irrespective of the party’s own intention is presumed to be of no legal relevance.286 E. Essential and Non-essential Errors 178. Whether a contract may be avoided on the ground of error depends on the quality of the mistake. According to section 871(1) ABGB, only essential errors as to the substance of the transaction in a broad sense entail the retrospective annulment of the contract. If the court finds that an error was essential, the contract is null and void from its very beginning. In doctrinal writing and in court practice, the opinion prevails that avoidance on the ground of error must be raised with the court and that it is not sufficient to direct an informal notice of the mistake to the other party.287 179. The crucial question is: When is a mistake of a contracting party essential? According to a simple test, an error is essential if the contract would not have been concluded without the error, whereas an error is not essential if the contract would have been concluded by the erring partner, albeit differently. According to section 872 ABGB, the validity of a contract cannot be affected by a ‘non-essential’ error. Such error entails the adaption or correction of the transaction. The contract has to be modified in a way that makes the transaction comply with the hypothetical consent of the parties without the error. Accordingly, the partner to a contract who is responsible for the error of the other has to compensate the mistaken party in a reasonable way. F. Statutory Requirements for Avoidance or Correction 180. According to section 871(1) ABGB, any avoidance on the ground of an error and any claim for correction on the same ground requires that additional conditions are met. Thus, the error must either have been caused by the partner of the 283. Cf. the chapter on laesio enormis, infra. 284. Cf. e.g., OGH 30 Nov. 1966, JBl 1967, 620. 285. Indeed, every party is free to evaluate the equivalent of the good he or she is bargaining for. A mistake about the true value is part of the typical risks of a contract. 286. Cf. e.g., OGH 10 Jan. 1989, JBl 1989, 446. 287. This position is dubious, as it is not required by the law, cf. Kerschner, Irrtumsanfechtung insbesondere beim unentgeltlichen Geschäft (1984) 59 et seq.

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mistaken party, or the partner must have failed to disclose the error, or the error must be revealed without delay. The policy on which these alternative requisites for the right of a mistaken party to claim avoidance are based focuses on the fact that the other party does not appear to merit any protection. As it is doubtful whether either party merits protection if they are commonly mistaken about the same aspect, the courts permit the avoidance on the ground of an error also in the case of a ‘common error’.288 1.

Causation of Error

181. A contracting party may cause an error of the other party by active conduct or by failure to provide the necessary information.289 It is not a requirement for a claim of avoidance or correction of the contract that the causation of the contracting partner’s error would be attributable to fault.290 2.

Negligent Failure to Disclose Error

182. If it ought to have been clear to a contracting party that the partner was labouring under a mistake when declaring the consent to an agreement, the mistaken party may either claim avoidance or correction of the contract. Here, the partner of the mistaken party is to blame for negligence in failing to disclose the error.291 3.

Prompt Disclosure

183. If the partner of a mistaken contracting party has not yet made any disposition in reliance on the valid conclusion of the contract, the error is deemed to be disclosed ‘without delay’.292 The requirement of timely disclosure of an error for the declaration of avoidance by the erring party is a tribute to the so-called res integra doctrine which is a disputed part of the Austrian contract law’s Roman heritage.

288. Cf. e.g., OGH 2 Sep. 1980, SZ 53/108; OGH 15 Jun. 1983, SZ 56/96; OGH 3 Mar. 1988, SZ 61/53; etc. 289. Cf. OGH 8 May 1985, SZ 58/69; OGH 24 Mar. 1987, JBl 1987, 531; OGH 25 Mar. 1987, JBl 1987, 657; cf. most recently OGH 22 Mar. 2004, ecolex 2004/272, 606. 290. Cf. OGH 16 Jan. 1991, ecolex 1991, 318. 291. Cf. OGH 15 Jun. 1988, JBl 1988, 783. 292. Cf. OGH 4 Sep. 1969, SZ 42/121.

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II. Deceit 184. The error of a party to a contract may be induced by the partner’s deceit. Deceit is the deliberate deception of a party making a declaration of consent.293 If someone is consciously misled by fraudulent misrepresentation, or prevented to take notice of the true facts, there is reason to assume a case for deceit. It is generally acknowledged, that not only active fraudulent conduct amounts to deceit. In a situation, where a party to a contract is clearly mistaken, and the other party, notwithstanding the duty to give notice thereof, remains silent in order to benefit from the partner’s error, the latter may also face a claim for avoidance on ground of deceit. Whenever a party to a contract resorts to deceit no contractual duties are created, provided that the deceptive behaviour caused the other to enter into the transaction. In the case of a deceit, the contract may be avoided without further ado. III. Duress (Illegal and Well-Founded Fear) 185. A person making a declaration of consent in a state of fear is not mistaken, however, but is not free in his or her decision to enter into a contract. Pursuant to section 870 ABGB, the inducement to declaring the consent to a contract by ‘illegal and well-founded fear’ entails the invalidity of the transaction. No obligation at all is created by such a declaration. Whether a fear is ‘well-founded’ follows from the gravity and probability of the danger created by the other party, and the physical and mental state of the threatened person.294 A fear is illegal if it is created by a menace which amounts either to the crime of extortion,295 or to the misdemeanour of compulsion.296 IV. Laesio Enormis 186. In contrast to the German law of obligations, the concept of laesio enormis is typical of the Austrian law of contract. If a party to a synallagmatic contract receives as counter-performance less than 50% of the value of his own performance, then section 934 and section 935 ABGB apply. According to these provisions, the party aggrieved by such serious disproportion of performance and counter-performance may file an action for rescission of the contract and restitution of the status quo. In accordance with the rule that performance and counterperformance should be approximately equivalent, the other party may preserve the contract and prevent its rescission by making up the deficiency according to common value. ‘The disproportion of the value is to be determined as of the moment when the contract was made.’297

293. 294. 295. 296. 297.

Cf. OGH 21 Apr. 1982, SZ 55/51; 19 Oct. 1989, JBl 1990, 175. Cf. most recently OGH 5 Aug. 2003, SZ 2003/90. Cf. §144 of the Austrian Criminal Code of 1975, Strafgesetzbuch, ‘StGB’: ‘Erpressung’. Cf. §105 StGB: ‘Nötigung’. §934 ABGB, last sentence.

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187. Since the amendment of section 935 ABGB in 1979,298 it is not possible to exclude the application of section 934 ABGB by stipulation.299 However, no claim for laesio enormis is available in a number of situations: e.g., if someone has made an express declaration: that the property is accepted at an extraordinary valuation for personal reasons; where a party knowing the real value has nonetheless consented to the disproportionate valuation; where it can be presumed from the relationship between the parties that they intended to conclude a mixed contract consisting of both onerous and gratuitous obligations; where the real value can no longer be ascertained; and lastly, where the property has been sold by the court in public auction.300 Laesio enormis may have a considerable impact on all types of synallagmatic contracts, in particular on contracts of sale, leasing and loan,301 and it has become an effective remedy since the enactment of the Consumer Protection Act which amended section 935 ABGB thus eliminating the possibility of waiving such a claim to the disadvantage of a consumer.302 §3. OTHER CONDITIONS OF VALIDITY 188. The Austrian General Civil Code includes no enumeration of the conditions which are essential to the validity of an agreement. Nevertheless, the requirements of a valid contract are basically the same as those specified by the famous Article 1108 Code Civil (CC), viz., ‘the consent of the party who binds itself, his capacity to contract, a definite object which forms the subject matter of the agreement, and a licit cause for the obligation’.303 The requirement which appears to be the least significant in Austrian law is the ‘cause for the obligation’. Whereas it follows from section 380304 that any transfer of ownership depends on a valid title or cause, which, according to section 424 ABGB, may be ‘based upon a contract, a last will, judicial decree or upon a legal provision’, it is evident that no such clear distinction of cause (or title) and legal 298. Cf. §33 KSchG. 299. Before the amendment became effective on 1 Oct. 1979, the claim for laesio enormis used to be waived. Virtually all standard form contracts included a standard clause to this end. 300. Cf. §935 ABGB. 301. For example, on leasing contracts; particularly in cases where the lessee is obliged by the agreement to pay the total amortization of the costs of the furnishing of the leased object and the credit costs, and has also to bear all the risks affiliated to ownership, but does not receive in exchange the full value of substance and use of the leased object. 302. Whereas no remedy based on laesio enormis was available to the partners of a commercial sale before 1 Oct. 1979, it is possible to stipulate that the application of §934 may be excluded to the disadvantage of the entrepreneur. Cf. §351 UGB as amended by BGBl I 2005/120. 303. Cf. Art. 1108 Code civil (Translation provided in , The Civil Law System 1168 (von Mehren/ Gordley trans., 2d ed.). 304. Cf. §380 ABGB: ‘No property can be acquired without the title and without a legal manner of acquisition.’

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manner of acquisition can be made with regard to obligations. Nevertheless, as has been mentioned earlier,305 an obligation must have a cause in order to create rights and duties among the involved parties. I. Cause 189. In contrast to German law, Austrian law puts much more emphasis on the concept of cause by denying the binding effect of abstract obligations in general.306 Therefore, the economic purpose of an obligation, in particular of a contract, must be transparent. In litigation the parties may be forced to disclose the purpose of their agreement.307 If somebody agrees to hand over a thing to another person the reason for this conduct may be either to sell it, to hand it over as a gift, or to lend it. A promise of a person to give something to, or to provide services for another, can be made either solvendi causa, or donandi causa, or credendi causa. Thus, the most important causes for the creation of rights and duties are: exchange, altruistic generosity, securing, and settlement of litigation. A conduct of a person which shall entail legal duties must be explained by a direct and typical purpose which determines the legal character of the transaction, viz. the cause. Without the cause-requirement the formality of a notarial contract under seal for promises to make a gift could easily be evaded. 190. The cause of an obligation must not be confused with a motive to enter into a contract. Motives provide only a remote rationale of a person’s decision to enter into an obligation and do not affect the legal character and consequences of a synallagmatic contract. 191. In contrast to the French Civil Code,308 the General Civil Code of Austria does not include an express provision dealing with ‘cause’ as a positive requirement for the valid conclusion of a contract. Nevertheless, the validity of a promise to give or to do something nearly always depends on a valid cause. 192. Exceptions from the requirement of cause are the obligations emerging from bills of exchange and cheques,309 bearer bonds and payment orders made out by a merchant310 (abstract obligations). In addition, the duty of the person accepting a payment order or delegation311 to honour it is abstract insofar as it does not depend

305. 306. 307. 308.

Cf. supra, Introduction to contract law, §1 II. Cf. OGH 16 Mar. 1966, EvBl 1966/425; 1 Jul. 1971, SZ 44/108; 29 Apr. 1975, SZ 48/55. Cf. OGH 5 Jul. 1983, RdW 1983, 105. Cf. Art. 1131 Code civil: ‘An obligation without cause or one based on a false or on an illicit cause cannot have any effect.’ 309. Cf. Art. 17 WechselG and Art. 22 ScheckG. 310. Such commercial instruments to order can be endorsed. Cf. §364(2) UGB: ‘The debtor may only raise such defenses against the legitimate holder of the document which concern the validity of his declaration in the document or arise from the contents of the document or which he is entitled to assert directly against the holder.’ 311. This is the way Baeck (cf. supra) translates the German ‘Anweisung’ or ‘Assignation’.

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on the validity of the obligations between the person ordering payment and the payee, and between the person ordering and the person to whom payment is ordered.312 Finally, an abstract obligation emerges from a documentary letter of credit. II. Possibility 193. The object of a contract must be possible. If it is clear from the beginning that if an agreement cannot be fulfilled, no valid contract can be formed. In respect to this so-called initial impossibility, Austrian law makes a distinction between ‘evident impossibility’ and ‘simple impossibility’. No valid contract is formed, if the agreement aims at the performance of ‘clearly impossible matters’:313 ‘impossibilium nulla obligatio’. ‘Clearly impossible’ is the content of a contract, if the parties have agreed on a de facto absurd or legally impossible obligation. ‘Evidently’ or ‘clearly impossible’ pursuant to section 878 ABGB, is, e.g., the promise to transport a person to Mars, or to grant a person a right, which is made unavailable by legal prohibition. If the promisor of a ‘clearly impossible performance’ was or should have been aware of the impossibility, he will, according to the third sentence of section 878 ABGB, become liable to the other innocent party for any damage suffered by the other party in reliance upon the validity of the contract up to the value of his or her expectancy. No such duty to compensate the damage exists if the other party himself or herself knew or ought to have known of the impossibility.314 A promise to enter a contract which cannot be performed by the promisor at the time of its conclusion, but may be performed at a later date, does not amount to an ‘initial impossibility’. In this case of a simple impossibility the contract is validly formed. If the performance remains impossible, the promisor may be held liable for the other party’s reliance damage. 194. Section 878 ABGB provides also for the situation, where possible and impossible matters are simultaneously contracted for. In this situation, ‘the contract remains valid as to the possible matters, unless it appears therefrom that no one matter can be severed from the others’. III. Permissibility 195. According to section 879(1) ABGB, ‘[a] contract which violates a legal prohibition or public morality315 is null and void’. This provision puts limits on the freedom of the parties to make up contracts at their discretion. Section 879(1) ABGB corresponds to section 512 of the US Restatement 2nd of Contracts stating 312. Cf. §1402 ABGB. 313. Cf. first sentence of §878 ABGB. ‘A clearly impossible matter cannot become the subject of a valid contract.’ 314. This is a case of the so-called culpa compensation. 315. The German notion of ‘gute Sitten’, which is translated by ‘public morality’ is not fully consonant with ‘public policy’.

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that a contract is illegal ‘if either its formation or performance is criminal, tortious, or otherwise opposed to public policy’.316 Under Austrian law, a contractual agreement must neither be prohibited by statutory provisions, nor violate public morality. If it does, however, it may not always be null and void as section 879(1) ABGB suggests. In order to be absolutely null and void the contractual agreement itself must be illegal because its subject matter is not permitted. This is not the case, however, when a party enters into a contract merely with an intention which is prohibited by the law.317 As a rule, the validity of a contract is not affected if the statutory prohibition does not relate to the contents of a transaction but only to the way, place, and time of conclusion of the contract, or if the statutory prohibition concerns only one of the contracting partners. Therefore, in many cases the legal consequences of the conclusion of a contract in violation of a legal prohibition do not amount to its nullity. Such violations of a legal provision may only entail the imposition of a fine. 196. Section 879(2) ABGB enumerates a number of void contracts. It reads: In particular, the following contracts are null and void: 1. The stipulation of a reward for the negotiation of a marital contract; 1a. The stipulation of a reward for the procurement of a medically assisted procreation;318 2. The acquisition by an attorney-at-law of a matter in litigation, totally or partially, or an agreement by an attorney to take as his fees a definite portion of the amounts he would gain for his client; 3. The alienation of an inheritance or a legacy which may be received from a third, living person; 4. An agreement by which any person exploits the improvidence, the strained financial situation, the lack of experience or the excited frame of mind of another person by causing him to promise or give to himself or to a third person a performance in exchange for a clearly disproportionate consideration. As the words ‘in particular’ indicate, this enumeration is not exhaustive and there exist several prohibitions of certain contractual agreements in the General Civil Code of Austria319 as well as in numerous statutes, such as the Foreign Exchange 316. Similarly, English law makes a distinction between contracts which are contrary to positive law and contracts violating public policy. 317. Cf. OGH 17 Mar. 1978, EvBl 1978/156: The purchase of a slot-machine does not violate the law itself, notwithstanding the purchasers intention to install and run the machine in a way prohibited by the law. 318. Introduced by the Statute on Medically Assisted Procreation (Fortpflanzungsmedizingesetz, ‘FMedG’, BGBl 1992/275). 319. Cf. e.g., §1371 ABGB according to which, ‘[a]ll provisions and accessory agreements which are inconsistent with the nature of the pledge contract or the contract for loans are null and void’; e.g., ‘that the pledge shall become the property of the creditor after the obligation becomes due’; or, ‘that the creditor may alienate the pledge at his pleasure or for a price which has been previously fixed’; or, ‘that he may keep the pledge’ etc.

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Law,320 provincial statutes concerning the acquisition of real property by aliens,321 the Statute on the Employment of Aliens,322 the Statute on the Law of Lease and Tenancy323 etc. 197. According to section 879(2) N.1 ABGB marriage brokerage contracts for gain324 are considered to be illegal. This means that the claim for payment of the agreed amount cannot be enforced. Nevertheless, numerous prosperous matrimonial agencies exist in Austria. In practice, they charge their clients with an advance payment. This payment could be reclaimed as long as the agency has not been performed. However, a mere procurement of addresses does not amount to a void marriage brokerage.325 Whereas a similar position in respect of marriage brokerage contracts can be found in numerous legal systems, in particular in the Anglo-American jurisdictions,326 the case for illegality provided by section 879(2) N.2 ABGB may surprise American lawyers. This subparagraph contains the express prohibition of a ‘pactum de quota litis’ between a member of the legal profession in its broadest sense327 and his client. This appears to be in sharp contrast to the US practice of contingency fee agreements. In Austria neither an attorney,328 nor a notary,329 nor a tax consultant330 may conclude a valid contract with their clients by which a certain portion of the money gained for the client is considered to be the fee for the professional advice. This provision is designed to prevent the exploitation of inexperienced clients who do not have the ability to assess their chances to succeed in a lawsuit. In addition to the consequence that the contract would be null and void, an attorney, notary, etc., would have to expect disciplinary sanctions if he or she would agree to practicing on a contingency fee basis.

320. Cf. §22 of the Foreign Exchange Act (Devisengesetz 2004, ‘DevG’, BGBl I 2003/123). 321. The Grundverkehrsgesetze of the provinces include prohibitions of sales of real property to aliens and of agriculturally used land. However, since Austria has become a Member State of the EU, these provincial laws are not applicable if they unlawfully discriminate against EU citizens. 322. According to the Ausländerbeschäftigungsgesetz (‘AuslBG’, BGBl 1975/218) the unauthorized employment of aliens is void. However, this rule does not apply to citizens of another EU Member State. 323. Mietrechtsgesetz, ‘MRG’, BGBl 1981/520 (latest amendment. BGBl I 2010/29; in particular §27. It declares void and illegal an agreement of redemption which obligates the new lessee to pay a certain amount of money to the lessor or the original lessee. 324. These type of contracts between a person seeking a partner for life and a broker concern the procurement of marriage in exchange for an amount of money. 325. Cf. OGH 19 Jan. 1977, SZ 50/6; 10 Nov. 1977, SZ 50/144; 18 Nov. 1981, SZ 54/173. 326. Cf. the famous explanation given in Cole v. Gibson (1750) 1 Ves.Sen. 503, 506, ‘that marriages may be on proper foundation … and to prevent that influence which servants more especially would gain over young ladies’. 327. The antiquated language of the Code employs the word ‘Rechtsfreund’ which covers lawyers, notary and tax consultants. 328. Cf. OGH 5 Oct. 1966, SZ 39/160. 329. Cf. OGH 8 May 1972, EvBl 1973/11. 330. Cf. OGH 23 Apr. 1958, SZ 31/66.

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198. There are basically two policy considerations on which the provision of section 879(2) N.3 ABGB is based. In the first instance, the law considers that selling an inheritance which one expects from another person during the lifetime of the potential testator beforehand would be irreverent. In the second instance, the law wants to prevent a prospective heir from thoughtless activity with regard to the hoped-for inheritance. Probably the most important case among the illegal contracts enumerated by section 879(2) ABGB is that of N.4 which concerns usurious contracts. There are different forms of usury such as usury as to credit, salary, leases etc. Under Austrian law, usurious agreements are not simply characterized by the charging of an excessive percentage of interest by a party. Moreover, three conditions must be met: First, the performance must be given in exchange for an obviously disproportionate consideration. Second, a party must be unable to take adequate care of his own interests because of a situation of distress, caused by improvidence, lack of experience, financial plight, etc. Third, the other party must pursue an objectionable conduct in taking advantage of this state of necessity, although the culpable party need not have caused this situation. Thus, it is a combination of objective criteria such as the obvious disproportion in the values of performance and counter-performance, and subjective aspects viz. the state of necessity of one party and its exploitation by the other331 which combine to constitute usurious practices. If one of these elements is absent in a given case, an unfair and exploitative conduct cannot qualify as a violation of the positive provision of section 879(2) N.4 ABGB, but it may amount to a violation of public morality instead, provided that an additional equivalent element of immorality substitutes the absent requirement provided by the cited legal rule.332 In contrast to a factual situation giving rise to a laesio enormis remedy, it is not a requisite for a claim of avoidance based on section 879(2) N.4 ABGB that a party receives a counter-performance of less than 50% of the value of his own performance. However, to comply with the requirements of that provision, a less significant disproportion of performance and counter-performance must be accompanied by certain subjective features in the situation and conduct of the contracting parties. Such subjective elements are irrelevant for a claim based on section 934 ABGB. 199. Whereas section 879 (2) N.4 ABGB refers to a situation in which performance and counter-performance are not in an approximately equivalent relation, section 879(3) ABGB333 concerns only collateral clauses. The provision states that:

331. Thus, Baeck, The General Civil Code of Austria, supra, at 167, mentions rightly in a footnote to §879 that ‘if a very rich person who at a given moment has no ready cash but does not want to sell any of his investments, borrows some money for the purchase of luxury items … even an interest rate of 20% or 30% may not be considered usurious, because (assuming he is an intelligent person) neither his improvidence, a strained financial situation, lack of experience, nor excitement prevails’. 332. Cf. OGH 20 Mar. 1985, JBl 1986, 777. 333. Introduced in 1979 by §33 KSchG; cf. BGBl 1979/140.

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[i]n any case, a contract term included in general terms of business or standard contract forms, which does not refer to an essential part of the mutual performance, is null and void, if it places the other party to a gross disadvantage taking into account all circumstances. ‘Placing the other party to a gross disadvantage’334 means that the legal position of that party is substantially and unfairly weakened in comparison to the position of the party employing the general conditions of business or standard contract forms. This rule was inserted to provide additional protection for a weaker party in a contractual relation. It entails the partial nullity of a contract as only the unfair clause is invalidated, whereas the validity of the remaining agreement is not affected.335 200. It follows from section 879 ABGB that contracts which are concluded by the parties with the intention to avoid or circumvent a legal prohibition336 are also null and void. Here, the parties knowing that the agreement they actually wish to conclude may be null and void, resort to a permitted contract to reach the intended illegal end. Frequently, the parties manipulate the real facts, to escape the burden of obtaining certain licenses by state authorities or to avoid other legal ambiguities. A frequent and well-known example of a ‘circumventing contract’ is the conclusion of a sub-tenancy agreement instead of a tenancy contract which would provide a significantly higher and comprehensive protection of the tenant against a notice of termination by the house owner.337 In such a case the circumvented legal rule prohibiting the intended agreement applies to the contract338 by which the purpose and aim of the prohibition should be thwarted. That may not always result in the nullity of the bargain, however, but may more often entail a correction in order to make the parties comply with the provision they wanted to avoid. IV. Compliance with Public Morality (Good Morals) 201. Section 879 ABGB states that not only illegal contracts but also contracts violating public morality are null and void. The draftsmen of this provision resorted to a rather vague general clause to realize their intention to invalidate contractual agreements by which the parties would offend the basic values of the society.

334. In German, gröbliche Benachteiligung. 335. Cf. OGH 2 May 1979, SZ 52/71; OGH 22 Feb. 1984, SZ 57/41. 336. Cf. OGH 28 Aug. 1986, EvBl 1987/181; OGH 15 Jul. 1987, JBl 1988, 35; OGH 12 Nov. 1987, JBl 1988, 250. For details see, Tamussino, Die Umgehung von Gesetzes- und Vertragsnormen (1990). 337. To stop this frequent abuse by owners of a house in regard to persons wishing to lease an apartment, the legislator provides an express rule in §2(3) MRG, stating that the sub-tenant is deemed to be a chief-tenant, if it is clear from the circumstances that the tenancy contract was concluded as a sub-tenancy only to deprive the party of more favourable rights (BGBl I 2001/161); cf. OGH 28 Jun. 1983, JBl 1985, 43; OGH 30 Sep. 1986, SZ 59/158; OGH 20 Jan. 1987, SZ 60/8. 338. Cf. OGH 2 Sep. 1987, SZ 60/158; OGH 27 Apr. 1989, JBl 1989, 780; OGH 26 Jun. 1990, JBl 1991, 381.

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Whereas it is clear that such agreements shall have no legally binding consequences, it is rather unclear which agreements might amount to a violation of public morality. It is the task of the courts to clarify this difficult question. Public morality is not the same as the generally acknowledged and accepted moral rules. Rather, it is the totality of those rules of law which are not expressly laid down in positive statutory provisions, but which must be respected as the result of a common and just evaluation of the involved interests. Public morality may be understood as being identical with the general and unwritten principles of law of which the generally accepted moral rules form a part. According to court practice,339 a contract is not in compliance with public morality if it is in contradiction to ‘the sense of justice of all just and equitable members of society’. The violation of good morals is indicated by a number of aspects, such as jeopardy of generally acknowledged values, restriction of someone’s liberty, the exploitation of a position of superior strength, the manifestation of a reprehensible mind, etc. Thus, the violation of the legally protected interests of a party, or a serious disproportion between the violated and favoured interests of the partners of a contract may amount to a violation of good morals.340 202. A distinction may be made between immoral contracts in a narrow sense, viz. agreements for immoral conduct and other violations of good morals. The public opinion about agreements violating good morals are changing, however. Thus, court practice used to reveal that e.g., agreements about prostitution,341 as well as agreements to exercise sexual freedom between married persons, or to participate as an actor in a pornographic film explicitly showing sexual intercourse342 would qualify as violations of good morals. This position has been revised most recently, when the Supreme Court held that a contract between a client and a prostitute on sexual services would not be a general violation of good morals.343 Whereas, a tying contract by which a partner binds himself in an excessive way to another party and makes himself economically dependent on the other’s mercy, may be found to violate good morals.344 If a person exercises some rights in an excessive and vexatious way, such conduct may qualify as a violation of public morality.345 However, the courts are restrictive in qualifying a specific behaviour as chicanery. As a rule, the vexatious

339. Cf. OGH 15 Dec. 1965, SZ 38/217; OGH 29 Jan. 1974, EvBl 1974/137; OGH 27 Apr. 1983, SZ 56/72; OGH 28 Jun. 1989, JBl 1989, 784. 340. Cf. OGH 19 Oct. 1978, SZ 51/142; OGH 22 Feb. 1984, NZ 1984, 219; OGH 8 May 1985, SZ 58/72; OGH 10 Jan. 1989, JBl 1989, 379. 341. Cf. OGH 28 Jun. 1989, JBl 1989, 784. 342. Cf. LG Wien 18 Nov. 1986, JBl 1987, 334, an international case to which, according to the rules of Private International Law, German law applied. 343. Cf. OGH 18 Apr. 2012, EvBl 2012/111. 344. Cf. OGH 1 Oct. 1982, JBl 1983, 321; OGH 10 Jan. 1989, JBl 1989, 379. 345. According to §1295(2) ABGB, ‘[a] person who intentionally injures another in a manner in violation of public morals is liable therefor; however, if the injury was caused in the exercise of legal rights, the person causing it shall be liable therefor only when the exercise of this right obviously has the purpose to cause damage to another’.

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exercise of a right must have the exclusive purpose to inflict loss on another person.346 203. The meaning of the notion of ‘good morals’ or ‘public morality’ is subject to a permanent change because the public opinion about what is immoral is in permanent flux. This is demonstrated by a certain permissible change in the evaluation of pornography and prostitution. Finally, it should be mentioned that no structural difference exists between illegality and immorality. Indeed, courts have sometimes found an immorality which was later transformed into a legal prohibition, as, e.g., in the field of unfair competition. §4. THE CONSEQUENCES OF A DEFECT OF CONSENT OR OF A LACK OF SUBSTANTIVE VALIDITY I. Avoidance or Adaptation of the Contract 204. According to section 870 ABGB, a person who was induced to a contract through deceit or through illegal and well-founded fear has no duty to perform. This means that such a person has the choice to bring an action for avoidance of the contract,347 or to maintain it. On the ground of an error, a contract may either be avoided or adapted dependent on the quality of the mistake. Section 871(1) ABGB states that only essential errors concerning the substance of the transaction may entail the retrospective annulment of the contract as a result of an action for avoidance of the mistaken party, whereas a minor mistake in the sense of section 872 ABGB may not affect the validity of the entire contract. 205. If the contract forming the title for the transfer of ownership of a movable or immovable property has been concluded by a party in a state of an essential and legally relevant error, the transfer loses its effect retrospectively. As the Austrian law adheres to the concept of ‘causal transfer of ownership’, the invalidation of the title affects the validity of the transfer. Therefore, the person who wanted to transfer ownership of the good and assign it to the partner of the avoided contract continues to be the owner.348 The right of a mistaken party to avoid the contract remains unaffected if the restitution of the movable or immovable property is no longer possible due to an accident, for which the mistaken party is not responsible.349 Whether the declaration of avoidance by the mistaken party to a contract may have retrospective effect is highly doubtful in regard to certain contracts for the performance of a continuing or recurring obligation, such as labour contracts, because

346. 347. 348. 349.

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Cf. OGH 9 Aug. 1960, JBl 1961, 231; OGH 30 Sep. 1982, SZ 55/137; etc. The notice of avoidance must be brought by action in court, cf. OGH 4 Mar. 1981, JBl 1983, 36. Cf. OGH 30 Jan. 1980, JBl 1981, 425. Cf. OGH 26 Nov. 1980, JBl 1984, 200; OGH 22 Jan. 1986, RdW 1986, 173.

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in these cases the retroactive unwinding often poses insurmountable problems.350 Therefore, with respect to these types of contractual relations, the avoidance is only effective from the time it was declared. If the error of a party is not essential, a claim for the adaptation of the contract can be raised. The contract has to be reshaped in a way that corresponds to what the parties would have agreed upon had they been aware of the true circumstances. This is the true meaning of the misleading phrase in section 872 ABGB that ‘a suitable indemnification shall be paid by anyone who has caused the mistake’. It does not mean that damages shall be paid. It is the disproportion of performance and counterperformance caused by the mistake that shall be balanced. 206. Notwithstanding the wording of section 871 ABGB, that no duties arise from a contract which a person concluded in the state of error, the legal consequence of a mistake is not the automatic absolute nullity of the agreement. It lies with the mistaken party to demand avoidance of the contract or not. The party in error has the choice to terminate the contractual relation with retrospective effect by unilateral declaration, or to waive this right. If the mistaken party decides to the latter, the validity of the contract remains unaffected. Irrespective of the absence of any legal provision to this end, it is the predominant doctrinal position that the declaration of avoidance must be raised in court. An out-of-court declaration is deemed to be insufficient.351 The mistaken party has to assert his or her error either by way of an action or by way of a defence to an action brought against him or her.352 207. ‘[T]he claim to rescind a contract because of well-founded fear or mistake, where there is no deceit on the part of the other contracting party’, is subject to a limitation period of three years.353 208. The right to declare avoidance of a contract on grounds of a mistake may be waived beforehand. An action demanding avoidance or correction of the contract cannot be brought by the mistaken party, if the other party declares his or her willingness to put the mistaken partner into the situation he or she would have been in had he or she concluded the contract without an error. In such a case the mistaken party has no reason for a complaint any longer.354

350. Cf. e.g., OGH 26 Apr. 1983, DRdA 1986, 209. 351. Serious doubts against this position have been raised by Kerschner, Irrtumsanfechtung insbesondere beim unentgeltlichen Geschäft (1984) passim. 352. Cf. OGH 12 Nov. 1980, SZ 53/150. 353. Cf. §1487 ABGB. It follows from that provision that a defect of will of a party to a contract, which was caused by the other party’s deceit, is subject to the general thirty year-limitation period; cf. §1478 ABGB. 354. Cf. OGH 29 Oct. 1982, SZ 55/160; OGH 3 Mar. 1988, SZ 61/53. In the same way, a mistaken party loses his right to declare the contract avoided, if the circumstances which were erroneously assumed to exist already at the time of the conclusion of the contract, occur at the time of performance; cf. OGH 24 Apr. 1986, SZ 59/71; OGH 3 Mar. 1988, SZ 61/53.

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209. The legal consequence of a contract violating a legal prohibition or good morals is its nullity. The courts make a distinction between an absolute nullity and a nullity which is dependent on its assertion. Contracts which violate statutory rules aiming at the protection of general interests of the community and at the preservation of public order are absolutely null and void.355 No declaration of avoidance is necessary. Everybody has the right to substantiate the nullity of such contracts, and this right is not subject to a period of limitation.356 If the aim of the violated legal prohibition is limited to the protection of the other party to the illegal contract and does not refer to public interests, it lies with the partner whether he or she wants to assert the nullity or not. In such a case, the party suffering detriment from the illegality of the agreement has to invoke the violation of a legal rule, e.g., by challenging his or her duty to perform, to make it clear that the contract is null and void.357 An analogous distinction between absolute nullity and relative nullity requiring the assertion by a party is made in regard to immoral agreements. 210. Usurious contracts in the sense of section 879(2) N.4 ABGB are not null and void per se. Instead, they are subject to a declaration of avoidance by the violated party. This is clearly a case of ‘relative nullity’, as this rule aims only at the protection of an economically and emotionally weak party, which suffers from the partner’s exploitative behaviour. The victim of a usurious contract may bring an action for the avoidance of the bargain within the general limitation period of thirty years.358 II. Partial Avoidance 211. A contract violating a legal prohibition may result in partial nullity. Whether only part of an agreement, or the contract as a whole, is null and void depends on the protective aim of the violated legal rule. Thus, according to section 27 of the Statute on the Right of Lease and Tenancy, an agreement of redemption by which the new lessee is bound to pay a certain amount of money to the lessor or the original lessee for being granted the lease of an apartment or business premises, is null and void. This does not mean, however, that the whole contract of lease is null and void. The aim of the legal prohibition of section 27 Mietrechtsgesetz (MRG) is the protection of the weaker party, viz. the (new) lessee. The protection of the lessee would be undermined if the conclusion of a void redemption agreement would result in the nullity of the lease.

355. Cf. OGH 12 Nov. 1987, JBl 1988, 250; OGH 26 Apr. 1990, RdW 1990, 374. 356. However, if somebody has performed such an absolutely null and void contract, e.g., by delivering a good, he may claim restitution only within the limitation period of thirty years. 357. Cf. OGH 5 Jun. 1973, EvBl 1973/277; OGH 9 Nov. 1988, SZ 61/235. 358. According to §1478 ABGB.

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Similarly, an oppressive tying agreement expanding the time of commitment of a beer retailer to a long-term franchise with a brewery for an unreasonable period, does not result in the nullity of the whole contract.359 212. According to section 917a ABGB,360 the agreement of a payment which violates a statutory rule fixing a maximum or a minimum price to protect the party to a contract, is only void insofar as it deviates from the fixed price.361 Partial nullity also results when a contract is concluded on the basis of pre-formulated general conditions employed by a party which include either unfair collateral terms by which the other party is placed to a gross disadvantage according to section 879(3) ABGB, or terms which pursuant to section 6 KSchG are lacking validity.362

359. 360. 361. 362.

Cf. OGH 13 Oct. 1983, SZ 56/144. This provision was inserted in 1979 by §33 KSchG; cf. BGBl 1979/140. Cf. OGH 9 Apr. 1986, SZ 59/65. Cf. OGH 30 Jun. 1982, SZ 55/100; OGH 13 Apr. 1983, SZ 56/62; OGH 4 Jul. 1985, SZ 58/119. The notion of ‘geltungserhaltende Reduktion’ for this result has been created. This means that a contract is to construed restrictively, thus, leaving its validity (without the invalid clause) unaffected.

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Chapter 3. The Contents of a Contract §1. THE DIFFERENT CLAUSES I. Express Terms 213. A contract is based on the consonant declarations of intention of two or more parties. Its content may be composed by ‘express’ and ‘conclusive declarations of intention’. From a functional view, these notions correspond to the ‘express terms’ and ‘implied terms’ of English law. Express terms constitute the core of any contractual agreement, irrespective of whether it is concluded orally or in a written form. Their ascertainment does not pose difficult legal problems if a clear wording is employed by the parties. If such terms are formulated in an ambiguous way, however, they have to be interpreted pursuant to the rules on the construction of contracts laid down in section 914 and section 915 ABGB. 214. Austrian law neither provides a direct equivalent to the distinction of the English law of contract between conditions and warranties, nor to that of terms and representations. With regard to ‘condition’, it should be noted that the word ‘Bedingung’ does not correspond with the respective notion of English contract law, which, in contrast to a ‘warranty’ which is only collateral to the main purpose of a contract, means a stipulation going to the root of the contract.363 Under English law, a breach of warranty gives rise only to a claim for damages, whereas a right to repudiate the contract does not follow therefrom. Only a breach of condition entails such a right. However, in English legal terminology, ‘condition’ also appears to mean ‘a provision which makes the existence of a right dependent on the happening of an uncertain event.’364 In Austrian legal terminology the word ‘condition’ (Bedingung) is exclusively used in this sense and stipulations of certain conditions according to sections 897 et seq. ABGB frequently form part of a contract. Notwithstanding the necessity to clearly determine the contents of a contractual agreement, the distinction between ‘terms’365 and ‘(mere) representations’366 is not characteristic of Austrian contract law. Indeed, misrepresentations may amount to the violation of a collateral contractual duty and may entail legal consequences, such as damages. From a functional point of view, therefore, no really significant divergence may be found.

363. American contract law has obviously abandoned the historical distinction between ‘condition’ and ‘warranty’. 364. Such right is a ‘conditional right’ in contrast to an ‘absolute right’. 365. Meaning agreements forming a veritable part of the contract. 366. Meaning statements of facts which a party to a contract makes to the other, before or at the time of the conclusion of the contract, of some matter or circumstance relating to it.

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II. Implied Terms 215. The agreement to a contractual stipulation may be conclusive or tacit, i.e., it follows from collateral or accessory circumstances rather than from some declarations or a certain clear conduct. According to section 863(1) ABGB, a party’s ‘intention is manifest not only expressly by words and generally adopted signs but also tacitly by acts which in regard to their circumstances reveal an intention beyond substantial doubt’. Whether an implied or conclusive term forms part of an agreement must be scrutinized by taking ‘[t]he custom and usage prevailing in honest transactions’ into consideration. Otherwise, the danger of erroneously attributing a certain legally relevant intention to certain acts and omissions of a party would be great. Only if no substantial doubt about the true meaning of an activity or omission remains, such act or omission would amount to an implied term.367 If the parties fail to fix all details of their contractual agreement, the nonmandatory (dispositive) legal rules of the General Civil Code often provide an answer. It depends on whether the agreement fits into one of the patterns of typical contracts for which a set of statutory rules exists. The full meaning of an incomplete agreement may follow from these statutory provisions. III. Exemption Clauses and Limitation Clauses 216. Under Austrian law, the parties to a contract may agree upon the exclusion or limitation of liability for damage resulting from the breach of a contractual duty. However, the validity of such exemption clauses is subject to controversy. It primarily depends on the degree of fault and on the kind of damage whether the exclusion is effective. It is a clear and undisputed rule that the exclusion of liability for damage caused to the partner of a contract by one’s own intentional wrongdoing or by the intentional behaviour of one’s servant can neither be excluded nor restricted.368 Under the influence of EU law, the rule has been adopted that liability for personal injury cannot be excluded at all. With regard to damage caused by gross negligence, any exclusion or limitation of liability therefor was deemed for a long time to have no legal effect. However, it has become a matter of increasing dispute in recent years whether this traditional rule369 can be upheld without any exceptions. In particular, in the context of incorrect statements of a bank about a customer’s reliability and solvency, the Austrian Supreme Court accepted the validity of a clause excluding liability for ‘simple gross negligence’, provided that such information was given free of charge.370 In a case in which wrong information was given for consideration by a credit inquiry agency,

367. Cf. OGH 11 May 1965, JBl 1966, 97. 368. Cf. e.g., OGH 24 Apr. 1958, SZ 31/67; OGH 22 Oct. 1968, SZ 41/139; OGH 19 Nov. 1968, JBl 1970, 201. 369. Cf. OGH 12 Mar. 1963, SZ 36/38; OGH 22 Oct. 1968, SZ 41/139; OGH 19 Nov. 1968, JBl 1970, 201; OGH 28 Nov. 1978, JBl 1979, 483. 370. Cf. OGH 22 Nov. 1984, SZ 57/184.

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the Supreme Court went further, holding in 1985,371 that an exclusion clause is only invalid if the inquiry agency is to blame for so-called crass gross negligence.372 Thus, only the exclusion of liability for ‘crass gross negligence’ still is unanimously deemed to be invalid as violating ‘good morals’.373 The law appears to be a little more settled with regard to standard form contracts (in non-consumer transactions). Here, at least the exemption of gross negligence is overwhelmingly considered invalid. Likewise, an exemption in standard terms which excludes liability for personal injuries in case of simple negligence is now deemed to be invalid.374 217. Specific rules on exemption and limitation clauses are provided by the Consumer Protection Act of 1979375 for consumer transactions. Thus, according to section 6 N. 9 KSchG, a clause excluding or limiting liability of a businessman for damage he or one of his employees may cause to a consumer intentionally or by gross negligence is null and void as is a clause excluding or limiting liability for personal injury of a consumer.376 In its revised wording377 section 9 KSchG states that consumers’ warranty rights may not be excluded or limited before the consumer has become aware of the nonconformity of the delivered good with the contract, and only with regard to used goods a shorter period may be negotiated between the businessman and the consumer. 218. Each party to a contract under general civil law may waive some or even all of his or her respective rights and claims against the other party. This follows from the general rule for all types of contracts in section 1444 ABGB.378 A right may be waived gratuitously or in exchange for money. For a waiver to be effective the debtor’s consent is necessary. However, the creditor does not have to expressly declare the waiver; an implied waiver is sufficient.379

371. OGH 9 May 1985, JBl 1986, 172. 372. In German, krasse grobe Fahrlässigkeit. 373. For a harsh criticism of this decision, cf. Jabornegg, ‘Formularmäβige Freizeichnung für grob fahrlässige Auskunft’, JBl 1986, 144. 374. Cf. OGH 24 Mar. 1998, SZ 71/58; OGH 22 Feb. 2001, JBl 2001, 590: etc. 375. BGBl 1979/140. An important amendment to this statute has been passed by Parliament in spring 1993: cf. BGBl 1993/247, publ. 16 Apr. 1993. Thereby Austrian consumer protection law has been brought into compliance with EC-law pursuant to the European Economic Area Treaty: in particular with the Council Directive 85/577/EEC ‘to protect the consumer in respect of contracts negotiated away from business premises’, of 20 Dec. 1985, OJ 1985 L 372/31, and with the Council Directive 90/314/EEC ‘on package travel, package holidays and package tours’, of 13 Jun. 1990, OJ 1990 L 158/59. Another amendment proved to be necessary to implement the Council Directive 93/13/EEC ‘on Unfair Terms in Consumer Contracts’. Currently (2012) as a reaction to Directive 2011/83/EU on consumer rights the Austrian Ministry of Justice is preparing a comprehensive reform of the Consumer Protection Act. 376. Whether provided by general contract form or based on an individual agreement. 377. Cf. BGBl I 2001/48. 378. Cf. §1444 ABGB. ‘In all cases in which a creditor is entitled to waive his rights he can also divest himself thereof to the benefit of the debtor and thereby cancel the obligation of the debtor.’ 379. Cf. OGH 27 Jun. 1979, SZ 52/104; OGH 20 May 1981, SZ 54/83; OGH 28 Oct. 1980, JBl 1982, 426.

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IV. Penalty Clauses 219. Section 1336 ABGB states in its first subparagraph: The contracting parties may enter into a special agreement, that in case the promise is not performed at all or not in the proper manner or period, a fixed sum of money or other property shall be paid (§912). If no special agreement exists, the debtor does not obtain the right to be released from the contract by the payment of the aforesaid sum. A penalty agreed for non-compliance with the period or place of performance may be asserted together with a claim for performance. The second subparagraph adds: ‘In any case, however, the amount of the penalty may be diminished by the court after expert testimony if necessary, if the debtor can prove that the amount fixed is excessive.’ Austrian law does not distinguish between ‘liquidated damages’ and ‘penalties’ as does the Anglo-American law. Under Austrian law, such clauses are understood as fixing the amount of damage by way of a lump sum in advance, and therefore they are admitted without any principal restriction. By such agreement, detriments shall be compensated that may occur out of a violation of the contract. The aim of a penalty clause is to avoid expensive assessments of the amount of the real damage, thereby simplifying the process of finding a just and equitable remedy in the case of a breach of contract by a party. However, a penalty must only be paid by a party in breach of a contractual duty if that party is to blame for faulty causation of the non-performance or defective performance of a contract. The explanation for this position lies in the fact that a penalty is a specific sort of damage and that, under Austrian law, within a contractual relationship liability for damages always depends on fault of the party in breach.380 Under Austrian law, the parties may agree that a certain amount of money that need not reflect a ‘reasonable forecast of actual damage’381 shall be paid by the party failing to perform the contract. The absence of any damage as a result of a breach of a contractual duty does not affect the aggrieved party’s right to claim the amount of liquidated damages which was agreed upon.382 According to the new section 1336(3) ABGB, the creditor may claim an additional compensation, if the amount of the actual damage proves to be higher than the penalty. However, additional compensation of the damage exceeding the amount of penalty must be negotiated individually if the debtor is a consumer.383 220. The court may, according to section 1336(2) ABGB, reduce the amount agreed upon by the parties if it is excessively high. The sole fact that a breach would 380. Cf. OGH 19 Oct. 1976, EvBl 1977/83; OGH 14 Jan. 1981, SZ 54/4; OGH 17 Jun. 1987, DRdA 1990, 49. For a different view, see OGH 23 Oct. 1975, EvBl 1976/194. 381. Cf. e.g., §2–718 UCC. 382. Cf. OGH 22 Apr. 1969, SZ 42/57; OGH 19 Jun. 1973, JBl 1974, 368; OGH 30 Mar. 1981, SZ 54/46; OGH 20 Dec. 1989, RdW 1990, 293. 383. This is provided by BGBl I 2005/120. The specific rules for merchants – § 348 UGB and Art. 8 No. 3 of the Third Regulation Introducing Commercial Provisions in Austria – are repealed.

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not cause any damage is no conclusive reason for having the amount of liquidated damage reduced by the court. By diminishing an excessive penalty, the judge exercises the exceptional right to correct a contract, thereby intervening into the parties’ freedom of contracting at their will. The diminution of the penalty must be asked for by the aggrieved party. Its size depends on the circumstances, the degree of fault, the existence of contributory negligence of the aggrieved party and the extent of damage caused.384 If a businessman promised, in the operation of his commercial business, to pay a penalty if he should breach a contractual duty, the court had no power to diminish the amount by reason of the provision of section 1336(2) ABGB before 1 January 2007, even if the penalty was unreasonably excessive.385 That has changed and a merchant is no longer presumed to be experienced enough to know of the consequences which the acceptance of a penalty clause may entail. 221. The validity of a penalty clause depends on the validity of the principal obligation. If the contract including the penalty clause is null, the obligation to pay the penalty is likewise null. V. Arbitration Clauses 222. The Austrian Code of Civil Procedure (ZPO) provides detailed and new rules on arbitration procedures in sections 577 et seq.386 According to section 586 ZPO the arbitration panel is composed of three arbitrators if the parties have not agreed otherwise. The parties may also submit a future case to the decision of one or more arbitrators. The parties to a contract are entitled to conclude an arbitration agreement by way of a clause incorporated in a contract, or by separate contract. According to section 583 ZPO, an arbitration agreement must either be made in a signed writing, or be included in their correspondence, telefaxes, e-mails or other forms of communication allowing proof of the content of the messages. Thus, internal Austrian law has been brought into compliance with those multilateral conventions on internal arbitration which Austria has ratified, viz. the Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958,387 and the European Convention on International Commercial Arbitration of 1961.388 In a regular situation the form employed by the parties must correspond to the definition of section 886 ABGB.389 That means that the parties must have signed

384. 385. 386. 387. 388. 389.

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Cf. in particular OGH 14 Jan. 1981, SZ 54/4. Cf. §348 UGB. Cf. BGBl I 2006/7; effective on 1 Jul. 2006. So-called New York Arbitration Convention of 10 Jun. 1958, BGBl 1961/200. So-called Geneva Arbitration Convention of 21 Apr. 1961, BGBl 1964/107. §886 ABGB reads: ‘A contract which the law or the mutual agreement of the parties requires to be in written form is validly made with the signature of the parties or, if they are ignorant of writing or unable to write because of corporal defect, with the fixing of their mark certified by a court or a notary or added in the presence of two witnesses, one of whom must write out the name of the party. An instrument drawn in court or by a notary satisfies the requirements of a written contract. A printed signature is only sufficient where it is customary in commercial transactions.’

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the agreement, or at least added their mark. A mechanical way of signature is accepted if consonant with accepted customs. It is not sufficient, however, that the parties to an oral contract refer to a document providing standardized contract terms into which an arbitration clause is incorporated. Further, in consumer transactions, an arbitration clause is only valid if it has been specifically bargained for.390 §2. INTERPRETATION 223. Austrian private law provides a number of rules dealing with the interpretation of contracts in general. These rules can be found in the General Civil Code and in the Enterprise Code. The relevant sections of the General Civil Code are sections 914 and 915 together with section 863. In addition, section 346 of the Enterprise Code provides a specific rule for the interpretation of commercial contracts involving businessmen as parties. According to section 914 ABGB, ‘[t]he interpretation of contracts shall not be based upon the literal meaning of the expressions used but rather upon the true intention of the parties, and the contract shall be construed in accordance with the customs of honest dealings’. Section 915 ABGB states that ‘[i]n unilaterally binding contracts it is presumed, in case of doubt, that the person bound intended to take upon him(her)self a lighter rather than a heavier charge’, whereas ‘in bilaterally binding contracts a vague declaration shall be interpreted to the prejudice of the person who has made it’. According to section 346 UGB, the customs and usages prevailing in commerce shall be taken into consideration among businessmen in respect of the meaning and effect of acts and omissions. Pursuant to these provisions, a fundamental distinction is usually made between ‘simple interpretation’ and ‘supplementary interpretation’.391 As long as the process of clarifying the sense of an agreement is based on the wording of the declarations of intentions by the parties, the interpretation is a ‘simple’ one. Whenever the meaning of a declaration cannot be deducted in its entirety from the words used by the parties, interpretation has to go beyond the scope of the actual wording of the statements. It then amounts to a ‘supplementary interpretation’. 224. The starting point for a ‘simple interpretation’ of a contract must always be the common literal meaning of the words employed by the parties.392 However, the express terms of a contract imposing reciprocal obligations on both parties393 must not be interpreted by focusing only on the narrow literal meaning of the words. If the parties fail to use unequivocal language, the interpretation of their agreement must be directed to the disclosure of the ‘true intention’ of the parties.394 This is decisive in determining the relevant content of a declaration of intent directed to the 390. §6 (2) N. 7 KschG. 391. In German legal terminology ‘Einfache Auslegung’ and ‘Ergänzende Auslegung’. For an important study on the rules of ‘interpretation of contract according to customary standards’, see Rummel, Vertragsauslegung nach der Verkehrssitte (1992). 392. Cf. OGH 27 Apr. 1976, SZ 49/59; OGH 5 Mar. 1986, JBl 1986, 782. 393. Such as contracts of sale, barter, lease etc. 394. Cf. OGH 23 Feb. 1977, JBl 1978, 204; OGH 13 Feb. 1979, JBl 1979, 596.

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other party.395 Its true meaning must be evaluated from what the addressee could have recognized as being the intention of the person making the declaration. Thus, in determining the meaning of a contractual agreement, the Austrian courts resort to the so-called recipient’s horizon test.396 According to section 914 ABGB, if doubts remain about what the ‘true intention’ of the parties actually is,397 ‘the customs of fair dealing’ come into play. That means that the circumstances under which the declarations of the parties have been made, and the customs and usages which are generally observed in the ordinary course of business in the involved branch indicate the true content of a contractual agreement.398 It has to be considered that a word may have a different meaning in different regions within the area where the German language is spoken.399 In particular, the peculiarities of the Austrian idiom have to be taken into account by the person interpreting a contract that is concluded by parties having their place of business or permanent residence in Austria.400 The interpreters of a contract must also be aware of the fact that customary standards and usages within a profession or a branch of business may exist,401 according to which a factual behaviour is presumed to express a certain legally relevant intention. Another aspect that has to be taken into account in the context of interpreting a contract is the fact that the parties of specific contracts customarily include certain characteristic clauses in their agreement. For instance, it is customary practice that a clause reserving ownership in favour of the seller until payment of the purchase price is included in a credit sale.402 225. If terms that may usually be expected to form part of a contractual agreement are missing, interpretation in good faith may even allow the hypothetical completion of the agreement. In real life, it often happens that the parties do not treat every single aspect of their agreement in an express term. In such a situation, it is generally accepted under Austrian contract law that the real or hypothetical intention of the parties shall be found out by way of a ‘supplementary interpretation of the contract’. The relevant meaning of an incomplete contract follows from what honest and reasonable parties would have agreed, and from what complies with the practice of

395. Cf. OGH 24 Nov. 1966, JBl 1967, 375; most recently OGH 26 Jan. 2005, JBl 2005, 382. 396. The measure is the ‘Empfängerhorizont’: cf. OGH 13 Mar. 1975, JBl 1975, 602; OGH 1 Jul. 1976, JBl 1977, 486; OGH 27 Apr. 1976, SZ 49/59; OGH 17 Jan. 1978, JBl 1978, 387. 397. Following the attempt to clarify the meaning of the wording of the agreement by application of the ‘recipient’s horizon test’. 398. Cf. OGH 17 Jan. 1978, JBl 1978, 387; OGH 23 Jul. 1987, JBl 1988, 38. 399. There may exist a ‘customary meaning of a declaration’, designated in German as ‘Erklärungssitte’. 400. For illustrations of the extensive court practice, see Rummel in Rummel, ABGB–Kommentar, 3rd ed., §914 No. 5. 401. In German, echte Verkehrssitte. 402. This is an example for a so-called Vertragssitte in Austrian legal terminology.

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honest dealings in business. Indeed, the express declarations and positive agreements of the real parties and their discernible intentions must be taken into account.403 226. It has sometimes been expressly stated in decisions by the Austrian Supreme Court that trade and business must not be abused for cheating and deceiving the partner but should be exercised in honesty.404 Thus, notwithstanding the absence of a general rule in the General Civil Code pursuant to which the debtor is bound to perform a contract in accordance with the requirements of good faith,405 the final resort in finding the true meaning of an agreement is the reference to good faith. In their attempt to clarify the rights and duties of the parties to an ambiguous contract, numerous decisions refer to the ‘principle of good faith’.406 Whether ‘performance in compliance with the principle of good faith’ is to be assumed in a given case is examined by the Austrian Supreme Court ‘in accordance with the generally accepted standards and views of the involved circles’.407 227. ‘Supplementary interpretation’ according to section 914 ABGB is aiming at the determination of collateral contractual duties which the parties did not expressly consider. The content of such collateral duties may concern the clarification of the scope of performance, the protection to one of the parties, or the obligation to provide specific information for the partner.408 A prominent example of how the courts made use of the instrument of supplementary interpretation is the acknowledgement of contractual duties for the protection of a third party.409 228. If a bilateral commercial contract concluded by a businessman as seller and another businessman as buyer includes ambiguous stipulations, section 346 UGB requires that their true meaning shall be identified by reference to the commercial customs and usages which are usually observed in the industry concerned. It may be presumed that businessmen carrying on a specific commercial activity conclusively agree to the relevance of the generally accepted usages and customs of their business or profession. 229. If a party to a reciprocal contract makes a declaration, either in writing or orally, and interpretation cannot eliminate the vagueness, the vague declaration shall finally be understood to the detriment of that party. In particular, an unclear term or 403. Among the decisions of the Austrian Supreme Court on the topic see, e.g.,: OGH 31 May 1983, JBl 1983, 592; OGH 27 Nov. 1984, ZAS 1986/12; OGH 16 Sep. 1985, JBl 1986, 38; OGH 16 Dec. 1986, JBl 1987, 248; 20 Jun. 1989, JBl 1990, 105; most recently: OGH 18 Nov. 2003, ÖBA 2004/ 632; OGH 4 Oct. 2005, ÖBl 2006/17, 75. 404. Cf. OGH 28 Mar. 1985, JBl 1985, 547; OGH 23 Jul. 1987, JBl 1988, 38. 405. Cf. §242 of the German Civil Code. 406. Cf. OGH 14 Jun. 1971, JBl 1972, 200; OGH 17 Mar. 1978, EvBl 1979/3; OGH 28 Jun. 1978, EvBl 1979/112; OGH 3 Sep. 1979, SZ 52/130; OGH 12 Jan. 1983, SZ 56/3; OGH 1 Feb. 1983, SZ 56/17; OGH 29 Feb. 1984, SZ 57/45; OGH 8 Mar. 1988, WBl 1988, 240 etc. 407. Cf. OGH 14 Dec. 1979, SZ 52/189. 408. A distinction is made between Nebenleistungspflichten, Schutzpflichten and Aufklärungspflichten. 409. Cf. OGH 11 Dec. 1973, SZ 46/121; OGH 27 Feb. 1975, SZ 48/23; OGH 15 Nov. 1989, RZ 1990, 102; most recently OGH 14 Dec. 2004, JBl 2005, 579.

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phrase included in a standardized form which the other party has to accept on a ‘take it or leave it’ basis and which might qualify as a ‘contract of adhesion’ under American contract law410 must be interpreted to the detriment of the party having used the form with the ambiguous clause. Therefore, if an offeree accepts an ambiguous offer, the interpretation which is most favourable to the offeree shall be presumed to be relevant.411 The so-called interpretation ‘contra proferentem’ provides effective assistance for the balancing of unfair contract terms. 230. It may occur that even after the application of all the instruments of interpretation a contract continues to demonstrate a final and definite vagueness of the agreement. In such a case of total lack of consent412 no obligation is created at all between the presumptive parties. §3. CONDITIONAL CONTRACTS 231. According to section 696 ABGB, a condition is ‘anything that occurs upon which a right has been made to depend’. A condition may be affirmative or negative, according to its reference to the occurrence or non-occurrence upon which the right depends. It is a ‘condition precedent’413 if the conceded right414 only comes into effect after the condition occurs, and a ‘resolutive condition’415 when the conceded right ceases at the moment the condition occurs. This definition of a ‘condition’ together with a number of additional rules dealing with the concept of condition is embodied in the rules of the General Civil Code on the law of succession in the context of declarations of a last will.416 Nevertheless, it is of general importance for the law of contract as well, and the general contract rules of the Code refer to the relevant provisions of the law of succession. Thus, section 897 ABGB states that ‘[t]he provisions governing conditions added to dispositions of one’s last will also apply to conditions stipulated in contracts’. Thus, the parties to a contract are entitled to add to their agreement additional clauses by which the creation or distinction of a legal effect is made dependent on the occurrence of an uncertain event in time.417 It is possible that the occurrence of the event and the time of the occurrence are uncertain. It may also be that the time of the occurrence of the event is certain, whereas the occurrence itself is uncertain. A reference to a past or an actual event lacks the characteristic abeyance which is a requisite of a condition. Nevertheless, such stipulations may be validly provided 410. Cf. Kessler, Contracts of Adhesion – Some Thoughts About Freedom of Contract, 43 Colum. L. Rev. 629 (1943). 411. Cf. §915 ABGB. 412. The word used to characterize such a situation in Austrian legal terminology is derived from Latin: ‘Dissens’. 413. Or ‘suspensive condition’. 414. The General Civil Code uses the term ‘bequeathed right’ because the rule is embodied in the law of succession. 415. In English the respective notion is ‘condition subsequent’. 416. This is due to the fact that last wills most frequently include clauses providing conditions. 417. Cf. §704 ABGB. ‘If it is uncertain whether or not an event in time, in respect to which the testator has limited a right bequeathed, will occur, this limitation is considered as a condition.’

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by the contract if the parties do not know of the real occurrence of such events.418 The so-called legal condition419 which is embodied in statutory provisions is no real condition as it is not agreed upon by the parties.420 By resorting to a condition, the parties may adapt their transaction to the eventualities beyond their influence and of which it is uncertain at the time of the conclusion of the contract whether they will have any impact on the contractual relationship. This follows from section 901 ABGB which allows the parties to expressly add as a condition the motive or the final purpose of their agreement, and states that ‘such motive or purpose is to be considered as any other condition’.421 I. Suspensive and Resolutive Conditions 232. In accordance with section 696 ABGB, Austrian contract law distinguishes conditions which are ‘suspensive’ from conditions which are ‘resolutive’. This distinction has considerable practical importance. A suspensive condition makes the creation of legal effects dependent on the occurrence of an uncertain event, whereas a ‘resolutive condition’ makes the continuation of the legal effects of a contractual agreement dependent on the occurrence of an uncertain event. Thus, it is a case for a suspensive condition, if, e.g., an uncle makes the performance of a gift to the niece dependent on whether she passes a certain exam. However, it is a case for a resolutive condition if the contract between a soccer club and a manager includes an agreement that the contractual relationship shall be terminated if the club’s soccer team fails to be promoted to the next division.422 II. Affirmative and Negative Conditions 233. Another distinction which also follows from section 696 ABGB is of little importance. It is the distinction between affirmative and negative conditions. This is mainly a question of formulation.423 However, it may be necessary that a negative,

418. Cf. OGH 24 Mar. 1966, EvBl 1966/350; OGH 16 Dec. 1986, DRdA 1988, 452. 419. In German, Rechtsbedingung. 420. Thus, the consent of the statutory representative is a legal condition for the validity of a contractual agreement of a minor. 421. Normally, unless having been made the object of an express condition, such agreements as to the motive of entering a contract shall not be considered in determining the validity of contracts based upon consideration. 422. Cf. OGH 9 Nov. 1982, ZAS 1984/28. 423. Cf. the case of an uncle and a niece. Should the uncle promise the niece a gift ‘if she passes the exam’, this would be an ‘affirmative condition’. If the uncle would use slightly different words, e.g., that he would not give the niece the present ‘should she not pass the exam’, the condition would be a ‘negative’ one.

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suspensive and potestative condition be converted by interpretation into a positive and resolutive condition, if only that makes sense.424 III. Casual, Mixed and Potestative Conditions 234. Although the Austrian General Civil Code does not include detailed express provisions in respect thereof, another distinction which is part of the common heritage of ancient Roman Law is important.425 This distinction is made between ‘casual’ (or ‘aleatory’), ‘potestative’, and ‘mixed conditions’:426 (1) A ‘casual’ (or ‘aleatory’) condition makes a legal effect dependent upon a chance, viz. an incidence, the occurrence of which cannot be influenced by the parties.427 (2) A ‘potestative’ condition refers to an uncertain act, the realization of which is dependent on the will of one of the parties.428 (3) A ‘mixed condition’ makes a legal effect dependent on an incidence beyond control and influence of the parties, and on the will of a person.429 Section 899 ABGB provides that ‘[i]f a condition prescribed in a contract had occurred before the contract was entered into, it must be repeated thereafter only when it consists of an act of a person who is to acquire a right, and can be repeated by him’. This provision makes sense only in respect of a ‘potestative condition’. IV. Possible and Impossible, Illicit and Permitted Conditions 235. Another distinction in respect of conditions is to be derived from section 698 and section 699 ABGB. This provisions deal with ‘possible’ and ‘impossible’ conditions on the one side, and with ‘permitted’ and ‘illicit’ conditions on the other. According to section 698 ABGB, ‘[a] disposition by which a right is granted to someone under a precedent and impossible condition is invalid, even if the fulfilment becomes impossible only afterwards and the impossibility was known’ to the person making the condition,430 whereas ‘[a] resolutive and impossible condition is considered as inoperative’. The last sentence of this provision which, according to 424. Thus, according to a common example, if an uncle promises his nephew to award him a certain amount of money if he won’t smoke and drink for all his life, such a condition must be given a new interpretation; e.g., ‘if the nephew starts smoking and drinking he will lose his entitlement to the award’. 425. Cf. Arts. 1169–1171 of the French code civile (FrCC), providing definitions for each of these categories. 426. The respective German notions are: ‘Zufallsbedingungen’, ‘Wollensbedingungen’ or ‘Potestativbedingungen’ and ‘gemischte Bedingungen’; cf. §699 ABGB, making a distinction between conditions depending ‘upon chance, or on the will of the heir, legatee, or a third person’. 427. An example would be: ‘ … if the sun shines’. 428. An example would be: ‘ … if you will have finished your work at 7 p.m.’. 429. This definition is different from that provided by Art. 1171 FrCC. 430. Viz. the testator, as §698 concerns conditions included in declarations of last will.

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section 897 ABGB, applies to contracts as well, makes it clear that the same principles apply also to illicit conditions. Section 898 ABGB, which reads that in contract law ‘[p]rovisions subject to conditions which would be considered as not having been added to a last will are invalid’ in their entirety, requires correction by interpretation in some situations. Irrespective of section 898 ABGB, a resolutive and impossible condition may also be considered as not included in the agreement in the law of contract. In addition, it may follow from the purpose of a prohibition which is violated by a condition that only the condition is to be considered invalid, whereas the validity of the remaining contract remains unaffected. V. The Effect of a Condition 236. The immediate effect of a condition is a state of abeyance. For the time the condition is pending, the parties continue to be bound by their agreement. §900 ABGB states that ‘[a] right promised under a condition precedent may pass to the heirs’. A conditional right may also be sold or given in pledge. During the abeyance, nobody has the right to intervene with the course of events in a way contravening the principles of good faith in order to draw benefit therefrom. If the person who would detrimentally be affected by the conditional event thwarts its occurrence, the condition is considered fulfilled.431 If the person to whose advantage the occurrence of the conditional event would be, induces that event in contravention to the principles of good faith, the condition is considered repealed. 237. The person who is entitled by a suspensive (or precedent) condition has, for the period of abeyance, an ‘expectant right’432 which becomes a full right at the moment the conditional event occurs. The right which is made dependent on the occurrence of an uncertain event by a resolutive (or subsequent) condition becomes extinct at the time the conditional event happens. If it becomes evident that the condition may not be fulfilled, the right which is promised under a resolutive condition continues to exist as an unconditional right, whereas the ‘expectant right’, which is suspensively dependent on the occurrence of the conditional event, is lost.

431. Cf. OGH 20 Dec. 1972, JBl 1973, 470: OGH 4 Nov. 1980, SZ 53/140; OGH 21 Feb. 1989, JBl 1990, 37; OGH 19 Dec. 1990, JBl 1991, 382. 432. In German, Anwartschaftsrecht.

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Chapter 4. Privity of Contract §1. THE RULE OF PRIVITY OF CONTRACT I. Third Parties and the Contract 238. At the time when the Austrian General Civil Code was elaborated the contract was understood as creating rights and duties only among the respective partners of the agreement. ‘Alteri stipulari nemo potest’: This principle of ancient Roman Law which even denied representation by an agent still dominated the mind of the draftsmen of the General Civil Code although agency was accepted by them.433 It was a result of the Third Partial Amendment of 1916 that, under the influence of the German Civil Code, two provisions on contracts for the benefit of a third party were inserted into the Austrian General Civil Code, viz. section 881 and section 882 ABGB. Together with these provisions section 880a ABGB dealing with the problem of whether a contract could impose any burden on a third party was enacted. It follows from these three provisions that, whereas a valid entitlement of a third person can be validly agreed under Austrian contract law, the partners of a contract cannot by their agreement create an obligation of a third person. 239. As a consequence of private autonomy a ‘contract at the expense of a third party’,434 viz. the imposition of contractual duties on a person without his or her consent is void. If, according to section 880a ABGB, ‘one party has promised to the other any performance by a third person’, such a declaration cannot impose contractual obligations on the third party, but must ‘be considered as a promise of his intercession with the third person’. In this case, the party making the promise has to make serious efforts in good faith and in accordance with the principles of honest dealings to get the third person to perform as promised. If, however, the promisor went so far as to guarantee the success of his intercession, and if the third party does not perform, the promisor will become liable to the promisee for damages including lost profits.435 II. Contract for the Benefit of a Third Party 240. The two provisions dealing with contracts for the benefit of a third party introduced in 1916, established a solid basis for the acknowledgment of a category of contractual agreements which was still unknown to the draftsmen of the original version of the General Civil Code. These rules were modelled after the detailed provisions of the German Civil Code of 1900 on the ‘promise of performance in favor

433. Cf. §§1002 et seq. ABGB. 434. In German, Verträge zu Lasten Dritter. 435. Cf. OGH 25 Mar. 1953, SZ 26/81; OGH 16 Dec. 1953, SZ 26/303.

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of a third party’.436 Section 881 and section 882 ABGB became the statutory framework for promises for the benefit of a third party. Such promises are frequently embodied in the agreements of the partners of an insurance contract. In these so-called third party benefit insurances,437 the party contracting with the insurance company remains the debtor of the premium payments, whereas the rights and entitlements stemming from the insurance contract are due to the third party beneficiary. 241. It follows from section 881 ABGB that it is possible for one party to make a promise to the other party that the performance of the agreement will be procured for the benefit of a third party. Such promise may either give the promisee the right to demand the performance for the third party, or entitle the third party beneficiary to such demand. The second alternative is the so-called true contract in favour of a third party.438 Section 881(2) ABGB provides that ‘[t]he conditions under which the third party also acquires the right to demand the performance from the promisor must be determined on the basis of the contract and of the nature and purpose thereof. Thus, it is within the freedom of the parties to determine the position of the third party beneficiary. If the parties fail to include a provision to this end, the third party, in case of doubt, acquires a direct right if the performance is primarily for his advantage.’439 242. Under Austrian law, nobody can be forced to accept a benefit. Therefore, a valid donation requires acceptance by the donee, whereas a contract for the benefit of a third party may be rejected by the beneficiary by refusing a right he or she would acquire as a result of the contract of the other parties. If the third party beneficiary so decides, any right that should be conferred on him or her by the contract of the two other parties is, according to section 882(1) ABGB, considered as if it had not been acquired. 243. The fact that the debtor has the duty to procure performance to a third party, has no impact on the debtor’s position. Any objections the debtor could bring against demands of the partner of the contract can be raised against the third party as well. This is stated in section 882(2) ABGB providing that ‘[t]he promisor retains any defenses in regard to the contract even as against the third party’. This includes a demand for a set-off440 as well as defences such as mistake, laesio enormis, etc. Defects in the relationship of the promisee and the benefiting third party are of no relevance.

436. 437. 438. 439. 440.

Cf. §§328 et seq. BGB. In German, Versicherung auf fremde Rechnung. In German, echter Vertrag zugunsten Dritter. Cf. OGH 7 Jun. 1978, SZ51/82; 14 Feb. 1980, SZ 53/25; 11 Sep. 1985, JBl 1987, 580. Cf. OGH 28 Jun. 1984, NZ 1985, 15; 20 Jul. 1989, WBl 1990, 55.

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III. Contract Implying the Protection of a Third Party 244. A specific concept of Austrian law, designed to bridge the gap between contractual and non-contractual liability, is the ‘contract implying the protection of a third party’. Austrian doctrine proposed the doctrine of contractual duties of protection and care in favour of a third party to overcome shortcomings of the law of noncontractual liability with regard to liability for servants and the burden of proof of fault.441 The concept of ‘contract implying the protection of a third party’ is related to that of ‘contract for the benefit of a third party’, but, nevertheless, quite different in its construction and application. The third party benefits from the protective effect of the contract because the rules of contractual liability apply. This means that a victim of a damage caused by one party of a contract with another person finds himself in the same position as a partner to the contract. No proof of fault of the person causing damage, who is also liable for the wrongdoing of employees, is needed. 245. The contract implying the protection of a third party became a characteristic figure of Austrian law of civil liability and for years has been the basis for the imposition of a ‘quasi-strict’ liability on the manufacturer of defective products442 by the Supreme Court of Austria prior to the transposition of the respective EU Directive 85/374/EEC (European Economic Community).443 This judge-made solution of the product liability problem did not lose all of its importance, when the Austrian Product Liability Act444 entered into effect. The new statute leaves the possibility to bring claims based on traditional rules unaffected. §2. TRANSFER OF CONTRACTUAL RIGHTS 246. The creditor is free to pass his right to claim performance of an obligation by the debtor to a third person. If such transfer of a contractual right is accepted by the transferee, the debtor is confronted with a new creditor. The change in the person of the creditor is named assignment (or ‘cession’).445 The assignment which, according to section 1392 ABGB, can be made with or without consideration does not affect the content of the transferred contractual claim. This is clearly expressed by section 1394 ABGB, according to which the rights of the assignee are identical with the rights of the assignor.

441. The contract implying the protection of a third party was proposed by F. Bydlinski, Vertragliche Sorgfaltspflichten zugunsten Dritter, JBl, 359 (1960). For recent case law, cf. OGH 28 Nov. 2002, JBl 2003, 379; OGH 11 Sep. 2007, JBl 2008, 320. 442. Cf. OGH 4 Feb. 1976, SZ 49/14; OGH 28 Nov. 1978, SZ 51/169; OGH 3 Nov. 1981, SZ 54/152 etc. 443. For a report in English, cf. Posch, Legal Aspects of International Business Transactions 141, 164–173 (Campbell & Rohwer eds., 1984). 444. BGBl 1988/99, effective 1 Jul. 1988. 445. In German, Forderungsabtretung or Zession.

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247. According to section 1393 ABGB, all alienable rights may become the subject of an assignment. However, there are exceptions from this principle. The most important one concerns strictly personal rights, such as e.g., maintenance claims. They cannot be transferred.446 In addition, the right to repurchase (section 1070 ABGB), the right to resale (section 1071 ABGB), the claim for the payment of rent under section 42(2) MRG, and claims which are not subject to execution cannot be assigned according to section 293 Exekutionsordnung (EO). Creditor and debtor may agree on the non-assignability of their mutual claims. Such a contractual prohibition of assignment has the effect that an assignment made in violation of the agreement is invalid unless the debtor agrees to the assignment or renounces the defence following from the non-assignability.447 It is possible to assign future claims, provided they are sufficiently determined. Section 1393 ABGB provides in its last sentence that ‘[b]earer bonds are assigned by their delivery and do not require any proof of assignment besides possession’. It should be mentioned, that rights in rem, in particular the right of ownership, cannot be assigned. 248. The assignment need not be based on the consent of assignor and assignee. The General Civil Code acknowledges a number of situations in which a claim passes to a new creditor without any agreement. The most important example of such a ‘legal assignment’ or ‘cessio legis’448 is provided by section 1358 ABGB. This provision states that ‘[a] person who pays the debt of another which he (she) has assumed, either personally or in regard to certain assets, is subrogated to all the rights of the creditor and is entitled to demand the restitution of the amount paid by him (her) from the debtor’ with the inclusion of interest.449 ‘Legal assignments’ are provided in the statutes on private and social insurance. According to section 67 of the Statute on (Private) Insurance Contracts and according to section 332 of the Statute on Social Insurance, the private and the social insurance companies, are subrogated to the claims for damages of their insured persons against the responsible tortfeasors. 249. The Austrian General Civil Code provides a rather peculiar form of assignment in section 1422 ABGB. It is the so-called necessary assignment.450 According to this provision, if a person pays the debt of another which he or she has not assumed by way of surety, he or she may, ‘before payment or at the time payment is made, demand from the creditor the assignment of his rights’. If the person paying the debt makes such a demand, the payment has the effect of a redemption of the debt.

446. The law refers to ‘rights which are inherent in a person and which consequently cease with his or her death’. 447. Cf. OGH 16 Jan. 1984 SZ 57/8; OGH 5 Mar. 1986, JBl 1986, 383; OGH 12 Jun. 1986, JBl 1987, 183. 448. In German, Legalzession. 449. Cf. OGH 8 Oct. 1975, SZ 48/101. 450. In German, notwendige Zession.

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I. The Formalities 250. An assignment is normally the subject of an agreement between the old creditor (assignor) and the new creditor (assignee), and this agreement creates rights and duties only between these two parties. This is expressed by section1395 ABGB, providing that ‘a new obligation arises only between the assignor (cedens) and the assignee (cessionarius) of the claim and not between the assignee and the debtor (cessus)’. Under Austrian law, the assignment is considered to be a transaction by which the disposition of the claim is transferred (modus), and such a transaction requires a valid title, like e.g., a contract for the sale of the claim, or a donation of the claim. The determination of title and ‘modus’ is more difficult with regard to an ‘assignment for security (purposes)’.451 In respect of this type of assignment which illustrates that a pledge is not the only instrument for securing a credit, the title is found in a ‘security agreement’ documenting the assignee’s interest to receive as a security the right to effect a claim of the assignor. The ‘modus’ must consist in an externally perceptible public act, such as an express notice of the assignment to the debtor, or a special entry into the books of account of the assignor.452 No significant advantages result from the creation of an assignment for security as compared with the pledging of the claim since basically the same rules as to publicity must be observed (sections 451 et seq. ABGB). Moreover, the rules concerning the assignment for security are basically the same as are established with regard to chattel mortgages. An important difference is provided in section12(1) KSchG, however: According to this provision, a salary demand of a consumer debtor must not be assigned to a businessman having granted the consumer a credit to secure a claim not yet due, whereas pledging the claim would be admissible. In Austrian commercial practice, when a bank finances instalment purchases, the assignment of the claim for the purchase price by the seller to the bank combined with a retention of title in favour of the bank is the regular way to secure the claim for repayment. Apart from the specific publicity requirements for assignments for security, Austrian law does not require any formalities in respect of an assignment. Assignor and assignee may agree on an assignment by oral consent. Thus, the distinction between title and assignment is often merged into one act. The validity of the agreement between assignor and assignee to transfer a claim does not depend on the debtor’s consent. The debtor cannot suffer any detriment since the debt is not modified at all and since the debtor, according to section 1396 ABGB, ‘is at liberty to present any defenses against the claim’. Under Austrian law, the debtor need not even be informed of the assignment. In such a situation it becomes evident that the debtor who performs to the original creditor in good faith needs protection.

451. In German, Sicherungsabtretung. 452. These principles have been fixed by the Austrian Supreme Court in an expert opinion (comparable to a ‘practice direction’ of the House of Lords) of 15 Jan. 1929, SZ XI/15; cf. OGH 21 Mar. 1973, JBl 1974, 90; OGH 18 Jun. 1985, JBl 1986, 235, etc.

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II. Effects of the Assignment 251. According to the second sentence of section 1395 ABGB, ‘the debtor is authorized to pay to the first creditor or to settle the matter in another way with him (her), as long as he (she) is not notified of the assignment’. However, as soon as the assignee is made known to the debtor, payment must be made to the assignee.453 This provision protects the debtor who has paid to the original creditor in good faith from being forced to satisfy an identical claim brought against him by the assignee. As the assignee is now the true creditor, the debtor, theoretically, could be forced to pay to the assignee for the second time. Indeed, the debtor would then have the right to address himself to the assignor, his former creditor, for recovery because of unjust enrichment. However, if the assignor has become bankrupt, the debtor would have no chance to enforce his claim for recovery. Since the rights of the assignee are identical with the rights of the assignor (section 1394 ABGB), the debtor is entitled to confront the assignee with all the defences he would have had against the claim of the original creditor, such as e.g., that the claim has been released, stayed, or become barred by the statute of limitations, etc. The debtor may also resort to the objection that the assignment is lacking a valid title. However, the debtor may not raise as a defence that the assignor is in a position to cancel the agreement with the assignee, or that the assignment is voidable.454 As soon as ‘he acknowledges the claim as just in regard to a bona fide assignee’ (section 1396, second sentence ABGB),455 the debtor may no longer resort to a defence with the exception of an objection in respect of a future defective performance of contractual duties by the assignor.456 252. The rights and duties between assignor and assignee are determined by the contractual relationship forming the title of the assignment, e.g., sale, donation, etc. The General Civil Code provides a number of specific warranty rules in sections 1397 et seq. ABGB which apply if the parties have not made specific agreements. According to section 1397 ABGB, a gratuitous assignment does not entail any liability of the assignor in regard thereto. Whereas ‘[i]f an assignment is made for consideration, the assignor warrants to the assignee both that the claim is correct and that it will be paid at maturity’. This ‘liability for correctness and payability’457 is limited, however, by the amount of money the assignor has received as consideration from the assignee.

453. Cf. §1396 ABGB. ‘The debtor is no longer able to do so [viz., effect payment to the assignor] when the assignee is made known to him, however, he is at liberty to present any defenses against the claim. If he acknowledges the claim as just in regard to a bona fide assignee, he is bound to satisfy him as his creditor.’ 454. Cf. OGH 4 Oct. 1984, ZVR 1985/88; OGH 6 Sep. 1984, JBl 1985, 297; OGH 14 May 1985, EvBl 1986/91. 455. Cf. OGH 5 Mar. 1986, JBl 1986, 383; OGH 12 Jun. 1986, JBl 1987, 183; OGH 9 Apr. 1991, ecolex 1991, 383. 456. Cf. OGH 27 May 1982, SZ 55/79. 457. In German, Haftung für Richtigkeit und Einbringlichkeit.

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253. According to the second sentence of section 1398 ABGB, ‘[t]he assignor shall also have no liability in regard to a claim which was recoverable at the time of the assignment but has become irrecoverable by mere chance or by inadvertence on the part of the assignee’; e.g., because the assignee did neither recall the claim at a time when it could be recalled, nor collect the claim after maturity; or because the assignee granted an extension to the debtor and failed either to procure an available security at a suitable time or to request judicial execution.458 Finally, an assignee who could have discovered by inspection of the public mortgage registers that a claim is not recoverable is not entitled to any compensation.459 254. Austrian law acknowledges specific forms of assignments of claims which serve peculiar purposes, such as the ‘assignment of accounts receivable for collection’,460 the so-called silent assignment,461 or the ‘global assignment’. With an assignment of accounts receivable for collection the assignee becomes the new creditor of the debtor; he is, however, bound to transfer the debtor’s payment to the assignor. In this case, a transfer of the position of a creditor is conditional insofar as the assignee must act on behalf of the assignor in a similar way as a trustee must act in favour of the beneficiary. From an economic perspective, the assignor remains the true creditor. Therefore, the debtor’s ability to resort to defences with regard to the assignor remains intact, and the assignor has the position of a privileged creditor in a bankruptcy proceeding of the assignee since he may separate the transferred right. It is contingent upon a ‘silent assignment’ that the debtor shall get no knowledge of the assignment. By the concealment, any doubt about the assignor’s solvency shall be precluded. Usually, the assignor retains the right to collect the claim in his own name.462 ‘Global assignments’ are frequently concluded for security purposes. In practice, Austrian banks are accustomed to including a ‘global assignment clause’ in a framework credit agreement with a businessman. This clause binds the borrowing enterprise to assign, in a global manner, all future claims it will acquire in exchange for delivered goods.463 Finally, it is remarkable that in Austria, too, factoring has become an important method of sales financing. Thereby the creditor is bound to transfer the accounts receivable from his clients to the factor, usually a bank, at a discount. In a factoring relationship, the transferor of the accounts may either resort to an assignment of accounts receivable for collection, or to a sale of the claims. If the credit risk is assumed by the factor, the relationship is a ‘factoring without recourse’,464 if the

458. 459. 460. 461. 462.

Cf. §1399 ABGB. Cf. §1398 first sentence ABGB. In German, Inkassozession. In German, stille Zession. Cf. OGH 13 Jul. 1972, SZ 45/82; OGH 8 Apr. 1975, SZ 48/40; OGH 13 May 1982, RZ 1983/20, etc. 463. German words for this type of contract are ‘Rahmen-’ or ‘Mantelzessionskreditvertrag’. 464. In German, echtes Factoring.

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credit risk is assumed by the transferor, the relationship is a ‘factoring with recourse’.465 III. The Transfer as against Third Parties (Other than the Debtor) 255. If the original creditor has made several successive assignments of the same claim, only the first assignee acquires title. This follows from section 1394 ABGB, stating that ‘[w]ith respect to an assigned claim, the rights of the assignee are identical with the rights of the assignor’. This rule makes it clear that a bona fide acquisition of a claim by an assignee is impossible. Priority of the date of the agreement of the assignment determines, as a rule, which among two or more assignments of the same claim is valid, provided that the several assignments of one claim were made on the basis of contracts for sale, donation, etc. 256. However, in respect of transfers of the same claim for security purposes to more than one assignee, the solution provided by Austrian law is a special one since priority of the date of the agreement between the assignor and the assignee is not determinative. Instead, the assignee who first procures the required act of publicity, viz., notifies the assignment to the debtor, or effects the entry into the assignor’s books of account, is the one acquiring the assigned claim.466 §3. DELEGATION OF CONTRACTUAL DUTIES 257. In the same way by which rights emerging from a contract may be assigned, contractual duties may be delegated. The relevant sections of the General Civil Code on delegation are section 1404 to section 1410 ABGB. Whereas an assignment results in a change of the creditor, the effect of a delegation is a change of the debtor. The original debtor may be replaced. In this case the corresponding term for this act in Austrian contract law is ‘Schuldiibernahme’, which can be translated into English as ‘assumption of a debt’. It is also possible that a co-debtor be added to the original debtor. This is the so-called Schuldbeitritf, which may be translated as ‘collateral promise to pay a debt’. For such delegations of contractual duties no formality is required by the law. 258. Since a change in the person of the debtor affects the interest of the creditor who may strongly wish to have as debtor the original counterpart in the contractual agreement, the legal effects of a change in the person of the debtor depends on whether the creditor consents. Thus, the debtor of a good may substitute a third person who obligates him(her)self to pay the debt to the creditor instead of the debtor

465. In German, unechtes Factoring. 466. This significant difference caused serious problems of Private International Law in respect of Austrian–German cases of multiple assignments for security purposes; cf. OGH 11 Jul. 1990, IPRax 1992, 47 (on this case, see Posch, IPRax 1992, 51); 18 Sep. 1991, IPRax 1992, 652.

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only if the creditor consents.467 As a result the original debtor of the purchase price is exonerated and the consenting creditor can claim performance by the new debtor only. In the case of the purchase of real property with a registered mortgage, the assumption of that mortgage is considered as the assumption of a debt.468 If the creditor refuses to consent to an assumption of a debt, his position remains unaffected. According to the second sentence of section 1405 ABGB, the ‘new debtor’ is liable to the ‘original debtor’ in this case, if the creditor asserts the claim to the original debtor. However, no direct claim against the new debtor arises from such an ‘assumption of performance’.469 Furthermore, according to section 1406(1) ABGB, ‘a third party may assume another’s debt by contract with the creditor, even in the absence of any agreement with the debtor’.470 The new debtor has the same duties as the original debtor and is entitled to the same defences against the creditor.471 The appointment of a new debtor instead of the original debtor may amount to a novation if the liability of the new debtor is based on a new legal ground, or the principal object of the claim is altered thereby putting an end to the original creditor–debtor relation.472 259. Since, in the case of a collateral promise resulting in the new debtor’s joint liability with the original debtor, the creditor’s position is altogether ameliorated, no consent is required. In the context of the alienation of an estate or enterprise, section 1409 ABGB states that ‘the buyer becomes thereby directly liable for debts connected with the estate or the enterprise of which he knew or should have known at the time of the transfer, without prejudice to the liability of the seller to his creditors’. However, if the buyer pays an amount of these debts equal to the value of the acquired estate or enterprise, he shall be released from further liability.473

467. Cf. the first sentence of §1405 ABGB. ‘A person who promises to a debtor to take over his debt (assumption of a debt) steps into his place as a debtor if the creditor consents thereto.’ According to the third sentence of this provision, ‘[t]he creditor’s consent may be given to the debtor or to the assuming party’. 468. Cf. §1408 ABGB. After the registration of the buyer, the seller ‘may request the creditor in writing to accept the new debtor in his stead, with the condition that such consent shall be con sidered given if not refused within six months’. 469. Cf. §1404 ABGB. 470. §1406 (2) ABGB provides, that ‘[i]n case of doubt, however, the assumption of a debt, notified to the creditor, is to be considered as a joint liability with the original debtor rather than a sole liability in his stead’. 471. Cf. §1407 ABGB. ‘(1) With regard to the debt assumed, the duties of the assuming party are the same as those of the original debtor. The assuming party is entitled to the same defenses against the creditor, based upon the legal relation between the debtor and the creditor, as was the original debtor. (2) The existing rights with respect to the claim are not affected by the change in the person of the debtor. However, the liabilities of sureties and of pledges given by third persons are continued only if the surety or pledgor has consented to the change of debtors.’ 472. Cf. §1410 ABGB. 473. A similar rule is provided by §25 UGB for the sale of an enterprise, if the purchaser continues to use the original firm name; buyer’s liability for debts is unlimited, if not excluded by express stipulation.

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§4. TRANSFER OF AN OBLIGATION474 260. Whereas the Austrian General Civil Code provides for the assignment of contractual rights as well as for the delegation of contractual duties, nothing is expressly stated in respect of the transfer of the entire obligation consisting of mutual rights and duties of the parties. It is generally acknowledged that, in principle, the entire position of a party to a contract may be transferred to another person,475 provided that the original parties and the transferee agree to the transaction. By stepping into the position of an original party, the transferee assumes all contractual rights and duties. §5. SUBCONTRACTING 261. According to section 1313a ABGB, ‘[a] person who is under an obligation of performance to another is liable to the latter for the fault of … persons whom he has employed for the performance, in the same manner as for his own fault’. Whereas this provision, which was introduced in 1916 as an adoption of section 278 BGB, refers to the employment of a servant, Austrian law acknowledges the concept of ‘substitution’, i.e., the employment of a totally independent subcontractor. If a party to a contract is entitled by the other to employ a third person for the performance of contractual duties in his stead, he is only liable for negligence in the selection of an unfit substitute (culpa in eligendo). 262. Specific rules exist for the transfer of the power of attorney to a third person and for the performance of work contracts by a subcontractor. According to section 1010 ABGB, the agent must, as a rule, exercise the power of attorney himself. He may, however, be expressly permitted to appoint a subagent. This is indeed very important for any client–lawyer relation, for which the statutes on the profession of attorneys provide detailed rules.476 Section 1165 ABGB provides that the contractor carries out the work personally or has the work carried out under his personal responsibility. It follows therefrom, that the contractor has the right to employ servants as well as subcontractors, unless the specific personal qualifications of the contractor are declared essential by agreement.477 If the contractor employs a subcontractor he continues to be the only debtor of the principal to whom he is responsible for any irregularity of performance.

474. In German, Vertragsübernahme. 475. Specific situations are covered by the Statute on the right to lease in regard to the acquisition of the lessee’s position in the cases of the exchange of flats (§§12 et seq. MRG) and of the purchase of an insured property (§§69 et seq. VVG). 476. Cf. §14 RAO. 477. Cf. §1171 ABGB.

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Chapter 5. The End of the Contract §1. FROM PERFORMANCE TO DEATH: STATUTORY REASONS FOR THE EXTINCTION OF A DEBT I. Payment 263. According to section 1412 ABGB, ‘[a]n obligation is generally cancelled by payment’.478 ‘Payment’ means ‘the performance of that which a party was obliged to perform’. The Austrian General Civil Code, like the French code civil (Article 1235), understands ‘payment’ in a broader sense: What is meant, is not only the transfer of an amount of money. The regular mode of termination of an obligation is its performance, which may consist in a payment of a sum, but more often and according to section 861 ABGB, the performance of a contractual obligation consists in giving something other than money, or doing something, or in a forbearance. Payment (or performance) is not a contract itself.479 However, its content may be a ‘real act’ (e.g., the rendering of a service, the completion of a work), a ‘unilateral juristic act’ (e.g., the making out of a document), or a ‘juristic act’ (e.g., the transfer of ownership). A. Who may Pay? 264. The rule is, that the debtor has to pay either personally, or through ‘persons whom he has employed for the performance’.480 Strictly personal obligations, such as the duty to perform services personally pursuant to section 1153 ABGB, may only be performed by the debtor. The debtor has to procure payment in compliance with his obligations under the contract. He has to pay at the agreed time and place, and in the agreed manner. The debtor cannot be compelled to perform anything else.481 It is possible, however, that according to section1422 ABGB a person, without a legal obligation, pays the debt of another. Such a person may demand from the creditor the assignment of his rights. If he so demands, the payment does not extinguish the obligation but has the effect of a redemption of the claim. A payment by a third person must be accepted by the creditor, if it is offered with the debtor’s consent.482 However, according to section 1423 ABGB, payment cannot, as a rule, be forced upon the creditor by a third party without the debtor’s consent.

478. 479. 480. 481. 482.

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In German, Zahlung. Cf. OGH 1 Feb. 1972, MietSlg 24.203. Cf. §1313a ABGB. Cf. §1413 ABGB. In addition, §1423 ABGB provides, ‘that the creditor does not become liable in regard to the correctness and timeliness of the payment at maturity of the claim’, except in a case of fraud.

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265. Lack of capacity of the debtor does not deprive him of his ability to pay. It follows from the first sentence of section 1421 ABGB, that a debtor who is otherwise incapable of managing his property can relieve himself of his obligation by paying, provided that the debt is really and legally existing and mature. However, if an incapable person paid a debt which is barred by the statute of limitations, such payment may be claimed back by the legal representative pursuant to section 1433 ABGB.483 B. Whom should One Pay? 266. The payment must be made to the creditor. This is clearly stated by the first sentence of section 1424 ABGB, which further provides that a payment may also be made to the creditor’s representative ‘who is capable of receiving it, or to a person whom the court has adjudged to be the owner of the claim’. Whether the performance has the legal effect of terminating an obligation depends on the creditor’s capability of managing his affairs. This follows from the second sentence of section 1424 ABGB, which provides that a person who has made a payment to another who is unable to manage his property, ‘must pay again insofar as that which he has paid has been lost or has not been employed for the benefit of the recipient’.484 267. The debtor who has made a correct payment to the creditor is, according to section 1426 ABGB, entitled to demand a receipt,485 ‘that is, a certificate in writing, that the obligation has been fulfilled’. The name of the debtor and creditor and the place, time, and object of the debt settled has to be specified, and the certificate must be signed by the creditor or by his agent, who has to bear the costs of preparing the receipt, unless the parties have otherwise agreed.486 268. If the creditor possesses a certificate of indebtedness,487 he must return it together with the receipt. The return of a certificate of indebtedness without a receipt creates on behalf of the debtor a legal presumption of payment. It does not exclude proof of the contrary, however.488

483. This provision states, that §1432 ABGB does not apply in a case where a person under guardianship or a person who cannot freely dispose of his or her property has made the payment. 484. Cf. OGH 24 Jun. 1987, SZ 60/119. 485. In German, Quittung. 486. Cf. §1427 ABGB: ‘A receipt stating that principal has been paid creates the presumption that the interest thereon has likewise been paid.’ 487. In German, Schuldschein. 488. Cf. the detailed rules on the certificate of indebtedness in §1428 ABGB which further provides, that the paying party is entitled to security measures, if a certificate of indebtedness which should be returned has been lost. In this case, the debtor has the right to deposit the payment in court and to demand that the creditor seek the cancellation of the certificate in accordance with the law on procedure. Further details are provided by §1429 and §1430 ABGB.

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C. What to Pay? 269. According to section 1413 ABGB ‘[th]e creditor cannot be compelled to accept anything against his will except that which he is entitled to claim’, and the first sentence of section 1415 ABGB specifies, that ‘[a] creditor is not bound to accept the payment of a debt in part or on account’. If the performance is not in conformity with the obligation, the creditor has the choice either to reject it, and to resort to the remedies which are available in respect of a non-performance, or to accept the defective performance, and to bring a claim for breach of warranty. If the debtor has to render performance of different obligations, those are to be considered as performed which the debtor, with the consent of the creditor, has expressly declared himself willing to fulfil. If the parties cannot reach a consent,489 section 1416 ABGB providing a scheme of priorities of payment applies: first, the interest is assumed to be settled; ‘then the principal (debt), but of several principals, first the one which has already been demanded or which has become due and thereafter the one which is the most onerous for the debtor’. D. Special Rules as to Payment of Money Debts 270. Provisions on payment of money debts are included in the General Civil Code (sections 902 et seq. ABGB).490 as well as in statutes on commercial law such as the Bill of Exchange Act (Article 41 WechselG) and in the Law on Cheques (Article 36 ScheckG). These statutes include detailed identical rules for the payment by a bill or cheque. The provisions of the ABGB became amended in 2013, when the Directive 2011/7/EU on combating late payment in commercial transactions490.1 was implemented.490.2 271. A specific important type of banking transaction is the ‘giro contract’, enabling the bank’s customer to pay without cash by money transfers. A giro contract is a specific type of service contract combined with elements of agency. Rules on this type of transaction are provided in the new Consumer Credit Act490.3 and in the Act Regulating the Bank System of 1993.491 272. Legal tender in Austria is the Euro. The common currency replaced the Austrian Shilling. It was introduced by section 1 of the ‘Euro Act’ (Eurogesetz) of 8 August 2000, BGBl I 2000/78, effective 1 January 2002.

489. Cf. OGH 3 Mar. 1978, SZ 51/24. 490. Former provisions of commercial law stating that, if money debts expressed in a foreign currency are payable in Austria, payment may be made in Austrian Shillings, unless expressly stipulated otherwise, have been repealed by BGBl.I 2005/120. 490.1. O.J.EU L 48, 23 March 2011, 1. 490.2. By the “Late Payment Act” (Zahlungsverzugsgesetz) BGBl I 2013/50; effective 16 March 2013. 490.3. BGBl I 2010/28, effective 11 June 2010. 491. Bankwesengesetz, ‘BWG’, BGBl 1993/532; most recently amended by BGBl I 2014/59.

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273. Frequently, the agreement of two persons concerns a type of contract where performance by one party is to be carried out by the payment of an amount of money, as is the case with the contract of sale. Austrian contract law considers payment to be simply a specific form of performance which is characterized by the use of, or reference to, ‘money’. ‘Money’ is everything accepted as a means of payment in daily life. Therefore, a money-debt may be paid by drawing a bill of exchange or a cheque, by the issue of a payment order, by crediting, or by the transfer of goods in lieu of payment. 274. If businessmen have permanent business connections with one another, it is economically sound to reduce the number of mutual claims for payment and performance by establishing a ‘current account’. In this case, according to section 355 UGB, the mutual claims are charged to the other’s account and balanced at regular intervals by setting them off, and determining the resulting surplus in favour of one party or the other. A unilateral set off is admitted by the law, if claim and counterclaim are mutual, of a similar nature, valid, actionable, due, and liquid. 275. The place of payment may be fixed by express agreement of the parties. If the parties make no agreement in this regard, the place of payment should follow from the nature or purpose of the transaction. If nothing can be derived therefrom, the new section 905 ABGB, as amended by the Late Payment Act 2013, now focuses, in the case of doubt, on the creditor’s place of business or residence. Thus, Austrian law is now in compliance with EU-law.492 Usual forms of how the money may be sent are postal money order), remittance, bank transfer, payment by cheque, etc. 276. Usually the parties of a contract provide for the due date of a payment. If nothing is agreed, however, the seller may claim payment without unnecessary delay pursuant to section 904 and section 1062 ABGB, thereby fixing the due date of the claim for payment of the price; and the purchaser of a good has to pay the price in cash at the same time the good is conferred to him. The rule that mutual contracts are to be performed contemporaneously requires that the creditor is ready for his performance. Otherwise the debtor notwithstanding that the payment is due, would have the defence of lack of performance (section 1052 ABGB). Payment is due at the creditor’s place of business or residence and it is made on schedule if the transferred amount reaches the creditor’s bank account at the agreed time of performance.492.1 277. In everyday business life payments are carried out by money transfers to the account of the creditor. Whether the money transfer from the account of the debtor to the account of the creditor has the effect of discharging the debtor, depends on whether the creditor has consented to that form of payment or not.

492. Cf. CJEU C-306/06, Telecom/Deutsche Telekom, ECR 2008, I-1923. 492.1. Cf. §907a as amended by BGBl I 2013/50.

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If a business form or invoice of the creditor indicates the number of his bank account, it may be assumed according to customary standards, that the creditor thereby empowers the debtor to make a money transfer to the designated account. 278. Other accepted modes of payment by agreement of the parties are payment by bill of exchange, cheque, remittance, assignment of a claim of one’s own against a third person. In the case of doubt, these payments are effective no sooner than the creditor has actually received the money in cash. Only if the parties have agreed on a performance by means of a bill, cheque, remittance or assignment ‘in lieu of payment’, the issue of such instruments has the effect of discharging the debtor.493 279. The currency of the payment depends on the place where performance is due. If the performance is due abroad, payment must be carried out in foreign currency. If a money-debt expressed in a foreign currency is payable in Austria, payment may be made in Euros, unless expressly stipulated that payment must be made in a foreign currency. 280. Unless otherwise agreed, payment of money debts must be carried out at the debtor’s risk, since the debt has become an obligation to be performed at the creditor’s place of business or residence.493.1 As soon as the money arrives with the creditor or with the creditor’s bank, risk passes to the creditor. If the debtor, with the creditor’s consent, pays to the bank of the creditor, the sphere of the bank is assumed to be part of the creditor’s sphere. The money has arrived as soon as the transferred amount is credited by the bank. With regard to cash payments risk passes as soon as the money is handed over. Under Austrian law, the rule is quite simple: If not agreed otherwise, the payer bears the risk of incurring costs and losing the money until the arrival of the amount in the sphere of the creditor. 281. Interest is consideration for the utilization of a capital. It is computed by the amount and the time of the utilization of the capital. According to section 912 ABGB interest is a category of supplementary fees. It is dependent on the principal obligation and subject to a limitation period of three years. In general, a claim for interest is limited by the rule of ne ultra alterum tantum as stated in section 1335 ABGB providing that interest in arrears must not exceed the principal capital. No such limitation is provided for transactions between businessmen according to section 353 UGB. Compound interest must only be paid if expressly agreed by the parties. As a rule, the due date of interest is fixed by the party agreement, if not, interest is due with the payment of the capital. In the case of a lasting obligation it is due per annum. 282. Statutory interest has to be paid by the party in delay from the day after the due date of the performance, irrespective of whether the delay is attributable to fault or not (section 1333 ABGB). The statutory rate of interest in civil law is 4%, for 493. Cf. §1414 ABGB. 493.1. Pursuant to the amendment by the Late Payment Act the debt is no longer a “Schickschuld” but a “Bringschuld”.

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commercial transactions between two businessmen it is 8% in addition to the key interest rate issued by the European Central Bank (section 352 UGB). Under the law on bill of exchange and the law on cheques the legal interest rate is 6% (Article 48 WechselG, Article 45 ScheckG). Next Page is AUSTRIA–137

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II. Deposit of a Debt in Court 283. A debtor who wants to settle his debt pursuant to his obligations stemming from a contract is entitled to deposit that which is to be paid with the court, if direct payment to the creditor is prevented by circumstances which the debtor cannot control or influence. In order to get discharged, the debtor has to make the deposit with the court of the place at which the performance is due under the contract. This is possible according to section 1425 ABGB, e.g., if the debt cannot be paid because the creditor is unknown, absent or not satisfied with what has been offered, and ‘because of other good reason’.494 The effect of a deposit of a debt in court or of its transfer into the custody of a bailee appointed by the court, if undertaken legally and made known to the creditor,495 is the debtor’s release from his obligation. In addition, all risk in regard to the payment devolves upon the creditor. III. Performance in Lieu of Payment496 284. As has been remarked earlier,497 the creditor cannot, according to section 1413 ABGB, ‘be compelled to accept anything against his will except that which he is entitled to claim, nor can the debtor be compelled to perform anything except that which he is obliged to perform’. Nevertheless, the creditor and the debtor may make the agreement that something other than a specified performance may be procured by the debtor, thereby bringing the obligation to an end. Such a ‘performance in lieu of payment’ or ‘datio in solutum’ is, according to section 1414 ABGB a nongratuitous transaction. IV. Set-off498 285. Among the reasons for the extinction of a debt which are expressly acknowledged by the General Civil Code set-off is of high practical importance. Thereby a mutual cancellation of claim and counterclaim arises according to section1438 ABGB, insofar as the claims are equal. A set-off has the effect of reciprocal payment of the debts in question. According to sections 1439 et seq. ABGB, ‘[a] set-off does not take place between a correct and an incorrect demand or between a demand which has already become due and a demand which has not yet become due’, or between ‘claims whose object are of a different kind,499 or definite or indefinite things’. Thus, the claims to be set-off must be reciprocal, homogenous, correct, and due. The amounts of claim and counterclaim need not be identical. The effect of the set-off is limited 494. For examples, cf. OGH 3 Mar. 1954, SZ 27/59; OGH 27 Nov. 1957, SZ 30/79; OGH 12 Nov. 1986, JBl 1987, 326; OGH 16 Mar. 1988, NZ 1989, 16, etc. 495. Cf. OGH 6 Apr. 1978, SZ 51/42. 496. In German, Erfüllung an Zahlungs Statt. 497. Cf. supra, No. 269. 498. In German, Aufrechnung or Kompensation. 499. Money debts are, indeed, debts of the same kind.

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by the amount of the smaller claim. In certain circumstances a set-off is prohibited or restricted by statute.500 The availability of a set-off in a bankrupt’s estate is determined by specific provisions of the Insolvency Act.501 The set-off is effectuated by a declaration of set-off, which can be made by either of the parties having mutual claims which comply with the requirements for set-off, unless the parties have expressly stipulated for its exclusion. V. Waiver502 286. A creditor is entitled to waive his rights vis-à-vis the debtor. Therefore, a creditor can divest himself of his claim for the benefit of the debtor. Thereby, the debtor’s obligation is cancelled. However, the released debtor’s approval is necessary, since nobody shall be forced to accept a benefit. Therefore, the waiver of creditor’s rights appears to be a form of discharge by agreement. VI. Merger503 287. Nobody can be creditor and debtor in respect of one and the same obligation. Therefore, ‘[i]f a right is in any manner merged in one person with the obligation, both cease’.504 If it is foreseeable, that the merger will be short-lived, the obligation may only be suspended for a certain time, and according to section 1446 ABGB ‘[r]ights and obligations which are entered in the public records are not cancelled by merger in one person as long as they have not been stricken from the public records’. VII. Lapse of Time505 288. Rights and obligations stemming from contracts for the performance of a continuing obligation expire also by the lapse of the time to which they have been restricted by virtue of the contractual agreement.506

500. Cf. the second sentence of §1440 ABGB providing that ‘[p]roperty which has been wilfully or secretly removed, borrowed or taken into tenure cannot, in general, be the subject of a set-off’. Cf. also §1441 ABGB excluding the set-off of a sum which someone is to receive from one branch of the public treasury by a sum which this person is obliged to pay to another branch thereof; further restrictions are provided by §1442 ABGB for the set-off of claims which have been transferred consecutively to several persons. 501. Cf. §19 and §20 Insolvency Act as amended by BGBl I 2010/29. 502. In German, Verzicht; the General Civil Code uses the antiquated notion ‘Entsagung’. 503. In German, Vereinigung or Konfusion. 504. Cf. §1445 ABGB. 505. In German, Zeitablauf. 506. Cf. §1449 ABGB.

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VIII. Notice of Termination507 289. If the parties failed to fix a date for the expiry of contracts for the performance of a continuing obligation, the rights and duties emerging therefrom are terminated by the notice of one party. The notice of termination requires no consent but it must arrive with the other party. IX. Death 290. Normally, death does not affect the existence of contractual rights and duties. They form part of the deceased’s estate and are conveyed to the heirs. However, those rights and obligations which are restricted to the person or which affect mere personal acts of the deceased are extinguished by the death according to section 1448 ABGB. In particular, those contractual relations which are based on a certain confidence in the other party end with the death.508 §2. IMPOSSIBILITY AND FRUSTRATION I. Impossibility 291. The first sentence of section 1447 ABGB provides, that ‘[t]he accidental and entire destruction of a certain property cancels every obligation in regard thereto including the obligation to reimburse its value’. This provision deals with a type of impossibility. Similar to German contract law, Austrian law makes a distinction between initial and subsequent impossibility on the one hand, and between subjective and objective impossibility on the other. The impossibility is initial, if it existed already at the time of the conclusion of the contract.509 If it occurred after the conclusion, it is subsequent. The impossibility is objective, if the performance of the contract is impossible for everyone. It is subjective, if only the actual contracting party is unable to perform due to reasons which are attributable to his or her person. Lack of money does not amount to impossibility. It is a case for impossibility, however, if the performance appears to be unreasonable or economically unfeasible.510 In addition, a distinction has to be made in respect of whether the occurrence of the impossibility is purely accidental, or whether it is attributable to the fault of a party.

507. In German, Kündigung. 508. Cf. §1022 ABGB: ‘An agency is generally terminated by the death either of the principal or the agent.’ 509. Cf. supra n. 193. 510. In these circumstances performance could not be expected by any reasonable man.

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292. Whereas initial impossibility according to section 878 ABGB is crucial for the creation of a contract since ‘a clearly impossible matter cannot become the subject of a valid contract’, subsequent impossibility appears in the wake of a valid formation of a contract. Its legal consequences depend on the type of impossibility. If the fulfilment of an obligation becomes impossible because of an external cause or an accident, the contract is invalidated provided that the obligation concerns a specific property which is destroyed. A party to such a contract cannot claim performance by the other party, and each partner must return or restore, as a bona fide possessor, everything which he or she has received for the purpose of fulfilling the obligation. Nobody shall obtain any profit from the damage the other party is suffering as a consequence of an external accidental cause. If a substitute value such as an insurance coverage representing the destroyed property exists, the party who is still able to perform may offer to the other the performance of his or her contractual obligation in exchange for the substitute.511 In the case of accidental destruction of unidentified goods forming the subject of a contractual agreement, the validity of the contract is not affected: ‘genera non pereunt’. The debtor must provide other goods of the same kind and quality instead of the destroyed ones. This appears to be an exception from the general rule of Austrian contract law according to which a debtor is responsible only for those obstacles preventing performance which are attributable to his fault. 293. If the party whose performance became impossible enabled the impossibility due to a violation of his or her duty to exercise reasonable care or due to the negligence of a servant whom he or she employed in the performance, the contract becomes ineffective as well. However, the other party will be entitled to a claim for damages which extends to the so-called expectation interest. If the performance of a contract is made impossible by the fault of a party or by an accident whose consequences must be borne by a party, the other party may, according to section 920 ABGB, ‘either claim damages for non-performance or rescind the contract’. Section 920 ABGB gives the innocent party a choice. The partner of the negligent party in breach may either stick to the contract, perform his own obligation in exchange for the economic value of the counter-performance, or he may declare the contract rescinded and claim the difference in values of his own performance and the counter-performance by the party responsible for the impossibility. Section 921 ABGB states, that ‘[r]escission of the contract is not prejudicial to any claim for damages caused by the non-performance attributable to the fault of a party’.512 The innocent party is entitled to compensation of his or her expectation interest. 294. Impossibility of performance may not only be caused by the negligence of the debtor, but also by the fault of the creditor: The creditor was, e.g., delayed in accepting the due delivery of a good which later is accidentally destroyed, or the 511. In German, stellvertretendes commodum. 512. In addition, the second sentence of §921 provides, that ‘[a]ny consideration previously given must be returned or refunded in such a manner that neither party profits from any damages caused to the other’.

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subject of the contract was destroyed by the creditor or his servants before transfer. In these situations, the creditor has to perform his obligation without getting anything in exchange. 295. If the impossibility is only partial, the innocent party may rescind the contract ‘provided that the nature or purpose thereof, as known by the other party, indicates clearly that a partial performance is of no interest’.513 Whether the contractual duties are cancelled as a whole, or whether only the mutual duties of the parties concerning the impossible part of the performance are abandoned, depends on whether the creditor may have an interest in the partial performance. II. Relevance of Unforeseeable Circumstances 296. The Austrian General Civil Code does not provide a general rule on ‘frustration of contract’. However, a number of provisions may serve as the basis for an analogy by acknowledging the so-called clausula rebus sic stantibus.514 Thus, it is generally accepted, that a fundamental change of circumstances on which the parties based their agreement and which was not foreseeable for both parties at the time of the meeting of their minds may affect the validity of an original contractual agreement. The theory of ‘falling away of the foundation of a contract’515 which may appear to be in conflict with the general principle of ‘pacta sunt servanda’, was created in 1921 by the German professor Oertmann516 and won the attention first of German517 and Austrian doctrinal writers518 and later of the courts. 297. Today a cancellation or a modification of a contractual obligation due to fundamental changes of underlying circumstances is accepted in Austrian law under a number of rather restrictive preconditions. First, the circumstances which later have changed must have been silently assumed to be the basis of the contract by both parties. Second, the presupposed circumstances must be characteristic for the type of contract concluded and deemed essential by any potential party. Third, the changes of the circumstances must be of an external character, viz., generate from factors beyond the spheres of influence of the parties, and fourth, the changes in the circumstances must not have been foreseeable.

513. 514. 515. 516. 517. 518.

Cf. second sentence of §920 ABGB. Cf. §§936, 1052 last sentence, 1170a ABGB. In German, Wegfall der Geschäftsgrundlage. Oertmann, Die Geschäftsgrundlage (1921). Cf. Larenz, Geschäftsgrundlage und Vertragserfüllung (3rd ed., 1963). In particular, Kerschner, Irrtumsanfechtung insbesondere beim unentgeltlichen Geschäft (1984); cf. also Kerschner, ‘Zum Wegfall der Geschäftsgrundlage bei unwiderruflichen Sozialleistungen’, WBl 1988, 211.

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As a result, demands for cancellation or modification of a contractual agreement which are based on the theory of unforeseen fundamental changes in the circumstances underlying the agreement, are rather rare. In practice, the most frequent situation in which a party resorts to such a demand is a fundamental change in the circumstances on which a long-term continuing obligation is based.519 §3. NOVATION, SETTLEMENT AND RECOGNITION I. Novation 298. Under Austrian law, an obligation is not terminated by novation. Rather, this concept520 means a significant modification of an obligation. According to the statutory definition provided by section 1378, a novation is ‘[a]n alteration without the intervention of a third person’. Debtor and creditor remain the same persons. Such an alteration may consist in a change of the principal subject or the legal foundation of an obligation. Typical examples for a novation are the alteration of a contract of lending into a lease, or the modification of a bailment into a loan. The specific type of contract is changed in these cases. According to section 1377 ABGB, ‘the former principal obligation ceases and the new obligation commences simultaneously’, however, the new obligation is dependent on the existence of the original obligation. Invalidity of the old obligation affects the new one as well. The fact that the new obligation depends on the original one, is illustrated by the fact that defences such as the plea of the statute of limitation that may be raised against the old debt, may be put forward against the new obligation as well. However, it is stated in section 1378 ABGB, that ‘[t]he rights of guarantee and pledge, and other rights connected with the former principal obligation, are extinguished by a novation’, unless otherwise provided by the parties. II. Modification of an Obligation 299. In addition to a novation, which means a significant alteration, Austrian contract law accepts a ‘simple modification’ of an obligation. Section 1379 ABGB provides, that minor changes of an existing obligation: such as where, when, and how it is to be performed, and other accessory provisions by which no alteration is agreed upon in regard to the principal object or legal owner of an existing obligation as well as the mere delivery of a new debenture or another document referring thereto, are not to be considered as novations.

519. Cf. OGH 21 Oct. 1987, SZ 60/218. 520. Cf. §§1378 et seq. ABGB.

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Therefore, a minor modification of accessory contractual provisions cannot create a new obligation. The rights of guarantee and pledge continue to be connected with the obligation.521 III. Settlement522 300. According to section 1380 ABGB, ‘[a] novation by which rights in dispute or doubtful rights are determined in such a way that the parties mutually agree to give, to do or to omit something is called a settlement’. A settlement is a bilaterally binding contract which is characterized by mutual concessions by both parties of an obligatory relationship. Parties wishing to avoid a decision by a court or preferring to reach a prompt clarification have the possibility to resort to a settlement. By such an agreement, contested or doubtful rights and duties can be reorganized and fixed by the parties in a new way. Renunciation of clearly defined rights by one party qualifies as a donation.523 Typical of a settlement is its compromise character: Each of the parties abandons some of the contested rights in favour of the other. ‘A settlement which has been made in regard to a particular dispute does not extend to other cases.’524 301. As a settlement is a contract by which the mutual rights and duties are definitely fixed anew,525 it remains unaffected if the previously doubtful rights and duties should be clarified at a later date. A settlement has the ‘effect of definite adjustment’.526 Therefore, a settlement can neither be attacked on the ground of laesio enormis,527 nor can newly discovered documents invalidate a bona fide settlement.528 Because the purpose of a settlement is to bring about a final and definite clarification, the possibility to avoid a settlement on the ground of a mistake is, according to section 1385 ABGB, restricted to errors concerning the essentials of the parties thereto or the subject thereof.529 In the case that one party conceals that

521. According to the second sentence of §1379 ABGB, ‘[i]n case of doubt, a former obligation is not considered as extinguished insofar as it can reasonably exist simultaneously with a new obligation’. 522. In German, Vergleich. 523. Cf. §1381 ABGB. ‘A person who releases another with his consent from an undisputed or an undoubted obligation without consideration makes a donation (§939).’ 524. Cf. first sentence of §1389 ABGB. 525. C/OGH 2 Mar. 1955, JBl 1955, 500. 526. In German, Bereinigungswirkung. It follows from this effect of a settlement that, according to §1390 ABGB, ‘[s]ureties and pledges which have been made for the security of the whole of a right in dispute are liable for any part which has been determined by settlement’. 527. Cf. §1386 ABGB. 528. Even if they should prove that the claims of one party were completely unfounded; cf. §1387 ABGB. However, according to §1388 ABGB, ‘[a]n evident miscalculation or arithmetic mistake which occurred in the making of a settlement shall not be prejudicial to either of the contracting parties’. 529. Cf. OGH 17 Sep. 1963, SZ 36/114; OGH 29 Mar. 1966, SZ 39/57; OGH 11 May 1967, SZ 40/72; OGH 26 Sep. 1974, SZ 47/192; OGH 4 Jun. 1987, SZ 60/99.

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he has knowledge of the relevant facts whereas they remain obscure to the other, a settlement may be avoided due to an error.530 302. Not every contested question of law can be included in the final adjustment since, according to section 1389 ABGB, even ‘general settlements’531 are ‘not applicable to rights which have been intentionally concealed or which the contracting parties could not have been aware of’.532 In addition, the law imposes certain limits to the ability to settle specific disputes.533 IV. Recognition 303. As opposed to a settlement the characteristic feature of the recognition of a debt is that only one party makes a concession whereas the other insists that his or her position remains unchanged.534 No legal definition of recognition can be found in the General Civil Code which only mentions this concept as a ground for the interruption of the periods of adverse possession and limitation.535 It is viewed as a specific subcategory of a settlement and is subject to basically the same principles.536 304. The so-called constitutive recognition537 refers to disputed questions of law and has the effect of definite adjustment. Whereas this type of recognition creates a new obligation, a ‘declaratory recognition’538 is nothing but a ‘declaration of fact’.539 Thereby, a person makes a statement about his knowledge of the existence of the creditor’s claims and no new obligation is created.540

530. Cf. OGH 28 Jun. 1938, SZ 20/159; OGH 13 Jan. 1959, JBl 1959, 556. 531. In German, Generalvergleich. The characteristic feature of such agreements is that they refer to all disputes without distinction. 532. Cf. OGH 9 Sep. 1987, JBl 1988, 380. 533. According to §1382 ABGB, ‘[s]uch disputes include those which have arisen between spouses in regard to the validity of their marriage’; cf. also §1383 ABGB stating that ‘[a] settlement shall have no effect in regard to the contents of a disposition of last will which is not yet published’, and §1384 ABGB allowing ‘settlements concerning violations of the law’ only in regard to private indemnification, whereas ‘legal proceedings and punishment can be affected by a settlement only when the violations are of such a kind that the authorities are allowed to proceed only on the request of the parties’. No valid settlement is possible in regard to claims for compensation against the managers of a limited liability company according to §10 (6) and §25 (7) GmbHG. 534. Cf. OGH 3 Oct. 1985, ZVR 1986/111. 535. Cf. §1497 ABGB stating that ‘[a]dverse possession and limitation are interrupted if the party who seeks to avail himself thereof has, before the expiration of the time of limitation, either expressly or impliedly acknowledged the right of the other party.’ 536. This is in particular true in respect of the avoidance due to an error; cf. OGH 1 Jul. 1976, JBl 1977, 486; OGH 6 Apr. 1978, EvBl 1979/45; OGH 11 Jan. 1979, ZVR 1980/44; OGH 31 May 1989, SZ 62/102; OGH 24 Apr. 1991, JBl 1991, 791. 537. In German, konstitutives Anerkenntnis. 538. In German, deklaratorisches Anerkenntnis. 539. In German, Wissenserklärung. 540. A ‘declaratory recognition’ has only evidentiary effect.

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Chapter 6. Remedies

§1. GENERAL INTRODUCTION 305. It is very difficult to present the Austrian system of irregularities in performance and corresponding remedies in a way which complies with the AngloAmerican approach to contract remedies. In the legal systems of the Common law tradition, the focus is more or less on four basic remedies, viz., expectation damages, restitution, reliance damages and specific performance, and these remedies are embodied within a framework of judge-made law which does not correspond with the statutory system existing in Austrian law. Whereas in Anglo-American law specific performance is an equitable remedy which is not generally available, the primary remedy to which a creditor would resort under Austrian law is a claim for (specific) performance, whenever such claim is possible and economically reasonable. And, whereas the claim for foreseeable damage resulting from a breach of contractual duties is the regular remedy in AngloAmerican legal systems, Austrian law limits the availability of a claim for damages to situations in which the party in breach is to blame for fault. From the point of view of an Austrian lawyer, the explanation of the legal consequences of a certain irregularity of performance541 in a chapter on ‘remedies’ entails significant difficulties. 306. Austrian law distinguishes different types of irregularities in the winding up of a validly concluded contract: ‘Impossibility of performance’ means a definite and irreversible defect. Temporary obstacles to performance result in a ‘delay’. Such irregularities may originate either in the sphere of the debtor, or in the sphere of the creditor, or in a neutral sphere. Other types of ‘irregularities in performance’542 are ‘breach of warranty’, and ‘positive violation of contractual duties’. Each of these irregularities entails a characteristic remedy, which is dependent on whether the party violating a contractual duty is to blame for it or not. Since the type of irregularity of performance determines the type of available remedy, the treatises of the Austrian law of obligation explain the remedies of a contractual party which is aggrieved by the other’s violation of contractual duties in the context of ‘irregularities of performance and their consequences’. A description of ‘contract remedies’ has not yet been made without reference to this conceptual background.

541. Whether ‘laesio enormis’, viz. a disproportion of consideration and performance amounting to more than 50% in respective values, is a ‘irregularity in performance’ or a ‘defect in the root’ of a contract, is doubtful. 542. In German, Leistungsstörung.

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307. Unlike the UNCITRAL-Convention on Contacts for the International Sale of Goods,543 the Austrian General Civil Code provides no systematic list of remedies to which a party aggrieved by the other party’s violation of a contractual duty may resort. However, if a catalogue of remedies which are available under Austrian law should be established in compliance with the Anglo-American approach, the following list may be presented: (1) remedies in case of non-performance: rescission and exceptio non adimpleti contractus; (2) remedies in case of delayed performance: rescission and granting a grace period;544 (3) enforced performance; (4) warranty remedies: primarily, reparation and replacement; secondarily, price reduction and rescission; (5) damages; (6) remedies in case of laesio enormis; Since a party who has not fulfilled all of his or her contractual duties for a longer period of time may resort to the defence that the other party’s claim has become unenforceable under the statute of limitation, another position may be added to this list, viz., (7) limitation. §2. REMEDIES IN CASE OF NON-PERFORMANCE BY THE OTHER PARTY 308. A party may be faced with the impossibility to perform a promise. As mentioned earlier,545 this impossibility to perform may be initial or subsequent, and, in the case of a subsequent impossibility, the legal consequences depend on whether the debtor of the obligation which cannot be performed is to blame for the nonperformance, or not. If the debtor has negligently or wilfully caused the impossibility, the creditor has, pursuant to section 920 ABGB,546 the choice between either performing himself and, at the same time, claiming the value of the destroyed property in exchange

543. This Convention (CISG), which became effective in Austria on 1 Jan. 1989, provides a coherent system of remedies of the parties. Thus, according to Art. 45 CISG, the buyer has: (1)the claim for specific performance; (2)the right to avoid the contract; (3)the right to reduce the price; and (4)the right to claim damages. With regard to the remedies of a seller, Art. 61 CISG provides a mirror image of Art. 45. 544. In German, Nachfrist. 545. Supra, nn. 291 et seq. 546. Cf. §920 ABGB. ‘If the performance of a contract is frustrated by the fault of a party or by an accident whose consequences must be borne by a party, the other party may either claim damages for non-performance or rescind the contract. If the frustration is only partial such other party may rescind the contract provided that the nature or purpose thereof, as known by the other party, indicates clearly that a partial performance is of no interest.’

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under the title of his interest in the performance of the contract,547 or declaring the contract rescinded. I. Rescission548 309. A creditor who decides to rescind a contract549 on the ground of faulty nonperformance by the debtor need not grant a grace period. According to section 921 ABGB,550 he may also claim damage, viz., his interest in the performance of the contract. In this case the rescinding creditor must, however, deduct the value of his own performance from the hypothetical value of the destroyed thing, since his own obligation to perform has lapsed, or since, if he had already performed, his performance may be reclaimed. If such return of performance is not possible, the debtor has to reimburse the creditor for the benefit the former has derived from the latter’s performance. The legal basis for such reimbursement is unjust enrichment.551 310. If performance by the debtor becomes partially impossible, the creditor may rescind the entire contract, if the purpose of the whole agreement has become frustrated.552 If, however, the creditor continues to be interested in the performance of the remaining (possible) part of the contract, he may rescind the contract partially and claim compensation for the vanished (impossible) part, provided the debtor is to blame for the partial impossibility. If the debtor is not to blame, the mutual obligations become extinct to the extent to which the contract cannot be performed. 311. If the impossibility of performance occurred accidentally, the mutual obligations are automatically put aside without any express rescission by one party.553 In this case, each partner has to restitute or compensate in money what he has already received. If the debtor was insured and receives a benefit from the insurance company, or if the debtor receives compensation of his damage by a person responsible for the destruction of the object of the contract, the creditor is entitled to perform his contractual obligation and to claim from the debtor the value of the benefits or damages substituting the destroyed thing.

547. 548. 549. 550.

In German, Erfüllungsinteresse. Cf. supra, nn. 292–295. In German, vom Vertrag zuriicktreten. Cf. §921 ABGB. ‘Rescission of the contract is not prejudicial to any claim for damages caused by the non-performance attributable to the fault of a party. Any consideration previously given must be returned or refunded in such a manner that neither party profits from any damages caused to the other.’ 551. Cf. §§921, 1435 ABGB. 552. Cf. supra, n. 295. 553. Cf. §1447 ABGB.

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312. The rules on ‘accidental impossibility of performance’ laid down in section 1447 ABGB apply in the same way to the ‘unreasonability’554 and lack of economic feasibility555 of performance. Thus, a debtor is released, if the performance of a contract would create serious dangers to his life, or if the performance would, due to unexpected changes of the circumstances, request extraordinary expenses to be borne by the debtor.556 II. Exceptio Non Adimpleti Contractus 313. Viewed from the ‘remedial perspective’ of the Common Law, the defence that the other party to a reciprocal contract has not yet performed his contractual obligations appears to be a type of a ‘defense of non-performance’. The General Civil Code deals with this defence in the context of barter agreements, since section 1052 ABGB provides in a general manner that ‘[a] person who insists upon delivery must either have performed his obligation or be ready to perform it’.557 From there, it can be derived that the other party has the right to suspend the performance of his or her obligation until the other party is likewise ready to perform. 314. With regard to contracts obligating a party to perform in advance section 1052 ABGB includes another defence which is closely related to the exceptio non adimpleti contractus. According to the second sentence of this provision, the party bound to perform in advance has the right ‘to delay performance until the other party gives security for his counter-performance where there is a risk of nonperformance thereof due to the deteriorating financial situation of the other party’. However, this defence is only available if the party having agreed to perform in advance was innocently unaware of the bad economic situation of the other at the time of the making of the contract.558 III. Debtor’s Remedies when Creditor cannot Perform 315. Usually, the parties to a contract have to perform a plurality of obligations or duties. Thus, the buyer is not only bound to pay the price, but must also take delivery of the purchased property in due time. The permanent failure to accept delivery by the seller in due time creates a case of ‘creditor’s impossibility to perform’.

554. In German, Unzumutbarkeit. 555. In German, wirtschaftliche Unerschwinglichkeit. 556. In many cases, such situations amount to a ‘frustration of contract’ (Wegfall der Geschäftsgrundlage) and would lead to the application of the ‘clausula rebus sic stantibus’; cf. supra, nn. 296–297. 557. This provision expresses the principle of ‘do, ut des’; cf. supra, No. 123. For a recent decision cf. OGH 11 Dec. 2003, SZ 2003/160. 558. In German, this defence is named ‘Unsicherheitseinrede’. This defence appears to have the same function as the remedy provided by Art. 71 CISG in the case of an ‘anticipatory breach’ of an international contract for the sale of goods.

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The Austrian General Civil Code deals with the cases of non-performance for which the creditor has to respond in an insufficient way since it does not set up rules for all possible constellations. In case the property is destroyed during the period of the creditor’s delay in accepting performance by the debtor, the latter is considered to having correctly performed, and the creditor must pay the stipulated price. §3. REMEDIES IN CASE OF DELAYED PERFORMANCE BY THE OTHER PARTY 316. Delay of performance by the debtor means his failure to perform in due time although, at the same time, the possibility of performance continues to exist. The delay may be ‘objective’, if the debtor is not to blame for the failure. It may be ‘subjective’, if the debtor was at fault in causing the delay. However, a creditor may fail to accept the performance which is properly offered by the debtor in due time. Here the debtor is, as a rule, not entitled to force the creditor to accept performance. According to section 1419 ABGB, the delay of a creditor amounts only to a violation of a minor category of obligation.559 Such violation has the effect that the risk of accidental loss or damage passes from the debtor to the creditor, and that the debtor’s liability for damages caused by his simple negligence is excluded. In addition, the delay of a creditor does – in principle – not result in his liability for damages the debtor may suffer from the delay. Pursuant to section 1425 ABGB, the debtor is entitled to deposition in court, thereby getting discharged from his duty to perform. 317. Pursuant to section 918 ABGB,560 the creditor may in a situation of delayed performance by the debtor either insist on specific performance at a later time, or rescind the contract simultaneously allowing a reasonable grace period for performance. As long as he is in delay, the debtor bears the risk of accidental loss or damage. In the case of a ‘subjective delay’, the creditor is also entitled to damages. I. Rescission 318. Thus, delay of the other party in performing his or her contractual obligation is another ground for rescission. If a party does not perform in due time, at the proper place or in the agreed manner, the other party has to fix a grace period for the performance and may rescind after its expiry.561 No grace period needs to be

559. In German this minor category of obligation is named ‘Obliegenheit’. 560. Cf. §918 ABGB. ‘(1) If a contract for consideration is not performed by one of the parties in due time, at the proper place or in the agreed manner, the other party may accept performance of the contract and damages for the delay, or he may, after fixing a period of grace for the performance, rescind the contract.(2) If the performance is divisible for both parties, rescission may be declared with respect to both the performed and the unperformed parts of the contract.’ 561. Cf. §918 ABGB.

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granted if a fixed date or period is specified for the performance of a contract and this period has expired.562 If the creditor decides to rescind the contract, he may claim the interest in performance.563 As a result, the debtor has to put the creditor just into the position the latter would be in, had the delay not been caused.564 319. If the debtor performs only part of his obligations in due time, the creditor may partially rescind if performance and counter-performance are divisible. In the case of indivisibility, the rescission affects the whole contract. In the case of bilateral contracts for delivery by instalments, the creditor may not only rescind with regard to the delayed deliveries by instalments, but also with regard to future deliveries since it would be unreasonable to require a party of such an obligation to continue a contractual relation with a party in breach of his duties resulting thereof.565 320. In case a contract is rescinded because of an ‘objective delay’ in the performance, the parties have to return mutually that what they have received from one another. If no return of the received good is possible, compensation has to be paid for its value. If delay is attributable to fault, the other party is entitled to damages for non-performance. II. Granting a Grace Period 321. It is characteristic of Austrian contract law that, in a situation of delayed performance, rescission requires the fixing of a period of grace for the performance according to section 918 ABGB. The creditor must notify the debtor in delay that he will not be interested in the debtor’s performance any further, if a certain period of reasonable length expires. The German wording of section 918 ABGB566 clearly indicates that the granting of a period of grace for the performance must be made in close connection with the declaration to rescind.567 322. The period of grace must be of reasonable length. Whether a period is reasonable or not, depends on whether the debtor has a real chance to make good what he failed to perform in due time. Circumstances that have to be taken into account

562. Cf. §919 ABGB. ‘If a fixed date or period is specified for the performance of a contract, and the failure thereof would give rise to rescission, the party entitled to such rescission must, if he insists upon the performance of the contract, notify the defaulting party of his decision immediately after the time for performance has ended; if no such notice is given, performance cannot thereafter be required. The same rule applies even if the nature or purpose of the contract, as known by the defaulting party, clearly indicates that delayed or further performance is of no interest to the other party.’ 563. Cf. §921 ABGB. 564. If the creditor resorts to a claim for performance by the debtor, the creditor is entitled to get compensation for all detriment caused by the debtor’s delay. 565. Cf. second sub-para. of §918 ABGB. 566. In German, unter Setzung einer angemessenen Nachfrist. 567. Cf. OGH 19 Oct. 1955, JBl 1956, 151; OGH 24 Nov. 1998, JBl 1999, 527.

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in the evaluation of the reasonableness of the grace period are the time usually necessary for carrying out a performance which ought to have already been commenced,568 and the degree of urgency of the performance for the creditor. If the grace period is too short, the delayed debtor may either ask for a prolongation or validly perform even after the expiration of the grace period, provided that the performance was rendered within the reasonable time. 323. Since the granting of a grace period shall provide a ‘last chance’ for the debtor, it is not necessary, if the debtor expressly refuses to perform,569 or if it is quite obvious that he is unable to provide performance within a reasonable period of time.570 If delay occurs in a contract stipulating that performance has to be effected at an expressly fixed date, the obligations become automatically extinct: Neither the granting of a grace period, nor an express rescission is necessary.571 III. Exceptio Non Adimpleti Contractus 324. The defence that allows a party to suspend his or her performance as long as the other party to a reciprocal contract has not yet performed his or her contractual obligations according to section 1052 ABGB,572 is also available in the case of delayed performance. IV. Debtor’s Remedies when Creditor is in Delay 325. If a creditor fails to accept the performance properly offered by the debtor in due time, the debtor is, as a rule, not entitled to force the creditor to accept performance. According to section 1419 ABGB, the delay of a creditor amounts only to a violation of a minor category of obligation,573 which results in the passing of the risk of accidental loss or damage from the debtor to the creditor, and in the exclusion of the liability of the debtor for damages caused by his simple negligence. In addition, the delay of a creditor does – in principle – not result in his liability for damages of the debtor. Pursuant to section 1425 ABGB, the debtor is entitled to deposition in court, thereby getting discharged from his duty to perform.

568. Cf. OGH 12 Apr. 1961, SZ 34/54. 569. Cf. OGH 29 Jun. 1976, JBl 1977, 543; OGH 3 Oct. 1985, JBl 1986, 246; OGH 21 Dec. 1987, SZ 60/287. 570. Cf. OGH 17 Nov. 1987, JBl 1988, 241. 571. Cf. §§919 ABGB, 376 UGB. 572. Cf. supra, n. 312. 573. In German, Obliegenheit.

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§4. ENFORCED PERFORMANCE 326. In general, a contracting party suffering loss because he or she does not get what he or she was promised will be content with monetary compensation. If something as good as what was promised by the other party can be procured elsewhere, though at a higher price only, the innocent party may sue the defaulting party for the damages caused by the extra price. The question is, whether there is also a possibility for a court to order the party in breach to perform in natura (or ‘in specie’), if the innocent party so demands. In Austrian law, like in other legal systems of the civil law tradition,574 a creditor has the right to bring a claim for specific performance of a contract as long as the performance by the debtor is still possible. If a judgment ordering the debtor to perform ‘in specie’ is rendered, the creditor can resort to the coercive measures provided by the ‘Code on the Execution of Judgments’.575 This code provides clear distinctions between the various types of claims which may be subject to a judgment for performance.576 327. Thus, sections 346 et seq. EO provide for the execution of judgments on claims for the delivery of goods, sections 349 et seq. EO deal with the execution of judgments ordering the transfer of real property and titles thereto. Section 353 EO concerns the execution of judgments on claims for performing an act which could easily be performed by a third person instead of the debtor,577 and section 354 EO deals with the execution of judgments imposing on the debtor the duty to perform an act, which cannot be performed by another person and is entirely dependent on the debtor’s intention.578 Finally, sections 355 et seq. EO provide for the enforcement of ‘obligations to tolerate and abstain’.579 In the case of section 346 EO, the judgment is executed by the bailiff who takes the good in question from the debtor, whereas in respect of real property he may force the debtor, according to section 349 EO, to leave the premise. In the case of section 353 EO, the creditor has the right to address himself to a third party and demand performance of the act at the expense of the debtor.580 In the case of section 354 EO, the creditor may enforce the performance of the act by having a fine imposed on the debtor. The maximum amount of a single fine is, according to section 359(1) EO,581 Euro (EUR) 100,000. If this measure would not help, the creditor can demand the incarceration of the debtor for an uninterrupted period of two months at the longest. Altogether, the entire time of incarceration must not exceed a total maximum period of six months. The court may also resort to the coercive

574. For example, Germany, France; as opposed to the legal systems of the Common Law. 575. Exekutionsordnung, ‘EO’, of 1896, as most recently amended by BGBl I 2010/58. 576. This system is highly consonant with the one provided by §§883 et seq. German Code of Civil Procedure. For a short and clear description, cf. Zweigert/Kötz/Weir, An Introduction to Comparative Law III, §12 II. 577. In German, vertretbare Handlungen. 578. In German, unvertretbare Handlungen. 579. In German, Duldungs- und Unterlassungspflichten. 580. In German, Ersatzvornahme. 581. As amended by BGBl I 2000/59.

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measures of fine and imprisonment,582 whenever a judgment concerning an ‘obligation to tolerate and abstain’ is to be executed. 328. Fines and incarceration under the Code on Execution of Judgments must not be confused with criminal sanctions. These coercive measures are designed to put indirect pressure on a contracting party refusing to perform his or her duties. In practice, however, a creditor will demand the imposition of a fine on, or incarceration of, a debtor only in exceptional cases. More often a reasonable creditor will decide to renounce a claim for specific performance and seek to get damages. §5. WARRANTY REMEDIES I. Types of Warranty 329. In contrast to e.g., German or French law, warranty is under Austrian law not considered to be primarily affiliated with the contract of sale. Notwithstanding their specific importance for sale transactions, the relevant sections 922 to 933b. ABGB are of a general character and apply to the defective performance of all types of non-gratuitous contracts. However, in reactions to the peculiarities of certain types of contracts, such as leasing and tenancy contracts,583 assignation,584 and contracts between two entrepreneurs,585 statutory modifications of the general rules are provided. Until recently, specific warranty rules applied also to contracts for work and services. However, as a consequence of a major reform of the Austrian law on warranties,586 the latter statutory modifications of the general rules on breach of warranty have been abolished. This reform was initiated in the early 1990s when it became obvious that the Austrian law on warranties which in its basic rules dates back to 1811 was in permanent tension with the practical requirements of a market of mass products. By 1995, a controversial proposal for a new law on warranties was introduced by the Federal Ministry of Justice. The reform gathered additional momentum when in 1999, the EU Directive on consumer sales guarantees was adopted and required implementation into domestic Austrian law by 1 January 2002.587 On this date, the new Austrian provisions on breach of warranty entered into effect.588 Contrary to Germany, which took the Sales Directive as an opportunity to modernize a considerable part of its law of obligations towards a regime similar to that of the CISG, the Austrian

582. 583. 584. 585. 586. 587.

Here, the maximum period for incarceration is, according to §355 (1) EO, one year. §1096 ABGB. §§1397 et seq. ABGB. §377 UGB. In German, Gewährleistungsrecht. Directive 1999/44/EC on Certain Aspects of the Sale of Goods and Commercial Guarantees of 25 May 1999, O.J. EC. L 171, 7 Jul. 1999, 12. 588. Law Amending the Law on Warranties, BGBl I 2001/48 (Gewährleistungsrechtsänderungsgesetz).

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reform is limited to the field of warranties only. Thus, by adopting a ‘small’ legislative solution instead of a legal revolution similar to the German Schuldrechtsmodernisierungsgesetz,589 the Austrian legislator abstained from launching a more comprehensive reform of the law of obligations. 330. The Austrian law of warranties makes a formal distinction between a deficiency of title590 and a defect of quality,591 but as a matter of principle, it treats them in the same way. A defect of title exists whenever the transferor of a property is unable to transfer the right thereto in compliance with the contractual stipulations. Characteristic of a defect of quality is the absence of expressly stipulated or implicitly assumed qualities.592 Concepts such as ‘merchantability’ or ‘fitness for a specific purpose’ may be foreign to an Austrian lawyer. In substance, however, no significant difference can be found between the standards employed by section 932 ABGB and those of the Common Law. The deficiencies and defects which may entitle to warranty remedies need not exist already at the time of the conclusion of the contract. Rather, the decisive moment is the time when the contract is performed, that is, when a good or service is delivered. For all deficiencies and defects which do not already exist at the time of performance, no breach of warranty may be claimed.593 However, in this respect the new section 924 ABGB shifts the burden of proof: If a deficiency or defect becomes obvious within six months after the time of performance, it is presumed that it has already existed at the time of performance. This presumption does not apply if it is incompatible with the nature of the good or defect, such as defects that are obviously caused by use.594 331. Under the traditional law on warranties that was in force until 31 December 2001, the nature of the defect was of primary importance for the type of available remedy. According to the letter of the law, rescission constituted the primary remedy. Contrary to that, the new provisions abandon the traditional distinctions between reparable and non-reparable defects and essential and non-essential defects and replace the existing complex system of remedies by a hierarchical two-step system. Under this system, the right to repair and the right of replacement are primary remedies, whereas the right to price reduction and the right to rescind the contract are secondary remedies only. The underlying principle as derived from Article 3 of the EU Sales Directive is that the transferor should be given a second chance to perform and thereby, the contract should be preserved.

589. 590. 591. 592. 593. 594.

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German BGBl I 2001 3138. In German, Rechtsmangel. In German, Sachmangel. Cf. §922 ABGB. Welser/B. Jud, Die neue Gewährleistung, 41 et seq. Cf. §924 second Sentence ABGB.

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332–334

II. Repair and Replacement (Primary Remedies) 332. In case of a defect, section 932(2) ABGB provides two primary remedies to the transferee of a good or service: Repair, which includes supplemental performance for defects in the quantity of goods or services, and replacement. Within these two remedies, the transferee is entitled to choose the one he prefers. However, the transferee’s freedom of choice is not unlimited: If the transferee’s remedy of choice is either factually impossible or requires disproportional expenses in comparison with the respective other remedy, the transferor may reject the choice and offer the other remedy.595 For example, if the defect concerns a specific and unique good – a ‘species’ – or service, replacement is impossible so that the transferor is only obliged to repair. Contrary to that, if a defective mass product is factually or economically irreparable, the transferee may only claim replacement. The repair or replacement of a defective good or service has to take place at the initial place of performance and has to occur within a reasonable period of time. Further, it should cause as little inconvenience to the transferee as possible.596 If the time period lapses without repair or replacement or if the transferor rejects both remedies, the transferee is entitled to claim the ‘stage two remedies’ of price reduction or rescission. III. Price Reduction and Rescission (Secondary Remedies) 333. Under the new law on warranties, price reduction and rescission are secondary remedies which may be taken only if repairing and replacing a defective good or service remains unsuccessful for some reason. This could happen in five different circumstances:597 – if both, reparation and replacement are factually impossible or would require disproportionate expenses on part of the transferor; – if the transferor generally rejects his second chance to perform and does not repair or replace the defective goods or services; – if the transferor does not repair or replace the defective product within reasonable time; – if reparation and replacement would constitute a considerable inconvenience on part of the transferee; – if there are serious reasons within the personality of the transferor that justify that the transferee abstains from requesting reparation and replacement. 334. Again, it is up to the transferee to choose between the two remedies, price reduction and rescission. However, the remedy of rescission is only available if the

595. Cf. §932(2) ABGB. On ‘disproportionality of repair’, cf. OGH 18 Dec. 2006, SZ 2006/184; OGH 7 Jul. 2008, JBl 2008, 786. 596. §932(3) ABGB; cf. OGH 3 Nov. 2005, SZ 2005/157; OGH 20 Dec. 2005, JBl 2006, 518. 597. Cf. §932(4) ABGB.

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deficiency or defect is of more than a ‘minor quality’.598 The test to determine when a defect is more than minor so that the transferee is entitled to resolve the contract is a test of proportionality: If in relation to the defect it would appear disproportionate to rescind the contract, the transferee may only claim price reduction. 335. The legal effect of a rescission because of breach of warranties according to section 932 ABGB is identical to those of a rescission because of nonperformance (section 920 ABGB) or delayed performance (section 918 ABGB). It results in the avoidance of the contract and entitles the parties to claim mutual return of their performance. Thus, whereas the contractual obligations are considered to have never come into existence (void ex tunc), the transfer of ownership based on this contract has been effective, but the property can be claimed back under contract law (void ex nunc). 336. Contrary to the right to rescind a contract, the right of price reduction does not require a defect of more than minor quality. The amount of the reduction of the price is computed in compliance with the formula provided by section 472 of the German Civil Code. The adoption of the so-called relative method of computation599 by the Austrian doctrine and court practice600 means that the relation of the stipulated to the reduced price equals the relation of the market values of complying and defective property at the time the contract was concluded.601 The formula is: ‘ Relative method of computation’

stipulated price value of performance without defect = reduced price value of defective performance and from there it follows:

reduced price =

value of defective performance × stipulated price value of performance without defect

IV. Common Characteristics of Warranty Remedies 337. To entitle the transferee to warranty remedies, claims for breach of warranty have to be filed in court. The time period in which warranty claims may be filed depends on the nature of the good or service: With regard to chattels, the period

598. §932(4) ABGB; cf. OGH 28 May 2005, SZ 2005/138; OGH 15 Feb. 2005, SZ 2006/17. 599. In German, relative Berechnungsmethode. 600. Cf. OGH 8 May 1953, SZ 26/120; OGH 8 Jul. 1953, SZ 26/185; OGH 8 May 1957, JBl 1957, 454; OGH 9 Jun. 1981, SZ 54/88; OGH 6 Oct. 1982, JBl 1984, 203; more recently: OGH 29 Nov. 2006, ecolex 2007/40, 99. 601. The same formula is employed by Art. 50 CISG. However, under the uniform sales law the relevant time is the time of delivery.

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338–339

is two years, with regard to real property, it is three years.602 In both cases, for defects in quality, the period starts at the time when delivery of the goods or services is complete, regardless of whether the defect is discernible or not. For deficiencies of a title, however, the period begins to run at the time when the legal entitlement of a third person becomes evident. Thus, to trigger the time, it is not required that a claim in court is filed by the lawful owner.603 As the time period of section 933 ABGB is a limitation period, it is not to be determined by a court ex officio.604 Instead, the parties to the proceedings have to resort to this defence. The effect of the qualification of section 933 ABGB as providing a limitation period instead of a prescription period is that after it has lapsed, a warranty remedy can no longer be enforced. Nevertheless, as the right to claim a breach of warranty becomes an ‘obligatio naturalis’, an erroneous payment by the transferor cannot be demanded back.605 §6. DAMAGES 338. Under Austrian law, a claim for damages can be brought by an innocent party only if the other party is to blame for having negligently or wilfully violated his or her contractual duties. According to section 921 ABGB, rescission of a contract is not prejudicial to any claim for damages caused by the negligent or wilful non-performance of a party, and the last sentence of section 933a(1) ABGB provides that if the transferor has caused the defect by his fault, he is liable for damages. In addition, Austrian doctrine and courts have accepted the category of ‘positive violation of a contract’, thereby adhering to the German model. 339. Claims for damages, whether based on sections 921, 933a(1) ABGB or on the rules on positive violation of a contract, are subject to the specific rules of contractual liability. Thus, the burden of proof of fault is shifted to the party in breach of a contractual duty,606 and section 1313a ABGB imposes a strict vicarious liability on the party of a contract whose employee caused damage to the other in the course of the performance of contractual duties. In compliance with the rules of good morals, the parties may agree on clauses exempting from liability for negligence.

602. 603. 604. 605. 606.

§933 ABGB. Welser/B. Jud, Die neue Gewährleistung, 88 et seq. Cf. §1501 ABGB. This follows from §1432 ABGB. Cf. §1298 ABGB.

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I. Damages in Case of Non-performance and Delay 340. If a party to a contract, due to his or her fault, is permanently unable to perform, the other party has a choice.607 The innocent party may either decide to stick to his or her own duty to perform and to claim at the same time the value of the destroyed property in exchange under the title of his or her interest in the performance of the contract, or declare the contract rescinded. A creditor who decides to rescind the contract may, according to section 921 ABGB, also claim the interest in the performance. However, he must deduct the value of his own stipulated performance. Thus, the creditor receives as damages the difference in the values of performance and counter-performance, which is either computed specifically or abstractly insofar as there is a market price or a stock exchange price for the performance. Only if the party in breach is to blame for gross negligence or intentional wrongdoing, compensation is not limited to damnum emergens but extends to lost profits. However, if a commercial transaction is not correctly performed, the so-called full interest has always to be compensated according to section 349 UGB.608 An entrepreneur in breach of contractual duties may be to blame only for simple negligence; he nevertheless must also compensate the lost profits of the innocent party. 341. The same principles of liability apply to the wrongful delay of performance. Here, the reasonable period of grace must first have expired without result before a claim for damages can be brought. II. Damages for ‘Positive Violation of a Contract’ 342. No provision on positive violation of contract can be found in the Austrian General Civil Code. Notwithstanding some critical comments,609 it is today a generally recognized category among the irregularities of performance. The concept of positive violation of a contract has been created by German doctrine and court practice and was adopted by Austrian legal practice. A common characteristic of all cases of ‘positive violation of a contract’ is the occurrence of consequential or additional damage. 343. Liability for positive violation of a contract is based on section 1295(1) ABGB. It follows from this general provision dealing with contractual and noncontractual liability that every negligent or intentional violation of a contractual duty entails liability. 344. The rules on positive violation of a contract apply to two typical fact patterns: On the one hand, to cases of negligent defective performance causing consequential damage to the partner of the contract; on the other hand, to cases in which 607. Cf. §920 ABGB. 608. As amended by BGBl I 2005/120. 609. In particular by Reischauer, Der Entlastungsbeweis des Schuldners (1975), 147 et seq.

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345–348

the performance itself is not defective, but damage is caused as a result of a negligent violation of ‘collateral duties’ aiming at the protection of the contractual partner. Such ‘contractual collateral duties’610 are e.g., the duty to give certain information or the duty to give clear instructions as to the proper use of the delivered property. 345. In each of the two types of positive violation of a contract, the damage exceeds the losses that may be recovered by other available remedies in cases of non-performance, delayed performance, or breach of warranty. By resorting to a claim for damages, the victim of a positive violation of a contract demands compensation of ‘consequential damages’. III. Concurring Remedies: Warranty and Damages 346. According to traditional doctrine and court practice, the loss consisting in the defect of the transferred property itself, viz., the depreciation in value, the expenses for repair, etc., was no case for a damage claim. Under the law on warranties in force until 31 December 2001, the notion ‘damages’ as employed by the last sentence of section 932(1) ABGB used to be understood as ‘consequential damages’. Even in the case of fault the innocent party could only resort to the warranty remedies,611 and these remedies are available only within the short periods of section 933 ABGB. 347. A new perspective was suggested by Welser in 1976:612 Since the debtor had the duty to remove corrective defects, he might be held liable, if he negligently or wilfully violated this contractual duty by rejecting repair of the property he had transferred in a defective condition. According to section 1298 ABGB, the burden of proof of fault would lie with the party in breach of warranty. According to this theory, the transferor of a defective property would have to bring evidence that he did not know and could not have known of the defectiveness, or that he/she is not to blame for not being able to eliminate the defect. A similar situation appears, if a defect that occurs in the time between the making of the contract and its performance is caused by the debtor’s negligent or wilful violation of his contractual duty of care for the concerned property. 348. This theory was adopted by the Supreme Court, first in respect of contracts for works and services,613 later also in respect of contracts of sale.614 The effect of 610. In German, vertragliche Nebenpflichten. 611. Cf. Pisko, Gewährleistungs-, Nichterfüllungs- und Irrtumsfolgen bei mangelhafter Ware, 2nd ed. (1926); and OGH 4 Apr. 1973, SZ 46/39; OGH 30 Apr. 1975, JBl 1975, 600; OGH 30 Apr. 1975, SZ 48/56; OGH 18 Jan. 1977, EvBl 1977/159; OGH 7 Oct. 1976, JBl 1977, 319; OGH 19 Sep. 1984, JBl 1985, 625; OGH 29 Jan. 1985, JBl 1986, 108. 612. Welser, ‘Gewährleistung und Schadenersatz’, JBl 1976, 127. 613. OGH 7 Mar. 1990, JBl 1990, 648; OGH 4 Apr. 1990, JBl 1990, 653. 614. OGH 17 May 1990, JBl 1990, 792.

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this important change in court practice was significant, since the short periods of prescription provided by section 933 ABGB for warranty remedies were superseded by the three years limitation period for damage claims. And whereas the periods of section 933 started running at the time of the transfer, the limitation for a damage claim began, according to section 1489 ABGB, at ‘the moment when the damaged party learned of the damage and the identity of the person who caused it’.615 A draft bill to amend the law of warranty (and to implement the Council Directive 93/13/ EEC) was presented by the Ministry of Justice in summer 1995, but it took another five years to adapt the law. 349. When on 1 January 2002, the new provisions on warranties became effective, section 933a ABGB for the first time provided for a statutory basis for damages for losses consisting in the defect. In principle, this provision puts into black letter law what the Supreme Court has consistently held since 1990: As an alternative to breach of warranty, the defect itself may be claimed as loss for which damages are awarded, provided that the transferor was to blame for faulty conduct. However, section 933a ABGB also brings this in line with the results of general reform of the law on warranties. Under the new section 932 ABGB, in case of a non-conforming performance because of a defect in the delivered good or service or a deficient title, a transferee may claim reparation or replacement first. Thus, the transferor is granted a second chance to perform. Price reduction and rescission are only secondary remedies which are primarily granted if both, reparation and replacement are factually impossible or would entail disproportionate expenses. However, if under section 933a ABGB damages could be claimed, the primacy of reparation and replacement would be circumvented because, similar to the secondary remedy of price reduction, the transferee would receive monetary payments. To prevent this, section 933a(2) ABGB provides that the transferee as the injured person could claim only reparation and replacement in the first place. It is up to the transferee’s discretion to make the choice between the two remedies. Monetary damages are to be awarded only if repair or replacement of a defective good or service is factually impossible or would entail disproportionate expenses for the transferor. They are limited to what the transferee would have received if performance had successfully taken place.616 Thus, systematically, section 933a ABGB relies on the same two-stage hierarchy of remedies as section 932 ABGB. This result also corresponds to the fundamental principle of Austrian tort law that primarily, damages are to be restituted in natura.617 350. Contrary to the law of warranties, fault on part of the transferor is required for awarding damages. As the liability of the transferor for defective goods or services is regularly a liability based on contract law, the burden of proof is on the transferor. Thus, he has to prove that he was not at fault. However, section 933a(3) ABGB provides that this shift of the burden of proof is only temporary: Ten years 615. Cf. supra, n. 352. 616. In German, Erfüllungsinteresse. 617. In German, Naturalrestitution. Cf. §1323 ABGB.

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351–353

after the delivery of the good or service took place, the burden of proving fault shifts back to the transferee. This ‘shift-back’ provision does not only apply to losses consisting in the defect, but also to consequential losses.618 351. The claim for damages for losses consisting in the defect has to be made within the standard limitation period of section 1489 ABGB. This three-year period starts running at the time the identity of the injurer and the loss become known to the injured person, but thirty years after the loss actually occurred, no more claim may be brought. §7. REMEDIES IN CASE OF LAESIO ENORMIS: RESCISSION 352. If a party to a bilaterally binding contract ‘receives consideration equal to less than one-half of what he has given’, such party may, according to section 934 ABGB, ‘demand the rescission of the contract and the restitution of the status quo’. This remedy is characteristic of Austrian contract law and has no equivalent in other laws. In particular, the otherwise closely related German law does not provide for such a situation. If the other party wishes to preserve the contract, he or she can react on the aggrieved party’s demand for rescission by making up, according to common value, the deficiency in the value of his or her performance, so that the values of performance and counter-performance are equal. 353. According to section 935 ABGB, this legal remedy does not apply, when a party has made the: declaration that the property is accepted at an extraordinary valuation for personal reasons; where a party knowing the real value has nonetheless consented to the disproportionate valuation; where it can be presumed from the relationship between the parties that they intended to conclude a mixed contract consisting of both onerous and gratuitous obligations; where the real value can no longer be ascertained; and, lastly, where the property has been sold by the court in public auction. The law of laesio enormis was amended two times. First, by the Consumer Protection Act,619 effective on 1 October 1979, stating that this remedy cannot be validly waived by the consumer, and more recently by the statute amending the Commercial Code which provided the possibility to stipulate that the application of section 934 may be excluded to the disadvantage of an entrepreneur.620

618. See supra nn. 342 et seq. 619. BGBl 1979/140. 620. Cf. §351 UGB as amended by BGBl I 2005/120.

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§8. LIMITATION621 354. The passage of time has a crucial impact on the enforceability of contractual duties. A party who has not fulfilled all of his or her contractual duties for a longer period of time may resort to the defence that the other party’s claim has become unenforceable under the statute of limitation. The General Civil Code provides an intricate and complex system of rules on limitation and adverse possession in its sections 1451 et seq. 355. According to section 1451 ABGB, ‘[a] limitation is the loss of a right which has not been exercised during the time fixed by the law’. The general period of limitation is, according to the second sentence of section 1478 ABGB, thirty years.622 This period starts running at the moment when a right could have been used for the first time.623 There are, however, numerous exceptions from the rule in which the law provides for a short limitation period of three years. In particular, the long period of thirty years does not apply to rights and obligations emerging from contractual relations. 356. In the context of contract law, section 1486 ABGB is of major importance. According to this provision: [a] limitation of three years applies to claims: 1. for delivery of property, performance of work or other performances in a trade, mercantile or other business enterprise; 2. for the delivery of agricultural or forestry products in an agricultural or forestry enterprise; 3. for the fürnishing of board, care, cure, education or instruction by persons who are engaged therein or by institutions which serve such purposes; 4. for rents of tenants or lessees; 5. of servants for payment of wages, and refund of expenses based upon service contracts with laborers, day workers, and all other private servants, and of advance payments of masters in regard to such wages; 6. of physicians, veterinaries, tutors, attorneys-at-law, notaries, patent attorneys and other persons publicly appointed for the performance of certain tasks with respect to their fees and disbursements, and of the parties (clients, patients, etc.) for advance payments to the said persons.

621. In German, Verjährung. 622. It reads: ‘However, for the limitation itself the mere non-use during thirty years of a right which otherwise could have been used is sufficient.’ This period is, according to §1485(1) ABGB, expanded to the benefit of certain legal entities which are enumerated in §1472 ABGB such as the public treasury (fiscus), the churches and communities, etc., to a period of forty years. 623. It should be noted that, according to §1494 ABGB, ‘[t]he period of … limitation cannot commence against persons who through a mental defect are incapable of managing their rights, against persons under guardianship or against insane or mentally deficient persons insofar as no legal representatives are appointed therefor’.

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357–360

According to section 1487 ABGB, the limitation period of three years applies also to: the right ‘to revoke a gift because of ingratitude of the donee’; the right to rescind a reciprocal contract for laesio enormis; and ‘the claim to rescind a contract because of well-founded fear or mistake, where there is no deceit on the part of the other contracting party’.624 It follows from these provisions, which are worded in a rather old-fashioned way, that a creditor loses his right to enforce the remedies in case of non-performance or delayed performance of a contract with the lapse of three years from the date at which the performance was due. 357. A limitation period of three years is also provided, according to section 1489 ABGB, for ‘[a]ll actions for damages’, irrespective of whether they sound in contract or in tort. The period begins with ‘the moment when the damaged party learned of the damage and the identity of the person who caused it, regardless whether the damage was caused by breach of contract or without relation to a contract’. The overall limitation is thirty years, ‘if the damaged party does not become aware of the damages or of the identity of the party who caused the damage at an earlier date, or if the damage arises from a felony’. 358. The General Civil Code includes special provisions concerning the conditions under which the limitation may be suspended625 or interrupted.626 Thus, the entire cessation of the administration of justice due to war, etc., would result in a suspension of the limitation, whereas the express or implied acknowledgment of the other party’s right, the filing of an action, or the entering into serious negotiations for a settlement have the effect of interrupting the running of the limitation period. 359. Since a limitation is not to be determined by a court ex officio,627 the parties must resort to this defence. The effect of limitation is that a right cannot be enforced any longer. After the lapse of the limitation period a debt becomes a so-called obligatio naturalis. Therefore, an erroneous payment subject to limitation cannot be demanded back by the debtor.628 360. According to section 1502 ABGB, ‘a limitation may not be waived in advance and a longer period than that which has been provided by law may not be specified’. However, section 933 ABGB provides that the periods of two years with

624. The right to avoid a contract because of deceit or duress according to §870 ABGB is subject to the limitation of thirty years. 625. Cf. §1496 ABGB. ‘An absence caused by civil or military service, or the entire cessation of the administration of justice, as in time of pestilence or war, suspends not only the commencement but also the continuation of the adverse possession or limitation as long as such impediments last.’ 626. Cf. §1497 ABGB. ‘Adverse possession and limitation are interrupted if the party who seeks to avail himself thereof has, before the expiration of the time of limitation, either expressly or impliedly acknowledged the right to the other party, or if an action has been commenced against and properly pressed a debtor by a creditor. However, if such complaint has been dismissed by a final judgment the limitation is not considered as interrupted.’ 627. Cf. §1501 ABGB. 628. Pursuant to §1432 ABGB.

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regard to movables and three years with regard to immovables for claiming warranty remedies may be subject to modification. §9. SPECIFIC REMEDIES UNDER SPECIFIC STATUTES 361. A number of specific statutes dealing with certain contract types provide characteristic remedies which cannot be treated in detail. However, mention should be made of the most important among these specific statutory contract remedies. I. Consumer Protection Act 362. A particular right to rescind a contract within one week is provided by sections 3 and 4 of the Consumer Protection Act for a consumer who purchased a good from a businessman or an agent of an enterprise in a door-to-door sale.629 To trigger this prescription period, the consumer has to receive a documentation of the transaction which includes information about his right of rescission. However, section 3(1) KSchG provided that regardless of whether the consumer had actually received such information, he may no longer exercise his right of rescission one month after complete mutual performance had taken place. The European Court of Justice (CJEU), however, held that Article 5 of the Door-step selling Directive630 did not provide for such an absolute limitation period.631 Thus, section 3(1) KSchG has been changed so that if no instructions on the right to rescind are handed over to the consumer, the prescription period of one week is never triggered.632 With regard to distance contracts the KSchG provides in sections 5e et seq. specific rules on the right of the consumer to rescind.633 II. UNCITRAL-Convention on the International Sale of Goods (CISG) 363. The UNCITRAL-Convention on the International Sale of Goods entered into effect in Austria on 1 January 1989.634

629. Together with the European Area Treaty a statute to amend the Consumer Protection Act, BGBl. 247/1993, entered into effect on 1 Jan. 1994. This statute provided among other innovations for a closer approximation of the Consumer Protection Act to the respective EC-Council Directive No. 85/577/EEC of 20 Dec. 1985, O.J. EC L 372, 31 Dec. 1985, 31. 630. Directive 85/577/EEC to Protect the Consumer in Respect of Contracts Negotiated away from Business Premises of 20 Dec. 1985, O.J.EC 372, 31 Dec. 1985, 31. 631. CJEU C-481/99, Coll. 2001, I-09945 (Heininger gegen Bayrische Hypo- und Vereinsbank AG). 632. BGBl I 2003/91. 633. As amended by BGBl I 1999/185. 634. Cf. BGBl. 1988/96.

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364–367

This convention provides a well organized remedial system which was designed to overcome the serious differences existing in this context among the national systems of sales law. It was the aim of the draftsmen of CISG to find a solid compromise between the different solutions in the national systems of law.635 364. The Convention makes a systematic distinction between the remedies of the buyer in the case of breach by the seller (Articles 45–52), and the remedies of the seller in the case of breach by the buyer (Articles 61–65). Article 45 CISG provides a general overview of the remedial system of the Convention in the case of breach of contract by the seller and, by referring to Articles 46–52 and Articles 74–77 CISG, accepts as primary remedies of the buyer: (1) (2) (3) (4)

the the the the

claim for (specific) performance (Article 46); possibility to avoid the contract (Article 49); possibility to reduce the price (Article 50); claim for damages (Article 74).

365. In addition, Article 47 CISG empowers the buyer to fix an additional period of time of reasonable length for the performance of the seller’s duties under the contract, whereas Article 48 CISG allows the seller, even after the date for delivery, the right to cure any failure to perform his obligations on his own expense. 366. Article 61 CISG presents a mirror image of Article 45 in respect of the remedies of the seller in the case of a breach of contractual duties by the buyer. This Article provides a general overview of the remedial system of the Convention in the case of breach of contract by the buyer, and by referring to Articles 62–65 and Articles 74–77 CISG accepts as primary remedies of the seller: (1) the claim for payment and taking delivery (Article 62); (2) the possibility to avoid the contract (Article 64); (3) the claim for damages (Article 74). 367. In addition, Article 64 CISG empowers the seller to fix an additional period of reasonable time for the performance of the buyer’s duties under the contract; and Article 65 gives the seller the right to specify the form, measurements or other features of the goods, if under the contract the buyer ought to have made such specification and failed to make it in time.636

635. Fore more details, see, e.g., Bianca/Bonell, Commentary on the International Sales Law (1987); Honnold, Uniform Law for International Sales under the 1980 United Nations Convention (2d ed., 1991). 636. §375 HGB providing rules for the ‘Spezifikationskauf’ has been repealed by BGBl I 2005/120. Today the relevant rules are § 1063b and § 906(2) ABGB.

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368–368

Part II. Specific Contracts

Introductory Remarks 368. The General Civil Code of Austria of 1811 includes in sections 938 et seq. a number of chapters with provisions on certain types of contracts which, at the time of the creation of the codification, were the acknowledged categories in business life. The influence of ancient Roman law is clearly visible. The enumeration of contract types in the General Civil Code begins with the donation contracts (sections 938–956), and continues with bailments (sections 957–969), contracts of lending (sections 971–982), contracts concerning loans (sections 983–1001), agency (sections 1002–1044), barter (sections 1045–1052), sale (sections 1053–1089), tenancy and lease or ‘contracts of tenure’ (sections 1090–1150), service and work contracts (sections 1151–1174), contracts of civil partnership (sections 1175–1216), marriage settlements (sections 1217–1266),637 and gambling and wagering contracts (sections 1267–1292). Since the enactment of the General Civil Code new types of contracts have become popular. These contractual agreements had their legal basis either in the codification, such as the pledge agreement in section 1368 ABGB, or developed without a statutory foundation. Some types, such as leasing or franchising contracts, were introduced from foreign legal systems. Some contracts have been submitted to a more detailed and mandatory statutory regime, such as the contract for a lease.638 A new category of contractual relations aiming at the ‘protection of the weaker party’ emerged from consumerism and received statutory recognition in the Consumer Protection Act of 8 March 1979.639 The following explanations of the individual types of specific contracts existing in Austrian contract law follow the statutory order of enumerated specific contracts in the General Civil Code. Short explanations of those types of contracts which have recently become important in practice have been added.

637. The inclusion of marriage settlements in the enumeration of contracts is obsolete. The modern view is that this category forms part of family law. 638. Cf. Statute on the Law of Lease, BGBl 1981/520. 639. BGBl 1979/140.

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Chapter 1. Donation §1. THE CONCEPT OF DONATION 369. According to the statutory definition of section 938 ABGB, a donation640 is a contract by which a ‘thing’ is given to someone else without remuneration. The provision is inaccurate insofar as it focuses on the gratuitous transfer of property thereby giving the impression that the donation contract is a legal transaction which by itself transfers property rights of the donated thing. Following the conception of the General Civil Code the donation contract is only a so-called causa, viz., an agreement manifesting the economic reason or justification of the transaction of ownership or a ‘title’ for the subsequent transfer of property. It follows from the form requirement of section 943 ABGB that for the acquisition of property by the donee the donated object needs to be transferred. If the act of handing over is not effected immediately upon agreement, the contract of donation, according to section 943 ABGB, is only valid if made in writing. Thus, a clear distinction has to be drawn between donation as ‘titulus’, and handing over as should apply modus’. 370. Donations are contracts in the true sense of the word. This means that the formation of the contract requires that the donee consents. The donation contract is a bilateral legal transaction. Therefore, simple abandonment of ownership (section 362 ABGB) is not regarded as a donation as it is merely unilateral. For the same reason, e.g., the renunciation of an inheritance, the relinquishment of a co-owner’s shares and the remission of a debt are, by themselves, not considered to be donations, as they are valid by unilateral representation. However, such acts may turn into a donation if the beneficiary consents.641 According to section 939 ABGB, the renunciation of an expected, an existing right, or a contingent right which is neither accompanied by a proper transfer of such right to another nor by the release of the person obliged, does not amount to a donation. The traditional concept of donation is based on the so-called contract theory in order to prevent anybody from being forced to accept a gift. Indeed, the same result would have been reached on the basis of a concept of donation by unilateral representation by granting the donee the right of refusal. This solution has been accepted in respect of the contract for the benefit of a third party which may also be a donation. 371. A donation must be gratuitous. The donor gives the thing to the donee without consideration. The donation is the prototype of a legal transaction without remuneration. Whenever the donor receives anything in exchange, the transaction cannot be regarded as a donation. Even little deeds rendered in exchange are considered to

640. In German, Schenkung. 641. That follows, in particular, from §1381 ABGB.

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Part II, Ch. 1, Donation

372–375

be ‘remunerations’.642 Performing an unenforceable obligation, according to section 1432 ABGB, does not amount to a donation, and is, thus, not governed by the formal requirements for donation or by the provisions enabling a donor to revoke the gift. 372. The substantial characteristics of a donation, in particular the fact that the thing is given without the expectation of any remuneration, must be within the intention of the parties of such a contract. The intention to make a gift is essential and the party who wants to base a claim on it has the burden of proof. 373. According to the legal definition, the subject of a donation is a ‘thing’. The German text uses the word ‘Sache’ which is often translated as ‘property’. With respect to the broad definition of ‘thing’ in section 285 ABGB,643 this notion comprises not only physical things, but claims, copy rights, and trademark rights as well. It is controversial whether services can also be the subject of a contract of donation. §2. DOUBTFUL AND MIXED FORMS OF DONATIONS 374. Donations are based on the generosity of the donor. This is not the case with so-called gifts given in discharge of an obligation,644 including the advancement of a child by the parent upon marriage (sections 1220 et seq. ABGB).645 The same is true for ‘donations which are mutually agreed upon in such a manner that the donor must receive a donation in return’. In such a case, according to section 942 ABGB, ‘no true donation arises with regard to the entire donations but only with regard to the excess in value of one donation over the other’. 375. Gifts motivated by moral obligations or considerations of equity are also called ‘gifts given in discharge of an obligation’. This is misleading because it implies that such gifts do not qualify as donations. However, the fulfilment of a moral duty is not equal to the fulfilment of a legal obligation which, indeed, would amount to a remuneration of the ‘donor’. According to section 785(3) ABGB, gifts made in fulfilment of a moral obligation or for the sake of propriety are expressly acknowledged as ‘donations’. Therefore, this kind of gift is to be considered as governed by the regular provisions pertaining to donations. However, moderate gifts

642. Cf. §940 ABGB. ‘The character of a donation does not depend upon whether or not it has been made because of gratitude, or with regard to the merits of the person receiving the gift, or as a special reward; however, the donee must not have had an existing right to demand the gift by way of judicial proceeding’; §941 ABGB. ‘If the donee has an existing legal right to demand the gift by judicial proceeding, based either upon prior agreement between the parties or upon the law, the contract ceases to be a donation and is to be considered as a contract for consideration.’ 643. In the translation by Baeck this provision reads as follows: ‘Everything which differs from the person and serves for the use by man is called property in the legal sense.’ 644. In German, Pflichtschenkung. 645. This field of the law has been modernized by BGBl I 2009/75; effective on 1 Jan. 2010.

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376–378

Part II, Ch. 1, Donation

motivated by morality or equity differ from normal donations in that they cannot be set aside by creditors according to section 29 of the new Insolvency Act.646 376. With regard to ‘mixed donations’ section 935 ABGB states that section 934 ABGB, which allows the remedy of cancellation or adaptation of the contract in the case of a crass disproportion in the values of performance and counter-performance of a synallagmatic contract (laesio enormis), is not applicable to a case ‘where it can be presumed from the relationship between the parties that they intended to conclude a mixed contract consisting of both onerous and gratuitous obligations’. In the context of ‘mixed donations’ the question arises whether the statutory provisions on sales contracts (sections 1052 et seq. ABGB) or those on donations (sections 938 et seq. ABGB) should apply. Pursuant to the dominant ‘unity theory’, a ‘mixed donation’ is deemed to be a specific combination of the elements of a sale and of a donation, to which the provisions dealing with either type of contract shall apply in like manner. As a consequence, there is no standard formula as to which rules should apply – those on sales or those on donations. One must examine each provision in order to know whether it was meant to be applied to a transaction such as the mixed donation at hand. 377. Section 940 ABGB deals with a donation made as a special reward.647 Such a transaction is treated like other donations and does not entail divergent legal consequences. The motive to bestow the reward does not preclude the characteristic feature of gratuity. The performance or merit of the donee is only the motive of the donor. Fringe benefits and the like, which employers grant their employees, are considered to be given in exchange for the employee’s services. An excessive payment is, thus, regarded as remuneration and is not treated as a donation. §3. FORMAL REQUIREMENTS 378. A rule on the statutory form of donations is provided by section 943 ABGB. According to this provision, ‘[n]o right of action accrues to a person accepting a donation made only orally without “actual delivery”’. The General Civil Code requires that a promise to donate a thing must be fixed by a written document. Moreover, section 1(1) NAktsG, which became effective in 1871 and renamed in 2001,648 requires a solemn notarial deed. The purpose of this formal requirement is to protect the donor from rash decisions and exploitation. The fact that the promise of a donation has to be made in writing should warn the person making such a promise of the risks of such a promise, and it also had to serve disclosure principles in that it protects creditors from assertions of fictitious donations.

646. In German, Inzolvenzordnung, ‘IO’. It replaced the former Konkursordnung ‘KO’. Enacted by BGBl I 2010/29; in effect on 1 Jul. 2010. 647. In German, belohnende Schenkung. 648. From Notariatszwangsgesetz to Notariatsaktsgesetz; cf. BGBl I 2001/98.

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379–381

The meaning of ‘actual delivery’ must be determined from the purpose of the provision. According to the Austrian Supreme Court649 it must be a perceptible and obvious act demonstrating the serious intention of the donor to give the donation to someone else. ‘Physical delivery’ is always considered ‘actual’. ‘Delivery by symbol’ (e.g., car keys and documents for the car) also amounts to an ‘actual delivery’. In the case of delivery ‘brevi manu’, the person who is meant to receive the gift is already in possession of it (e.g., on the basis of a loan). It is doubtful whether the formal requirement may be neglected in such circumstance, although this way of handing over is sufficient with respect to the disclosure purpose, but it is insufficient with respect to the function of warning the donor. Nevertheless, this form of delivery is accepted as ‘actual’. Finally, the so-called constitutum possessorium is an assumption of constructive possession by the donee although the gift stays with the donor. This neither complies with disclosure purposes nor with the warning function of the formal requirement. Thus, the promising donor has to resort to the formality. 379. If the required form of a notarial deed is not observed, a claim which is based on a promise to make a gift is not enforceable according to section 943 ABGB, and the contract is invalid. Nevertheless, if the donor performs what he has invalidly promised, the donor has no claim to recover the gift. The donee is not unjustly enriched.650 The formal requirement cannot be contracted out. It is not possible to agree that the donor will not insist on the formal requirements. Finally, it must be mentioned that an unconditional discharge of a debt does not require a notarial act (as the promise of discharge and its accomplishment coincide), while a conditional contract of discharge does.651 §4. DUTIES OF THE DONOR AND REMEDIES OF THE DONEE 380. The donor is bound to transfer ownership of the object he has validly promised to donate, and this ownership has, according to section 945 ABGB, to be free from rights of third persons. However, since a donation is a gratuitous act, the donor’s liability for irregularities in the performance of a donation is limited. 381. In case of delay, non-performance, or defectiveness of the gift, the donee has no claims based on ABGB sections 918 (delay), 920 (non-performance), or sections 922 et seq. (warranty) as these provisions apply only to transactions for a consideration. The rule is: ‘Never look a gift-horse in the mouth’. Section 945 ABGB establishes that only a person who knowingly gives away as a gift the property of another, and conceals this fact from the donee, may be held liable for any damages caused thereby.652 The donee is not entitled to damages for non-performance.

649. OGH 13 Dec. 1950, SZ 23/383; OGH 19 Oct. 1966, JBl 1967, 623; OGH 8 Apr. 1981, SZ 54/51; most recently: OGH 6 Apr. 2005, JBl 2005, 648. 650. Cf. §1432 ABGB. 651. Cf. §1444 ABGB. 652. See also §367 ABGB.

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382–384

Part II, Ch. 1, Donation

§5. DONOR’S RIGHT OF REVOCATION 382. According to the general rule of section 946 ABGB, donations cannot be revoked. There are, however, a number of exceptional situations in which the General Civil Code allows revocation. Thus, according to sections 947 et seq. ABGB, subsequent indigence of the donor, ingratitude of the donee, infringement of a maintenance obligation, curtailment of the compulsory portion, and the afterbirth of children of the donor may, in theory, affect a completed donation. 383. In practice, the only form of statutory revocation which is of practical importance is that provided for a case of grave ingratitude of the donee towards his donor. According to section 948 ABGB, ‘grave ingratitude’ amounts to an ‘injury to the body or violation of honor, liberty, or property, which is of such a nature that the perpetrator can be prosecuted ex officio or at the request of the person injured in accordance with the criminal law’. The ungrateful donee is treated as a mala fide possessor, and the heirs of the injured person also have the right to revoke the donation. Such action for revocation may even be instituted against the ungrateful donee’s heirs. The right to revocation is terminated if the donor pardons the ingratitude, or if nothing of the substance of the gift still exists. §6. DONATION CAUSA MORTIS 384. According to section 956 ABGB, ‘[a] donation which is to take place only after the death of the donor is valid as a legacy if its statutory formalities are complied with’.653 A donation causa mortis may, nevertheless, be considered as a contract, if the parties comply with a number of conditions. Thus, the donee must have accepted the donation, the donor must have expressly waived the right to revoke it, and a document in writing in regard to it must have been handed over to the donee.

653. As to the formal requirements, cf. §647 and §§577 et seq. ABGB.

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385–387

Chapter 2. Bailment §1. THE CONCEPT OF BAILMENT 385. According to the statutory definition provided by section 957 ABGB, a contract of bailment arises whenever a person takes into his custody property belonging to another. Under Austrian law, a bailment is a ‘real contract’, as it requires transfer of the object from the custody of the bailor to that of the bailee.654 This solution complies with the model of Roman Law which made the conclusion of a contract of bailment dependent on the actual deposit. Therefore, a contract of bailment without the depositing of the object to be taken into the bailee’s custody is only a binding agreement to conclude a custody contract and, as such, is subject to the provision of section 936 ABGB on ‘the agreement to agree’.655 As a consequence, the preliminary agreement to conclude a bailment is no longer binding if a fundamental change of circumstances underlying the consent of the parties occurs, e.g., if one partner loses confidence in the other.656 This is important because an agreement of bailment is based on the mutual trust of the contracting parties. However, the mere deposit of an object with somebody else does not amount to a contract of bailment without the appropriate mutual agreement. Quite often, however, the handing over of a property will be the expression of the parties’ intention to conclude a bailment. In this case this factual act will per se constitute the formation of an implied contract according to section 863 ABGB.657 386. In general, a contract of bailment between private persons is gratuitous.658 This follows from section 969 ABGB which mandates that a remuneration may only be claimed by the bailee where it is so provided expressly or implicitly according to the social status of the bailee. 387. According to section 960 ABGB, movables as well as immovables may be the object of a bailment. Intangibles such as subjective rights may not be placed in custody, whereas documents evidencing such rights may. The bailee does not

654. Cf. the second sentence of §957 ABGB: ‘An accepted promise to take into custody the property of another which has not yet been delivered, binds the promisor but does not constitute a contract of bailment.’ 655. In German, Vorvertrag. 656. Doctrine of clausula rebus sic stantibus. 657. Thus, an innkeeper who places a cloak room at the disposal of his guests will be regarded as making an implied offer to conclude a bailment contract which may be accepted by hanging up one’s coat in there; cf. OGH 26 Oct. 1964, SZ 37/151; OGH 26 Nov. 1968, EvBl 1969/197. However, special attention has to be paid with regard to the assumption of implied bailment contracts concluded by innkeepers because of the strict limits of §§970 et seq. ABGB. It is not permitted to extend the severe liability standards of §§970 et seq. ABGB which only apply to hotels and inns offering accommodation, to restaurants by way of construing implied bailment contracts. 658. Whereas businessmen, may claim a reasonable remuneration when taking a property into custody (cf. § 354 UGB).

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388–391

Part II, Ch. 2, Bailment

acquire any right of ownership, possession or use of the entrusted property. According to section 958 ABGB, he is a mere ‘holder’659 of that property. In this position the bailee has the duty to protect the thing in his custody from any damage. Since the bailee is neither possessor of a right to the object, nor of the object itself, he may not raise a possessory action in his own name against a trespasser. The bailee may, however, sue in the bailor’s name as the bailor’s agent if he can prove to be authorized to do so. 388. The bailment is terminated either by the expiration of the period of time which the parties have expressly fixed, or, if no period of time has been fixed, at the time indicated by the circumstances, or by revocation. The place at which the deposited property has to be returned by the bailee is, in case of doubt, the place of deposit. §2. OBLIGATIONS OF THE BAILEE 389. According to sections 961 et seq. ABGB, the principal obligations of the bailee are the duty to ‘carefully preserve the entrusted property during the period of bailment’, and the duty to return that property to the bailor in the same state in which it was received after the expiration of the period together with the accrual. The bailee has to comply with the instructions the bailor has given at the time of deposit. He has to exercise due care in the custody of the property and is liable to the bailor for damage caused by any breach of that duty of care. 390. If the bailor so requests, the bailee must return the property even before the expiration of the period.660 However, the bailee has no right to return the property entrusted to him before the expiration of the agreed period of custody. Only if an unforeseen circumstance has prevented him from keeping the property safe or the property caused detriment to himself he may return the property at an earlier time than originally agreed. If, however, the time of the bailment has not been determined by express agreement, or cannot otherwise be implied from the accompanying circumstances, revocation may be made at will.661 §3. OBLIGATIONS OF THE BAILOR 391. If the bailor is at fault, he has to reimburse the bailee for any damage. The bailor has to refund all expenses of the bailee for the preservation of the property and for the efforts to increase profits. If the bailee, in order to save the deposited

659. Cf. the first sentence of §309 ABGB: ‘Whoever has property in his power or custody is called the holder of it.’ 660. According to §962 ABGB, the bailee can only demand compensation for any damage which may have been caused to him by such request. 661. Cf. §963 ABGB.

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Part II, Ch. 2, Bailment

392–393

property, has sacrificed his own property in a case of emergency, he is entitled to a suitable compensation.662 §4. LIABILITY OF THE BAILEE 392. The general rule provided by the first sentence of section 964 ABGB is that ‘[t]he bailee is liable to the bailor for the damage caused by any omission in his duty of care but not that caused by an accident’. The degree of care which the bailee owes to the bailor in regard to the property entrusted to him is independent of whether the bailment has been made for a consideration.663 The bailee is responsible for careless behaviour of his servants according to section 1313a ABGB. However, according to section 965 ABGB, no responsibility can be imposed on the bailee if the damage of the entrusted property is purely accidental, irrespective of whether the property could have been saved by the sacrifice of his own property. This provision reads as follows: However, if the bailee has made use of the property deposited with him, or has unnecessarily and without the permission of the bailor placed it in the custody of a third person, or has delayed returning it, and the property suffers injury to which it would not have been exposed in the custody of the bailor, the bailee cannot defend himself by alleging an accident and such damage is to be imputed to him.

§5. RIGHTS OF THE BAILEE 393. In general, the bailee has four rights: First, he may claim remuneration, if such remuneration has been agreed or if the bailee is a businessman (section 969 ABGB); second, the bailee may claim reimbursement of the expenses incurred to preserve the entrusted property and to secure the increase of continuing profits therefrom (section 967 ABGB); third, the bailee who has voluntarily sacrificed his own property to salvage the entrusted object is entitled to a suitable compensation (section 967 ABGB); fourth, the bailee may claim damage pursuant to the general rules of civil liability (sections 1293 et seq. ABGB).

662. According to the last sentence of §967 ABGB, ‘any action concerning the mutual demands of the bailee and bailor in regard to movable property must be instituted within thirty days from the time of the return of the property’. 663. In contrast to §690 BGB which mitigates the bailee’s degree of care to ‘diligentia quam in suis’ if the bailment is without remuneration.

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394–398

Part II, Ch. 2, Bailment

§6. DISTINCTION OF RELATED TYPES OF CONTRACT 394. A bailee is not entitled to make use of the entrusted property. If, nevertheless, ‘the use of the property is allowed to the bailee at his request, or by the voluntary offer of the bailor, the contract ceases to be a contract of bailment’.664 By way of a novation ‘such contract becomes a loan with regard to consumable property and a contract of lending with regard to durable property, and the rights and obligations arising from these sorts of contracts become effective’. §7. MIXED AND SPECIAL FORMS OF BAILMENT 395. According to the second sentence of section 960 ABGB, the bailee is considered to be an agent as well, if he is commissioned not only with the custody but with another transaction concerning the entrusted property. In practice a bailment is also often combined with a contract for service and work, and it may be combined with a contract of tenancy and lease, e.g., in the case of a garaging contract. 396. Detailed rules on the safekeeping of money and securities are provided by a special statute, the Securities Deposit Act of 22 October 1969,665 which distinguishes four different types of bailment of money and securities. 397. Sequestration is a specific form of bailment designed for controversial claims raised by two or more parties in respect of the same thing. According to section 968 ABGB, such a thing at issue may be entrusted to the custody of a third party by the litigating parties or by the court. This special bailee whose rights and obligations are to be determined in accordance with the provisions laid down in the chapter dealing with the bailment contract, is named ‘sequestrator’. Cases for a sequestration under the General Civil Code are governed by sections 347 and 348 concerning doubts in respect of the rights to possession of competing parties, and section 390 providing for the deposit of a lost and found property. §8. PROFESSIONAL LODGING OF GUESTS 398. The provisions of section 970 to 970c ABGB deal with the liability of innkeepers and hotel owners and similar businessmen666 for damage to, or loss of property brought in by their guests. The liability is strict but limited by a maximum amount of EUR 1,100. It is not the result of a breach of a contractual duty, but represents a form of non-contractual (or delictual) liability which is independent of whether a contract of bailment has been concluded between the damaged guest and the innkeeper or hotel owner.

664. Cf. §959 ABGB. 665. Depotgesetz, BGBl 1969/424 (as most recently amended by BGBl I 53/2011). 666. Viz., entrepreneurs keeping stables, garages and storage rooms, and operators of bathing establishments.

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399–402

Chapter 3. Contract of Lending 399. According to section 971 ABGB, a contract of lending is the delivery of a durable thing for gratuitous use during a definite period of time. Physical delivery of the good is necessary for the creation of this contract type as the contract for lending is a so-called real contract. Therefore, an agreement on the lending of a thing without its immediate delivery is merely a binding agreement to conclude a contract of lending according to section 936 ABGB, not yet the contract of lending itself.667 §1. CHARACTERISTIC ELEMENTS 400. According to section 971 ABGB, a contract of lending relates to ‘durable’ or ‘consumable goods’. It would have been more accurate to refer to a ‘thing which is not fungible’ since lending intends the gratuitous delivery for the use of property which is determined by individual characteristics rather than by measurement, number, or weight. The differentiation between consumable and non-consumable in respect of an object of a lending contract is crucial since the delivery will qualify as a loan which grants the borrower a considerably different legal position in rem. Rights may also be the object of a contract of lending, e.g., the right to services as in employment contracts on the basis of lending.668 The lending of employees of another is possible under Austrian law. 401. The contract of lending aims at the delivery of a property for ‘gratuitous’ use by another. Therefore, the delivery for use may not be made in discharge of an obligation or in return for another performance received. The delivery of a thing for use in exchange for money represents a rental agreement in spite of a contrary designation. 402. The contract of lending must be concluded for a ‘definite period of time’.669 In contrast thereto, the law requires that loans, rental agreements, and employment contracts are concluded for a ‘certain period of time’.670 As a consequence, contracts providing an indefinite period of use are not considered lending contracts. The lending period does not have to be determined in an express manner. It may also follow from the intended use.671 Thus, e.g., the period of time for which a suitcase is borrowed is determined by the duration of the travel. It is the accepted view that lending for as long as the borrower lives complies with the requirement of a definite period, whereas lending for as long as the lender lives is judged indefinite. Because the parties may not agree to enter in a contract of lending for an 667. 668. 669. 670. 671.

Cf. second sentence of §971 ABGB. In German, Leiharbeitsverhätnisse. In German, auf bestimmte Zeit. Cf. §§983, 1090, 1151 ABGB; in German, auf gewisse Zeit. Cf. §973 ABGB. ‘If no time has been fixed for the return of the property but the intended use has been determined, the borrower shall not defer the use and shall return the property as soon as possible.’

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403–405

Part II, Ch. 3, Contract of Lending

indefinite period, a lending contract is generally not terminable by simple notice unless the contract particularly grants the lender a premature claim for return of the borrowed property.672 403. The property must be ‘delivered’673 for use by the recipient. ‘Delivery’ means an actual handing over which does not have to comply with the requirements for a transfer of property according to section 426 ABGB. By a ‘delivery’ under section 971 ABGB the borrower shall be put into the position to use the property. §2. RIGHTS OF THE BORROWER 404. According to section 972 ABGB, the right to use the borrowed property comprehends the ordinary and the stipulated use. In certain circumstances the right to use may amount to an obligation, e.g., the borrower of a riding-horse is bound to ride the borrowed horse to keep it in practice. §3. OBLIGATIONS OF THE BORROWER 405. The borrower must use the property carefully and keep it in safe custody.674 He is responsible for the usual maintenance at his own expense.675 Furthermore, the borrower in a lending contract is obliged to return the same object, whereas a loan contract requires property of the same kind and quality to be given back. The time for return is either determined by a provision of the contract of lending or indirectly by the intended use. In the latter case, according to section 974 ABGB, the borrower must not defer the use and must return the object as soon as possible. There is, however, no obligation of early return even if the lender should need the thing himself/herself, but the borrower has the right to return it early if this causes no inconvenience to the lender.676 The person entitled to claim the return of the lended property is always the lender, irrespective of whether he is its owner or not.

672. Cf. §976 ABGB. ‘In the absence of express agreement, a lender has no right to demand the return of the property before the expiration of the term or before the use has ceased, even if the property lent has become indispensable to the lender himself.’ 673. In German, übergeben. 674. Cf. §978 ABGB. ‘If the borrower has used the borrowed property other than in the manner agreed upon, or has arbitrarily permitted a third person to make use thereof, he (she) is liable to the lender for any damage incurred thereby, and the lender may demand the immediate return of the property.’ 675. Cf. §981 ABGB. ‘The borrower must defray the expenses commonly connected with the use. He (she) must also bear any extraordinary expenses for maintenance for any period during which he (she) can or will not return the property to the lender; however, he (she) shall be reimbursed for such expenses in the same manner as a bona fide possessor.’ 676. Cf. §977 ABGB. ‘The borrower is, in general, authorized to return the property borrowed even before the end of the term fixed; however, if such an early return would cause inconvenience to the lender he (she) may prevent it.’

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406–409

§4. OBLIGATIONS OF THE LENDER 406. The lender has no duty to grant warranty since the use of the borrowed property is gratuitous, but he may become liable for damages.677 §5. RIGHTS IN REM OF THE BORROWER 407. The borrower is not possessor but merely holder of the borrowed property since he does not have the intention to keep it as his own.678 As the borrower is entitled to its use, he is a ‘possessor of a right’.679 Thus, the borrower is granted the legal protection emerging from possession680 against third persons as well as against the lender himself. Nevertheless, the borrower has no right to retain the borrowed property, nor to compensate with it according to section 1440 ABGB. §6. LIABILITY OF THE BORROWER 408. The liability of the borrower is a responsibility based on fault including liability for accidental damage consequent to faulty conduct within the meaning of section 1311 ABGB.681 Section 980 ABGB provides for the case that the borrower loses the borrowed property, therefore pays to the lender an amount equal to the value of the property, but subsequently finds the lost object. In this situation, the lender has the right to retrieve his property by returning the amount received.682 §7. SHORT LIMITATION PERIOD 409. According to section 982 ABGB, all claims resulting from a lending relationship, as e.g., the lender’s claim for damage due to abusive use by the borrower, must be put forward within thirty days from the time of return of the borrowed property.

677. Whether the limitations to liability provided for donations by §945 ABGB apply to contracts of lending by way of analogy is doubtful. 678. Cf. §309 ABGB. 679. In German, Rechtsbesitzer. 680. As opposed to the bailee. 681. Cf. §979 ABGB, which corresponds with the respective provision of §965 ABGB for the contract of bailment. 682. Under Austrian law, the borrower does not – as he did according to ancient Roman law – automatically acquire ownership.



410–410

Part II, Ch. 3, Contract of Lending

§8. PERMISSION FOR USE UPON PETITION683 410. If the period of time of a lending contract and the intended use have not been determined, no true contract has come into being according to section 974 ABGB. Nevertheless, according to the prevailing opinion, the permission for use upon petition is a contractual relation which enables the ‘lender’ to revoke the permission at any time. This characteristic feature places the permission for use close to a bailment contract. Gratuity is a common element of lending contracts and permissions for use, but the courts do not apply strict standards in the examination of whether a permission for use is actually gratuitous or not. The user’s possession of the property is protected against interference by third persons but not against that of the ‘lender’.

683. In German, Bittleihe or Prekarium.

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411–416

Chapter 4. Loan Contract 411. According to section 983 ABGB, the loan contract concerns the delivery of fungible goods to a person on condition that he can dispose of it at his will for some time, and the return of corresponding goods. The borrower acquires ownership of the object of the loan. It is clearly stated in section 983 ABGB that under a loan contract, the person to whom the fungible goods are delivered for use must return, after a certain period, a like kind and amount of goods. 412. The relevant chapter of the General Civil Code has recently been amended684 and one of the results is that the validity of a loan contract is no longer contingent on the actual delivery of the money or other fungible goods forming the subject matter of the loan contract.685 Now sections 983 et seq. make a difference between a gratuituous contract of loan (Darlehen) and a loan for interest (Kreditvertrag). 413. According to section 984(2) ABGB, the conclusion of a (gratuituous) loan contract without handing over the good has legal effect only if a written declaration of the lender to this end is issued. This rule has replaced the rule of former section 1001 that the transfer had to be evidenced by a certificate of indebtedness or ‘debenture’. §1. CHARACTERISTIC ELEMENTS 414. Object of a loan contract must be, in contrast to a contract of lending which requires that the contract is concluded in respect of a ‘durable property’, a ‘fungible property’.686 However, only money loans are of practical significance and money is fungible and consumable, not ‘durable’. 415. The former detailed rules on the way the property, especially money, has to be delivered to someone else’s disposition at will, are repealed since the transfer of property is no longer of essence for the conclusion of the contract. But nothing has changed in substance. Any indirect or direct way of procuring the borrower with the money amounts to ‘delivery’, be it cash, by payment order or by handing over a bill of exchange. Where loans are not concluded for money but for other consumable property, repayment has been specified in the same sort, quality, and quantity. 416. The borrower is bound to return an equal amount of property of the same kind and quality. According to the new section 985, changes in the value of the property, whether to the advantage or disadvantage of the borrower need not be balanced. 684. Cf. Darlehens- und Kreditrechts-Änderungsgesetz, ‘DaKRÄG’, BGBl I 2010/28, Art. 1. The new law entered into effect on 11 Jun. 2010. 685. Thus, the loan is no longer a ‘Realvertrag’. 686. Cf. § 984 (1) ABGB.

1

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Part II, Ch. 4, Loan Contract

417. According to section 986 ABGB the parties may fix a date for return or a period of time for the loan, or they may agree on a loan for an indefinite period. A contract of loan for an indefinite time may be called in upon a notice of a month. The new section 987 ABGB provides that each party to a loan contract may cancel the contract for serious reasons without notice. 418. The statutory definition of a loan contract provided by the General Civil Code does not refer to the question which purpose the transaction is serving. Nevertheless, it is generally acknowledged that loan contracts are concluded in order to grant a person a credit. Therefore, the credit function is a characteristic of loan, it need not be subject to interest, however. 419. Loan contracts need not comply with statutory formal requirements. The general rule of informality as stated in section 883 ABGB applies, except when a loan is made between husband and wife. In this case, the validity of the agreement depends on the establishment of a notarial deed according to section 1(1) NAktsG. §2. TYPES OF LOAN: GRATUITOUS AND FOR INTEREST 420. According to section 984(1) ABGB ‘[a] loan may be granted either in money or in other fungible property and either gratuituously or for money’. The Austrian General Civil Code calls the latter form now a ‘credit contract’.687 There is no statutory limitation to the permitted rate of interest and it is up to the parties to agree on the interest rate. If the parties fail to fix the rate themselves, section 1000(1) ABGB provides subsidiarily a statutory rate of 4%. Charging an excessive rate may amount to usury according to section 879(2) N.4 ABGB.688 §3. RELATED TYPES OF CONTACTS 421. The rules for credit contracts between consumers and businessmen which used to be included in the Consumer Protection Act are now provided in a separate statute on consumer credit689 which entered into effect on 11 June 2010. By this act the Directive 2008/48/EC of the European Parliament and of the Council of 23 April 2008 on credit agreements for consumers690 was implemented into Austrian law. 422. Advance moneys are usually no loans but early payments of future obligations or of obligations not yet due. Advances as provided by sections 397, 410 and 440 UGB appear to have a similar function as a loan: These provisions refer to the commercial practice of commission agents, forwarding agents and carriers who pay 687. In German, Kreditvertrag. 688. As mentioned earlier, this provision ‘on usury under private law’ requires an objective disproportion in the values of the mutual performances of the two parties and subjective severity, viz., the exploitation of one party (in a state of emergency) by the other. 689. Verbraucherkreditgesetz, ‘VKrG’, BGBl I 2010/28, Art. 2. 690. O.J.EU L 133, 22 May 2008, 66.

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Part II, Ch. 4, Loan Contract

423–424

advance money to their customers, arrange to receive payment for the goods from the buyer or consignee, and set this amount off against the advance. 423. Another specific type is the loan with profit participation.691 Such participation may be agreed by the parties in addition to or instead of interest. 424. The instalment sale transaction is not a form of a loan contract, but a specific type of a sales contract. Detailed rules on this type of sale between an entrepreneur and a consumer are now provided by sections 13 et seq. of the Consumer Credit Act. As a rule, an instalment sale is combined with a loan since a bank financing the transaction is involved. Under the heading of ‘combined consumer contracts’692 the Consumer Credit Act provides detailed rules on such ‘contracts of sale financed by a third party’.693

691. In German, and according to Austrian legal terminology, this type of loan is named ‘partiarisches Darlehen’. 692. In German, Verbundene Kreditverträge. 693. Austrian legal terminology uses the German expression ‘drittfinanzierter Kauf’ for this widely used type of transactions.

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425–429

Chapter 5. Agency 425. The General Civil Code uses the term ‘agency’694 instead of ‘mandate’695 to characterize a contract ‘in which a party undertakes to manage in the name of another a business entrusted to him’.696 However, the notion of agency embraces two separate legal acts which the Code did not distinguish due to its early creation. Its draftmen had not enough perspicacity to recognize the fundamental difference in the legal functions of an agreement on a mandate and the conferring of authority. Today, it is the generally accepted position that three concepts are to be carefully distinguished, viz., mandate, authority697 and authorization.698 §1. MANDATE, AUTHORITY AND AUTHORIZATION 426. The ‘mandate’ relates only to the internal relationship between principal and agent, and it establishes an obligation of the mandatary to act for the principal. Consent of the mandatary is required. The mandate is, thus, a contract establishing a legal duty. 427. The ‘authority’ (or ‘power of attorney’) only pertains to the ‘external relationship’ of the agent toward third parties. It is the legal power of the agent to act in the name of the principal and to bind the principal directly by a legal transaction.699 The authority merely provides a person with power to act on behalf of another. It does not oblige the agent to take action. Authority may, therefore, be conferred by unilateral declaration and without approval of the authorized person. 428. There is no provision on ‘authorization’ in the General Civil Code. The authorization concerns the so-called internal relationship between principal and agent. In a way it is an intermediate between mandate and authority. Through it, the internally authorized person is empowered but not obliged to act on the account of the principal (but not necessarily in the principal’s name). 429. The General Civil Code mingles mandate and authority, combining them into the contract of agency. It speaks of a ‘mandate’ to manage a business ‘in the

694. 695. 696. 697. 698. 699.

18

In German, Bevollmächtigungsvertrag. In German, Auftrag. Cf. §1002 ABGB. In German, Vollmacht. In German, Ermächtigung. Cf. §1017 ABGB, stating that the agent can, according to the contents of the power of attorney, acquire rights for and impose obligations upon the principal within the scope of the given authority. Therefore, if the agent has ‘concluded a contract with a third person within the limits of the disclosed power of attorney, the rights and obligations established thereby belong to the principal and the third person, but not to the agent. A secret power of attorney given to the agent has no influence on the rights of the third person’. §1018 ABGB adds that ‘[b]usiness concluded within the limits of a power of attorney is binding both the principal and a third person, even when the principal has appointed an agent who is incapable of contracting obligations for himself’.

Part II, Ch. 5, Agency

430–431

name of another’, i.e., with authority.700 Nevertheless, the differentiation of mandate, authority and (internal) authorization is crucial because, in practice, the mandatary does not always dispose of an authority. Each of the above may be given in combination or without the other, and their expiries (or withdrawals) are independent. 430. The following combinations are possible: (a) mandate with authority: the agent is obliged to act for the principal and may, in the external relationship, act on the principal’s behalf; (b) mandate without authority: the mandatary must act for the principal, but in his/ her own name only; (c) authority without mandate: the agent may act on behalf of the principal but is not obliged to act; (d) (internal) authorization with authority: the agent is free to act for the principal, if he acts, that it is within his discretion whether he acts in the name of the principal; (e) (internal) authorization without authority: the authorized person may act for the principal, but only in his own name; (f) authority without internal authorization: the agent can act on behalf of the principal, but the transaction will be for the agent’s account unless the principal subsequently gives his approval; (g) (internal) authorization without mandate: compare e.g., delegation according to section 1400 ABGB: ‘the delegated person becomes entitled to receive the performancefrom the third party, and the third party becomes entitled to effect performance to the delegated party, for the account of the delegator’. From this plethora of combinations, it becomes clear that, when speaking of agency, attention must be paid as to whether the internal or the external relationship is at issue. §2. THE MEANING OF MANDATE 431. A mandate concerns the management of legal transactions and legal acts by another. Solely factual acts cannot become the object of a mandate. A mandate, thus, establishes an obligation to conduct a business for the account of another. A mandate can be concluded either with or without a consideration. In case of doubt, agency is gratuitous under Austrian law.701 Consideration may be expressly agreed by the parties. It may, however, also implicitly follow from the professional status of the mandatary. Under Austrian law, the services of certain professional 700. Cf. §1003 ABGB referring to ‘[p]ersons who are legally authorized to manage certain kinds of business (such as attorneys-at-law, notaries, etc.) … ’. 701. Cf. §1004 ABGB. ‘If a consideration is provided for the management of the business of another, either expressly or implicitly according to the profession of the agent, the contract is an onerous contract; in other cases the contract is gratuituous.’

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432–434

Part II, Ch. 5, Agency

groups of agents, such as attorneys-at-law, notaries, tax advisers, etc., are offered at a definite rate fixed by tariffs of fees. §3. CONCLUSION OF AN AGENCY CONTACT 432. It is a feature of freedom of contract that, as a rule, everybody is free to enter into a contract or not. Section 1003 ABGB, however, imposes on certain ‘[p]ersons who are legally authorized to manage certain kinds of business’ the special duty to react upon receipt of a mandate concerning such business by expressly and without delay declaring whether or not the mandate is accepted.702 Such obligation of immediate response is imposed on, among others, legally appointed engineers, attorneys-at-law, and notaries. In addition to section 1003 ABGB, section 10 of the Statute on Attorneys-at-law703 provides a consonant rule requiring that attorneys reject a mandate offered to them without delay if they do not wish to accept it. Under Austrian law, the mandate is a contract arising upon the agreement of the parties. If, in addition, a power of attorney is conferred, this can be accomplished simply by a unilateral declaration (of intention) which becomes valid upon receipt by the other party. The granting of a power of attorney is, therefore, not a contract (which would require mutual declarations of intention and the meeting of minds). §4. CASES OF IMPLIED POWER OF ATTORNEY704 433. Implied (tacit) conferment of authority (which includes the power of attorney) is possible. A person who causes another to think that he has transferred authority may be treated as a principal even if it was not his intent to confer such authority. The alleged principal who has caused this impression by disregarding ordinary care becomes liable as true principal if the third party had reason to rely on the impression that authority has been conferred. 434. Sections 1027 et seq. ABGB provide rules for specific cases of implied conferment of authority. Whereas section 863 ABGB contains strict requirements for the tacit expression of intention to enter into contractual agreements by conclusive acts,705 section 1027 is limited to conduct of the supposed principal which merely allows the conclusion that he has, at one time or another, conferred authority of a certain extent, even if no such declaration of intent is apparent. Section 1027 ABGB enlists a number of professions to which such implied power of attorney applies,

702. According to the second sentence of §1003, they become otherwise liable to the person giving the mandate for any damage caused thereby. 703. Rechtsanwaltsordnung, ‘RAO’, RGBl. 1868/96 as amended by BGBl I 2007/111. 704. The German expression is ‘stillschweigende Vollmacht’. ‘Stillschweigend’ is more correctly translated by ‘tacit’. 705. Such acts must ‘in regard to their circumstances reveal an intention beyond substantial doubt’.

18

Part II, Ch. 5, Agency

435–437

viz., ‘proprietors of a trade, a ship, a shop or other business, who entrust the administration to a manager, a navigator, a shop assistant or other agents’.706 435. Implied powers of attorney to administer a business707 have great practical importance. According to section 1029 ABGB, ‘[a]ny person who has entrusted another with the administration of his business is presumed to have given him the power to do everything which such administration requires and which is generally connected therewith’.708 Based on this provision, a property manager is, e.g., considered to be entitled to conclude rental agreements, to give notice to terminate tenancy, and to effectuate fire insurance.709 But, his authority is not deemed to include the right to revoke the right to terminate without the owner’s approval. A special form of implied authority to administer the business of another is the authority of the spouse to transact business for the family. Since the enactment of the Statute on the Legal Effects of Marriage in 1975,710 this subject matter has been regulated by section 96 ABGB. A spouse who is in charge of the common household and who has no independent revenue represents the other spouse in everyday legal transactions which are concluded for the household and in concordance with the couple’s standard of life. 436. Sections 1030 et seq. ABGB deal with the so-called shop authority.711 According to this provision, it is presumed that servants selling goods in a shop or outside with the approval of the owner of the shop, are authorized to receive payment and to give receipts. The authority to sell goods in the name of the owner does not, however, include the right to buy goods in his name.712 Sections 1030 et seq. ABGB have been largely substituted by more specific provisions in the Enterprise Code. Thus, for example section 56 UGB provides that an employee in a shop or public warehouse is regarded as authorized to conduct sales and to take delivery in respect of transactions which usually occur in such a business, and insofar as section 1031 ABGB concerns the implied authority of a carrier, it became invalidated by sections 425 et seq. UGB dealing extensively with rights and duties of carriers. 437. The Enterprise Code also contains rules on the so-called formal commercial powers of attorney, the extent of which is determined by law. The relevant provisions are sections 48 et seq. on full and limited commercial powers of attorney 706. According to §1028 ABGB, the rights of such managers ought ‘to be determined in particular from the document of their appointment, for example, among merchants, from the properly published authorization to use the signature of the firm’. However, if no power of attorney has been given in writing, ‘its extent is to be determined according to the object and nature of the business’ (cf. §1029 ABGB). 707. In German, Verwaltungsvollmacht. 708. In this context the provision refers to §1009 ABGB. 709. Cf. OGH 30 Nov. 1960, MietSlg 7802; OGH 20 Sep. 1961, MietSlg 8583; OGH 12 Dec. 1956, JBl 1957, 477. 710. Bundesgesetz über die Neuordnung der persönlichen Rechtswirkungen der Ehe, ‘EheRwG’, BGBl 1975/412. 711. In German, Ladenvollmacht. 712. Cf. the first sentence of §1031 ABGB.

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438–441

Part II, Ch. 5, Agency

(‘Prokura’ and ‘Handlungsvollmacht’). These concepts and their extent are clearly determined by law. In the same way, the powers of attorney of partners, shareholders of private companies, and boards of directors of private companies are determined in the respective statutes on commercial companies. Section 1030 et seq. ABGB have thus lost their original sphere of application. 438. Authority by estoppel713 is not a case of an implied conferment as in section 1027 et seq. ABGB. Such authority by estoppel requires a conduct on the part of the principal which, pursuant to the rules laid down in section 863 ABGB, implies the intent to give authority. §5. CATEGORIES OF POWERS OF ATTORNEY 439. General and special authorities. According to section 1006 ABGB, ‘[p]owers of attorney may be general or special according to whether the agent is entrusted with the general management of all of a business or only of some definite part thereof’. 440. Unlimited or limited authority. According to section 1007 ABGB, ‘[p]owers of attorney may be conferred with either unlimited or limited power to act’. The person to whom authority without limitation is conferred is free to manage the principal’s business, but must do this to the best of his knowledge and conscience. In contrast, the extent and manner of management of business are defined by the principal who wishes to confer only limited authority. For a number of transactions a special power of attorney containing the description of the nature of the business is required by section 1008 ABGB.714 §6. FORMAL REQUIREMENTS 441. In principle, there are no formal requirements to be met. Section 1005 ABGB allows powers of attorney to be conferred orally or in writing. There are, however, quite a few exceptions from the rules, in particular in company law.715 In

713. In German, Duldungsvollmacht. 714. The enumeration in §1008 ABGB of ‘acts for which a special authority is necessary’ refers to the following cases: ‘[w]hen property is to be alienated in the name of another or received for consideration; when debts are to be contracted or loans granted; when money or money’s worth is to be collected; when lawsuits are to be instituted; and when settlements are to be made. However, special power of attorney referring to the specific transaction is required when an inheritance is unconditionally accepted or refused; when acts of a partnership are contracted; when donations are made; when a right to choose an arbitrator is renounced; and when rights are renounced gratuitously’. 715. Cf. §4(3) of the Law on Limited Companies (GmbHG) on the conclusion of a shareholders’ agreement by an agent requiring a written and notarially attested document on the specific power of attorney. Cf. the corresponding provision of §16(1) Stock Company Act (AktG). The same also goes for votes by proxy according to §39(3) GmbHG and §114(3) AktG.

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Part II, Ch. 5, Agency

442–445

addition, section 30 of the Code on Civil Procedure demands a written power of attorney for the representation of a party before a court. §7. RIGHTS AND DUTIES OF THE AGENT 442. Section 1009 ABGB provides that the agent has the power to use all reasonable means in connection with the nature of the business and in accordance with the declared intention of the principal, irrespective of whether the agent has full or only limited power of attorney. 443. According to the same provision, ‘[t]he agent is bound to carry out the business zealously and honestly, according to his promise and to the power of attorney received, and to give up all the profit arising from the business to the principal’. Agents have to act with all possible care, and must not accept money for bribes. Moreover, ‘[t]hey are not permitted to accept donations in regard to the conduct of their business from third persons without the consent of the principal.’716 Finally, agents must not enter into transactions with themselves. 444. If agents exceed the limits of their authority or unnecessarily delegate the business to a third person, also known as a subagent, they will be liable for any consequences. The appointment of a subagent may be expressly permitted in the power of attorney, however, or it may be unavoidable in view of the circumstances. In this case, ‘the agent is liable only for negligence in the selection of the subagent’. The agent who negligently or wilfully causes damage to the principal has to provide indemnification. In addition, an accounting of the agent’s conduct of the business has to be presented as often as the principal so requires.717 §8. RIGHTS AND DUTIES OF THE PRINCIPAL 445. According to section 1014 ABGB, the principal has the duty to reimburse the necessary or useful expenses incurred by the agent in conducting the business. This duty to compensate the agent’s expenditures is independent of whether a positive result has been obtained.718 In addition, the principal is liable for all damages arising from his fault or connected with the execution of his order as well as for the accidental damages which an agent suffers in conducting a business the management of which he undertook gratuitously.719 Finally, the principal has to pay the fee fixed by express or implied agreement. However, if the business the agent was 716. Cf. §1013 ABGB. According to this provision, ‘[a]ny such donations shall be confiscated and turned over to the public welfare association’. 717. Cf. §1012 ABGB. 718. If the agent so requests, the principal has to make a suitable advance payment in order to defray the agent’s disbursements. 719. Under this specific form of strict liability, the agent may demand in regard thereto such an amount as would have been due to him/her in the case of an onerous contract, based upon the highest estimate thereof; cf. §1015 ABGB. This liability pertains to typical damages ex causa mandati only.

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446–448

Part II, Ch. 5, Agency

bound to manage fails because its completion has been prevented by accident, only a reasonable part of the remuneration must be paid by the principal.720 §9. EXCESSIVE USE OF AUTHORITY BY THE AGENT 446. ‘If the agent exceeds the limits of his power of attorney, the principal is only bound insofar as he ratifies the business or accepts the profit arising there-from.’721 This possibility of a retroactive cure for the lack of authority by the principal is laid down in section 1016 ABGB. The general rule on the liability of the ‘falsus procurator’ can be found in section 1009 ABGB which simply states that the agent exceeding the limits of authority is liable for any consequences. The new section 1019 ABGB722 provides in more detail that an agent exceeding the limits of his authority is liable for the damage which the third party suffers in reliance on the validity and extent of the authority, if the principal refuses to ratify the contract or to accept the profit of the bargain. However, if the other party knew or ought to have known of the lack of authority, no liability of the agent occurs. §10. THE END OF AGENCY 447. An agency may end by revocation,723 notice of termination,724 death, or bankruptcy. 448. Under Austrian law, each of the two parties of a contract of agency is entitled to terminate their relation at any time. The principal may revoke it at will under section 1020 ABGB, but has to reimburse the expenses and compensate any damage of the agent, and must in addition pay him/her compensation ‘in proportion to the work done’. However, according to section 1021 ABGB, the agent may terminate it at his discretion by giving notice to the principal thereof. However, if the agent does so before the completion of business entrusted specifically to him, or which he has commenced under a general power of attorney, he is liable for any damages which have been occasioned thereby, provided that no unforeseen and unavoidable impediment has arisen. If a power of attorney is repealed by revocation or notice of termination, ‘the conduct of business which cannot be delayed must nonetheless be continued’, as long as the principal has not (or could not reasonably have) made another provision.725

720. Cf. §1020 ABGB. 721. By a so-called versio in rem. 722. Cf. BGBl I 2005/120. This provision replaces Art. 8 No. 11 of the Fourth Regulation Introducing Commercial Provisions in Austria. 723. In German, Widerruf. 724. In German, Aufkündigung. 725. Cf. §1025 ABGB.

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Part II, Ch. 5, Agency

449–451

449. According to section 1022 ABGB, ‘[a]n agency is generally terminated by the death either of the principal or the agent’. Nonetheless, the agent has to continue to conduct the business whenever it is necessary that no delay occurs. In particular, if ‘business already commenced could not be interrupted without evident disadvantage to the heirs’ the agent is bound to proceed. It is also possible that the power of attorney may expressly provide for the continuation in the case of the death of the principal.726 450. Section 1024 ABGB states that the power of attorney given to the agent automatically ends as soon as an insolvency proceeding is commenced upon the agent’s property. The commencement of insolvency proceedings in relation to the principal’s property deprives all acts the agent performs in his position as agent of the principal after the date of commencement of these proceeding of its legal effects.727 §11. SPECIFIC FORMS OF COMMERCIAL AGENCY 451. In addition to the full and the limited commercial powers of attorney,728 Austrian enterprise law provides a number of rules concerning the power of attorney of certain commercial professionals, such as ‘commission agents’729 (sections 384 et seq. UGB), ‘forwarding agents’730 (sections 407 et seq. UGB), ‘commercial agents’731 (sections 1 et seq. of the Statute on Commercial Agents732), and ‘commercial brokers’733 (sections 93 et seq. UGB). Detailed discussion on these specific forms cannot be provided in this context, however.

726. The same principle applies to the legal entity of an artificial legal entity (or ‘juristic person’); cf. §1023 ABGB. 727. §1024 as amended by BGBl I 2010/58. 728. Cf. supra §4. 729. In German, Kommissionäre. 730. In German, Spediteure. 731. In German, Handelsvertreter. 732. Handelsvertretergesetz, ‘HVertrG’, BGBl 1921/348. 733. In German, Handelsmäkler.

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452–455

Chapter 6. Barter734 452. According to the definition provided by section 1045 ABGB, ‘[b]arter is a contract under which one thing is exchanged for another’. In contrast to the contracts for lending and loans, ‘[a]ctual delivery is not necessary for the making of a contract of barter, but only for the performance thereof and the acquisition of ownership’.735 A contract of barter aims at the alienation of property. It is a contract for a consideration and mutually binding immediately upon agreement. 453. Generally there are no formal requirements for the conclusion of a barter contract; a notable exception exists between spouses, since section 1(1) NZwG providing a notarial deed applies. §1. BARTER AND SALE: RELATED CONTRACTS 454. Austrian contract law provides a peculiar solution for the relation between barter and sale. As opposed to more modern codifications such as the German, Italian and Swiss Codes, the General Civil Code deals with barter ahead of sale and considers sale as a kind of barter.736 Barter is understood as a more general contract than sale. That, together with the fact that the General Civil Code does not include a comprehensive chapter on introductory general provisions for the law of contract, explains why the chapter on barter includes provisions which apply to all reciprocal contractual agreements, such as the rules on the defences of lack of and uncertainty of performance.737 In addition, the chapter on barter contains fundamental provisions, for instance on the bearing of risk, which the law of sales then simply refers to. §2. RIGHTS AND DUTIES OF THE PARTIES 455. According to section 1047 ABGB, ‘[t]he parties to a contract of barter are bound by virtue thereof to deliver and accept for free possession the things exchanged according to the agreement with their parts and all their accessories, at the proper time and place, in the same state as at the time the contract was made’.

734. 735. 736. 737.

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In German, Tausch. Cf. second sentence of §1045 ABGB. This may be appropriate in respect of the historical evolution of these two contract types. Cf. 1052 ABGB. ‘A person who insists upon delivery must either have performed his obligation or be ready to perform it. A party who must perform in advance may delay his performance until the other party gives security for his counter-performance where there is a risk of non-performance thereof due to the deteriorating financial situation of the other party of which the first party was innocently unaware at the time of the making of the contract.’

Part II, Ch. 6, Barter

456–459

What may cause some misunderstanding in the wording of this provision is the reference to a ‘delivery and acceptance for free possession’.738 The correct interpretation of this statutory provision leads to the result that the parties to a barter contract have to transfer the ownership of the property each of them delivers together with the accessories, and that they have to concede a possession which is free from encumbrances to which third persons are entitled.739 If the barter involves transportation of the exchanged goods, transfer into the free possession of the other party can be assumed to have been made by one party as soon as he or she has abandoned the power to dispose of the good. This is, in particular, the case if the party has handed over a document of title, such as a bill of lading740 or a warehouse receipt,741 to the carrier. 456. The parties to a barter contract are also bound to accept the exchanged good. This duty is not a real obligation742 since it is not enforceable by action.743 However, according to section 1419 ABGB, the detrimental consequences of a delayed acceptance must be borne by the party in delay. 457. According to section 1047 ABGB, the parties to a barter contract have to perform the duties emerging therefrom at ‘the proper place’. Usually, the proper place of performing duties emerging from a barter contract is the place the parties have fixed in their agreement. However, in the absence of a contractual provision as to the place of delivery, the domicile or place of business of the respective party owing the performance is the place of delivery. §3. DISTINCTION OF BARTER AND SALE 458. Although several provisions are relevant for barter and sale, a differentiation of these two types of contracts is crucial in some cases, e.g., for commercial transactions. Sales between businessmen require a notice of defects by an entrepreneurial buyer under the warranty provisions of the Enterprise Code,744 commercial barters do not. Moreover, warranty claims for barter contracts do not include claims for price reduction. They merely provide that the party in breach of warranty may be asked to pay the difference in the values. 459. The technique for delineating a barter contract from a sale is fixed by section 1055 ABGB which provides the so-called absorption rule: If performance and

738. 739. 740. 741. 742.

In German, Übergabe und Übernahme in den freien Besitz. Cf. §923 and §928 ABGB. Cf. §450 UGB. Cf. §424 UGB. In Austrian terminology this incomplete obligation is called ‘Obliegenheit’. Cf. supra, n. 316 and n. 325. 743. Cf. e.g., OGH 30 Dec. 1966, SZ 39/223. 744. Cf. §377 UGB as amended by BGBl I 2005/120. Now the notice of a detected defect of the acquired good must be made to the seller within a reasonable time.

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460–462

Part II, Ch. 6, Barter

counter-performance of a contract consists partly of money and partly of other property it: is considered a sale or barter contract depending on whether the amount paid in money is more or less than the general market value of the property exchanged therewith; if the amount of money and value of the property is equal, then the contract is considered a sales contract. Thus, one contract type ‘absorbs’ the other, depending on the respective values of the performances. This determination based on the objective relation of the respective values involved in exchange is, however, to be regarded as subordinate to the intent of the parties. It only becomes relevant when the parties’ intentions cannot be ascertained from their agreement. 460. In this context, the delimitation of barter contracts from ‘double sales contracts in combination with set off’ causes serious difficulties. If the parties wanted the two transactions to be interdependent, barter is to be assumed. If none or only one of the parties viewed the entire transaction as being composed of interdependent agreements, or if the parties’ intent cannot be determined by a ‘typical intent of the parties’745 examination, a double sale contract must be assumed.746 The selection of the relevant type of contract entails important consequences. If barter is assumed, and the specific property to be exchanged by one party perishes, the contract is considered non-existent.747 Assuming a sales contract, the other party could demand the thing’s money value as a substitute performance. Moreover, if one party to a barter contract is delayed in performing, the other party is not obliged to perform either. Not so with a double sales contract where the two sales are not regarded as interdependent. 461. It should be mentioned that, according to section 1046 ABGB, ‘[m]oney is not an article of barter’, but that gold and silver may be exchanged as goods, whether as coin or in another shape. §4. RISK OF LOSS 462. The rules on risk of loss in barter transactions are provided by section 1048 and section 1049 ABGB. Here it again becomes apparent that the Austrian General

745. Viz., an intention which parties in the same position usually have. 746. Suppose e.g., that a car owner swaps his old car (plus an additional payment) against a new one. He might want to buy the new car only on the condition that the car dealer takes the old car back, whereas the car dealer will want to sell the new car in any case. 747. Cf. §1048 ABGB. ‘If a time for delivery has been stipulated, and prior thereto the specific things to be exchanged have been withdrawn from commerce by prohibition, or have been accidentally destroyed entirely or to an extent exceeding one-half of the value, the barter is to be considered as not having been made.’

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Part II, Ch. 6, Barter

463–465

Civil Code understands sale as a subcategory of barter, as it does not include specific rules on risk of loss for sales. Thus, sections 1048 et seq. ABGB apply also to contracts of sale. 463. The passing of risk depends on whether a time for delivery has been stipulated or not. In case that the parties have fixed the time for delivery by agreement, the barter is to be considered as not having been made, if ‘the specific things to be exchanged have been withdrawn from commerce by prohibition, or have been accidentally destroyed entirely or to an extent exceeding one-half of the value’, before the date fixed for delivery.748 Other pre-delivery accidental deteriorations and encumbrances thereon are to be borne by the transferor.749 464. If the parties failed to fix a date for delivery, the time at which risk of loss passes is the moment of actual delivery.750 In respect of the so-called usufruct of an item to be exchanged, section 1050 ABGB provides that the profits belong to the transferor until the specified time of delivery, whereas thereafter they belong to the transferee, irrespective of whether the item has already been actually delivered. 465. A specific rule on passing of risk is provided by the second sentence of section 1049 ABGB for a barter transaction concerning delivery of a thing ‘as is’, viz., ‘without fixing number, measure and weight’.751 In this case ‘the transferee must bear the accidental destruction of separate pieces provided, however, that the value of the whole is not diminished by more than one-half thereby’.

748. 749. 750. 751.

Cf. Cf. Cf. Cf.

§1048 ABGB. the first sentence of §1049 ABGB. §1051 ABGB. §930 ABGB; Austrian legal terminology uses the notion of ‘Aversionaltausch’.

19

466–468

Chapter 7. Sale 466. Austrian law provides basically identical legal rules for contracts of sale of goods and for contracts of sale of immovables. According to section 1053 ABGB, a sale is a transaction involving a seller who agrees to deliver a property, and a buyer who has to pay a certain amount of money in exchange for it. The sales contract is a contract aiming at the alienation of a ‘thing’ (or property) by one person to another; it is a non-gratuitous transaction creating mutual rights and duties. The parties must agree upon the object of the sale and the price. The rules on contracts of sale are based on the general contract rules of the Austrian General Civil Code. The law treats the sales contract as a subcategory of barter. This follows, in particular, from section 1066 ABGB which provides that ‘[f]or all matters relating to sales which are not expressly provided for in the law, the provisions of the chapter concerning contracts in general, and concerning the barter contract in particular, are to be applied’. §1. THE CONCEPT OF SALE 467. In principle, virtually everything of economic interest or value, whether movable or not, whether physical or intangible, whether specified or unidentified, whether a single asset or a complex of assets, such as a deceased’s estate or an enterprise, may be the object of a contract of sale.752 Even things not yet existing at the moment of the conclusion of the contract may be sold. The seller need not be the owner, it is sufficient that he is able to acquire the thing sold by him/her in order to transfer ownership thereof. If he fails to do so, the seller will be held liable in warranty and will have to pay damages to the buyer, if found to be at fault. Specific statutory prohibitions exist in respect of sales of certain poisonous or dangerous things, such as narcotics and military weapons.753 468. The price ought to be fixed by the parties.754 At least it must be ascertainable by means of a market price755 or stock exchange price to which the parties may resort. The price is an amount of money, but this does not mean that payment of price must be in cash.756 A cheque or a bill of exchange are sufficient instruments of payment. According to section 1056 ABGB, the parties to a sales contract can 752. Cf., however, §1065 ABGB. ‘If property is bought which is only an expectation the provisions set forth in the chapter concerning gambling and wagering contracts are to be applied.’ 753. In addition, certain things are deemed to be ‘extra commercium’ (e.g., human corpses and parts thereof) and cannot constitute the object of a contract of sale. 754. Cf. the first sentence of §1053 ABGB. ‘In a sales contract property is delivered to another for a fixed sum of money’; cf. also the second sentence of §1054 (infra, footnote 2) and §§1056 et seq. ABGB. 755. For the determination of a market price, cf. the second sentence of §1058 ABGB which provides: ‘If the ordinary market price has been adopted as a basis for the price, the average market price at the place and the time at which the contract is to be performed shall be used.’ 756. There is no contradiction in the second sentence of §1054 ABGB which, in the translation suggested by Baeck, reads as follows: ‘The price must consist of cash money and must not be either indefinite or unlawful.’

19

Part II, Ch. 7, Sale

469–471

also leave the fixing of the price to a third party757 or to several persons whom the parties have chosen in common. In the latter case the majority vote of the chosen parties makes the decision.758 According to section 917a ABGB, agreements fixing the price of a bargain without conforming to a relevant statutory regulations of the price are void in as much as the statutory prohibition has been violated. Such regulations, which may state either a maximum or a minimum price, are aiming at the protection of one of the parties. 469. The contract of sale serves as a title for the transfer of ownership and, indeed, is the most important one. It is, in the same way as the barter contract, an agreement aiming at the acquisition of ownership. In contrast to French law, acquisition of ownership takes place, under Austrian law, only upon the handing over of the sold property from the seller to the buyer. Until the moment of delivery, the seller retains the right of ownership. In contrast to German law, the valid conclusion of the contract of sale is a statutory requisite for the validity of the transfer of ownership:759 Austrian law does not adhere to the principle of abstraction which is characteristic of German law.760 470. As a rule, contracts of the sale of goods may be validly concluded without any formality, even if it involves the importation or exportation of the sold property. This is also true in respect of a sale of real property. However, a document which is authenticized by a public notary is required for the entry of the transfer of ownership into the land register. The absence of formal requirements follows from the high importance of the general principle of freedom of contract in the Austrian law of obligations.761 §2. TYPES OF SALES CONTRACTS I. Regular Sales 471. The rules on contracts of sale concluded between private persons are to be found in sections 1053–1089 ABGB. These provisions are supplemented by the Code’s chapter on ‘contracts and legal transactions in general’ (sections 859 et seq. 757. §1056 ABGB also provides for the case where the third party does not fix the price within the specified time, as well as for the situation where no time has been specified and one party wishes to withdraw before the price has been fixed. In these cases, the sales contract is to be regarded as not having been made. 758. Cf. §1057 ABGB which also provides for the rare case when there is a parity of votes of the third persons who should fix the price. In this case, the contract is to be regarded as not having been made. 759. This follows from §380 ABGB which provides that ‘[n]o property can be acquired without title and without a legal manner of acquisition’. 760. On the German principle of abstraction, cf. Horn/Kötz/Leser, German Private and Commercial Law 69 (Weir trans.,1982). 761. Cf. §883 ABGB, providing that any ‘contract can be made orally or in writing, before the court or extra-judicially and with or without witnesses’.

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472–473

Part II, Ch. 7, Sale

ABGB) which includes general rules on the conclusion of valid contracts, on performance, and on interferences with performance of an obligation. These general provisions are to be applied to all types of contractual obligations, and, therefore, also to contracts of the sale of goods. In respect of contracts between a businessman and a consumer, mention is to be made of the rules of the Consumer Protection Act of 1979 which provides specific rules in favour of the weaker consumer. II. Commercial Sales 472. If at least one of the parties is an entrepreneur concluding the contract of sales in the context of his business, the chapter on ‘sale of goods’, viz. sections 373 et seq., of the Enterprise Code apply in addition to the provisions of the General Civil Code on sales. In case of conflict the commercial rules have priority. The most important difference between the General Civil Code and the Enterprise Code is laid down in section 377 UGB. This provision imposes on the buyer the duty to examine the delivered good and to give notice within a reasonable time of any shortcomings in delivery, if both parties to a commercial sale are entrepreneurs. In addition, cover purchase by buyer and resale by seller are generally accepted remedies with regard to the breach of contractual duties in commercial contracts of sale only.762 III. International Sales 473. With regard to international sales of goods mention must be made of the fact that Austria became a Contracting State of the United Nations CISG,763 also known as the ‘Vienna’ or ‘UNCITRAL Sales Convention’ of 1980. This Convention entered into effect in Austria on 1 January 1989.764 Since many legal practitioners had not realized this important change in the law in due time, and since CISG provides only non-mandatory rules, its practical importance had been limited for quite a long time. Even today, when nearly eighty states have ratified the Convention amounting to 80% of worldwide export–import trade, an agreement ascertaining the application of a national law of sale and expressly excluding the application of CISG is quite often preferred by Austrian parties to an international sales contract. Meanwhile, the Austrian Supreme Court has rendered nearly 100 decisions on CISG which are available from several data banks.765

762. 763. 764. 765.



Cf. §373 and §379 UGB. ‘CISG’. Cf. BGBl 1988/96. Cf. www.COSG-online.ch/ or www.cisg.law.pace.edu/.

Part II, Ch. 7, Sale

474–479

IV. Interrelation of the Legal Rules on Sale 474. The fact that statutory rules on the contract of sale are to be found in different chapters of the General Civil Code as well as in the Enterprise Code, and that there are additional rules concerning international sales in CISG and for consumer sales in the Consumer Protection Statute, may result in a conflict of rules which apply to a given contract. In general, the provisions of the ABGB constitute the general basis for the law of sales in Austria. §3. OBLIGATIONS OF THE SELLER 475. According to section 1061 ABGB, the seller has the duty to keep the thing in careful custody until the time of delivery to the buyer. The seller must transfer ownership of the thing together with components and accessories in due time, at the proper place, and in a condition conforming to the contract terms. 476. As a rule, the parties to a sales contract agree upon the due date of the performance. If the contract failed to provide a term on the time of delivery, the due date shall be derived from the nature and purpose of the performance. If nothing can be derived therefrom, the creditor is, according to section 904 ABGB, entitled to declare delivery or payment due immediately. 477. If the seller fails to deliver in due time, the seller will become responsible for delay of performance. The due date for performance may be postponed as result of a deferment. For the additional time granted the creditor is not entitled to claim performance and the debtor is not entitled to perform. 478. The place of performance of a contract of sale is the place where delivery is due according to the agreement. According to section 88 of the Austrian Statute on Jurisdiction,766 the place of performance is decisive for venue, and also has some impact on choice of law in transnational contracts. If the parties have failed to agree on the place of performance, and if nothing can be derived from the purpose of the contract, according to section 905 ABGB, the obligation has to be performed at the place of the residence or business of the seller. The seller has to prepare the good to be delivered for collection by the purchaser at due date. If a contract is not performed at the right place the rules on delay of performance apply. 479. However, the parties to a sales contract are free to agree that either the obligation be performed at the place of the residence or business of the seller, or that it be performed at the buyer’s place of residence or business. In either case, the seller shifts the risk of loss or damage on the creditor upon the dispatch of the property or the remittance of the money to the creditor.

766. In German, Jurisdiktionsnorm, ‘JN’.



480–485

Part II, Ch. 7, Sale

480. According to section 1052 ABGB, delivery of the goods and payment of price shall be concurrent acts. If one party fails to perform contemporaneously, the other party may put forward the defence of lack of performance, or the ‘defense of lack of (correct) performance’767 if the contract was performed incompletely as to quality or quantity. 481. If the seller has agreed to perform in advance, he has the right to put forward the ‘defense of uncertainty’,768 if the counter-performance seems to be endangered by a deterioration of the economic situation of the buyer. As a result, the seller may withhold delivery. §4. PASSING OF RISK 482. The rules on distribution of risk of loss apply in the case of accidental loss, destruction, or deterioration of the object of sale, when neither party is to blame for it. Under Austrian law, a distinction is made between ‘risk of performance’ and ‘risk of price’. Risk of performance is imposed on the party which has to make another attempt of performance after his or her first effort was not successful. Risk of price is imposed on the party being forced to bear the economic risk of the accidental impossibility to perform. 483. The question of who bears the risk depends on whether specified or unascertained goods have been lost. The rule is ‘genera non pereunt’, or, in other words, unascertained goods cannot perish. Before the specification of unascertained goods the seller has to bear the risk of performance. The seller has to repeat the delivery by taking another quantity of the same species from his inventory. Specification occurs at the latest at the time of transfer and acceptance of the sold good, or at the time the buyer is due to take delivery, or, in case of sale by delivery, at the time of the handing over to the carrier or forwarding agent. 484. In respect of a specified good, the passing of risk occurs according to section 1048 and section 1064 ABGB, primarily at the time the parties have expressly stipulated for delivery; and secondarily at the time of the actual delivery, if no time for the transfer had been fixed by the parties. If the accidental loss happens before said date, the contract is, according to section 1048 ABGB, considered void and the contractual duties are mutually terminated: the seller is charged with the loss of the economic value. If the loss or damage occurs after said date, the risk must be borne by the buyer, and the validity of the contract remains unaffected: the buyer must pay the price, unless the seller has not delivered in due time. 485. Before 1 January 2007, a specific provision concerned the passing of risk in the context of a contract of commercial sale involving the carriage of the sold

767. In German, Einrede des nichterfüllten Vertrages. 768. In German, Unsicherheitseinrede.

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Part II, Ch. 7, Sale

486–489

good,769 viz., Article 8 No. 20 of the 4th Regulation Introducing Commercial Provisions in Austria. This provision was repealed by BGBl I 2005/120 and no major difference exists in respect of passing of risk any longer between commercial and general civil law. Thus, section 429 ABGB dealing with the effective transfer of property, but applied, by way of analogy, to the passing of risk in ‘civil sales’ involving carriage of goods, is now also the rule for transactions of the same type between entrepreneurs and enterprises.770 The rules on passing of risk are, indeed, optional law. The parties may agree otherwise. §5. OBLIGATIONS OF THE BUYER 486. According to section 1062 ABGB, the buyer must pay the price immediately ‘in cash’ and has to take delivery of the good(s). If the buyer fails to take due delivery the seller may not, as a rule, bring a claim for performance of this duty of the buyer, however. The result of a buyer’s failure to take delivery is the passing of the risk of accidental loss or damage. The buyer’s obligation to take delivery is a legal duty of minor quality.771 And under regular circumstances the buyer cannot be forced by a court order to take delivery. 487. The obligation of immediate cash payment is an optional rule of law and may be altered by agreement of the parties. Thus, the buyer may agree to make an advance payment, or the seller may deliver on credit. The purchase on credit is insufficiently regulated in section 1063 ABGB which states that the buyer acquires ownership notwithstanding the deferred payment. 488. As a rule, a seller on credit will insist on retention of title in respect of the sold good(s) until full payment of the price by the buyer has been rendered. §6. SELLER’S WARRANTY OF TITLE AND QUALITY 489. The Austrian law of seller’s warranty is based on the general framework of legal rules on warranty for non-gratuitous contracts.772 No specific provisions dealing exclusively with the seller’s warranty exist in the General Civil Code. However, due to its German origin, the Enterprise Code includes a number of provisions on the warranty of commercial sellers of goods.773

769. 770. 771. 772. 773.

In German, Versendungskauf. According to the amended Enterprise Code, cf. BGBl I 2005/120. The buyer has an ‘Obliegenheit’ which is less than an ‘Obligation’. Cf. supra, n. 320 and n. 325. §§922 et seq. ABGB. Cf. supra, n. 329 et seq. Cf. §§372 et seq. UGB.

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490–491

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490. Warranty law is optional. Therefore, the parties have the right to modify the warranty rules.774 Within limits, however, as they may not totally exclude warranty, if new goods are sold. Such exclusion of warranty qualifies as a violation of good morals.775 Similarly, a complete exclusion of all warranty remedies in standard form contracts is also contrary to public morality. In case of doubt, a waiver of warranty is to be understood restrictively as to cover only warranty for the defect itself, but not damages for consequential losses. Further, if a certain quality was expressly agreed to, a general waiver of warranty does not extend to the warranty for defects in the quality. Specific rules exist with regard to consumer sales. Here, to the benefit of the consumer, the provisions of sections 922 et seq. ABGB are ius cogens.776 Thus, a warranty cannot be waived before the defect in quality or the deficiency in title becomes known to the consumer. With regard to modifications of the limitation period, a distinction has to be made between movables and immovables: For immovable property, the limitation period may not be reduced in consumer contracts, whereas for used movables – but not for new ones – the standard limitation period of two years may be contractually reduced to one year.777 I. Sale by a Non-owner 491. A defect of title exists whenever the purchaser does not acquire ownership of the delivered good.778 This can arise when the seller did not own the sold good himself, or when a good is transferred to the buyer with unexpectable encumbrances which were in fact unexpected by the buyer. According to section 931 ABGB, a buyer seeking reliance upon a warranty because a third party claims to have title to the sold good, must implead the seller. Nevertheless, the buyer does not lose his claim for indemnification by the seller, if he fails to so implead, but the seller ‘may in any future action avail himself of all defenses’, including those he might have urged against the third party.779 No really significant differences are provided by the General Civil Code in respect of the legal consequences of defects of title. The only major difference in the legal treatment of a defect of title is that the period of limitation commences at a later time, viz., upon the day when the claim of a third party contending to have title of the sold good becomes known to the purchaser. 774. 775. 776. 777. 778.

Cf. §929 ABGB. According to §879 ABGB; cf. OGH SZ 53/128. §9 (1) KSchG as amended by BGBl I 2001/48. §9(1) 3rd Sentence KSchG contains a special provision for the sale of used motor vehicles. According to §367 ABGB as amended by BGBl I 2005/120, the acquisition in good faith from the non-owner may be possible under certain circumstances; e.g., if the bona fide possessor can prove that he has acquired the good at an auction or from an entrepreneur within the regular course of his business, or from some one to whom the plaintiff himself had entrusted the purchased property. § 366 HGB was repealed by the same amendment. 779. Thus, the seller may discharge himself from paying any indemnity to the buyer, if it becomes clear that such defences, if duly presented, would have given rise for another decision against the third party. Cf. OGH 7 Sep. 1994, JBl 1995, 113; OGH 8 Apr. 1997, JBl 1997, 368; OGH 11 Dec. 2001, RdW 2003/355, 433.

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492–493

II. Warranty against Defects in Quality 492. A seller warrants that a sold good is not only free from ‘defects of title’ but from physical defects as well. Whether such warranty is express or implied does not affect the availability of remedies for breach of warranty. The same rules apply to non-professional as well as to professional sellers of defective goods. The type of remedy a victim may resort to in case of a breach of warranty is to be determined according to the general two-step system of warranty remedies introduced by the new section 932 ABGB.780 Thus, primarily, the buyer may claim reparation of the defect in quality or replacement of the defective good. Which of the two remedies he chooses is principally within his discretion. If, however, the chosen remedy is factually impossible or requires disproportionate expenses on part of the seller compared to the respective other remedy, the seller may offer the other remedy. This system of warranty remedies aims at giving the seller a second chance to perform. The reparation or replacement has to take place at the original place of performance, and it has to occur within reasonable time. Only if this period of time lapses without successful repair or replacement, or if the seller generally rejects any second performance, or if both, reparation and replacement are impossible or disproportionate, may the buyer claim price reduction or rescission. For the latter remedy, however, it is required that the defect in quality is not of such a minor nature that voiding the contract would constitute a disproportionate sanction.781 The seller in breach of warranty is liable irrespective of whether he is at fault. To avail himself of the warranty remedies, the buyer of a defective movable good has to bring an action for breach of warranty in court within two years, whereas in respect of real property, a period of three years has to be observed.782 These periods of limitation start to run with the delivery of the good or the transfer of the premise, irrespective of whether the defect is hidden or not. However, no claim for breach of warranty can be raised if the defect of the sold good is evident at the time of the conclusion of the contract of sale.783 493. Particular requirements are fixed by section 377 UGB for commercial contracts of sale between two entrepreneurs. According to this provision, as amended by BGBl I 2005/120, the merchant buyer has a duty to inspect the purchased good and to notify an existing defect to the seller within a reasonable period of time. If he cannot comply, the purchased good will be considered approved, unless the defect is absolutely undisclosed and could not have been detected thorough examination. The effect of a professional buyer’s breach of duty to inspect and notify a defect is the loss of the right to warranty.

780. 781. 782. 783.

BGBl I 2001/48. See supra, nn. 329 et seq. §932(4) ABGB. §933(1) ABGB. Unless the defect was fraudulently concealed, or an express stipulation was made by the seller that the good was free from defects according to §928 ABGB.

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494–495

Part II, Ch. 7, Sale

494. Until recently, the buyer of a defective good could bring a claim for damage only in respect of consequential damages caused by the defect in the sold good, provided that the seller could not prove that he was not at fault in selling a good in a defective condition. In 1990, however, the Supreme Court overruled the traditional position784 by allowing the buyer to resort also to a claim for damage in respect of the ‘direct loss’ which is represented by the defect itself.785 A claim for damage and the remedies for breach of warranty are available at the buyer’s choice. Thus, a buyer may claim the amount of money he had to spend for having the defective good repaired or replaced also by way of a claim for damage. This new approach is important because the buyer is not limited to the shorter periods for bringing a claim provided by warranty law, since the limitation period for damage actions is, according to section 1489 ABGB, three years ‘from the moment when the damaged party learned of the damage and the identity of the person who caused it’.786 495. When the new Austrian law on warranties entered into effect on 1 January 2002, section 933a ABGB put into black letter law what the Supreme Court had held since 1990. Thus, through the introduction of this provision, for the first time a statutory rule provides that breach of warranty and damages for losses consisting in the defect itself constitute alternate remedies. However, as at the same time, the provisions on warranty underwent a major reform as well, section 933a ABGB had to bring in line the new, two-step system of warranty remedies of section 932 ABGB with the case law on damages for defects. Otherwise, the aim of the reform that the seller gets a second chance to perform could have been circumvented by claiming monetary damages. To prevent this result, section 933a(2) ABGB provides that the buyer as the injured person could claim only reparation and replacement in the first place. Which of the two remedies he claims is up to the buyer’s discretion. Monetary damages are to be awarded only if repairing or replacing a defective good or service is factually impossible or amounts to disproportionate expenses on part of the transferor. They are limited to what the buyer would have received if performance had taken place successfully.787 Thus, systematically section 933a ABGB relies on the same two-stage hierarchy of remedies as section 932 ABGB. This result also corresponds to the fundamental principle of Austrian tort law that primarily, damages are to be restituted in natura.788

784. Cf. OGH, 17 May 1990, JBl 1990, 792; comment by Wilhelm, ecolex 1990, 461. In an earlier breakthrough decision this theory of ‘full concurrence of warranty and liability (for fault)’ (Volle Konkurrenz von Gewährleistung und Schadenersatz) in respect of the defect of the delivered good was first acknowledged by the Supreme Court for contracts of work: OGH 7 Mar. 1990, JBl 1990, 648; cf. OGH 4 Apr. 1990, JBl 1990, 653. Cf. supra, nn. 344–346. 785. With the exception of initial and non-remedial defects in a sold good. 786. The absolute maximum limitation period is thirty years, if the party does not learn of the damages and of the identity of the party who caused the damage at an earlier date. 787. In German, Erfüllungsinteresse. 788. In German, Naturalrestitution. Cf. §1323 ABGB.

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Part II, Ch. 7, Sale

496–497

§7. REMEDIES OF UNPAID SELLER 496. The buyer must accept the delivered good at the time agreed upon and must at that time pay the price in cash. According to section 1062 ABGB, the seller may refuse to deliver the property to the buyer in the absence of such acceptance and payment. The date on which payment becomes due is usually fixed by the parties. In the absence of such a stipulation, the obligation to pay the price ‘starts only from the day on which it is demanded’.789 Therefore, the seller will convey a formal notice to the buyer, who then must pay the price without unnecessary delay. If the buyer fails to pay in due time, the seller may resort to the rights offered by section 918 ABGB for delayed performance by a debtor. According to this general provision which applies to all types of contracts, the unpaid seller may insist on performance by the buyer and claim damages for the delay,790 or he ‘may, after fixing a period of grace for the performance, rescind the contract’.791 However, if the seller has delivered the good to the buyer and allowed deferment of payment, the seller’s right to rescind is suspended. §8. COLLATERAL AGREEMENTS 497. Within the limits of the law and good morals, the parties are free to include stipulations in their contract of sale. The General Civil Code provides in sections 1067 et seq. detailed rules for the most frequently used clauses concerning the provisions for redemption,792 reselling793 or preemption,794 the buying on approval,795 and the sale with the option to resell for a higher price.796 Section 1067 ABGB also lists the commission to sell among the statutory collateral agreements.797 789. Cf. §1417 ABGB. 790. Such a claim will only have success, if the buyer is at fault for not having paid the price of the purchased good in due time. 791. Cf. §914(1) ABGB. 792. In German, Wiederkauf. 793. In German, Rückverkauf. 794. In German, Vorkauf. 795. In German, Kauf auf Probe. 796. In German, Verkauf mit Vorbehalt eines besseren Käufers. 797. This is a separate specific type of contract which is closely related to the contract of sale. The German notion for this type is ‘Verkaufsauftrag’. The relevant rules are §§1086–1089 ABGB: §1086. If a person delivers his movable property to another, in order to sell it for a fixed price, upon the condition that the transferee must within a fixed period either pay to him the selling price or return the property, he is not authorized to demand the return of the property before the expiration of the period; however, the transferee must pay the fixed price after the period has expired. §1087. During the said period, the transferor remains the owner. The transferee is liable to him for any damages caused by his fault and, upon returning the property, he is entitled to demand only compensation for such expenses which have produced some advantage to the transferor. §1088. If the property is immovable, or the price or period for payment has not been determined, the transferee is to be considered as an agent. The property entrusted for sale can in no case be demanded from a third person who has acquired it from the transferee bona fide (§367). §1089. In general, the provisions set forth for contracts and particularly for contracts of barter and sale are to be applied even in case of judicial sales unless particular rules therefor are set forth in this law or in the law of procedure.

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498–500

Part II, Ch. 7, Sale

I. The Right of Redemption 498. The right of redemption is the seller’s right to recover a sold good.798 Such a collateral agreement can, according to section 1070 ABGB, only be made ‘in regard to immovable property, and the seller is entitled to this right only during his lifetime’. It cannot be conveyed to the seller’s heirs, or to a third party. This right may be entered in the public records and may thus have effect vis-à-vis third persons. II. The Right of Resale 499. The right of resale is the buyer’s right to resell the purchased good to the seller.799 Again, this collateral agreement can only be made in regard to immovable property and it is not inheritable or transferable to a third party since it is subject to the same restrictions set forth for the redemption. III. The Right of Preemption 500. Primarily, the right of preemption is the seller’s right to be offered the (re)sale of a movable or immovable property to him in the event that the buyer wishes to sell it again. However, an agreement by which a right of preemption is granted may not only be made between the original seller and the buyer of a property. Such agreement is possible between the owner and the tenant of a property as well as between persons irrespective of whether a contractual relation existed among them. According to section 1073 ABGB, the right of preemption is, in principle, a personal right which has no effect on third parties. In regard to immovable property, however, it may become a right in rem upon registration in the public records. The right of preemption is neither inheritable nor assignable to a third party.800 The right of preemption must be demanded by the entitled person. In regard to movable property the demand must be made within twenty-four hours and in regard to immovable property within thirty days, after such property has been offered. Otherwise, the right of preemption is considered to be extinguished.801 As a rule, the person entitled to preemption must pay the full price which has been offered by a third person except when otherwise agreed, and he must fulfil any additional conditions of the offer besides the usual selling price.802

798. Cf. §§1068–1070 ABGB. 799. Cf. §1071 ABGB. 800. Cf. §1074 ABGB. ‘A right of preemption cannot be assigned to a third person or transferred to the heirs of the person to whom the right belongs.’ 801. Cf. §1075 ABGB. Specific rules are provided by §1076 ABGB for the judicial public auction of property affected by a right of preemption. The person who has such a right must be specially notified of the auction, if his right is registered in the public books. 802. Cf. §1077 ABGB.

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Part II, Ch. 7, Sale

501–503

Section 1079 ABGB provides that the possessor of property who does not offer preemption to a person entitled thereto, will be held liable to the entitled person for any damage caused thereby. If the right of preemption has been entered into the public books, any property subject to that right can be demanded from a third person. IV. Sale on Approval 501. A sale on approval is made upon the condition that the buyer approves the ordered thing at his discretion.803 As long as the buyer has not approved the good he is not bound to buy. The seller’s obligation to sell is terminated, if the period granted for approval804 expires without any reaction from the buyer. However, silence of the buyer until after the end of the period of approval is considered as approval, according to section 1081 ABGB, if the good has already been handed over for inspection or testing. V. Sale with the Option to Resell for a Higher Price 502. This is a type of conditional sale,805 in which the effect of sale is made dependent on whether the seller finds within a fixed period a buyer whom he may prefer as more advantageous. The right to decide whether the new buyer is more advantageous lies with the seller. He is free to prefer a buyer who offers a lower price than another person. §9. PRODUCT LIABILITY 503. As the warranty law does not extend to incidental damage which is caused to a person as a result of a product having been put on the market in a defective condition, and as the judge-made expansion of the rules of contractual liability806 for this factual situations could not provide a totally satisfactory solution, the Austrian legislative bodies, as early as 1977, made the decision to enact a statute on product liability in consonance with the relevant legislative activities of the EC in this field.807

803. Cf. the first sentence of §1080 ABGB. 804. Usually the period for approval is agreed by the parties. However, in the absence of such agreement, §1082 ABGB as amended by BGBl I 2005/120 requires that the period is fixed at reasonable duration. 805. Cf. §§1083 et seq. ABGB. 806. By deriving contractual duties implying the protection of the ultimate buyer from the contract between the manufacturer and the wholesaler placed on the top of the chain of distribution. 807. For a report on Austrian product liability law, cf. Posch, Product Liability in Austria, Comparative Law Yearbook 1993.

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504–504

Part II, Ch. 7, Sale

504. On 21 January 1988, the Austrian Parliament passed a statute808 which, notwithstanding some quite important deviations, followed the wording of the EC-Product Liability Directive of 25 July 1985. Thus, Austria became the first European state outside the EC to enact a modern product liability statute. Meanwhile, this statute had to be amended to make it fully comply with the EC-Directive in the wake of Austria’s membership to the European Area and Union.809 The Austrian Product Liability Statute introduces a theory of strict product liability. It is the defect in the product which entails liability. Whether the manufacturer behaved wrongfully or not is irrelevant. The definition of ‘defect’ in section 5 fully complies with that of Article 6 of the EC-Directive. In its amended version the statute imposes strict liability on the manufacturer and on the importer of a defective product into the EEA810 for personal injury and damages caused to a property other than the sold good itself, provided that the amount of damage to property exceeds the lower threshold of EUR 500. The commercial seller of an ‘anonymous good’ shall be liable only if he cannot provide sufficient information about the identity of the manufacturer or importer, or the person who supplied the product to the seller, within a reasonable time. In contrast to the EC-Directive, the original version of the Austrian statute of 1988 did not exclude the recoverability of damages in respect of property used for commercial and industrial purposes. In its section 9 the original Austrian statute only provided a disclaimer with regard to such types of damages. The amendment has finally eliminated this irrational deviation from the European model, which had resulted in a considerably higher degree of liability on the part of an Austrian manufacturer than could have been imposed on a manufacturing firm having its place of business in an EU Member State. The amendment has brought the rules on liability for damages to property into compliance with EU law, which restricts such liability to damage to privately used things. In respect of the available defences and the limitation period of three years, traditional Austrian product liability law already complied with the Directive. In those three points in which options used to be originally offered to the national legislative bodies under the EC-Directive, viz., the inclusion of primary agricultural products, the availability of a ‘development risks defense’, and the imposition of an overall limit of EUR 70 million, the Austrian statute decided in favour of the exclusion of primary agricultural products from strict liability, allowed the development risk defence, and refrained from stating an overall limit.811 Whereas under the new product liability laws in Germany and Italy – Austria’s main partner countries in foreign trade – immaterial damage remained – at least in the beginning – without compensation, damage for pain and suffering has always been generally available under strict product liability rules in Austria.

808. BGBl 1988/99. The relevant EC-Council Directive is the one Concerning Liability for Defective Products, No. 85/374 of 25 Jul. 1985, O.J.EC L 210, 7 Aug. 1985, 29. 809. BGBl 1993/95. This amendment has come into force together with the EEA Treaty on 1 Jan. 1994. 810. In the original version of 1988 only the importer into Austria has been liable in the same way as the manufacturer of the defective product. 811. Thereby the Austrian statute complies with the majority of national product liability statutes of the EC-Member States implementing the directive.

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Part II, Ch. 7, Sale

505–505

According to its section 15(1), the statute of 21 January 1988 does not affect provisions of the General Civil Code and of other statutes under which damages are compensated to a greater extent or by other persons. §10. THE SALE ON INSTALMENT 505. Originally, the Consumer Protection Statute of 8 March 1979812 included in sections 16 et seq. comprehensive provisions dealing with sales on instalment. These rules applied to sales of goods, concluded between a businessman and a consumer, with a maximum total price of EUR 25,000,813 where the seller had to hand over the sold good before the full payment of the price, and the buyer, in addition to an initial down payment, had to pay the remaining price in at least two instalments. Sections 16 to 25 KSchG have been repealed by BGBl I 2010/28, effective 11 June 2010, and the new rules on consumer instalment sales are now provided by the Consumer Credit Act in its sections 13 et seq. on ‘combined credit contracts’. These rules refer to instalment sale contracts of consumers with a minimum total price of EUR 200 and abstains from setting a maximum limit, whereas the Directive sets a limit at the amount of EUR 75,000. Apart from this difference little deviations from the rules of the Directive may be found in the national Consumer Credit Act.

812. Effective on 1 Oct. 1979. 813. This threshold, which has been inserted by BGBl 1993/247, has replaced the former amount of EUR 12,000.

2

506–509

Chapter 8. Tenancy, Lease and Leasing §1. THE CONCEPTUAL FRAMEWORK OF THE CODE 506. According to section 1090 ABGB, ‘[a] contract by which a party is granted the use of durable property for a certain period and for a fixed price is called, in general, a contract of tenure’.814 The Austrian codification uses the term ‘contract of tenure’ as an antiquated generic term for contracts of tenancy and lease. As Baeck has pointed out in his translation of the General Civil Code of Austria815 the translation of the chapter on contracts of tenure ‘poses most difficult problems’. This is due to the fact that the landlord–tenant relation is not a single concept but ‘differs according to the nature of the subject matter of the lease’.816 Two different types are covered by the concept of ‘contract of tenure’, and the distinction between the two forms is clearly drawn by section 1091 ABGB:817 The use of a premise without further work818 is distinguished from the use of a premise in connection with some work by the tenant enabling him ‘to obtain the benefit from the premises for which he pays the rent’.819 Baeck suggested to translate the first concept by ‘tenancy’ and the second by ‘lease’, and since there is obviously no better solution, these terms shall be used in this way.820 507. The legal relation between landlord and tenant is of a purely obligatory nature. However, according to section 1095 ABGB, a contract for tenure may be entered into the public records. In this case, the right of the tenant is considered a right in rem affecting the position of a consecutive possessor. §2. TENANCY IN GENERAL 508. Tenancy is the permission to use a thing for payment of a certain amount of money according to section 1091 ABGB. All non-consumable things, whether movable or not, can become the subject of a tenancy contract, even so-called dependent component parts of a ‘thing’. Thus, apartments as well as automobiles can be the subject of a tenancy. Indeed, these things are most frequently leased. 509. The law of tenancy is a socially intricate matter in so far as apartments are concerned. On the one hand, protection of the tenant from eviction and mandatory

814. In Austrian legal terminology, the respective expression is ‘Bestandvertrag’. 815. Published for the Parker School of Foreign and Comparative Law by OCEANA Publications Inc. in 1972. 816. Cf. Baeck, The General Civil Code of Austria, 211 et seq. 817. Cf. §1091 ABGB. ‘A contract of tenure is called a tenancy contract when the property for which tenure was granted can be used without further work, and is called a lease when it can be used only with diligence and work. If in a tenure contract property of both sorts is granted at the same time, the contract is to be determined according to the nature of the principal property.’ 818. In German, Miete. 819. Cf. Baeck, supra, 212; in German, Pacht. 820. On alternative translations, cf. Baeck, supra, 212.

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Part II, Ch. 8, Tenancy, Lease and Leasing

510–513

statutory limitations on the amount of rent are necessary to prevent exploitation of those in need of a place to live. On the other hand, however, this must not lead to a quasi-expropriation of the landlord. 510. The General Civil Code’s regulation of tenancy is rather sketchy and brief. Its practical importance is limited today since its provisions only pertain to the lease of chattels and undeveloped land. The Statute on the Law of Tenancy of 1981821 has, as a lex specialis, priority in the field of tenancy of housing facilities and business premises. This statute includes provisions which are generally ‘relatively mandatory’, i.e., relatively in the sense that a deviation from the statutory provisions is only possible to the benefit of the tenant. Notwithstanding its rather recent date of enactment, this statute has been criticized for its inadequate solutions and was amended twenty-five times in thirty years so far.822 The project of a total revision by a new Federal Statute on the Law of Lodging823 was not realized however, only a preliminary draft was published in 1993.824 511. Under the current Statute on the Law of Tenancy the statutorily fixed maximum rent per square meter is determined according to categories of fixtures and fittings (A, B, C, and D), taking into account the size and the standard of a flat. According to section 16(1) MRG, the agreement of a rent exceeding the legal amount is possible under exceptional conditions only. So-called repayments for investments made to renovate or ameliorate the flat exacted without consideration, i.e., without an actual improvement, are forbidden and void: The tenant may demand the return of such payments; the landlord faces responsibility under criminal law. §3. BEARING OF RISK AND WARRANTY 512. The landlord has, according to section 1104 ABGB, no right to receive a rent, ‘[i]f the property taken in tenure cannot be used at all because of extraordinary accidents such as fire, war, pestilence, great floods’, etc. If the tenant can make only a restricted use of the property, a proportionate share of the rent must be remitted pursuant to section 1105 ABGB. 513. If the property given in tenure is defective when handed over, or becomes, without the grantee’s fault, defective in a way it cannot serve the agreed use any longer, the tenant is, according to section 1096(1) ABGB, ‘released from the payment of the consideration for the period of the inability to use, in accordance with the extent thereof’.

821. 822. 823. 824.

Mietrechtsgesetz, ‘MRG’, BGBl 1981/520. Important recent amendments are BGBl I 2006/124 and BGBl I 2009/25. Draft of a Bundeswohnrechtsgesetz, ‘BWRG’. JMZ 7123/64–I7/93.

21

514–516

Part II, Ch. 8, Tenancy, Lease and Leasing

§4. RIGHTS AND DUTIES OF THE PARTIES 514. According to section 1096 ABGB, the landlord has the duty to transfer the property to be given in tenure in serviceable condition at his own expense, and to maintain it in such condition.825 The landlord must not impair the contractual use or enjoyment of the property by the tenant and he must keep the property in a state allowing its use in compliance with the contract. The rules of the General Civil Code dealing with the duty to bear maintenance costs and the expenses of repairs826 are more or less superseded by the provisions of the Statute on the Law of Tenancy. Accordingly, a tenant may reclaim expenses from the landlord he made to considerably improve the object.827 Generally, maintenance expenses are to be financed from rental payments. Where these funds are not sufficient, the landlord may increase the amount of rent according to section 18 MRG. According to section 1099 ABGB, the landlord must bear all encumbrances and duties. 515. The tenant has to pay the agreed rent at the agreed dates. If property is taken in tenure for one or more years, the consideration must, according to section 1100 ABGB, be paid semi-annually if no other agreement has been met by the parties. However, the rule of section 15(3) MRG that the tenant shall pay in advance the rent on the first day of each calendar month, has become common usage. The tenant is entitled to make certain modifications on the rented property, e.g., with regard to electric installations, without the landlord’s express consent, provided the costs are covered by the tenant and nobody’s rightful interests are likely to be injured.828 The tenant may enter into a sub-tenancy agreement, and may charge the sub-tenant a rate higher than the chief rent. The chief rental contract may, however, forbid sub-tenancy according to section 1098 ABGB.829 Pursuant to section 11 MRG, such a restriction on the tenant is valid only under exceptional conditions. 516. If the chief tenant830 moves out of the rented flat, his family members who have been living in the flat for some time have the right to take over the tenancy by entering into the original contract. Similarly, the purchaser of an enterprise may take over the lease of business premises. The takeover is effective upon notice, even against the will of the landlord. The death of the tenant entails the same situation, 825. Cf. §3 MRG. 826. Cf. in particular, §1097 ABGB: ‘If repairs become necessary which are incumbent upon the grantor, the grantee has the duty to notify the grantor thereof without delay, failing which notice he becomes liable for damages to the grantor. If the grantee himself has defrayed expenses for the property given in tenure which are incumbent upon the grantor (§1036), or if the expenses were useful (§1037), he is considered in regard thereto as a manager without authorization; however, he must present an action for indemnification not later than six months after the return of the property taken in tenure or his right thereto is extinguished.’ 827. Cf. §10 MRG. 828. Cf. §9 MRG. 829. Cf. §1098 ABGB. ‘Tenants and lessees are entitled to use and employ the property rented or given in lease for the term fixed by contract and to give it in sub-tenure, if no disadvantage to the owner is thereby incurred and if not expressly forbidden in the contract.’ 830. In German, Hauptmieter, whereas the German word for sub-tenant is Untermieter.

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Part II, Ch. 8, Tenancy, Lease and Leasing

517–518

with the extension of the possibility of a take over to cohabitants according to section 14 MRG. Thereby the landlord may be prevented from adjusting the amount of consideration for an unreasonable long period of time. §5. TERMINATION OF THE CONTRACT 517. Apart from the possibility that a contract of tenure is terminated automatically, if the property is destroyed,831 a tenancy ends, under the General Civil Code provisions, ‘at the expiration of the period which was agreed upon’.832 However, ‘[t]he contract of tenure can be renewed not only expressly, but impliedly’,833 and, according to section 1115 ABGB, ‘the implied renewal of a contract of tenure is made under the same conditions as previously existed’. The death of either contracting party does not dissolve a contract of tenure according to section 1116a ABGB. Upon the death of the tenant, the contract may easily be rescinded by the heirs of the tenant, whereas the landlord is usually faced with statutory protection of the tenant’s relatives living in the apartment under the Statute on the Law of Tenancy. If the property given in tenure was delivered or became, without the tenant’s fault, unfit for the use agreed upon, the tenant has the right to rescind the contract before the expiration of the term agreed upon expressly or impliedly without notice of termination.834 However, the landlord can demand the premature termination of the contract according to section 1118 ABGB, ‘where the tenant makes an essentially detrimental use of the property’, or where the tenant, after he has been admonished, continues to delay the payment of the rent, or where ‘a building which has been let must be rebuilt’. 518. Under the Statute on the Law of Tenancy,835 the possibility to limit the duration of the tenancy by agreement between landlord and tenant is very restricted. The allowed maximum for limited contracts is one year. Where the landlord does not own the building but has only ownership of a flat,836 he may limit the time of the tenancy to a period of up to ten years. A contract with a limit exceeding the statutory maximum is considered to have been concluded for an unlimited period of time. If the limitation is valid, an earlier termination is possible for important reasons only. Such an important reason may be, e.g., the failure to pay the consideration, an

831. Cf. §1112 ABGB. 832. Cf. §1113 ABGB. 833. Cf. §1114 ABGB which further reads as follows: ‘If a contract provides for a prior notice of termination, the contract is impliedly renewed by the omission of such notice. If no notice has been agreed upon, an implied renewal takes place where the grantee continues to employ or use the property after the expiration of the period for which it was granted and the grantor makes no objection thereto.’ 834. Cf. §1117 ABGB. 835. Cf. §29 MRG. 836. In German, Wohnungseigentum. The legal construction of ‘ownership of a flat’ is ownership of an immaterial part with the right to use one of the flats of the whole building.

21

519–521

Part II, Ch. 8, Tenancy, Lease and Leasing

adverse use of the property contrary to the agreement, a durable state of the property making its contractual use impossible, a persistant vexation of the tenant by the landlord. An express or tacit prolongation of an originally limited contract is possible. A new time limit may be fixed. If, however, the entire period of tenancy exceeds the statutory maximum limitation frame, the contract becomes unlimited. 519. Under the General Civil Code, contracts of unlimited duration may be terminated within statutorily fixed periods.837 Whereas the tenant simply must informally give due notice, without having to state reasons, the landlord must give notice before court. Under the same Statute, the landlord can only terminate the tenancy for those important reasons enumerated in section 30 MRG. Among these reasons are, e.g., delay in payment of the rent, negligent or damaging use of the property, criminal offences against the landlord or other tenants, sub-tenancy of the entire objects, landlord’s urgent and qualified need of the flat for housing himself. In some cases, the landlord who wants to terminate an existing tenancy must provide an adequate substitute for the tenant. §6. LEASE 520. A contract of lease gives the lessor, in exchange for a consideration, the permission to use a ‘thing’ and to reap its fruits.838 Usually, a farm or a functioning business enterprise may be the subject of a lease since the proceeds are regarded as fruits. The distinction between lease of a business and tenancy of business premises is crucial as only the latter is governed by the Statute on the Law of Tenancy which grants the lessee an extensive security of tenure.839 Whenever a living organization is transferred, with a ‘good will’, an established clientele, a stock of goods, etc., the contract qualifies as a ‘lease’. 521. In respect of the lease of agriculturally used real property a Statute on Agricultural Lease840 provides protective rules for the tenant.

837. Cf. §560 Civil Procedure Code. 838. Cf. §1091 ABGB. 839. This distinction gave rise to numerous decisions of the Austrian Supreme Court which are mainly published in the ‘tenancy-and-lease-law reports’, the ‘Mietrechtliche Entscheidungen’; ‘MietSlg’; cf. OGH 16 Jan. 1985, SZ 58/8; OGH 10 Dec. 1985, MietSlg 37.123; OGH 3 Sep. 1986, MietSlg 38.135; OGH 19 Oct. 1988, MietSlg 40.110; OGH 13 Dec. 1988, MietSlg 40.111; OGH 31 Aug. 1989, MietSlg 41.081; OGH 23 Nov. 1989, MietSlg 41.085; OGH 18 Jan. 1990, MietSlg 42.082, etc. 840. Landpachtgesetz, ‘LPG’, BGBl. 1969/451.

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Part II, Ch. 8, Tenancy, Lease and Leasing

522–523

§7. LEASING 522. Leasing has become popular as a financing instrument and for fiscal reasons.841 It combines elements of tenancy with those of sale and is not specifically regulated in the General Civil Code. Therefore, it appears to be a ‘mixed type of contract’ which was created under the influence of Anglo-American law. The lessor may either be the producer of the leased object, or a leasing company. In case of a ‘sale-and-lease-back’ agreement the lessee sells a piece of property to the lessor to lease it back immediately. Whenever the lessor has the function of a grantor of credit, the leasing is labelled ‘finance leasing’. 523. As opposed to a tenant, the lessee bears the risk of accidental destruction or loss of the leased object. Leasing companies tend to exclude warranty and assign their warranty rights against the original supplier to the lessee. Often, the lessee will be offered the option to buy the leased object at the end of the leasing period at a low price. Such agreements appear to be governed by the rules of the Consumer Credit Act on combined credit contracts.842

841. For a comprehensive study on Leasing in Austrian law, see, Egger/Krejci (eds.), Das Leasinggeschäft (1987). 842. §§13 et seq. VKrG.

2

524–525

Chapter 9. Service Contract §1. THE CONCEPT OF SERVICE CONTRACT 524. Due to its early date of enactment, the Austrian General Civil Code did not provide rules for ‘employment contracts’.843 Like their German counterparts some eighty years later the draftsmen of the Austrian codification used the word ‘service contract’844 instead. Thus, the Austrian law adheres to an obsolete and preindustrial concept to characterize the complex relationship between an employer and an employee, and the Third Amendment of 1916 did not change much in that regard. When Marxist ideas emerged by the end of the nineteenth century, the rise of the Social Democratic Movement made the creation of protective rules on employment contracts an important political concern. The breakthrough came no sooner than 1918 with the end of the Monarchy. Since then, the specific legal rules dealing with this relationship have been steadily developing to become the core of a new field of law, which finally became a comprehensive new discipline in the law. Numerous specific statutes have been enacted so far to constitute the field of ‘labor law’ which has become more and more independent of civil law.845 Within this system the importance of sections 1151 et seq. ABGB on ‘contracts for services’ was fading away. Today, these provisions serve only as subsidiary rules: Whenever no other specific legal rule applies, sections 1151 et seq. ABGB will constitute the statutory basis for the employer–employee relationship. Civil servants, however, are subject to detailed regulations of public law character. 525. In a service contract a person commits himself to perform services to another person for a given period of time.846 As opposed to a ‘work contract’ which binds a person to perform a particular work for another, the ‘servant’ or ‘employee’847 does not owe a specific result or success to the employer. Within the framework of the contract, the employer can dispose of the employee’s time and capacities by giving directions to the employee. These principles apply, e.g., to ‘laborers’, viz., ‘unskilled workers’, as well as to highly qualified academic graduates from professional schools, managers, directors, and so forth.

843. In German, Arbeitsvertrag. 844. In German, Dienstvertrag. 845. As this field of law is covered by a separate volume in this encyclopaedia, nothing but a sketchy picture of the rules of the General Civil Code on ‘contracts for service’ and their remaining practical importance can be offered in this monograph. 846. Cf. §1151(1) ABGB. 847. For the purpose of this chapter the word ‘employee’ is used for the German ‘Dienstnehmer’, and ‘employer’ for ‘Dienstgeber’.

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Part II, Ch. 9, Service Contract

526–528

§2. RIGHTS AND OBLIGATIONS OF EMPLOYER AND EMPLOYEE 526. The employee must provide his working capacity as agreed in the contract. He is entitled to payment, usually at the end of a month.848 The extent of the employer’s right to give directions with regard to working hours, overtime, paid holidays, and the place where the work must be performed is strictly regulated by statute and collective agreement provisions. Actual dates for vacation shall be fixed by individual agreement. An employee must not only perform the service personally,849 he must also observe duties of care and good faith vis-à-vis his employer.850 Employees have the duty to abstain from any betrayal of trade secrets and must avoid causing damage to their employer or a third person in the performance of their duties under the service contract. The liability of employees is determined by a specific Statute on the Liability of Employees.851 Under this law, the employee’s obligation to pay damages is limited. 527. According to section 1157 ABGB,852 an employer is obliged to give an employee social and medical assistance, and he must provide for the employee’s safety at work. According to section 1154 b ABGB, an employee is not deprived of his right to payment for a period of six weeks, if after he has started his employment he becomes ill or suffers from an accident, provided that the illness or accident was not wilfully or by gross negligence caused by him.853 §3. TERMINATION OF CONTRACTS OF EMPLOYMENT 528. The general rules on the termination of contracts for the performance of a continuing obligation854 apply to service contracts concluded for an indefinite period of time. Such contracts may be terminated by giving due notice provided certain periods and dates are respected. The respective rules play a minor role since they are nearly completely superseded by more specific provisions.855 Contracts limited in time simply expire. Employees meriting particular protection as, for

848. Cf. §1152 ABGB. ‘If neither a certain consideration nor the absence of consideration is set forth in the contract, a reasonable consideration is regarded as provided therein’; and §1154(2) ABGB: ‘If the consideration is payable monthly or for shorter periods it must be paid at the end of each period; if it is payable for longer periods it must be paid at the end of each calendar month … ’ 849. It may be expressly agreed otherwise, cf. §1153 ABGB. 850. In German, Treuepflicht. 851. Dienstnehmerhaftpflichtgesetz, ‘DHG’, BGBl 1965/80. 852. §1157 ABGB states the employer’s duty of care and assistance (Fürsorgepflicht) vis-à-vis the employee. According to its sub-para. (1), ‘[t]he master must regulate the performance of the service and must, at his own expense, take all possible care with respect to the rooms and implements contributed or to be contributed by him so that the life and health of the servant are protected insofar as is possible according to the nature of the service’. 853. §1154b ABGB, as amended by BGBl I 2000/44. After five years of employment the six week period is extended to eight weeks. 854. In German, Dauerschuldverhältnisse. 855. Cf. §1159, 1159a and 1159b ABGB.

21

529–529

Part II, Ch. 9, Service Contract

instance, members of the works council856 or pregnant women, enjoy a privileged status. In certain cases, a dismissal to have effect requires approval by the works council; in other cases, the employee may protest against the dismissal. According to section 1162 ABGB, a service contract, even if entered into for a definite time, ‘may be rescinded before the lapse of this time, at any time without a period of notice of termination, by either party for good cause’. Section 1162a to 1162d ABGB provide for the legal consequences of an unjustified premature dissolution of a service contract. These provisions apply only in the absence of a more specific provision. So-called chain contracts, i.e., a number of contracts for services between the same employer and the same employee which follow one upon the other without interruption, are considered one contract since the duration of an employment affects the employee’s entitlement to holidays and dismissal pay.857 §4. INDEPENDENT EMPLOYMENT CONTRACTS858 529. Since the draftsmen of the General Civil Code understood employment for services as a master–servant relationship, the rules on service contracts are based on the assumption of the employee’s personal dependency on the employer. To a high extent, protective provisions enacted at a later time were aiming at the mitigation of the adverse consequences of the dependency of the employee. The purpose of independent employment contracts is the establishment of relations between employer and employee without economic and personal dependency of the latter. In general, protective labour law provisions do not apply to such contracts, therefore. Lawyers, medical doctors, ‘independent journalists’, members of boards of directors of public limited companies, etc., generally perform their services without being subject to orders from an employer, and without being integrated into the organization of an enterprise.

856. In German, Betriebsrat. 857. In Austrian legal terminology the respective German term is ‘Abfertigung’. 858. The German word is ‘freie Dienstverträge’.

2

530–532

Chapter 10. Work Contract 530. The General Civil Code of Austria deals with work contracts in close connection with service contracts. Whereas most of the antiquated provisions on service contracts have lost their practical importance because of specific legislation in the field, the rules on work contracts continue to be effective. According to the second sentence of section 1151(1) ABGB, a work contract is concluded ‘if a person undertakes to perform some work for consideration’. As opposed to the service contract in which a person owes an effort, a work contract obliges a person to produce a certain result. The amount of work performed is not evaluated separately, but is merely regarded as a means to bring about the agreed result. The statutory definition is, however, insufficient since piece workers are also paid according to their productivity, and yet they are not parties of a work contract. Thus, additional criteria must be adopted in order to be able to clearly differentiate. An employee is dependent and performs work as determined by his employer, whereas a work contractor is independent. §1. CHARACTERISTIC ELEMENTS 531. Characteristic features of a work contract are: (a) that one of the parties has to produce a certain work, and (b) that the party ordering this work is, as a rule, bound to pay some remuneration for it. I. Creation of a Result 532. Whereas a ‘service contract’ imposes on the employee the duty to make efforts in carefully performing the services, a work contract is directed to the ‘making of a work’, i.e., an actual result which can be either material or immaterial, e.g., the construction of a building, the passing on of an expert information, the composition of an opera, the writing of a novel,859 as well as the transportation of persons or goods.860

859. The rules of the General Civil Code on publisher’s contracts are §1172 and §1173. §1172 ABGB reads: ‘In a publisher’s contract, an author of a work of literature, music or the fine arts, or his legal successor, binds himself to entrust the work to the publisher for reproduction and distribution on his own account and the publisher binds himself to reproduce and to distribute the work’; and §1173 ABGB reads: ‘If the contract does not specify the number of editions, the publisher is entitled only to one edition. Before the complete sale of an edition the author may dispose otherwise of the work only if he pays an adequate indemnity to the publisher.’ These rules have lost their importance as the Statute on Coypright of 1936 (Urheberrechtsgesetz, ‘UrhG’) includes detailed rules on this specific type of works contract in §§14 et seq. 860. For this type of work contract, specific regulations are provided in a number of separate statutes. Also under the law of land-locked Austria, ‘transport law’ is emerging as a specific field of law.

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II. Consideration 533. Whether a work contract can only be concluded ‘for consideration’ is doubtful. Consideration is deemed to be a regular requirement although section 1152 ABGB refers to work contracts in which no consideration is agreed upon by the parties. According to the law, in such an unclear situation ‘a reasonable consideration is regarded as provided therein’. §2. OBLIGATIONS OF THE PARTIES I. Duties of the Contractor 534. According to section 1165 ABGB, ‘[t]he contractor is obliged to carry out the work personally or to have it carried out under his personal responsibility’. The contractor must adhere to instructions of the principal given at the time of conclusion. The work must be delivered in time. 535. Until 31 December 2001, section 1167 ABGB provided for special rules on warranty for work contracts. Due to the general reform of the Austrian law on warranties, however, contracts for work became subject to the general provisions of warranty for non-gratuitous contracts, so that a uniform system was created.861 Thus, the new section 1167 ABGB does not have a normative content on its own; rather, it merely refers to sections 922 ABGB et seq. In substance, this change introduced a two-step system of remedies for breach of warranty to work contracts. Under this system, the nature of the defect in quality or the deficiency in title – that is, whether the defect is essential or non-essential or whether it is reparable or irreparable – is of no importance. Instead, section 932 ABGB primarily grants the principal the remedies of reparation and replacement. Which of these two remedies he eventually chooses, is principally up to his discretion. However, if a principal’s remedy of choice is either factually impossible or requires disproportionate expenses by the contractor, the latter could reject the remedy chosen and resort to the other.862 536. This system of warranty remedies aims at giving the contractor a second chance to perform. The reparation or replacement has to take place at the original place of performance, and it has to be within reasonable time. Only if this period of time lapses without successful repair or replacement, or if the contractor generally rejects any second performance, or if both, reparation and replacement are impossible or disproportionate, may the principal claim price reduction or rescission. For the latter remedy, however, it is required that the defect in quality is not of such a minor nature that declaring the contract void would constitute a disproportionate sanction.863 861. BGBl I 2001/48. 862. Cf. §932(2) ABGB. 863. Cf. §932(4) ABGB.

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537–539

One particularity remains with regard to warranty and work contracts: According to section 928 ABGB, a waiver of warranty remedies is generally of no consequence if the defect is fraudulently concealed or an express stipulation was made by the transferor that the good is free from defects. This provision is inapplicable to work contracts. The reason for this is that section 928 ABGB focuses on the time of the conclusion of the contract – a time at which the work contracted for does not exist yet.864 537. Under the Austrian rules on work contracts, the contractor has a specific duty to warn the principal who furnishes the materials for the work or gives instructions, if it is obvious that these materials are defective or the instructions incorrect. If the work is frustrated because of such obvious defects in the material or incorrect directions by the principal, the contractor, according to the last sentence of section 1168a ABGB, ‘is liable for any damages caused thereby if he did not warn the principal against such defects’. II. Duties of the Principal 538. The principal has a special duty of care and assistance.865 This follows from the reference to section 1157 ABGB provided by section 1169 ABGB. The relevance of this duty of care which is rather designed for contracts of services or labour contracts is limited in respect of contracts of work. It may have some importance, e.g., in cases where the contractor lives with the principal for the time of the manufacture. 539. The principal has the duty to pay the stipulated price, generally after the work is terminated.866 In the absence of an agreement, the customer owes a reasonable consideration.867 Specific rules exist for contracts which are based upon an estimate of cost,868 according to section 1170a ABGB, which makes a distinction between guaranteed and non-guaranteed estimates. If the correctness of the estimate has expressly been guaranteed, the contractor cannot demand an increase of the price even if the cost of the estimated efforts to make the work has been unforeseen. However: [i]f the basis of the contract was an estimate without guarantee, and if it appears that an amount substantially in excess thereof will be unavoidable, the

864. Cf. Welser/B. Jud, Die neue Gewährleistung, 51. 865. In German, Fürsorgepflicht. 866. ‘If, however, the work is done by several partial performances, or if expenses are connected therewith which the contractor did not agree to bear, the contractor may,’ according to the second sentence of §1170 ABGB, ‘demand prior to termination a proportionate share of the price or a refund of such expenses paid by him’. 867. Cf. §1152 ABGB. 868. In German, auf der Grundlage eines Kostenvoranschlags.

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principal may rescind the contract upon payment of an adequate consideration for the work completed by the contractor.869 In a case of doubt it is presumed that estimates for business transactions are given without guarantee. The provisions of the Code on work contracts do not require that the principal contributes to the completion of the work. However, such contribution may be provided by the contract. In this case, the contractor may grant an adequate time to the principal who fails to cooperate in compliance with the contract. After the expiration of such time without success, the contract will be considered terminated. Unless otherwise provided in the contract, the principal’s duty to take delivery does not amount to a true obligation.870 The principal must merely provide consideration. §3. RISK OF LOSS 540. If the completion of the work is prevented accidentally the work contractor and principal divide the risk according to sections 1168 et seq. ABGB. If the performance is thwarted due to circumstances which originate in the sphere of the principal (e.g., the object to be treated is lost or destroyed as long as it is under the principal’s custody), the contractor is nevertheless entitled to receive the consideration therefor, provided that he was ready to perform.871 The principal bears the risk of having to pay the price even in the case of total loss of the object. The contractor must, however, subtract from his claim the amount saved by not having performed the work or by using the materials for which consideration was included in the original price, or which he has earned or intentionally omitted to earn through other work.872 On the other side, the work may be destroyed by accident before it has been accepted by the principal. In this case the failure of the work is rooted in the contractor’s sphere and that explains why the contractor is not entitled to demand the price. In this case, according to section 1168a ABGB, ‘[t]he risk of loss of the material is upon the party who furnished it’.

869. Cf. §1170a(2) ABGB, which provides in its second sentence that ‘[a]s soon as such an excess appears to be unavoidable, the contractor must notify the principal immediately thereof, or he shall lose his claim for the additional work’. 870. Cf. supra, n. 316 and n. 325. 871. In such a case, the contractor was clearly prevented from making the work by circumstances for which the principal is responsible (cf. §1168 ABGB), or which were generated within ‘the sphere of the principal’. Therefore, this legal approach to the distribution of risk is called in German ‘Sphärentheorie’. 872. Cf. §1168(1) ABGB first sentence. However, if the earnings of the contractor were diminished through loss of time, he may claim an adequate indemnity therefor.

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§4. THE END OF THE CONTRACT 541. A work contract ends with performance, i.e., the completion and delivery of the work by the contractor and the payment by the principal. Death of the principal usually has no effect on the mutual obligations. According to the last sentence of section 1171 ABGB, his heirs remain bound by the contract. However, if the work becomes useless (e.g., a tailor-made suit) section 1168 ABGB applies and performance is regarded to be prevented by circumstances originating in the customer’s sphere. Therefore, the contractor is entitled to payment but must deduct from his claim any amount saved. According to section 1171 ABGB, the contractor’s death puts an end to a work contract only if the agreement of the parties required that the specific personal qualifications of the contractor are essential.873 542. If a work contract provides for the cooperation by the principal and the principals fails to cooperate, the contractor has the right to terminate the contract by declaring its avoidance after the expiration of the grace period he has granted in accordance with section 1168(2) ABGB. §5. THE RELATION OF WORK AND SALES CONTRACTS 543. In contrast to the German Civil Code, the Austrian codification does not include provisions on ‘contracts for work and materials’,874 viz., work contracts in which the contractor supplies the material from which the work is to be made. Such a contract appears to be a combination of a contract for the sale of the raw material and a work contract. In respect of these ‘mixed contract types’ the question arises, whether the rules on the law of sales or those on work contracts apply. According to section 1166 ABGB, these contracts must in doubtful cases be considered sales contracts. In the light of this provision the delimitation of a work contract vis-à-vis a contract of sale causes no difficulty in the following cases: (a)Whenever the work contractor uses no materials at all, e.g., performs an advisory activity. (b)Whenever materials play a minor role, e.g., the use of sheets of papers for writing an expert opinion. (c)Whenever the principal fully or predominantly provides the materials. (d)Whenever the principal procures the ‘main object’ and the contractor merely procures collateral materials which then become part of the main object.

873. In this case, the heirs of the contractor can demand only the price for any materials used and for those useful parts of work already completed. 874. Cf. §651 of the German Civil Code on the so-called Werklieferungsvertrag.

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Chapter 11. Civil Partnership 544. In its chapter on ‘common ownership of property and other common real rights’875 the Austrian General Civil Code provides a definition of the concept of ‘community’876 and mentions the ways such a ‘community’ may be created. According to section 825 ABGB, a community ‘exists where the ownership of the same property or rights belongs to several persons undivided’. It ‘may be based on the circumstances, a law, a declaration of a last will, or a contract’. Section 826 ABGB refers to ‘chapter twenty-seven’ of the General Civil Code, viz., sections 1175 et seq. ABGB. There, the ‘special provisions with regard to common ownership of goods arising from a contract’ can be found. These provisions are outdated. A comprehensive overhaul of this chapter is currently (2012) in the making. 545. According to section 1175 ABGB ‘[a] contract in which two or more persons877 agree to unite their services or their property for common benefit establishes a partnership for common gain’. Thus, the obsolete terminology of the Austrian General Civil Code conceives a ‘civil’ partnership agreement to promote a common profitable purpose as ‘a contract for the creation of a common ownership of property’. The conclusion of such contracts requires no formality. The civil partnership878 lacks legal personality and may not be sued, or sue itself. Its entry into the register of firms is not permitted. The assets of a civil partnership are co-owned by the partners and form a separate estate. In principle, the partners are responsible for the debts of the partnership with its total assets, and pro rata as to their private estate.879 Unless otherwise provided in the contract, all acts in the ordinary course of business have to be conducted jointly by majority decision. Usually, the parties to the contract provide for the distribution of losses and earnings and fix the members having to run the management and render the accounts. 546. The rules of the General Civil Code on ‘civil partnerships’ have lost much of the practical importance they may have had at the time of their enactment, since an elaborate system of specific statutes on the different types of commercial partnerships and corporations has later been established. This system can be structured as follows: (1) Civil law partnership (sections 1175 et seq. ABGB). (2) General (commercial) partnership880 (sections 105 et seq. UGB). (3) Limited (commercial) partnership881 (sections 161 et seq. GB).

875. 876. 877. 878. 879.

Cf. §§825 et seq. ABGB. In German, Gemeinschaft. Either ‘natural persons’, or ‘legal entities’. In German, Gesellschaft bürgerlichen Rechts, ‘GesBR’. If the civil partnership runs a small trading business, which does neither require a commercial organization nor registration, the liability of the members is joint and several. 880. In German, Offene Gesellschaft, ‘OHG’. 881. In German, Kommanditgesellschaft, ‘KG’.

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(4) Public limited company (stock company)882 (AktG). (5) Private limited company883 (GmbHG). (6) Registered cooperative884 (GenG). For details consultation of the respective monographs of the Encyclopaedia is suggested.

882. In German, Aktiengesellschaft, ‘AG’. 883. In German, Gesellschaft mit beschränkter Haftung, ‘GmbH’. 884. In German, Genossenschaft, ‘Gen’.

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Chapter 12. Gambling and Wagering Contracts 547. According to section 1267 ABGB, the characteristic element of a ‘gambling and wagering contract’885 is the ‘promise and acceptance of the hope of an uncertain advantage’. Such contracts may be gratuitous or non-gratuitous. Due to their risky character, contracts of gambling and wagering are subject to specific rules in respect of their enforceability and the available remedies in case of breach. Thus, the legal remedy of rescission for laesio enormis is not available.886 548. The General Civil Code distinguishes seven different types of gambling and wagering contracts:887 (1) (2) (3) (4)

Bet (section 1270 and section 1271 ABGB). Gambling (section 1272 ABGB). Drawing of lots (section 1273 and section 1274 ABGB). Contract of sale and other contracts in regard to expectations or to future, uncertain rights888 (sections 1275–1283 ABGB). (5) Annuity (sections 1284–1286 ABGB).889 (6) Common maintenance contracts (section 1287 ABGB).890 (7) Insurance contract (sections 1288–1292 ABGB). 549. ‘A bet arises where parties specify a certain sum to be paid to the one of them whose proposition concerning an event unknown to all of them is correct.’891 The bet is null and void if the winning party fraudulently concealed that he or she knew of the event in advance, whereas a losing party who was certain of the event is to be considered as a donor. Since the stipulated sum cannot be demanded in court, it must be actually paid or deposited. This is due to the fact that a bet creates an unenforceable ‘natural obligation’.892 For the state lottery, however, section 1274 ABGB states that the winner may enforce his claim against the lottery. The Supreme Court applied this provision to authorized bookmakers as well.893 550. According to section 1272 ABGB, ‘[e]very game is a sort of bet’. Therefore, section 1270 and section 1272 apply to games as well. The rules on bets and gambling apply likewise to the drawing of lots the object of which is a bet or a game between private persons. A number of games are prohibited by the Statute on Gambling.894 885. In German, Glücksvertrag. 886. Cf. §1268 ABGB. ‘In contracts on gambling and wagering the legal remedy of recission where the value of the property exchanged differs by more than one-half thereof is not applicable.’ 887. Cf. §1270 ABGB. 888. In German, Hoffnungskauf. 889. In German, Leibrente. 890. In German, gesellschaftliche Versorgungsanstalt. This contract type is obsolete. 891. Cf. first sentence of §1270 ABGB. 892. Cf. §1271 ABGB; cf. supra, n. 127. 893. OGH 30 Oct. 1998, JAP 1999/2000, 33. 894. Glückspielgesetz, BGBl 1989/620.

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551–554

551. Section 1275 ABGB deals with the ‘emptio rei speratae’895 and section 1276 with the ‘emptio spei’.896 A party to the former type of contract ‘promises a proportionate price for a determined amount of some future product’ and concludes thereby ‘an ordinary contract for buying’, as opposed to a person who buys for a certain price the expectation of a future profit of a property: Such party bears the risk of his or her expectation being entirely frustrated and cannot resort to the remedy of laesio enormis, since this type of contract is a gambling and wagering contract. A specific type of speculative contract of buying is the purchase of an inheritance according to sections 1278 et seq. ABGB.897 552. Another type of gambling and wagering contracts which the General Civil Code provides for is the annuity. An annuity is, according to section 1284 ABGB, ‘a promise, made for money or for property valued in money, to make a certain yearly payment during the life-time of a certain person’. Usually, the duration of the annuity depends on the life of a party, but it may be made contingent upon the lifetime of a third person. 553. The codification of Austrian private law also understands insurance contracts as a type of gambling and wagering contracts and provides for these contracts very insufficient and sketchy rules. The explanation therefor can be easily found in the fact that insurance contracts had little importance in the late eighteenth and early nineteenth century when the time the draftsmen of the General Civil Code prepared the codification. 554. The increasing importance of the insurance industry gave rise for the enactment of specific insurance statutes, and the whole field of insurance law has become a separate and complex field of private law. Austrian statutes in that area are highly consonant with the relevant laws in Germany. The most important statute is the Statute on Insurance Contracts of 1958,898 which had to be brought into compliance with EU-law by far-reaching amendments as a result of the participation of Austria in the EEA Treaty.899

895. 896. 897. 898. 899.

In German, Kauf einer erhofften Sache. In German, Hoffnungskauf. This agreement is usually treated in the context of the law of succession. Versicherungsvertragsgesetz, BGBl 1959/2; as most recently amended by BGBl I 2013/12. One of the most important innovations of the amendment, BGBl 1993/90, which has come into force on 1 Jan. 1994 together with the European Economic Area Treaty, is the insured party’s right to rescind the contract within thirty days in the case the contract has not been concluded by an Austrian business establishment of the insurer; cf. new §165a of the statute.

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Chapter 13. Consumer Transactions 555. The Consumer Protection Act of 8 March 1979900 applies to contracts concluded between a businessman and a consumer.901 To the benefit of the consumer the statutory provisions of the Consumer Protection Act are mandatory. If the parties agree on derogating contract terms to the disadvantage of the consumer, this agreement is invalid.902 As a reaction to the Directive 2011/83/EU of the European Parliament and of the Council of 25 October 2011 on consumer rights,903 a comprehensive reform of the Act has been brought about as a result of the implementation of the Directive 29011/83/EU on consumer rights.903.1 In Addition to amendments of the Consumer Protection Act a second new statute on, ‘distance-’ and ‘off-premises contracts’ was enacted and became effective on 13 June 2014.903.2 556. Section 6 KSchG provides for an enumeration of contract terms which can become invalidated without affecting the validity of the remaining contract. Section 6(1) KSchG includes a catalogue of clauses which are void if included in a standard term contract: clauses of this type include, e.g., terms setting an unreasonably long or undefined time period for accepting or rejecting an offer or carrying out a performance by the businessman; terms by which an act or omission of the consumer is presumed to be a declaration unless the consumer is granted adequate time to make an express declaration; terms by which a declaration of legal importance by the businessman is deemed to have already been received by the consumer; terms imposing on the consumer formalities going beyond written form; terms excluding liability of the businessman for personal injuries caused to the consumer and terms excluding liability for damage to the consumer’s property if the businessman acts grossly negligent or intentionally; shifting the burden of proof from the businessman to the consumer, etc. Section 6(2) KSchG provides for a number of clauses which are only valid if individually negotiated by the partners of a consumer transaction. Clauses of this type include terms allowing the businessman to withdraw from his obligation to perform without good cause; terms allowing the businessman to alter arbitrarily the performance to which he is obliged; terms permitting price increases by the businessman when performance is due within two months; terms that make all disputes between a businessman and a consumer subject to arbitration, etc. 557. With regard to warranty claims, the Austrian Consumer Protection Act contains a number of specific provisions dealing with the place of performance where

900. Konsumentenschutzgesetz, ‘KSchG’, BGBl 1979/140; as amended by BGBl I 2014/33. 901. Cf. §1 KSchG. 902. Cf. §2(2) KSchG. 903. O.J.EU L 304, 22 Nov. 2011, 64. 903.1. O.J.EU L 304, 22 Nov. 2011, 64. 903.2. The (innovative) German title of the statute is “Fern-und Auswärtsgeschäfte-Gesetz”, BGBl I 2014/33.

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the reparation or replacement has to take place,904 the effects of waivers and modifications,905 the installation of goods,906 and contracts of guarantee.907 All of these provisions entered into effect on 1 January 2002.908 558. Section 8(1) N. 1 KSchG states as a general rule that the duties of a businessman to repair and replacement are to be performed at the place of original delivery. If, however, a contractual agreement provides that a good has to be sent or transported to a place within Austria, the place where it is sent or transported to constitutes the place where repair or replacement have to take place. Alternatively, the consumer may claim that instead of at the place of delivery or at the place where a good was sent to, reparation or replacement is performed at the place where the usual place of the good is, provided that this place is to be not unexpected to, or requires disproportionate expenses on the part of, the businessman. In any case, as long as it is not economically unreasonable to the consumer, a businessman may require that the defective product is sent to him. Here, the businessman is liable for any loss or damage occurring in course of the transport, and he has to bear the costs of the transport. 559. To the benefit of the consumer, the warranty provisions of Section 922 ABGB et seq. are ius cogens.909 Thus, warranty remedy cannot be waived before the defect in quality or deficiency in title becomes known to the consumer. With regard to modifications of the limitation period, a distinction has to be made between movables and immovables: For immovable property, the limitation period may not be reduced in consumer contracts, whereas for used movables – but not for new ones – the standard limitation period of two years may be contractually reduced to one year.910 560. For consumer contracts which oblige a businessman to provide installation of a good, section 9a KSchG provides warranty remedies to the buyer if the installation is incorrect. Further, if a good which is intended to be installed by the consumer is installed incorrectly because of a shortcoming of the installation instructions, the consumer may also claim warranty remedies.911 Under both prongs of section 9a KSchG, the consumer may only claim the loss consisting in the defect itself, but not consequential damages.

904. 905. 906. 907. 908. 909. 910.

§8 KSchG. §9 KSchG. §9a KSchG. §9b KSchG. BGBl I 2001/48. §9(1) KSchG as amended by BGBl I 2001/48. §9(1) Sentence 3 KSchG contains a special provision for the sale of used cars which provides that the reduction of the limitation period is only valid if at least one year has passed since the date of the car’s first authorization by the public authorities. 911. To this extent, §9a KSchG implements the so-called IKEA-clause of Art. 2 (5) of the EU Consumer Sales Directive into domestic Austrian law.

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561. Throughout the EU, contractual guarantees have often led to the confusion of consumers. To change this, Article 6 of the EU Consumer Sales Directive912 requires the Member States to provide a minimum of transparency with regard to guarantees. Section 9b KSchG implements the guidelines of Article 6 into domestic Austrian law. In substance, Section 9b KSchG contains numerous formal requirements which have to be fulfilled by the businessman. Among these are, for instance, the duty to state the remedies available to a consumer under sections 922 et seq. ABGB and the duty to hand over, upon the request of a consumer, a copy of the guarantee statement which is in plain intelligible language and contains the essential particulars necessary for making claims under the guarantee (duration, territorial scope, etc.). If a businessman fails to act in conformity with these formal requirements, the guarantee is valid, but the businessman is liable for all losses suffered by the consumer due to his non-compliance.913 The precise scope and benefits of a guarantee depend on the businessman’s guarantee statement and the associated advertising. As a rule, a guarantee may not be used to replace or modify a consumer’s warranty remedies to his disadvantage. Instead, it may only provide for more protection than offered by the law of warranties.914 562. Contracts of sales allowing the purchaser to perform his duty by instalments often include terms providing automatic acceleration of the remaining payments, if the purchaser fails to pay an instalment in due time. The relevant rule requiring a minimum delay of six weeks, a warning notice, and the granting of a grace period of at least two weeks used to be provided by section 13 of the Consumer Protection Act, but has been moved to section 14(3) Consumer Credit Act.915 With regard to instalment sales and finance leasing contracts involving a consumer, the provisions of sections 16 et seq. KSchG on hire-purchase transactions used to be of some importance. Meanwhile the relevant rules are sections 13 et seq. Consumer Credit Act which provide the legal framework for all types of transactions having the same economic purpose as credit sales: the so-called combined credit contracts.916 563. Austria’s membership to the EEA Treaty, which came into effect on 1 January 1994, has already made it necessary to extensively amend the Consumer Protection Act in order to bring it into compliance with EC-Law. A first amendment917

912. Directive 1999/44/EC on certain aspects of the sale of consumer goods and associated guarantees of 25 May 1999, O.J.EC L 171, 7 Jul. 1999, 12. 913. §9b(4) KSchG. 914. Cf. §§922 et seq. ABGB. 915. BGBl I 2010/28. The former provision of §12a KSchG granting the consumer’s right to pay back a credit before the originally agreed time has found its new place in §16 VKrG. 916. The Consumer Credit Act has implemented the Directive 2008/48/EU on consumer credits, O.J.EU L 133, 22 Aug. 2008, 68. 917. BGBl 1993/247.

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of the Act of 1979 implemented the respective EC-Council Directives on consumer protection:918 (1) Off-premises contracts: The modification of section 3 of the Consumer Protection Act,919 which entered into effect together with the EEA Treaty on 1 January 1994, has brought a closer approximation of the wording to the EC-Council Directive on Contracts Negotiated away from Business Premises without substantially changing its content. As a result of the implementation of the Directive 2011/83/EU the rules on off-premises contracts are now provided by the new statute on ‘distance-’ and ‘off-premises contracts’.920/921 (2) Consumer credit: In reaction to the then existing Directive on consumer credit a number of new provisions had to be inserted (such as section 12a and section 26c) into the Consumer Protection Act922 to make Austrian consumer protection law comply with EC-law. Together with the original rules on consumer credit transactions these amendments have recently been repealed and the respective rules in the Consumer Protection Act became replaced by the provisions of the new Consumer Credit Act.923 (3) Package holidays: The provisions on package travel, package holidays and package tours,924 which mean a pre-arranged combination of not fewer than two out of three components, transport, accommodation, and other tourist services, are following the model of the EC-Council Directive of the same name. These regulations had become effective on 1 May 1994.925 The implementation of the Package Travel Directive by the Austrian legislator has given rise to two proceedings before the CJEU. In the first decision, the Court held that the limitation of coverage for travel agencies which has been imposed by law runs counter the Directive.926 In the second decision, the Court argued that Article 5 of the Directive provides – at least in principle – for the compensation for immaterial losses suffered by the buyer of travel package.927 As a consequence of the latter decision, section 31e (3) KSchG has been introduced which, under certain circumstances, compensates immaterial damages for lost delight.928 (4) Distance Selling: In the internet age, distance selling became an increasingly important channel of distribution. However, as this commercial practice is

918. These were the EC-Council Directives (some already replaced) on Contracts Negotiated away from Business Premises, of 20 Dec. 1985, O.J.EC L 372, 31 Dec. 1987, 31; on Consumer Credits, of 22 Dec. 1986, O.J.EC L 42, 12 Feb. 1987, 48; and on Package Holidays, of 13 Jun. 1990, O.J.EC L 158, 23 Jun. 1990, 59. 919. BGBl 1993/247. 920/921. BGBl I 2014/33, effective 13 June 2014. 922. Cf. BGBl 1993/247. 923. Cf. BGBl I 2010/28; effective 11 Jun. 2010. 924. Cf. §§31b to 31f of the Consumer Protection Act, inserted by BGBl 1993/247. 925. Cf. §41a of the Consumer Protection Act, inserted by BGBl 1993/247. 926. CJEU C-140/97, ECR 1999 I-3499 (Rechberger/Österreich). 927. CJEU C-168/00 ECR 2002 I-2631 (Leitner/ TUI Deutschland). 928. BGBl I 2003/91.

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564–564

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characterized by particular risks on part of the consumer, the former sections 5a et seq. KSchG contained provisions which aimed at protecting the consumer in such transactions, by imposing various duties on the businessman to inform the consumer contracting with him and giving the consumer the right to rescind the contract within seven work days. These provisions of the Consumer Protection Law were based on the EU Distance Sales Directive.929 Meanwhile the Directive 2011/83/EU on consumer rights930 brought certain modifications in favour of the consumer by widening the businessmen’s duties to pre-contractual information and expanding the period for withdrawal from off-premises and distance contracts by the consumer to fourteen days. These modifications have been transposed by the statute on distance and off-premises contracts.931 (5) Time-sharing: Time-sharing is a special form of marketing for, and use of, hotels and apartments in holiday resorts. As this practice has become increasingly popular, the European legislator passed a directive which aims primarily at protecting consumers.932 The Austrian legislative bodies had implemented that directive in the Act on Time-Sharing of 1997.933 This act was repealed, however, as a new time-sharing Directive934 had to be implemented. The new Act on Time-Sharing entered into effect on 23 February 2011.935 564. For online contracts, a popular form of contracts in the era of the internet, the Act on Electronic Commerce (ECG)936 provides specific regulations. This Act which entered into effect on 1 January 2002 implements the E-Commerce Directive.937 It aims at reducing the legal insecurities associated with online contracts in two regards. First, it puts substantial obligations on an operator of an online business to provide information to his contracting partner.938 These duties to inform imposed by the ECG may be put into two categories: On the one hand, a supplier of internet services has to provide his contracting partner with general information about his

929. Directive 97/7/EC on the protection of consumers in respect of distance contracts of 20 May 1997, O.J.EC L 144, 4 Jun. 1997, 19. 930. O.J.EU L 304, 22 Nov. 2011, 64. 931. BGBl I 2014/33, effective 13 June 2014. 932. Directive 94/47/EC on the Protection of Purchasers in respect of Certain Aspects of Contracts relating to the Purchase of the Right to use Immovable Properties on a Timeshare Basis of 26 Oct. 1994 (repealed). 933. BGBl I 1997/32 (Teilzeitnutzungsgesetz,‘TNG’). 934. Directive 2008/123/EC of 14 Jan. 2009 on the protection of consumers in respect of certain aspects of timeshare, long-term holiday product, resale and exchange contracts, O.J.EU L 33, 3 Feb. 2009, 10. 935. BGBl I 2011/8. 936. BGBl I 2001/152. 937. Directive 2000/31/EC of the European Parliament and of the Council of 8 Jun. 2000 on Certain Legal Aspects of Information Society Services, in particular Electronic Commerce, in the Internal Market, O.J.EC L 178, 17 Jul. 2000, 1. 938. §9 ECG.

23

Part II, Ch. 13, Consumer Transactions

564–564

business (e.g., name, physical address, etc.) and his product (price, quality, etc.). On the other hand, the user of an online business has to receive information on the technicalities of the contract, such as the individual technical steps which lead to the conclusion of a contract or the online location where the text of the contract is saved. Second, the ECG contains rules on when an offer or an acceptance is binding. Here, the solution corresponds to the general principles of the Austrian law of contract: An electronic offer or acceptance becomes binding when the person who receives it could, under regular circumstances, get at least theoretically knowledge of its content. In addition, however, the operator of an online business has to affirm immediately by an electronic means (e.g., e-mail) that he has received an electronic acceptance from the user. The ECG applies to all kinds of online contracts, not only to consumer transactions. Nevertheless, its primary intention is to protect consumers from shady practices in online commerce. Consequently, the ECG has an immanent tendency to favour the users of online transactions, which in a mass market amounts to an indirect means of consumer protection. An example of the Act’s consumer protectionism is e.g., section 10 ECG which provides that in consumer transactions, the obligation to affirm that an electronic acceptance has been received can neither be modified nor waived.

23

565–568

Chapter 14. Commercial Transactions 565. The Austrian ‘Enterprise Code’, originally ‘Commercial Code’ provides specific legal rules for contracts involving at least one entrepreneur (businessman) or enterprise as partner thereto. As mentioned earlier the Code was overhauled and renamed in 2005. The modifications entered into effect on 1 January 2007939 and constitute one of the most important reforms of Austrian Private Law in recent years. Primary goal of that reform was to approximate the rules of commercial law to the general rules of the General Civil Code and to eliminate unnecessary differences. It was a declared gaol of the reform to eliminate the outdated notion of ‘merchant’ as addressee of the Commercial Code. Indeed, ‘merchant’ has been replaced by ‘entrepreneur’ or ‘businessman’ who need not carry on a commercial business. The concept is wider than that of ‘merchant’ and includes all persons engaged in a self-employed occupation. All types of commercial companies and partnerships, such as public and private limited companies, mutual insurance companies, saving banks, general and limited partnerships as well as very small businesses qualify as enterprises or entrepreneurs. 566. Section 2 of the Act on Firm Books940 enlists fourteen categories of entrepreneurs who may have their firm entered in the public register, which had been reorganized by the ‘Statute on Firm Books’ in the early 1990s. The register informs about all vital legal and economic facts relating to business enterprises. Businessmen have to make entries in the register if they make significant changes in their business, and a third party may rely on the absence of such an entry, thus enjoying a limited protection of reliance.941 567. Sections 343–353 UGB provide rules for business transactions, or as they are now named: ‘enterprise-related transactions’.942 According to section 343(2) UGB, the concept of ‘enterprise-related transaction’ covers all the transactions of entrepreneurs relating to their business. It is rebuttably presumed that an entrepreneur’s transaction always relates to his business.943 As a rule, the specific provisions of enterprise law apply also to those contracts to which only one party is a merchant, with the exception of those provisions expressly requiring both parties to be entrepreneurs.944 If the partner of the entrepreneur is a consumer, the Consumer Protection Act applies to the transaction. 568. With regard to commercial transactions private autonomy is, like in general private law, the most significant principle of law. In general, no formalities need

939. 940. 941. 942. 943. 944.

23

Cf. BGBl I 2005/120. Firmenbuchgesetz, ‘FBG’, BGBl 1991/10. Cf. §15 UGB. In German now, Unternehmensbezogene Geschäfte. Cf. §344 UGB. Cf. §345 UGB.

Part II, Ch. 14, Commercial Transactions

569–570

to be observed. But statutory provisions may require, and parties to a contract may agree on a specific form. 569. With regard to commercial sales sections 373–382 UGB provide for specific rules modifying the general rules on sales.945 Since a goal of the reform was to eliminate unnecessary differentiations between Civil law and Commercial Law these differences have been reduced. Among the remaining modifications of the general rules of the law of sales, the following deserve to be mentioned: (1) Pursuant to commercial usages,946 a contract of sale can be concluded between entrepreneurs even if a price is not fixed: in such a case it is assumed that the parties wanted to agree on a reasonable price. (2) The rule of section 373 UGB according to which, in a case of delayed acceptance of delivery by the purchaser, the seller is entitled to deposit the goods in a public warehouse or in some other secure way at the risks and expenses of the purchaser; and after having warned the purchaser, he may by the way of ‘selfhelp’ have the goods sold by a commercial broker or a publicly authorized auctioneer for the account of the purchaser in delay. (3) The rule that, in contracts of sale involving two entrepreneurs as partners, section 378 UGB imposes on a merchant buyer the duty to examine the purchased good and to make notice within a reasonable time if defective or nonconforming goods have been supplied. If the merchant buyer fails to give such notice, he loses the right to file a warranty or damage claim. Obviously these modifications are aiming to comply with Articles 39 and 39 of the United Nations (UN)-Sales Convention. 570. In business activities the conduct of an enterprise or entrepreneur must be in conformity with fair dealing. If the entrepreneur fails to provide the standard of care, a correct businessman would observe in the circumstances, he will become liable for damages. According to section 349 UGB, compensation always extends to lost profits, irrespective of the degree of fault. The former statutory exclusion of the remedy of laesio enormis according to section 934 ABGB is abolished. However, according to section 351 UGB entrepreneurs may exclude it by individual agreement.

945. §§1052 et seq. ABGB. 946. Cf. §346 UGB.

23

570–570

23

Part II, Ch. 14, Commercial Transactions

Selected Bibliography

I. Legal Transactions (Das Rechtsgeschäft) A. LEGAL TRANSACTIONS IN GENERAL Bydlinski, F. Privatautonomie und objektive Grundlagen des verpflichtenden Rechtsgeschäfts. 1967. Canaris. ‘Bewegliches System und Vertrauensschutz im rechtsgeschäftlichen Verkehr’. Das Bewegliche System im geltenden und künftigen Recht (1986): 103. Kramer, E.A. Grundfragen der vertraglichen Einigung. 1972. Rummel. Vertragsauslegung nach der Verkehrssitte. 1972. Steinwenter. ‘Die Vertragstreue im bürgerlichen Recht’. JBl 1950, 173, 197, 225, 250. Wellspacher. Das Vertrauen auf äuβere Tatbestdnde im bürgerlichen Recht 1906. B. THE FORMATION OF CONTRACT Bydlinski, F. Privatautonomie und objektive Grundlagen des verpflichtenden Rechtsgeschäftes. 1967. Bydlinski, F. ‘Die Grundlagen des Vertragsrechts im Meinungsstreit’. Basler Juristische Mitteilungen. (1982):1. Bydlinski, P. ‘Zum Vertragsschluβ durch, stille Annahme’ (§864 ABGB). JBl 1983, 169. Kramer, E.A. Grundfragen der vertraglichen Einigung. 1972. Kramer, E.A. Die ‘Krise’ des liberalen Vertragsdenkens. 1974. Mayer-Maly. ‘Vertrag und Einigung’. Nipperdey-FS I (1965): 509. Mayer-Maly. ‘Von solchen Handlungen, die den Kontrakten in ihrer Wirkung gleich-kommen’. Wilburg-FS (1965): 129. Pletzer. Doppelveräußerung und Forderungseingriff. 2000. Welser. ‘Konsens, Dissens und Erklärungsirrtum’. JBl (1974): 79.

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Selected Bibliography 1. Standard Form Contracts Bydlinski. F. ‘Zur Einordnung der allgemeinen Geschäftsbedingungen im Vertragsrecht’. Kastner-FS (1972): 45. Bydlinski, F. ‘Die Kontrolle allgemeiner Geschäftsbedingungen nach dem österreichischen Konsumentenschutzgesetz’, Meier-Hayoz-FS (1982): 65. Bydlinski, F. ‘Allgemeine Versorgungsbedingungen und Energielieferungsverträge’. In Neumayer-FS. (1986): 115. Kramer, E.A. ‘Die normative Kraft des dispositiven Rechts: Am Beispiel der AGB der österreichischen Kreditunternehmungen’. ÖJZ (1973): 505. Mayrhofer. ‘Überlegungen zum Recht der allgemeinen Geschäftsbedingungen’. JBl 1993, 94 and 174. Roth. ‘Der Schutzzweck richterlicher Kontrolle von Allgemeinen Geschäftsbedingungen’. ÖZW (1977): 33. Schauer. ‘Die “Allgemeinen Geschäftsbedingungen für die Einlage auf Sparbüchern”’. QuHGZ 1985, H 2, 41. C. CONGRUENCY OF INTENTION AND DECLARATION Bydlinski. F. Privatautonomie und objektive Grundlagen des verpflichtenden Rechtsgeschäfts. 1967. Iro. ‘Versuch eines harmonischen Verständnisses der Bestimmungen über Willensmängel bei Verkehrsgeschäften’. JBl (1974): 225. Iro. ‘Zurechnung von Gehilfen im Recht der Willensmängel’. JBl 1982,470 und 510. Kramer, E.A. Grundfragen der vertraglichen Einigung. 1972. Rummel. ‘Von durchschauten Irrtümern, falschen Bezeichnungen und aufzuklärenden Miβverständnissen’. JBl (1988): 1. Rummel. ‘Probleme des Dissenses beim Vertragsabschluß’. Rz (1996): 2. Welser. ‘Konsens, Dissens und Erklärungsirrtum’. JBl (1974): 79. 1. Error Bydlinski, F. ‘Das österreichische Irrtumsrecht als Ergebnis und Gegenstand beweglichen Systemdenkens’. Stoll-FS (2001): 113. Kerschner. Irrtumsanfechtung insbesondere beim unentgeltlichen Geschäft. 1984. Rummel. ‘Anmerkungen zum gemeinsamen Irrtum und zur Geschäftsgrundlage’. JBl (1981): 1. Schwind. ‘Der Irrtum im Verkehrsrecht des ABGB und BGB’. JherJB 89, 118. Thunhart. ‘Die Beachtlichkeit des Irrtums als Interessenabwägung’. ÖJZ 2000, 447. Vonkilch. ‘Auslegung oder Anfechtung?’. JBl (2010): 3.

2

Selected Bibliography D. POSSIBILITY AND PERMISSIBILITY 1. Possibility Lukas. ‘Zur Haftung beim anfänglichen unbehebaren Mangel’. JBl 1992, 11. Rabel. ‘Zur Lehre von der Unmöglichkeit der Leistung nach österreichischem Recht’. In FS zur Jahrhundertfeier des ABGB II (1911) 821. Reischauer. Der Entlastungsbeweis des Schuldners. 1975. Ziegler. Die anfängliche Unmöglichkeit der Leistung. 1992. 2. Permissibility Kötz. ‘Die Ungültigkeit von Verträgen wegen Gesetz- und Sittenwidrigkeit’. RabelsZ 56 (1994): 209. Koziol. ‘Sonderprivatrecht für Konsumentenkredite’? AcP 188, 183. Krejci. ‘Bewegliches System und kombinatorisch gestaltete Anfechtungs- und Nichtigkeitstatbestände’. In Das Bewegliche System im geltenden und künftigen Recht. (1986): 127. Krejci/Ruppe/Schick.Unerlaubte Provisionen, Zuwendungen und Vorteile. 1982. Mayer-Maly. Das Bewuβtsein der Sittenwidrigkeit. 1971. Mayer-Maly. ‘Die guten Sitten als Maβstab des Rechts’. JuS 1986, 596. E. FORM OF LEGAL TRANSACTIONS Berger W. ‘Gesetzliche Formvorschriften für Rechtsgeschäfte nach Österreichischem Recht’. Gutachten für die Fachveranstaltungen des 3. Österreichischen Notariatskongresses 1986’175 Jahre ABGB’ (1986): 41. Bydlinski P. ‘Die Notariatsaktpflicht 1850 und heute’. NZ 1990, 289. Bydlinski P. Veräuβerung und Erwerb von GmbH-Geschäftsanteilen. 1991. Dehn. Formnichtige Rechtsgeschäfte und ihre Erfüllung. 1997. Fenyves. ‘Die zivilrechtliche Anerkennung von Vereinbarungen zwischen Angehörigen’. In Ruppe, Handbuch der Familienverträge, 2nd ed. (1985) 71 ff. Rechberger (Hrsg.). Formpflicht und Gestaltungsfreiheit. 2002. Rummel. ‘Probleme der gewillkürten Schriftform’. JBl (1980): 236. Schauer. ‘Zur Formpflicht der Vollmacht bei der Schenkung’. NZ 1984, 185. Welser. ‘Ehepakt, Erwerbsgesellschaft bürgerlichen Rechts und Formzwang’. GesRZ (1976): 34. F. CONVERSION AND CURE OF VOID LEGAL TRANSACTIONS Binder, M. Zur Konversion von Rechtsgeschäften. 1982.

2

Selected Bibliography Reich-Rohrwig. ‘Zur Heilung formunwirksamer Abtretungen von GmbHGeschäftsanteilen’. ecolex (1990): 546. G. CONDITIONS, TIME LIMITATIONS AND IMPOSITION OF OBLIGATIONS Bydlinski, F. ‘Unbedingte Pflichten aus behördlich genehmigungsbedürftigen Verträgen’. In Ostheim-FS (1990): 53. Schrammel. ‘Resolutivbedingungen im Arbeitsverhältnis’. ZAS (1984): 221. H. AGENCY (STELLVERTRETUNG) Demelius, ‘M. Wellspachers Vollmachtslehre’. AcP 153, 1. Riedler. ‘Reformbedarf beim Bevollmächtigungsvertrag?’. ÖJZ (2008): 667. Welser. Vertretung ohne Vollmacht. 1970. Welser. ‘Drei Fragen des Stellvertretungsrechts’, JBl (1972): 337. Wilhelm. Die Vertretung der Gebietskürperschaften im Privatrecht. 1981. II. Law of Obligations A. THE TERM ‘SCHULDRECHT’ Koziol, Die Beeinträchtigung fremder Forderungsrechte. 1967 B. ‘OBLIGATION’ (DAS SCHULDVERHÄLTNIS) Barta/CALL. ‘Der Sukzessivlieferungsvertrag’. JBl 1971, 76 und 117. Fenyves. Erbenhaftung und Dauerschuldverhältnis. 1982. Gschnitzer. ‘Die Kündigung nach deutschem und österreichischem Recht’, JherJB 76, 317 und JehrJB 78,1. Jabornegg. Zurückbehaltungsrecht und Einrede des nicht erfüllten Vertrages. 1982. C. CREATION OF OBLIGATIONS 1. Fundamentals Mayer-Maly. ‘Über den Sinngehalt von § 859 ABGB’. ÖJZ (1965): 64. 2. Creation by Legal Transaction and Preliminary Contact Frotz. ‘Die rechtsdogmatische Einordnung der Haftung für culpa in contrahendo’, Gschnitzer- GedS (1969): 163.

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Selected Bibliography Ostheim. ‘Zur Haftung für culpa in contrahendo bei grundloser Ablehnung des Vertragsschlusses’. JBl 1980, 522 und 570. Posch. ‘Zur Haftung des Kaufhausunternehmers für seine Angestellten’. ZfRV 1974, 165. Welser. Vertretung ohne Vollmacht. 1970. Welser. ‘Das Verschulden beim Vertragsabschluβ im österreichischen Recht’. ÖJZ (1973): 281. Welser. ‘Die culpa in contrahendo im österreichischen Recht’. LJZ (1984): 101. Welser. ‘Die vorvertraglichen Pflichten in der Rechtsprechung des OGH’, WagnerFS (1987): 361. 3. Subsidiary Agreements to intensify or diminish Obligations Hoyer. ‘Pauschalierter Schadenersatz ohne Schaden?’ ecolex (1999): 387. Mayrhofer, ‘Zur Rechtsnatur der Stornogebühr im österreichischen Privatrecht’. Herdlitczka- FS (1972): 187. Noll. ‘Die Konventionalstrafe – Rechtsprechung und wirtschaftlicher Hintergrund’, AnwBl. (2001): 354. Weilinger. ‘Zum Ersatz des die Vertragsstrafe übersteigenden Schaden im Handelsrecht’. JBl (1989): 356. D. CONTENTS OF AN OBLIGATION 1. Act and Omission BÖHM, P. Unterlassungsanspruch und Unterlassungsklage. 1979. SCHUSTER W.-BONNOTT, ‘Der privatrechtliche Anspruch auf Unterlassung’. JBl (1976): 281. 2. Money-debt and Interest Dehn, ‘Das Zinsrechts-Änderungsgesetz’. RdW 2002/424. Ertl. Inflation, Privatrecht und Wertsicherung. 1980. Graf, G. ‘Zinsen, Bereicherung und Verjährung’. JBl (1990): 358. Jud,W. ‘Marginalien zum Ersatz aufgewendeter und entgangener Zinsen’. OstheimF5 (1990): 113. KERSCHNER. ‘Aufrechnungsprobleme bei Bankgeschäften’. ÖBA (1989): 266. E. TIME AND PLACE OF PERFORMANCE Bydlinski, F. ‘Fälligkeit und Grundlagen des Entgeltanspruchs bei Störungen in der Erfüllung des Kaufes und Werkvertrages’. JBl (1973): 281.

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Selected Bibliography Dullinger. ‘Zur Bedeutng des Zahlungseingangs bei der Geldschuld imm Lichte der Zahlungsverzugsrichtlinie’, Koziol- FS (2010): 97. Koziol. ‘Zur Rechtzeitigkeit der Leistung bei Banküberweisungen’. RdW (1985): 148. F. CONTEMPORANEOUS PERFORMANCE (LEISTUNG ZUG UM ZUG) Bydlinski, F. ‘Die Einrede des nicht erfüllten Vertrages in Dauerschuldverhältnissen’, Steinwenter- FS (1958): 140. Demelius. ‘Aufschiebungsrecht des Schuldners wegen fälliger Gegenforderung bei Kaufverträgen mit mehreren Leistungspaaren’ .R. Schmidt-GedS (1966): 199. Iro. ‘Das Zug-um-Zug-Prinzip im Insolvenzverfahren’. RdW (1985): 101. Jabornegg, Zurückbehaltungsrecht und Einrede des nicht erfüllten Vertrages. 1982. Wahle. ‘Kaufrechtsstudien I: Setzt die Verurteilung zu einer Zug-um-Zug-Leistung Anbieten der Gegenleistung voraus?’. JBl (1965): 281. Wimmer. ‘Die Einrede der Unsicherheit in Zielschuldverhältnissen’. ÖJZ (1980): 449. G. IRREGULARITIES IN PERFORMANCE (LEISTUNGSSTÖRUNGEN) 1. Impossibility of Performance (Unmöglichkeit) Binder, M. ‘Die Beendigung arbeitsvertraglicher Bindungen bei Eintritt dauemder Leistungsunmöglichkeit’. Strasser- FS (1983): 271. Rabel. ‘Zur Lehre von der Unmöglichkeit der Leistung nach österreichischem Recht’, FS zur Jahrhundertfeier des ABGB II (1911): 821. Rabel. ‘Unmöglichkeit der Leistung’, Becker-FS. (1907): 171. Reischauer. Der Entlastungsbeweis des Schuldners. 1975. 2. Delay (Verzug) a.Debtor’s Delay in Performance Bydlinski, F. ‘Fälligkeit und Grundlagen des Entgeltsanspruches bei Störungen in der Erfüllung des Kaufes und Werkvertrages’. JBl (1973): 281. Gitschthaler. ‘Verzugsschäden und Verzugsbereicherung’. ÖJZ (1984): 233. Iro. ‘Zur Nachfristsetzung beim Rücktritt’. RdW (1988): 341. Rabl CH. Schadenersatz wegen Nichterfüllung. 1998. Wilhelm. ‘Der Verzug mit der Verbesserung als Problem der Gesetzeskonkurrenz zwischen Gewährleistung und Nichterfüllung’. JBl (1975): 190. Wilhelm. ‘Festsetzung der Gewährung der Nachfrist beim Rücktritt vom Vertrag?’. JBl (1965): 515. b.Creditor’s Delay Apathy, ‘Schadenersatz und Rücktritt bei Annahmeverzug’. JBl (1982): 561.

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Selected Bibliography Holzer, ‘Annahmeverzug des Arbeitgebers und Anrechnung anderweitig absichtlich versäumten Verdienstes’. RdA (1983): 7. Rabl CH., ‘Gläubigerverzug und beiderseitig zu vertretende Unmöglichkeit’. JBl (1997): 488. Rabl CH., Hinterlegung, Selbsthilfeverkauf und Preisgabe – Rechtsbehelfe im Annahmeverzug des Gläubigers. ÖJZ (1998): 688. 3. Breach of Warranty (Gewährleistung) Apathy. ‘Reisevertragsrecht und Gewährleistungsreform’. JBl (2001): 477. Augenthaler. ‘Zum Vorrang der Verbesserung nach dem GewRÄG 2001’. JBl (2006): 437. Bollenberger. ‘Das neue Wahlrecht zwischen Wandlung und Minderung’. RdW (2002): 713. Gruber M. Gewährleistung für bedungene Eigenschaften. 1990. Kandut. Das Gewährleistungsrecht beim Kauf. 1992. Kletecˇ ka. Gewährleistungsrecht neu. 2001. Kletecˇ ka. ‘Der geringfügige Mangel’. RdW (2003): 612. Krejci, Reform des Gewährleistungsrechtes. 1994. Kurschel. Die Gewährleistung beim Werkvertrag. 1989. Proschak. ‘Neues zum, geringfügigen Mangel’nach § 932 Abs 4 ABGB’, ÖJZ (2005): 900. Reischauer, ‘Das Wesen der Gewährleistung im römischen und im geltenden Recht’. ÖJZ (1976): 57. Welser. ‘Gewährleistung und Schadenersatz’. JBl (1976): 127. Welser. ‘Zwei Fragen des Gewährleistungsrechts’. JBl (1982): 585. Welser. ‘Qualitätsmängel und Quantitätsmängel’, Strasser- FS (1983): 919. Welser. ‘Entscheidung des verstärkten Senates und Reform des Gewährleistungsrechts’. ÖJZ (1993): 753. Welser. Schadenersatz statt Gewährleistung. 1994. Welser/JUD B. Die neue Gewährleistung. 2001. Welser/JUD,B. Reform des Gewährleistungsrechts – Die europäische Richtlinie über den Verbrauchsgüterkauf und ihre Bedeutung für ein neues Gewährleistungsrecht. 2000. 4. Positive Violation of Contract ( Positive Vertragsverletzung) Koziol. Österreichisches Haftpflichtrecht 2nd ed., vol. II (1984): 79. Kramer E.A. ‘Der Ersatz des Erfüllungsinteresses bei Sachmängelhaftung’. RabelsZ (1972): 653. Reischauer. Der Entlastungsbeweis des Schuldners. (1975): 147 ff. Schlesinger. ‘Die Lehre von den positiven Vertragsverletzungen und ihr Einfluβ auf das österreichische Recht’, ZBl 1926, 401. Schlesinger. ‘Das Wesen der positiven Vertragsverletzungen’. ZBl (1926): 721. Welser. ‘Gewährleistung und Schadenersatz’. JBl (1976): 127. 24

Selected Bibliography Welser. Schadenersatz statt Gewährleistung. 1994. Wilhelm. ‘Schadenersatz statt Gewährleistung auch beim Kauf’. ecolex (1990): 461. Wittwer. ‘Die positive Vertrags- oder Forderungsverletzung’. ÖJZ (2004): 166. 5. Laesio Enormis Bydlinski P. ‘Die Stellung der laesio enormis im Vertragsrecht’. JBl (1983): 410. Bydlinski P. ‘Ein letztes (?) Mal: Zum Anwendungsbereich der Laesio-enormisVorschriften’. JBl (2008): 744. Jud W. ‘Anfechtbarkeit des Unternehmenskaufs aus einer Verlassenschaft wegen laesio enormis oder Irrtums über den Wert’, Wagner- FS (1987): 213. Mayer-Maly. ‘Renaissance der laesio enormis’ Larenz- FS (1983): 395. Riedler. ‘Systemfragen zum Verhältnis von laesio enormis und Gewährleistung’. JBl (2008): 359. Stölzle. ‘Die Neuregelung der laesio enormis durch das KSchG’. AnwBl (1980): 66. Winner. Wert und Preis im Zivilrecht. 2008. Zemen. ‘Kunstkauf und laesio enormis’. ÖJZ (1989): 589. H. EXTINCTION OF AN OBLIGATION ( ERLÖSCHEN DER SCHULD) 1. Payment Koziol. ‘Kreditsicherheiten und Anfechtung der Erfüllung’. JBl (1983): 517. 2. Deposit Rabl CH. ‘Hinterlegung, Selbsthilfeverkauf und Preisgabe – Rechtsbehelfe im Annahmeverzug des Gläubigers’. ÖJZ (1998): 688. Reischauer. ‘Einige Gedanken zur Hinterlegung nach § 1425 ABGB’. ÖJZ (2001): 453. 3. Set-off ( Aufrechnung, Kompensation) Astner/Merdzo. ‘Die Aufrechnung als Kreditsicherheit in der Krise?’. ÖBA (2006): 497. Berger, K.P. Der Aufrechnungsvertrag. 1996. Bötticher. ‘Die “Selbstexekution” im Wege der Aufrechnung und die Sicherungsfunktion des Aufrechnungsrechts’, Schima- FS (1969): 95. Bydlinski, P. ‘Die Aufrechnung mit verjährten Forderungen: Wirklich kein Änderungsbedarf?’ AcP 196/1996) 276. Dullinger. Handbuch der Aufrechnung. 1995. Eypeltauer. ‘Verjährung und Aufrechnung’. JBl (1991): 137.

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Selected Bibliography Faistenberger. ‘Selbsttätige Aufrechnung oder Erfordernis einer Aufrechnungserklärung?’ Gschnitzer- GedS (1969): 129. Kerschner. ‘Aufrechnungsprobleme bei Bankgeschäften’. ÖBA (1989): 254. Koch. ‘Die Gegenseitigkeit und deren Nachbildung durch Aufrechnungsvertrag’. JBl (1989): 222. Krejci. ‘Zur Kompensation von Entgeltsforderungen des Arbeitnehmers mit Arbeitgeberansprüchen auf Schadenersatz’. ZAS (1980): 163. Reiterer. Die Aufrechnung. 1976. 4. Merger ( Vereinigung, Konfusion) Koziol. ‘Treuhänderischer Forderungserwerb durch den Bürgen’. RdW (1987): 182. 5. Waiver ( Verzicht, Entsagung, Erlass) Bydlinski F. ‘Wissens- und Willenserklärungen im Arbeitsrecht’. ZAS (1976): 126. Eypeltauer. Verzicht und Unabdingbarkeit im Arbeitsrecht. 1984. Koziol. ‘“Rückstehungserklärungen” von Ausgleichsgläubigern’. RdW (1988): 342. Migsch. ‘Der sogenannte Verzicht des Arbeitnehmers auf Ansprüche aus dem Arbeitsverhältnis’. Strasser- FS (1983): 255. Reinl. ‘Bedarf der Verzicht der Annahme?’ ÖJZ (1970): 263. Schwarz. ‘Verzichtslehre und Wissenserklärung im Arbeitsrecht’. RdA (1984): 1. 6. Lapse of Time, Termination ( Zeitablauf, Kündigung) Gschnitzer. ‘Die Kündigung nach deutschem und österreichischem Recht’. JherJB 76, 317 und JherJB 78, 1 (1926/28). Oetker. Das Dauerschuldverhältnis und seine Beendigung. 1994. I. TRANSFORMATION OF RIGHTS AND UND VERBINDLICHKEITEN)

OBLIGATIONS (UMÄNDERUNG DER RECHTE

1. Novation Bydlinski P. ‘Weitere Gedanken zur Novation’. ÖJZ (1983): 484. Bydlinski P. ‘Novation und Weiterhaftung – Versuch eines Resümees’. JBl (1986): 298. Lukas. ‘Novation zugunsten des Bürgen?’ ÖZW (1995): 40. Reischauer. ‘Gedanken zur Novation’. JBl (1982): 393. Reischauer. ‘Nochmals zur Novation’. ÖJZ (1984): 365.

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Selected Bibliography 2. Arrangement (Vergleich) Dolinar. ‘Die bedingte Parteihandlung’. ÖJZ 1970, 85 und 118. Fucik. ‘Der Vergleich’. ÖJZ (2008): 741. Holzhammer. ‘Der Prozeβvergleich’. Schima- FS’ (1969): 217. Konig. ‘Der gerichtliche Vergleich in der österreichischen Lehre’. JBl (1971): 467. Schumacher H. ‘Der Rücktritt vom gerichtlichen Vergleich – Ein Beitrag zur Dogmatik des Vergleichs’. JBl (1996): 627. 3. Acknowledgment (Anerkenntnis) Apathy. ‘Das Saldoanerkenntnis nach österreichischem Recht’. ÖBA (1999): 679. Hartl. ‘Das Anerkenntnis und seine Bedeutung für den Kraftfahrzeugschadensfall’. ZVR (1964): 309. Klein. ‘Konstitutives Schuldanerkenntnis und DHG’. DRdA (1969): 144. Künell. ‘Das an der Unfallstelle abgegebene Anerkenntnis und seine Wirkungen’. ÖJZ (1983): 626. Mänhardt. ‘Zwangsversicherung und privatautonome Schadensbereinigung nach Verkehrsunfällen’. ZWR (1970): 113. Zwirchmayr. ‘Das Schuldanerkenntnis nach Verkehrsunfälien’. OJZ (1966): 281. 4. Assignment of a Claim (Forderungsabtretung, Zession) Beig. Die Zession künftiger Forderungen. 2008. Bydlinski P. Die Übertragung von Gestaltungsrechten. 1986. Iro. ‘Probleme der “Haftung des Zedenten”’. JBl (1977): 449. Mayrhofer. ‘Abtretung von Bestandrechten und Abtretungsverbot’. ÖJZ 1973, 146 und 169. Rummel (Hrsg.). Sicherungszession in der Krise. 2003. Strasser/Grillberger. Probleme des Zessionskredites. 1976. Zehetner. Zessionsrecht. 2007. 5. Assumption (Delegation) of an Obligation {Schuldübernahme) Bydlinski P. Die Übertragung von Gestaltungsrechten. 1986. Fenyves. Erbenhaftung und Dauerschuldverhältnis. 1982 42 ff. Kastner. ‘Schuldübernahme bei Rückstellung von Untemehmungen’. ÖJZ (1948): 341. 6. Assumption of One Party’s Entire Contractual Position (Vertragsübernahme) Bydlinski P. Die Übertragung von Gestaltungsrechten. 1986 95 ff. 24

Selected Bibliography Gschnitzer. ‘Zur Vertragsübernahme, besonders beim Kreditverhältnis’. WilburgFS (1965): 99. Krejci. Betriebsübergang und Arbeitsvertrag. 1972. Krejci. ‘Ist zur Vertragsübernahme bei Unternehmensveräuβerung Dreiparteieneinigung erforderlich?’ ÖJZ (1975): 449. Reischauer. ‘Kreditnehmerwechsel und Höchstbetraghypothek’. JBl (1979): 298. Schwarz. Das Arbeitsverhältnis bei Übergang des Unternehmens. 1967. J. PLURALITY OF ENTITLED AND OBLIGED PERSONS (MEHRHEIT VON BERECHTIGTEN UND VERPFLICHTETEN) 1. Plurality of Creditors and Debtors Kocévar. ‘Gläubiger- und Schuldnermehrheit bei Bestandverhältnissen’. ÖJZ (1956): 284. Rudolf. Schuldner- und Gläubigermehrheiten nach dem ABGB und dem slowenischen Obligationenrecht. 1997. Selb. Mehrheit von Gläubigern und Schuldnern. 1984. Welser. ‘Die Gesellschaft bürgerlichen Rechts als Gläubiger und Schuldner’. GesRZ 1978, 141 und GesRZ 1979, 15. Welser/Graff. ‘Zum Rücktrittsrecht des Masseverwalters gem §21 KO im Konkurs eines ARGE-Partners’. GesRZ (1984): 121. 2. Contracts for the Benefit and to the Detriment of Third Parties Dullinger. ‘Zur Aufrechnung beim Vertrag zugunsten Dritter’. JBl (1988): 151. Große-Sender. ‘Bereicherungsrechtliche Rückabwicklung beim Vertrag zugunsten Dritter’. ÖJZ (1999): 88. Habersack. Vertragsfreiheit und Drittinteressen. 1992. Heilmann. ‘Der Vertrag zugunsten Dritter – ein schuldrechtliches Verfügungsgeschäft’. ÖJZ (1970): 177. Mayrhofer. ‘Verfügungs- und Verpflichtungsgeschäfte’, Schnorr- FS (1988): 673. Spielbüchler. Der Dritte im Schuldverhältnis. 1973. Welser. ‘Das Zivilrecht und das Dreiecksverhältnis zwischen Sozialversicherungsträger, Arzt und Patient’. Tomandl, Sozialversicherung: Grenzen der Leistungspflicht (1975): 115 ff. Welser. ‘Zur rechtlichen Zulässigkeit des “gespaltenen” Haftpflichttarifs’. ZVR (1973): 306. 3. Contract of Guarantee/Surety (Bürgschaft) Bydlinski F./Koziol. ‘Die persönlichen Sicherheiten im österreichischen Recht des 19. und 20. Jahrhunderts’. Les sûretés personelles III (1969): 355. Bydlinski P. ‘Einreden des Bürgen’. ÖBA (1987): 690. 24

Selected Bibliography Bydlinski P. ‘Moderne Kreditsicherheiten und zwingendes Recht’. AcP 190, 165 (1990). Bydlinski P. Die Bürgschaft im österreichischen und deutschen Handels-, Gesellschafts- und Wertpapierrecht. 1991. Bydlinski P. Die Kreditbürgschaft im Spiegel von aktueller Judikatur und Formularpraxis. 2003. Bydlinski P. ‘Der Bürge im Konkurs’. ÖBA (2005): 97. Habel in Hadding/Schneider. Recht der Kreditsicherheiten in europäischen Ländern. Teil VI: Osterreich (1986): 87 ff. Harrer. ‘Einreden des Bürgen’. Honsell- FS (2002): 515. Koziol. ‘Über den Anwendungsbereich des Biirgschaftsrechts’. JBl (1964): 306. Rabl Th. Die Bürgschaft. 2000. 4. Guarantee Agreement {Garantievertrag) Koziol. Der Garantievertrag. 1981. Koziol. ‘Zur Zulässigkeit abstrakter Rückgarantien nach österreichischem Recht’. ÖBA (1986): 443. Moschner. ‘ProblemeinternationalerBankgarantien’. BanMrc/j 1987, 152. Müller St. Die Bankgarantie im internationalen Wirtschaftsverkehr. 1988. Reidinger. Rechtsprobleme der Garantieabrede. 1987. Schinnerer. ‘Neue Wege zur Regelung der Bankgarantie’. Hämmerle- FS (1972): 311. 5. Delivery Order (Anweisung, Assignation) Fink H. ‘Anweisung auf Schuld und Anfechtung’. ÖJZ (1985): 433. Koziol. ‘Streckengeschäft und Anweisung’. JBl (1977): 617. Koziol. ‘Anweisung und Gläubigeranfechtung im Konkurs des Anweisenden’. JBl (1985): 586. Spielbüchler. DerDritte im Schuldverhältnis. 1973. III. Law of Sales A. IN GENERAL Kandut. Das Gewährleistungsrecht beim Kauf. 1992. Mayer-Maly. ‘Dogmatik und Interessenwertung im Kaufrecht’. ÖJZ (1973): 197. Rabel. Das Recht des Warenkaufs I (1936), II (1958).

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Selected Bibliography B. RETENTION OF TITLE (EIGENTUMSVORBEHALT) Bydlinski P. ‘Eigentumsvorbehalt und Rücktrittsrecht’. RdW (1984): 98. Bydlinski P. ‘Der Rücktritt vom Vorbehaltskauf’. JZ 1986, 1028. Frotz. Aktuelle Probleme des Kreditsicherungsrechts. (1970) 128. Hoyer. ‘Einseitig erklärter Eigentumsvorbehalt?’. WBl (1995): 181. Koziol. ‘Eigentumsvorbehalt und Schadenersatz wegen Sachbeschädigung’. JBl (1968): 493. Koziol. ‘zu Fragen des Eigentumsvorbehaltes’. QuHGZ (1970): 70. Mayrhofer. ‘Erweiterter Eigentumsvorbehalt und Sicherungsübereignung’. ÖJZ (1969): 197. Mayrhofer. ‘Eigentumsvorbehalt und WeiterveräuBerung der Sache’. GschnitzerGedS (1969): 285. Mayrhofer. Zur neueren Entwicklung der Kreditsicherung durch Fahrnis. 1968. Prunbauer. ‘Probleme des Eigentumsvorbehalts nach verjährter Kaufpreisforderung’. JBl (1981): 121. Spielbüchler. ‘Eigentumsvorbehalt und Verarbeitung’. JBl (1968): 689. Spielbüchler. ‘Zur dinglichen Rechtsstellung des Vorbehaltskäufers’. JBl (1981): 505. Wegan. ‘Kollisionen im Bereich von Eigentumsvorbehalt und Sicherungsübereignung’. JBl (1966): 512. C. RISK AS TO PAYMENT OF PRICE ( PREISGEFAHR) Rabl Ch. Die Gefahrtragung beim Kauf. 2002. Schilcher. ‘Die Preisgefahr beim Kauf’. JBl (1964): 395. D. OPTION TO REPURCHASE ( WIEDERKAUFSRECHT) Thöni. ‘Die juristische Person als Wiederkaufsberechtigter’. JBl (1989): 162. E. OPTION OF BUYER TO SELL TO THE SELLER ( RÜCKVERKAUFSRECHT) Zankl. ‘Zur Rechtsnatur des “Flaschenpfandes”’. JBl (1986): 493. Czermak. ‘Das Besitzkonstitut beim Sale-and-Lease-back-Verfahren’. ÖBA (1987): 247. F. PREEMPTION ( VORKAUFSRECHT) Faistenberger. Das Vorkaufsrecht. 1972. Krehan. ‘Fragen aus dem Vorkaufsrecht’. NZ (1981): 68. Mayer-Maly. ‘Bedingte und anfechtbare Vorkaufsfälle’. Wagner- FS (1987): 283.

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Selected Bibliography Umlauft. ‘Die Preisbestimmung beim Vorkaufsrecht für alle Veräußerungsarten’, Hofmeister- GedS. (1996): 663. G. CREDIT PURCHASE ( KREDITKAUF) Barta. ‘“Stillschweigender” Kauf auf Borg?’. Herdlitczka- FS (1972): 11 ff. H. SALE FINANCED BY A THIRD PARTY ( Drittfinanzierter Kauf) Iro. ‘Die Übertragung des vorbehaltenen Eigentums beim drittfinanzierten Kauf und beim Factoring’. Frotz- FS (1993): 101. Mayrhofer. ‘Die besonderen Vertragsarten des I. Hauptstücks des KSchG’. Krejci, Handbuch zum Konsumentenschutzgesetz (1981): 476 ff. Welser. ‘Anmerkungen zum Konsumentenschutzgesetz’. JBl (1979): 459 ff. Zawischa. ‘Drittfinanzierung und Konsumentenschutzgesetz’. QuHGZ (1980): 89. I. SALE BY BUYER’S SPECIFICATION ( SPEZIFIKATIONSKAUF) Bydlinski E. ‘Erfüllungsklage beim Spezifikationsverzug?’ ÖJZ (1990): 440. Nitsche. ‘Der Bestimmungsverzug beim Spezifikationskauf’. Wertung und Interessenausgleich im Recht (1975): 147. IV. Other Specific Contracts

A. DONATION Grabenwarter. ‘Schenkung auf den Todesfall und Abhandlungspflege’. ÖJZ (1988): 558. Kulka. ‘Unentgeltlichkeit und Freigebigkeit’. ÖJZ (1969): 477. Migsch. ‘Die sogenannte Pflichtschenkung’. AcP 173, 46. Rummel. ‘Schenkungen unter Ehegatten und Scheidung’. JBl (1976): 626. Trenker. ‘Die Schenkung auf den Todesfall’. NZ (1969): 100. Welser. ‘Erbverzicht und Schenkung auf den Todesfall’. NZ (1991): 84. Zankl. ‘Schenkung auf den Todesfall, Vermächtnisvertrag und “reines Viertel”’. NZ (1997): 311. B. BAILMENT Kastner/Mayer. ‘Zum neuen Depotgesetz’. JBl (1970): 22.

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Selected Bibliography Riedler. ‘Reformbedarf bei Schenkungs-, Verwahrungs-, Leih- und Darlehensvertrag?’. ÖJZ (2008): 624. Sedlacek. ‘Über den Hinterlegungsvertrag’. ZBl 1914, 488, 550 und 655. C. CONTRACT OF LENDING Mayrhofer. ‘Zur Rechtsnatur der “Dauerleihe” an Museen und ähnliche Einrichtungen’. NZ (1975): 86. Schimetschek. ‘Wohnungsbenützung ohne Mietvertrag’. ImmZ (1971): 311. Zankl. ‘Zur Rechtsnatur des, Flaschenpfandes’’. JBl (1986): 493. D. LOAN Apathy/Iro/Koziol. Österreichisches Bankvertragsrecht, 2nd ed. Band IV – Kreditgeschäft (2012). Bydlinski P./Bollenberger. ‘Das neue Darlehensrecht des ABGB’. ÖBA (2010): 96 Bydlinski P. ‘Das neue ABGB-Darlehensrecht – Überblick und erste Einschätzung’. ecolex (2010): 520. Stabentheiner. ‘Verbraucherkreditgesetz – EU-Vorgaben, Geltungsbereich, vorvertragliche Information, Bonitätsprüfung, Vertragsdokument’. ÖJZ (2010): 531. Wendehorst/Zöchling-Jud. Verbraucherkreditrecht. 2010. E. AGENCY Hofer W. ‘Substitution und Untervertretung’. JBl (1980): 625. Kreller. ‘Das Rechtsinstitut der Stellvertretung’. JBl (1948): 221. Riedler. ‘Reformbedarf beim Bevollmächtigungsvertrag (Ermächtigung, Auftrag, Vollmacht)?’ ÖJZ (2008): 667. Welser. Vertretung ohne Vollmacht. 1970. Welser. ‘Drei Fragen des Stellvertretungsrechts’. JBl (1972): 337. Welser. ‘Äuβerer Tatbestand, Duldung und Anschein im Vollmachtsrecht’. JBl (1979): 1. Wilhelm. ‘Der Vollmachtsmiβbrauch im Zivil-, Handels- und Gesellschaftsrecht’. JBl (1985): 449. F. BARTER Lurger. Handbuch der internationalen Tausch- und Gegengeschäftsverträge. 1992.

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Selected Bibliography G. TENANCY, LEASE, USUFRUCTRUARY LEASE AND LEASING Call. Mietrecht und Wohnungseigentum. 1983. Egger/Krejci. Das Leasinggeschäft. 1987. Klang. ‘Der Rechtsschutz des Mieters gegen Dritte’. JBl (1947): 429. Korinek/Krejci (Hrsg.). Handbuch zum Mietrechtsgesetz. 1985. Krejci. ‘Zur Gefahrtragung beim Leasinggeschäft’. ÖJZ (1988): 129. Krejci. ‘Zur Gewährleistungspflicht des Leasinggebers’. JBl (1988): 490. Krejci. ‘Zur Lieferpflicht des Leasinggebers’. GesRZ (1988): 1. Nitsche. ‘Zur Rechtsnatur des Leasing’. ÖJZ (1974): 29. Ostermayer. MRG – Mietrechtsgesetz. 2006. Palten. ‘Untervermietung und Untermieter’. ÖJZ (1988): 531. Prader/Kuprian. Der Mietvertrag. 2nd ed. (2008). Stabentheiner. Mietrecht. 3rd ed. (2010). Schilcher. ‘Die Stellung des MRG in der gesamten Wohnrechtsordnung’. Korinek/ Krejci, Handbuch, 46. Schuhmacher. ‘Kfz-Leasing und KonsumentenschutzG’. ZVR (1979): 289. Tades/Stabentheiner. ‘Das 3. Wohnrechtsänderungsgesetz’. ÖJZ 1994, Sonderheft 1A. H. SERVICE (LABOUR) CONTRACT Floretta/Spielbüchler/Strasser. Arbeitsrecht – Individualarbeitsrecht. 4th ed. (1998). Strasser/Jabornegg/Floretta/Spielbüchler. Arbeitsrecht – Kollektives Arbeitsrecht. 4th ed. (2001). Marhold/Friedrich. Österreichisches Arbeitsrecht. 2nd ed. (2012). Löschnigg. Arbeitsrecht. 11th ed. (2011). Tomandl. Wesensmerkmale des Arbeitsvertrages. 1971. Tomandl. Arbeitsrecht. vol. I/II 7th ed. (2011). I. WORK CONTRACT Iro. ‘Die Warnpflicht des Werkunternehmers’. ÖJZ 1983, 505 und 593. Karollus/Lukas. ‘Das sogenannte Zurückbehaltungsrecht des Werkbestellers’ JBl 2001, 677, 766. Mazal. ‘Freier Dienstvertrag oder Werkvertrag?’. ecolex (1997): 277. Kurschel. Die Gewährleistung beim Werkvertrag. 1989. J. CIVIL PARTNERSHIP Krejci. Krejci. Krejci. Krejci. 25

Das Recht der Arbeitsgemeinschaften in der Bauwirtschaft. 1979. Erwerbsgesellschaftengesetz. 1991. ‘Gesellschaftsrechtliche Neuerungen des UGB’. JBl (2004): 10. ‘Zur Reform der Gesellschaft bürgerlichen Rechts’. Hopf- FS (2007): 115.

Selected Bibliography Roth/Fitz/Beiser. ‘Der Übergang von der GesBR zur OG gemäß § 8 Abs 3 UGB’. JBl (2007): 341. Straube. Die bürgerlichrechtliche Gesellschaft als Rechtsform zwischenbetrieblicher Kooperation. 1977. Welser. ‘Die Gesellschaft bürgerlichen Rechts als Gläubiger und Schuldner’. GesRZ (1978): 141. V. Consumer Transactions Bydlinski F. ‘Die Kontrolle allgemeiner Geschäftsbedingungen nach dem österreichischen Konsumentenschutzgesetz’. Meier-Hayoz- FS (1982): 65. Csoklich. ‘Die Allgemeinen Österreichischen Spediteursbedingungen und das Konsumentenschutzgesetz’. ÖJZ (1986): 437. Doralt P./Koziol. Stellungnahme zum Ministerialentwurf des Konsumentenschutzgesetzes. 1979. Fenyves. ‘Die Auswirkungen des Konsumentenschutzgesetzes auf das Recht der Vertragsversicherung’. VersRdSch (1979): 336. Jesser/Kiendl/Schwarzenegger. Das neue Konsumentenschutzrecht. 1997. Kosesnik-Wehrle A.M. (Hrsg.). Konsumentenschutzgesetz (KSchG) 3rd ed. (2010)) Kramer/Mayrhofer (Hrsg.). Konsumentenschutz im Privat- und Wirtschaftsrecht. 1977. Krejci (Hrsg.). Handbuch zum Konsumentenschutzgesetz. 1981. Krejci. ‘Konsumentenschutz und ABGB’. ÖZW (1977): 65. Krejci. Konsumentenschutzgesetz. 1986. Krejci. ‘Zehn Jahre Konsumentenschutzgesetz’. Ostheim- FS (1990): 161. Krejci/Schilcher/Steininger. Konsumentenschutzgesetz, ABGB und Verfahrensrecht. 1978. Lurger/Augenhofer. Österreichisches und Europäisches Konsumentenschutzrecht, 2nd ed. (2008). Reindl. ‘Rechtsprechung zum österreichischen Konsumentenschutzgesetz’. RIW/ AWD (1986): 669. Schuhmacher (Hrsg.). Verbraucherschutz in Österreich und in der EG. 1992. Stabentheiner. ‘Probleme bei der Umsetzung zivilrechtlicher EU-Richtlinien am Beispiel der Time-Sharing Richtlinie’. JBl (1997): 65. Welser. ‘Anmerkungen zum Konsumentenschutzgesetz’. JBl (1979): 449. Welser. ‘Die Beschränkung der Vertragsfreiheit beim Konsumentengeschäft’. JBl 1980, 1 und 72. Welser. ‘Das Konsumentenschutzgesetz in der Rechtsprechung’. Schönherr- GedS (1986): 325. Welser/B. Jud. Die neue Gewährleistung. 2001. VI. Electronic Commerce Gruber/Mader. Internetrecht und e-Commerce. 1999.

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Selected Bibliography Gruber/Mader. Privatrechtsfragen des e-commerce, Vertragsabschluss im Internet, Internet-Domains, Haftungsbestimmungen. 2003. Jahnel/Schramm/Staudinger. Informatikrecht. 2000. Mayer-Schönberger/Pilz. ‘E-Commerce: Rechtliche Rahmenbedingungen und Notwendigkeiten’. AnwBl (1999): 217. Staudegger. ‘Zur Qualifikation von Verträgen, die der Überlassung von Computersoftware dienen’. JBl (1998): 604. Zankl. ‘Zur Umsetzung vertragsrechtlicher Bestimmungen der E-CommerceRichtlinie’. NZ (2001): 288. Zankl. E-Commerce-Gesetz, Kommentar und Handbuch. 2002.

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Index The numbers here refer to paragraph numbers.

Abbreviations, 103 of courts, 103 Abeyance state of abeyance as an effect of conditions, 236–237 ABGB see General Civil Code Absorption rule barter and sale, 461 Abstract legal transaction, 32 Abstract obligation, 192 Acceptance, 109–110, 116, 117–119, 242, 294 and offer, 109–110 delay in, 294 electronic commerce, 564 of a donation, 242 Accidental impossibility, 311, 312 Account current account, 274 Acquisition legal manner of, 188 Act ‘real act’, 263 Adaption of the contract, 205 Adhesion contract of adhesion, 229 Administration, 7–8, 10–12, 24, 25–26 indirect federal administration, 11 Administrative law, 91 Administrative Court (VwGH), 7, 24 Administrator (of mentally ill persons), 163 Advance advance moneys, 414 Advancements upon marriage, 374 Age minority/majority, 161–162 of discretion, 162 Agency, 79, 238, 425–451 and bankruptcy, 452

and certain professions, 431, 432, 434, 436–437, 451 and commercial law, 436–437, 451 and consideration, 431, 445 and death, 449 and subagency, 444 authority, 427 authority by estoppel, 438 authorization, 428 categories of powers of attorney, 439–440 commercial agency specific forms, 451 conclusion of an agency contract, 432 end of, 447–450 excessive use of authority by the agent, 444, 446 external relationship, 427 falsus procurator, 446 formal commercial powers of attorney, 437 general/special agency, 439 implied agency, 433–438 implied conferment of authority, 433–438 internal relationship, 426, 428 lack of, 446 limited/unlimited agency, 440 mandate, 426, 431 mandate, authority and authorization, 426–430 meaning of, 431 no formal requirements, 441 notice of termination, 448 of the spouse, 435 possible combinations of relationships, 430 power of attorney, 427 procura, 437 revocation, 448 rights and duties of the agent, 441

25

Index rights and duties of the principal, 445 ‘shop authority’, 436 special duty of immediate response, 432 specific forms of commercial agency, 443 terminology, 425–429 Agent, 238, 267 and subagent, 262 Agreement: collateral agreements – contract of sale, 497–502 gentlemen’s agreement, 121 not enforceable agreement, 121 of the parties, 109–125 preliminary agreement, 42, 385, 399, 412 to agree, 42, 385, 399, 412 Alienation of estate/enterprise – joint liability, 259 restraint of, 76 Aliens restriction on the acquisition of real property, 165 Alteration of a contract, 298 alteri stipulari nemo potest, 238 Altruism, 124 Anglo-American law, 79, 82, 103, 112, 122, 131, 214, 305–307, 522 Annuity, 552 Application for the entry into the land register, 78 Approval sale upon, 501 Arbitration, 222 multilateral conventions, 222 Arbitration clause, 222 Areas of Austrian law, 90–91 Assignment, 246–256, 264, 278 and (other) third parties, 255–256 and factoring, 254 and liability, 252–253 contractual prohibition of, 247 defences of the debtor, 243, 251 effects, 251–254 for security (purposes), 250, 254, 256 formalities, 250 future claims, 247 global assignment, 254 information of the debtor, 250, 251 ‘in lieu of payment’, 278

25

legal assignment, 248 liability for correctness and payability, 252 ‘necessary’ assignment, 249 no bona fide acquisition, 255 nonassignable rights, 247 of accounts receivable for collection, 254 publicity requirement, 250, 256 silent assignment, 254 title and modus, 250 warranty, 252 Association representation, 167 Assumption of a debt, 257, 258 Attorney categories of powers, 439–440 formal commercial powers, 437 power of attorney ( see agency) power of attorney and subcontracting, 262 power of – implied power of attorney, 433–438 Austria capital, 1 currency, 272 economic and social values, 13–14 economy, 13, 14 geography, 1 history, 2–5 legal tender, 274 political system – past, 2–5 political system – present, 6–12 population, 1 social security, 13 Austrian law areas of, 90–91 Austrian Currency, 272, 279 Authority ( see also agency) by estoppel, 438 excessive use of authority by the agent, 444, 446 general/special authority, 439 implied authority – commercial law, 436–437 implied authority of the spouse, 435 implied conferment of, 433–438 lack of, 446 limited/unlimited authority, 442 ‘shop authority’, 436 Authorization ( see agency) Avoidance of the contract, 204–212

Index Bailiff and enforced performance, 327 Bailment, 385–398 and deposit of a debt, 283 and money, 396 and professional lodging of guests, 398 and remuneration, 384, 392, 393 a ‘real contract’, 384 concept of, 384–388 diligentia quam in suis, 392 distinction of related contracts, 394 liability of innkeepers/hotel owners, 398 of the bailee, 392 mixed and special forms, 395–397 no use of the concerned property, 394 object of, 387 obligations of the bailee, 389–390 obligations of the bailor, 391 place of return, 388 position of the bailee, 387 preliminary agreement, 385 premature return, 390 revocation, 393 rights of the bailee, 393 sequestration, 397 termination, 388 Bank banking transaction, 271 incorrect statement by the bank, 216 Bankruptcy, 70, 83, 285 and set-off, 285 Barter, 452–465 and double sales contract, 460 and sale, 454, 458–461 ‘absorption rule’, 459 commercial law, 458 delivery and acceptance, 455 distinction, 458–461 formal requirements, 453 object of, 461 obligation of acceptance, 456 place of delivery, 457 rights and duties of the parties, 455–457 risk of loss, 462–465 spouses, 453 transportation, 455 Basic concepts of the law of contracts, 29–35 Benefit of a third party, 240 Bilateral legal transaction, 29, 32

Bilaterally binding legal transaction, 32, 43–46 Binding effect of an offer, 112 Bona fide possessor, 292 Bona fide settlement, 301 Breach of contract, 216–218, 219, 305–363, 364–367 UNCITRAL-Convention, 364–367 Breach of contractual duties, 305 Breach of warranty, 329–337 Bundesgesetzblatt (BGBl), 98 Business transaction, 566 rebuttable presumption, 566 Cabinet, 10 Cancellation and rescission, 332 of a contract ( see warranty) of an obligation, 291–297 Capacity of the parties, 160–167, 265, 266 Capacity and payment/performance, 265, 266 legal capacity, 160 to act, 160 to become liable for tortious acts, 160 to contract, 160 aliens, 165 insanity, 163 juristic persons, 166–167 limited capacity to contract, 162 minors, 161–162 spouses, 164 Carriage commercial sale and carriage – risk of loss, 484 Case Law, 100–103 citation, 100–103 commentaries, 101 publication, 100–102 Causa, 32, 123, 188, 189–192, 205, 365 Cause (of transaction), 32, 125, 188, 189–192, 205, 369 and motive, 190 requirement of, 188, 189–192 Causal legal transaction, 32 Causal transfer of ownership, 205 Certificate of debenture, 413 of fulfilment, 267–268 of indebtedness, 268 Cessio legis, 248

25

Index Cession ( see assignment) Chain contract, 528 Chance and condition, 234 Chancellor, 10 Change as to an obligation, 298, 299 fundamental change of the underlying circumstances, 296–297 Charge on land, 72 Chicanery, 202 Circumstances fundamental change of, 296–297 unforeseeable circumstances, 296–297 Circumventing contract, 200 CISG see UNCITRAL-Convention Citation of case law, 100–103 of law/legislation, 98 Civil law, 27–28, 91 Civil partnership, 544–546 liability, 545 no formal requirements, 545 no legal personality, 545 Civil procedure, 23, 91, 222 Civil servant, 524 Claim and counter claim, 274, 285 arising from a performance, 63–64 for profitable utilization, 63, 65 Claim for restitution, 64 absent legal cause, 64 erroneous payment, 64 failure of intended transaction, 64 lapse of purpose, 64 unjust/objectionable cause, 64 Claim for separation, 83 Clause arbitration clause, 222 exemption clause, 216–218 limitation clause, 216–218 penalty clause, 219–221 unfair clause, 199 Clausula rebus sic stantibus, 296–297 Code civil (French), 15, 123, 188, 191, 263 Code of Civil Procedure (ZPO), 222 Codice Civile (Italian), 19 Coercive measures and specific performance, 326–328 Collateral agreements of a contract of sale, 497–502 Collateral contractual duty, 344

2

Collection assignment of accounts receivable for collection, 254 Commentaries (finding the law), 105–106 Commercial agency specific forms, 451 Commercial contracts, 223, 228 281, 282, 353, 472, 484, 563, 569 interpretation, 223, 228 Commercial corporations and partnerships, 546 Commercial law, 27–28, 91 and agency, 436, 437, 451 implied authority, 436–437 merchant, 563 warranty, 453 Commercial powers of attorney, 437 Commercial sale, 472, 484 risk of loss, 484 Commercial transaction, 28, 565–571 business transaction, 565 creditor’s delay, 569 duty of notification of defects, 569 duty to immediate examination, 569 fair dealing, 570 interest, 281, 282 merchant, 565 registration, 566 no laesio enormis, 352, 570 penalty, 219, 220 ‘self help’, 570 silence to an offer, 568 specific rules, 569 specification by the purchaser, 569 Commercial Code (HGB), 27–28, 91, 92, 96 ( see Enterprise Code) Common ownership, 535 Common law, 305–307, 313, 329 community ( see also civil partnership), 12 Company representation, 167 Compliance with public morality, 201–203 Compound interest, 281 Compromise (cf. settlement) Compulsion, 187 to enter into a contractual relation, 112 Computation – relative method ( see warranty) Conclusive declaration of intent, 33, 213, 215 Concurring remedies: warranty and damages, 346–348

Index Condictio, 64 Condition, 231–237 affirmative/negative condition, 233 aleatory condition, 234 and warranty, 214 Austrian law, 214 casual/mixed/potestative condition, 234 effect of a condition, 236–237 English law, 214 ‘expectant right’, 237 illicit/permitted condition, 235 impossible/possible condition, 235 legal condition, 231 precedent, 231, 232 resolutive/suspensive condition, 232, 235 state of abeyance, 236–237 Conducting another’s affairs without authority, 66–69 against the other’s will, 69 for the other’s profit, 68 in case of emergency, 67 Consensual contract, 41 Consent, 34–35, 41, 109, 114, 116, 168–187, 204–212, 230 consequences if defect, 204–212 deceit, 184 defect, of 168–187 duress, 185 lack of, 230 mistake/error, 169–183, 204–200 types, 160 Consideration, 123–125 Consignment, 119 Constitution, 3–12, 18 basic principles, 6, 7 Constitutional law, 91 Constitutional Court (VfGH), 24 Constitutum possessorium, 378 Consumer credit, 563 Consumer transaction, 135–136, 217, 362, 555–564 clauses to be individually fixed, 556 consumer credit, 563 exemption and limitation clauses, 217 door-to-door contract, 36 finance leasing, 562 formal requirements, 135–136 guarantee, 561 instalment sale, 562 mandatory provisions, 555 relationship warranty/guarantee, 561 void contract clauses, 556

warranty, 557 Consumer Protection Act (KSchG), 50, 52, 91, 187, 217, 353, 368, 424, 471, 490, 492, 505, 523, 555–562, 566 specific remedies, 362 Contemporaneous performance, 276 Contents of a contract, 213–237 Contingency fee agreement, 194, 196 Contract adaption ( see error) alteration, 298 and death, 290 and ‘dispositive’ law, 215 and legal obligations, 60–70 and limitation, 354–360 and (passage of) time, 354–360 and prohibitions, 193–200, 209–212 and subcontracting, 261–262 and the law of property, 71–78 and third parties, 55, 58–59, 141, 227, 238–262, 264 and torts, 53–59 and trust, 79–84 at the expense of a third party, 239 avoidance/correction ( see error) breach of, 216–218, 219, 305–363, 365–368 breach of UNCITRAL-Convention, 365–368 by correspondence, 117–119 cancellation ( see warranty) categories, 47–48 ‘chain contract’, 523 circumventing contract, 200 classification, 40–52 commercial contract, 223, 228, 281, 282, 352, 472, 484, 563–569 compulsion to enter, 110 conditional contract, 231–237 conditions of substantive validity, 160–212 consensual contract, 41 contents, 213–237 definition, 34 –35 delegation of duties, 257–259 end, 263–304 falling away of the foundation of, 296–297 for acquisition, 48 for activity, 48 for employment (cf. service contract) for gamble/wager, 48, 547–554

2

Index for interest, 420 for partnership, 48, 544–546 for services, 524–529 for the benefit of a third party, 238, 240–243, 244 for the opening of a credit, 421 for use, 48 for work and materials, 343 formal requirements, 49–51, 124, 126–137 formation, 109–159 freedom of, 432 frustration of, 296–297 gambling and wagering contracts, 48, 547–554 garaging contract, 395 general principles, 109–367 general provisions of the, ABGB 95 ‘giro contract’, 271 immoral contract, 202 implying the protection of a third party, 55, 141, 244–245 impossibility, 291–295 in favour of a third party, 240–243 incomplete contract, 215, 225–227 insurance contract, 240, 553–554 interest in the performance of, 308, 309, 318, 340 interpretation, 88–89, 213, 223–230 legal forms, 131–137 loan contract ( see loan) mutual contract, 276 novation, 298, 300–302 obligation to, 112 of adhesion, 229 of lending ( see lending) of sale, 273, 466–505 of tenure ( see tenancy) performance, 263–285 ‘positive violation of a contract’, 338, 342–345 privity of, 238–262 provisionally invalid contract, 162 ‘real contract’, 42, 385, 400, 412 recognition of a debt, 303–304 remedies, 305–367 rescission, 293, 309–312, 318–323, 349, 362 service contract, 524–529 settlement, 300–302, 303–304 sources of the law of, 90–110, 92–96 specific contracts, 369–568

26

agency, 425–451 bailment, 386–399 barter, 452–465 civil partnership, 544–546 commercial transaction, 563–569 consumer transaction, 555–562 contract of lending, 399–410 donation, 370–384 gambling and wagering contracts, 547–554 loan contract, 411–424 sale, 466–505 service contracts, 524–529 tenancy, lease and leasing, 506–523 work contract, 530–543 standard form contract, 52, 199, 229 statutory categories, 47–48 synallagmatic contract, 43–46, 123, 186–187 termination of an obligation, 263–304 transfer of rights, 246–256 transfer of the (entire) obligation, 260 ‘true contract’ in favour of a third party, 241 types, 368 unclear terms, 229 under seal, 131 uni-/bilaterally binding contract, 43–46, 223 usurious contract, 198–199, 210 with limited bilaterally binding effects, 46 work contract, 525, 530–543 Contract shopping, 141, 155, 157, 159 Contractor and subcontractor, 262 Contractual liability, 53–59 Contractual obligation, 60 Convention on Contracts for the international Sale of Goods see UNCITRAL Conventions multilateral conventions on arbitration, 222 Conversion of currencies, 270 Conveyance, 75–78 immovable property, 76–78 Corporation commercial corporations, 546 Correspondence contract by correspondence, 117–119

Index Counter-offer, 110 Counter-performance, 314 Counterclaim, 274, 285 Courts, 22–24 Credit contract for the opening, 421 ‘open credit’, 421 Credit sale, 224 Criminal law, 91 Criminal procedure, 23 Criminal Code (StGB), 2 Culpa in contrahendo ( see also precontractual liability) field of application, 146–153 legal framework, 140–142 summary, 158–159 unsound expansion, 154–157 Culpa in eligendo, 261 Curator, 163 Currency, 270, 272, 279 foreign currency and payment, 270, 279 Current account, 274 Custody and bailment, 385 holding in custody (possession), 73 Custom of fair dealing, 224 of honest dealing, 86–87, 89, 223 prevailing in commerce, 223, 228 prevailing in honest transactions, 215 Customary law, 15 Customary standards, 224 Damage, 53–59 consequential/additional damage, 342–345, 350, 360 immaterial damage, 504, 563 liquitated damage and penalty, 219 Damages ( see remedies), 338–351 and limitation, 351, 357 and warranty, 494 and warranty (concurring remedies), 346–350 burden of proof, 350 damnum emergens/lost profits, 341 delay of performance, 341 expectation damages, 305 for pain and suffering, 504 ‘full interest’, 341 non-performance, 340 ‘positive violation of a contract’, 342–345

reliance damages, 305 restitution in nature, 349, 495 Damnum emergens, 341 Date due date of payment/performance, 276 Datio in solutum, 284 Dealing custom of honest dealing, 86–87, 89 custom of fair dealing, 224 fair dealing, 85–87 honest dealing, 239 Death, 299 Debenture, 299, 413 Debt deposit of a debt in court, 283 extinction of (cf. extinction) Deceit, 184, 204 Deception, 184 Decisions see case law Declarations lacking seriousness, 120 mistake of expression, 174 of fact, 304 of set-off, 285 of will/intent, 33, 168, 213–215 to rescind, 321 unclear/vague declaration, 229 Declaration of intent, 33, 168, 213–215 express declaration, 213–214 express/implied declaration, 33, 213–215 implied/conclusive/tacit declaration, 213–215 interpretation, 213 Defect defective performance, 329–335 essential/non-essential defect, 330 in title, 329, 491 notification, 493 of quality, 329 removable/non-removable defect, 330 reparable/irreparable defect, 332 Defect of consent, 168–187, 204–212 avoidance of the contract, 204–212 consequences, 204–212 deceit, 184, 204 duress, 185 mistake/error, 169–183 nullity, 204–212 types, 168 Defence of lack of performance, 45, 276, 313–314, 324, 454, 480

26

Index of non-performance, 45, 276, 313–314, 324, 454, 480 of uncertainty of performance, 454, 481 Defences of the debtor assignment, 243, 251 Deficiency of the title, 329 Delay creditor’s delay – commercial transaction, 568 in acceptance, 294 Delay of performance, 276, 316–325, 341 by the debtor/by the creditor, 316 creditor’s delay, 325, 568 damages, 341 exeptio non adimpleti contractus, 324 grace period, 321–323, 341 objective/subjective delay, 316 remedies, 316–325 rescission, 318–320 Delegation and novation, 258 assumption of a debt, 257, 258 assumption of performance, 258 collateral promise to pay a debt, 257, 259 of contractual duties, 257–259 Delictual liability, 53–59 Delivery ‘actual delivery’, 378 by symbol, 378 legitimate mode, 75–78 physical delivery, 378 supplementary delivery ( see warranty) Delivery brevi manu, 378 Democratic principle, 7 Deposit and bailment, 385 of debt in court, 283 Destruction of property and substitute value, 292 of the owing property, 291–295 Diligentia quam in suis, 392 Diminution of a penalty, 220 Directions ( see administration) Discretion age of, 162 Dismissal of an employee, 528

26

Disposition of a real character, 77 Dispositional transaction, 32 Dispositive law, 215 Dispositive legal rules, 215 Disproportion of the value, 186–187, 198 Distant selling, 563 Do, ut des, 109–125, 123 Donation, 43, 300, 369–384 acceptance, 242 ‘actual delivery’, 378–379 and ‘remuneration’, 371, 372 causa mortis, 384 concept of, 369–373 consent of the donee, 370 doubtful and mixed forms, 374–377 duties of the donor, 380–381 formal requirements, 378–379 gratuity, 371 ‘grave ingratitude’ of the donee, 382–383 irregularities in performance, 380–381 made as a special reward, 379 mixed donation, 376 remedies, 380–381 revocation, 382–383 subject of, 373 without simultaneous performance, 132 Door-to-door sale, 362 Dowry, 374 Drafting of the ABGB, 88–89 style of drafting (ABGB), 88–89 Duress, 185 Duty collateral contractual duty, 344 notification of defects, 568 special duty to response agency, 432 to immediate examination, 568 to inform, 144, 148–149 to warn – work contract, 537 Easement, 72 E-commerce ( see electronic commerce) Economic law, 91 EEA Treaty, 14, 17, 91, 165 Elections parliamentary elections, 9, 10 Electronic commerce, 564 Employee dismissal, 528

Index liability, 526 Employment contract for (cf. service contract) Employment contract independent employment contract, 529 Emptio rei speratae, 551 Emptio spei, 551 Encumbrance restraint of, 76 End of the contract, 263–304 Enforced performance, 326–328 coercive measures, 327–328 Enrichment unjust enrichment, 251, 309 Enrichment claims, 62–65 Enterprise alienation – joint liability, 259 Enterprise Code (UGB), 27–28, 91, 92, 96, 565–570 Entity legal entity, 166–167 Equivalence of performance and counterperformance, 186–187, 198 Error (cf. mistake) and settlement, 301 as to the legal consequences, 175 as to the motive, 171, 177 as to the substance, 172 avoidance/correction of the contract, 180–183 causation of ,181 common error, 180 essential/non-essential error, 178–179 in calculation, 175–176 negligent failure to disclose error, 182 of expression, 174 prompt disclosure, 183 requirements for avoidance/correction, 180–183, 204 Estate alienation joint liability, 259 Estimate guaranteed/non-guaranteed estimate, 539 work contract based upon an estimate, 539 Estoppel authority by, 438 Euro, 272, 279 European Community (EC), 14, 17

European Economic Area (EEA-)Treaty, 14, 17 Examination duty to immediate examination, 568 Exceptio non adimpleti contractus, 45, 276, 313–314, 324, 454, 480 Exchange ( see warranty) Exclusion of liability for damage, 216–218 Executive power, 7–8, 10, 11–12, 18 federal executive power, 7–8, 10 of a community, 12 of a state, 11 Exemption clause, 216–218 Expectant right, 237 Expectation damages, 305 Express declaration of intent, 33, 213–214 Express terms, 213–214 Expropriation, 74 Extinction of a debt, 263–290 death, 290 deposit, 283 lapse of time, 288 merger, 287 notice of termination, 289 payment, 263–282 performance in lieu of payment, 284 set-off, 285 waiver, 286 Extortion, 185 Factoring, 254 with/without recourse, 254 Fair dealing, 85–87, 224, 569 Faith good faith, 85–87, 113, 225, 226, 236, 239, 250, 251 Falling away of the foundation of a contract, 296–297 Falsus procurator, 153, 446 Fault pre-contractual fault, 113 proof, 54, 140, 244, 339 Fear, 185 illegal and well-founded fear ( see duress) Federal principle, 7 Federal Assembly, 9 Federal Constitution (B-VG), 4, 5, 6–12, 18 Federal Council, 9 Federal Government, 9, 10 Federal Minister, 10 Federal President, 9, 10, 11

26

Index Fee supplementary fee, 281 Finance leasing, 522, 562 Finding the law, 97–108 Fine and enforced performance, 327–328 Firm book, 564 Firm offer, 112 Fitness for a specific purpose, 329 Form consumer credits, 563 gratuitous promises, 124 time-sharing of property, 563 Formal requirements (contracts), 49–51, 124, 126–137 arbitration, 222 assignment for security, 250 consumer transactions, 135–136 disclosing function, 130 donation, 378–379 evidentiary function, 128 reasons, 126–130 warning function, 129 Forms legal forms for contracts, 131–137 Foundation, 82 falling away of the foundation of a contract, 296–297 Fraudulent transaction by a debtor, 70 Fraudulent transfer of property, 70 Free market system, 13 Freedom of the parties, 241 Freedom of contract, 29, 35, 49, 126, 193, 241, 432 limitations, 35, 124, 126–137 French Code civil, 15, 123, 188, 191, 264 French law sale, 470 Frustration of contract, 296–297 Fulfilment impossibility, 291–297 Full interest, 341 Fund, 82 Gambling and wagering contracts, 547–554 annuity, 552 bet, 549 characteristic elements, 547 different types, 548 emptio rei speratae, 551 emptio spei, 551

26

games, 550 insurance contracts, 553–554 ‘natural obligation’, 549 no laesio enormis, 547, 551 Garaging contract, 396 Genera non pereunt, 292, 483 General law of reason, 36 General offer ( see promise of a reward) General Civil Code (ABGB), 2, 15–16, 19, 28 amendments, 16 and UGB, 96 drafting, 88–89 parts, 94–95 structure, 94–95 tripartite system, 94–95 General Land Register Act (GBG), 72, 91 Generally accepted view honest generally accepted view, 87 Generosity of the donor, 374 Gentlemen’s agreement, 121 Genus non perit, 292, 483 German Civil Code (BGB), 85–87, 238, 240 German contract law, 291 German law sale, 469 German legal family, 15–17 German occupation, 5 Gift given in discharge of an obligation, 374, 375 promise to make a gift, 124 Giro contract, 271 Global assignment, 254 Good faith, 85–87, 113, 225, 226, 236, 239, 250, 251 Good morals, 201–203, 216 Government federal government, 9, 10 state government, 11 Governor of a state, 11 Grace period, 309, 318, 321–323, 341 Gratuitous legal transaction, 32 Gratuitous promises, 124 Guarantee consumer transactions, 561 for the success of intercession, 239 Hague Convention trusts, 84

Index Holding in custody ( see possession) Honest dealing, 241 Honest generally accepted view, 87 Immaterial damage, 505 Immoral contracts, 202 Implied declaration of intent, 33, 213, 215 Implied terms, 213, 215 Impossibility, 291–295, 296–297, 308–315 accidental impossibility, 291, 292, 311, 312 and ‘unreasonability’, 312 ‘creditor’s impossibility to perform’, 315 due to fault, 291, 293, 294 initial/subsequent impossibility, 291, 292 objective/subjective impossibility, 291, 293 partial impossibility, 295 partial impossibility and rescission, 310 specific property/unidentified goods, 292 to perform remedies, 308–315 Imprisonment and enforced performance, 327–328 Incidence and condition, 234 Indebenture certificate of, 413 Indebtedness certificate of, 268 Indemnification, 53–59, 338–349 Independent employment contract, 529 Independent Administrative Senates, 24 Indirect federal administration, 11 Industrial Code (GewO), 13 Inform (pre-contractual) duty, 144, 146–149 Informality principle of, 49, 126 Insanity capacity to contract, 163 Instalment sale, 424, 504, 522, 562 Instances in civil procedure, 23 in criminal procedure, 23 Instruction ( see administration) Insurance and accidental impossibility, 311 contract, 240, 553–554 coverage, 292 law, 554 legal assignment, 248 statutes on, 248

third party benefit insurance, 240 Intent letter of, 122 Intention, 33 to create legal relations, 120–122 ‘true intention’ of the parties, 224 Intercession guarantee of success, 239 promise of, 239 Interest, 269, 281–282, 293, 341–420 commercial transaction, 281, 282 compound interest, 281 ‘contract for interest’, 420 expectation interest, 293 ‘full interest’, 341 in the performance of the contract, 308, 309, 318, 390 limitation, 281 loan contract for interest, 420 rule of ne ultra alterum tantum, 281 statutory interest, 282 International sales, 473 International Sale of Goods Convention see UNCITRAL Interpretation ABGB, 19 commercial contracts, 223, 228 ‘ contra proferentem’, 229 of contracts, 88–89, 213, 223–230 of declarations of intent, 213 rules, 88–89 simple interpretation, 223, 224 supplementary interpretation, 223, 225–227 Invitation to treat or offer, 115 Irregularities in performance, 305–368 donation, 380–381 Italian Codice Civile, 19 Jhering, 139 Joint liability alienation of estate/enterprise, 259 delegation, 257, 259 Judgment for performance, 326–328 Judges, 20–24 Judiciary, 20–24 Jurisdiction, 20–24 extraordinary jurisdiction, 24 ordinary jurisdiction, 22–23 subject matter jurisdiction, 22 Juristic act, 29–31, 263

26

Index Labour law, 91, 524 Laesio enormis, 186–187, 198, 352–353, 547, 561, 569 and commercial transactions, 353 and Consumer Protection Act, 353 limitation, 356 mixed donation, 376 no application of, 353 remedies, 352–353 settlement, 301 Land register, 76–78, 91, 470 entry in the land register and sale, 470 Land registration computerized, 91 Lapse of time and extinction of a debt, 288 Law administrative law, 91 citation, 98 civil law, 91 commercial and economic law, 91 constitutional law, 91 criminal law, 91 ‘dispositive’/non-mandatory law, 215 finding the, 97–108 labour and social security law, 91, 524 private international law, 91 publication of, 98–99 rule of, 7, 18 study of, 90 tax law, 91 Law of contracts basic concepts, guiding principles, 29–35 historical background, 36–39 sources, 36–38, 90–110, 92–96 system, 37 Law of lease (MRG), 91 Law of ownership, 74 Law of property, 39, 74 and contract, 71–78 Law of things (‘ Sachenrecht’), 39 Law on Compulsory Notarial Contracts (NZwG), 50–51 Lay-judges, 20 Lease (cf. tenancy) and tenancy – conceptual framework, 506–507 distinction, 506, 520 registered lease, 72 Leasing, 522–523, 562 finance leasing, 522, 562 ‘sale-and-lease-back’ agreement, 522

26

warranty, 523 Legal assignment, 248 Legal capacity, 160 Legal condition, 231 Legal entity, 166–167 Legal forms, 131–137 notarial contract under seal, 134 writing, 132–133 Legal obligation, 60–70 Legal person, 166–167 Legal presumption of payment, 268 Legal rules ‘dispositive’/non-mandatory legal rules, 215 Legal tender, 272 Legal transaction, 29–31, 39, 40, 263 and ABGB, 31, 40 causal/abstract legal transaction, 32 classification, 32 in general, 29–31 inter vivos/mortis causa, 32 interpolation into ABGB, 39 non-gratuitous/gratuitous legal transaction, 32, 45 non-gratuitous legal transaction, 284 notion, 30 uni-/bi-/multilateral legal transaction, 32 uni-/bilaterally binding legal transaction, 32, 43–46 unilateral legal transaction, 114 Legislation citation, 98 primacy, 18–19 publication of, 98–99 Legislative power, 9, 18 Lending contract, 399–410 and rental agreement, 401 as ‘real contract’, 399 characteristic elements, 400–403 definite period of time, 402 delivery, 403 gratuity, 401 liability of the borrower, 408 object, 400 obligations of the borrower, 405 obligations of the lender, 406 permission for use upon petition, 410 position of the borrower, 407 precarium, 410 preliminary agreement, 401 rights of the borrower, 404

Index short limitation period for claims, 409 time return, 405 Letter of intent, 122 Liability and assignment, 252–253 and negotiations, 138–159 and subcontracting, 261–262 contractual/extra-contractual liability, 244 contractual/tortious liability, 53–59 culpa in contrahendo, 55, 139–159 culpa in eligendo, 261 for correctness and payability, 252 for damage ( see remedies) for damage exclusion/limitation, 216–218 for negligence in the selection, 261 for ‘positive violation of a contract’, 342–345 for servants, 244, 261 joint liability alienation of estate/enterprise, 259 delegation, 257, 259 of the employee, 526 of the falsus procurator, 446 pre-contractual liability, 55, 113, 139–159 product liability, 247, 503–504 vicarious liability, 55, 140, 339 Limitation, 298, 303, 307, 348, 354–360 interruption/suspension, 358 long limitation period, 355 no determination ex officio, 359 no modification, 360 of interest, 281 of liability for damage, 216–218 overall limitation, 357 short limitation period, 355, 356–357 contract of lending, 409 Limitation clause, 216, 218 Limited bilaterally binding effects, 46 Loan contract, 411–424 as ‘real contract’, 412 characteristic elements, 413 credit function, 418 debenture, 413 delivery, 415 gratuitous loan contract, 420 loan contract for interest, 420 no formal requirements, 419 object, 414 preliminary agreement, 414 premature return, 417

purpose, 418 related types of contracts, 421–424 return/repayment, 415, 416 time for return, 417 types, 420 Loan with profit participation, 433 Loss pure economic loss, 55, 140 risk, 462, 465, 482–485, 540 Lost profits ( see damages) Majority (age), 161 Mandate ( see agency), 46, 426, 431 Manner of performance, 264 Market value error, 176 Marriage advancements upon, 374 Marriage brokerage contracts for gain, 194, 195 Marriage Act (EheG), 91 Material contract for work and materials, 543 Mayor, 12 Meeting of minds see consent Menace, 185 Merchant, 28, 563 categories, 563 firm book, 564 registration, 563 Merchantability, 329 Merger, 287 Minority (age), 161 prolonged minority, 162 Misrepresentation, 214 Mistake, 169–183, 204–208 avoidance/correction of the contract, 180–183 essential mistake, 169 in calculation, 175–176 of expression, 174 requirements for avoidance/correction, 180–183 Mixed donation, 376 Modification obligation, 298, 299, 300–302 simple contractual modification, 299 Modus assignment, 250 and titulus, 250, 369 Money, 270–282, 291

26

Index money debts and risk bearing, 280 other accepted modes of payment, 278 payment of money debts, 270–282 Money transfer, 275, 277 Moral person, 166 Mortgage, 72, 250 and assignment, 250 Motive, 171, 177, 231 Mutual consent, 34–35, 109, 114 Mutual contract, 276 National Council, 6, 9, 10 Natural law doctrine, 15, 19 Natural obligation, 125, 360, 371, 549 Natural person, 160–165 Natural Law School, 38 Ne ultra alterum tantum, 281 Necessary assignment, 249 Negligence crass gross negligence, 216 simple gross negligence, 216 Negotiations and liability, 138–159 Negotiorum gestio, 66–69 Neutrality, 5, 14 Non-cumul no rule of, 56 Non-gratuitous legal transaction, 32, 45, 284 Non-performance, 269, 293, 313–315, 324, 340 by the creditor, 315 damages, 340 ‘defense of non-performance’, 313–314, 324 exeptio non adimpleti contractus, 313–314 remedies, 308–315 rescission, 308–312 Non-assignability, 247 Notarial contract under seal, 50–51, 134 Notarial deed, 124, 374, 379 Notary and his function, 137 Notice of termination, 289 Notification of defects, 493, 568 Novation, 298, 300–302 Nullity of the contract, 204–212 Objection against execution, 83 Obliegenheit (minor category of obligation), 316, 325, 456, 486, 539

2

Obligatio naturalis, 125, 359, 371, 549 Obligation abstract, 192 cancellation because of frustration, 296–297 cancellation because of impossibility, 291–295 causal, 189–192 cause of an obligation, 123 contractual/legal obligation, 60–61 gifts given in discharge of an obligation, 374, 375 minor category of obligation (see Obliegenheit), 316, 325, 456, 486, 539 natural, 125, 359, 371, 549 not enforceable, 125 strictly personal, 264, 290 termination, 263–304 to contract, 110 to tolerate and abstain enforcement, 326–328 transfer of the (entire) obligation, 260 Obligational transaction, 32 Obligo offer ohne obligo, 112, 115 Oertmann, 296 Offer, 111–112, 114, 115, 119 and acceptance, 109–110 and promise of a reward, 114 binding effect, 112, 114 firm offer, 112 ‘general’, 114 ohne obligo/without obligation, 112, 115 or invitation to treat, 115 public offer, 109, 111 ‘real’, 119 revocation, 112 Omission, 33 and implied terms, 215 Onerous legal transaction, 32 Open credit, 421 Order by decree ( see administration) Organ of a legal entity, 166 Ownership, 32, 72, 74, 188, 544 ‘common’, 544 law of, 74 transfer of, 32, 188 Package holidays, 563 Pacta sunt servanda, 296 Pactum de quota litis, 194, 196 Parliament, 9 Parliamentary elections, 9, 10

Index Parliaments of the provinces/states, 9, 11 Parties agreement of the parties, 109–125 Partnership civil partnership ( see civil partnership) – commercial partnership, 546 for common gain, 545 Party capacity (to contract), 160–167 political, 9 protection of the weaker party, 368 Passing of risk, 462–465, 482–485 Payment ( also cf. performance), 263–282 and capacity, 265, 266 and foreign currency, 270, 279 and risk bearing, 280 by a third party, 264 by bill, 270, 273, 278 by cheque, 270, 273, 278 due date, 276 in part, 269 legal presumption, 268 of money debts, 270–282 on account, 269 other accepted modes, 278 performance in lieu, 284 place, 275 priority, 269 time, 276 Penalty, 219–221 and commercial transactions, 219, 220 and liquitated damage, 219 diminution by the court, 220 validity, 221 Penalty clause, 219–221 Performance ( also cf. payment), 263–282 agreed time/place/manner, 264, 316–325 and capacity, 265, 266 and extinction of a debt, 263–285 by a third person, 239, 264 contemporaneous performance, 276, 480 defective performance, 269, 329–335 defence of lack of, 454, 480 defence of uncertainty of, 454, 481 due date of, 276 enforced performance, 326–328 frustration, 296–297 impossibility, 291–295, 308–315 remedies, 308–315 in advance, 481 in lieu of payment, 284 in natural ‘in specie’, 326–328

interest, 308, 309, 318, 340 irregularities, 305–367 donation, 380–381 judgment for performance, 326–328 non-performance, 271, 295, 315–317, 324, 340 partial performance, 295 period of grace, 321–323 place, 275 promise of performance in favour of a third party, 240 remedies in case of delayed performance, 316–325 specific performance ( see remedies), 305, 317, 326–328 enforcement, 326–328 time, 276 unreasonable/economically unfeasible performance, 291 Period additional period for performance, 365, 367 grace period, 309 318, 321–323, 341 limitation period, 354–360 short /long limitation period, 355–357 preclusive period, 335, 348, 358 prescription period, 335, 348, 358 short limitation period, 405 Periodicals (finding the law), 104, 109 Permissibility, 193–200, 209–212 Person juristic person, 166–167 legal person, 166–167 moral person, 166 natural person, 160–165 Personal right in property, 39 Personal strictly personal obligation, 264, 290 Petition permission for use upon, 410 Place of payment/performance, 264, 275 Pledge, 72 and assignment, 250 Political parties, 9 Positive violation of a contract, 338, 342–347 Possession, 73 adverse possession, 303 Precarium, 410 Precedent no doctrine of, 21

2

Index Preclusive period, 335, 348, 358 Pre-contractual duty, 121, 143–153 general principles, 143–145 not to break off negotiations, 144, 150–152 not to deceive about authority, 144, 153 to inform about the object, 144, 147–149 to inform about obstacles, 144, 146 types, 144–145 Pre-contractual fault, 113 Pre-contractual liability (cf. culpa in contrahendo), 55, 139–159 field of application, 146–153 legal framework, 140–142 summary, 158–159 unsound expansion, 154–157 Preemption right of, 499 Preliminary agreement, 42, 385, 396, 412 Prescription period, 348, 362 Presumption legal presumption of payment, 268 Price reduction ( see also warranty), 331, 333–334 Primacy of legislation, 18–19 Principle of good faith, 85–87 of informality, 49 of legality, 7, 18 Private autonomy, 13, 29, 49, 109, 239, 567 Private international law, 91 Private law, 25–26 Privatization, 13 Privity of contract, 238–262 Procura, 437 Product liability, 245, 503–504 ‘anonymous good’, 504 defect, 504 immaterial damage, 504 industrial property, 504 liability threshold, 504 Product Liability Act (PHG), 57, 247, 504 Profit loan with profit participation, 423 lost profit ( see damages), 341 Prohibition and contract, 193–200, 209–212 circumventing contract, 200

27

Promise for the benefit of a third party, 240 gratuitous promise, 124 of a reward, 114 of intercession, 239 of performance in favour of a third party, 240 Proof of fault, 54, 59, 140, 244, 339 Property law, 39, 74 Protection of the weaker party, 368 Provisionally invalid contract, 162 Public law, 25–26 Public morality, 201–203 Public offer, 109, 111 Public policy considerations, 35 Publication case law, 100–102 law/legislation, 98–99 Publicity requirement assignment, 250, 256 Pufendorf, 38 Pure economic loss, 55, 140 Purpose fitness for a specific purpose, 329 of an obligation (cause), 32, 123, 188, 189–192 Quality defect, 329 Quasi-contracts, 61 Quid pro quo-principle, 123 Real act, 263 Real character disposition, 77 Real contract, 42, 385, 399, 412 Real offer, 119 Real property restricted acquisition by aliens, 165 Real right, 71–78 notion, 71–73 Real transaction, 32 Reason law of, 36 Receipt and payment, 267–268 Recipient’s horizon test, 224 Reciprocity of contractual duties, 45–46 Recognition of a debt, 303–304 constitutive/declaratory recognition, 304 Redemption of a claim, 264

Index right of, 498 Reduction of the price ( see also warranty), 331, 333–334 amount, 334 Registration land register, 76–78 merchant, 565 Regulation ( see administration) rei vindicatio, 74 Relative method of computation ( see also warranty), 334 Reliance damages, 305 Remedies, 305–367 catalogue, 307 concurring remedieswarranty and damages, 346–350 consumer Protection Act, 362 damages, 338–351 donation, 380–381 enforced performance, 326–328 general introduction, 305–307 in case of delayed performance, 316–325 in case of laesio enormis, 352–353 in case of non-performance, 308–315 limitation, 354–360 list of remedies (Anglo-American approach), 307 specific remedies under specific statutes, 361–367 types, 306–307 Uncitral-Convention, 363–367 warranty, 329–337 Remittance, 275, 278 Renunciation of rights, 300 Repair ( see warranty) Replacement ( see warranty) Representation, 238, 264–265, 266 and payment/performance, 264–265, 266 Representations and terms, 214 Repurchase right, 247 Resale right, 247, 499 sale with the option to resell for a higher price, 502 Rescission, 293, 309–312, 318–323, 351, 362 and cancellation, 333 and delay grace period, 321–323

and delay of performance, 318–320 and impossibility, 309–312 and warranty, 333–335 distant selling, 563 door-to-door sale, 362 laesio enormis, 351 partial delay, 319 partial impossibility, 310 time-sharing, 563 Restitution ( see remedies) Restraint alienation, 76 encumbrance, 76 Revocation donation, 382–383 offer, 112 promise of a reward, 114 Reward donation made as a special reward, 377 promise, 114 Right absolute/relative right, 71–73 alienable right, 247 ‘expectant right’, 237 in rem, 39, 71–73, 247 and tenancy, 507 notion, 71–73 non-assignability, 247 personal right in property, 37 real right, 71–78 renunciation, 300 strictly personal right, 247 to repurchase, 247 to resale, 247 to rescind ( see rescission) transfer, 248–256 vexatious exercise, 202 Risk passing of, 462–465, 482–485 Risk bearing and deposit of a debt, 283 and payment, 280 tenancy, 512 Risk of loss, 462–465, 482–485, 540 and carriage, 484 Risk of performance, 482 Risk of price, 482 Roman law, 15, 36, 36, 37, 237, 238, 368, 385 Rule of ne ultra alterum tantum, 281 Rule of law, 7, 18

2

Index Rules of interpretation, 88–89 Sale, 273, 466–505 agreement to perform in advance, 481 and barter, 454, 466 ‘absorption rule’, 458–461 commercial law, 458–461 distinction, 458–461 and entry into the land register, 470 and product liability, 503–504 as a title, 469 collateral agreements, 497–502 commercial sales, 472 concept of, 467–470 contemporaneous performance, 480 credit sale, 224, 487–488 date of performance, 476–477 delayed performance by the buyer, 496 door-to-door sale, 363 double sales contract in combination with set-off, 460 emptio rei speratae, 551 emptio spei, 561 French law, 469 German law, 469 instalment sale, 424, 505, 523, 562 international sales, 473 interrelation of the legal rules on sales, 474 no formal requirements, 470 object of ,466, 467 objectgoods and immovables, 466 obligations of the buyer, 486–488 obligations of the seller, 475–481 place of performance, 478–479 price at least ascertainable price, 468 regular sales, 471 relation to work contract, 543 remedies of the unpaid seller, 496 right of preemption, 500 right of redemption, 498 right of resale, 499 risk of loss, 482–485 commercial sale and carriage, 484 specified goods, 484 unascertained goods, 483 risk of performance, 482 risk of price, 482 types of sales contracts, 471–474 upon approval, 501 warranty ( see also warranty), 489–494 and damages, 494

27

commercial law, 493 defect in quality, 492 defect of title, 491 notification of defects, 493 with the option to resell for a higher price, 502 Secretary of state, 10 Security assignment, 250, 254, 256 transfer of ownership, 81 Separation of powers, 7, 18, 20 Sequestration, 397 Seriousness lack of, 120 Servants civil servants, 524 liability for, 244, 261 Service contract, 524–527 and independent employment contract, 527 and work contract, 525, 530 ‘chain contract’, 528 concept, 524–525 directions, 525 dismissal, 528 duties of care and good faith, 526 liability of the employee, 526 personal performance, 526 rights and obligations of the employee, 526 rights and obligations of the employer, 527 termination, 528 warranty, 329–337 Servitude, 72 Set-off, 243, 274, 285 double sales contract in combination with, 460 unilateral set-off, 274 Settlement, 300–302, 303–304 and error/mistake, 301 and laesio enormis, 301 bona fide settlement, 301 general settlement, 301 Shop authority, 436 Silence to an offer commercial law, 567 Silent assignment, 254 Simple interpretation, 223, 224 Social security law, 91 Sources of the law of contract, 90–110,

Index 92–96 Sovereign power, 25–26 Specific contracts ( see contract) Specific performance ( see remedies) Specification by the purchaser, 568 Spouse capacity to contract, 164 formal requirements for a barter, 453 implied authority, 434 Standard form contract, 52, 199, 229 Statutory interest, 282 Statutory obligation, 60–70 Study of law, 90 Subagent, 262 Subcontracting, 261–262 and performance of work, 262 and power of attorney, 262 Subcontractor, 262 Substitution, 261–262 Substitute value and destruction of the owing property, 292 Success guarantee for the success of intercession, 239 Supplementary delivery ( see warranty) Supplementary fee, 281 Supplementary interpretation, 223, 225–227 Supreme Court (OGH), 21–23 Suretyship, 50, 132 Synallagmatic contract, 43–46, 123 Tacit declaration of intent, 33, 213, 215 Tax law, 91 Tenancy, 202, 506–519 and death, 512 and lease conceptual framework, 506–507 distinction, 506, 520 and legislation, 509–511 and right in rem, 507 and social influence, 509–511 and sub-tenancy, 515 bearing of risk, 512 duration, 518 in general, 508–511 maintenance costs and expenses of repair, 514 possibility of limitation, 518 possibility of takeover, 516 rent, 515

rights and duties of the parties, 514–516 subject, 508 termination, 517–519 warranty, 513 Tender legal tender, 272 Tenure ‘contract of tenure’ ( see tenancy) Termination notice, 289 obligation, 263–304 Terms and representations, 214 express, 213–214 implied, 213, 215 Test ‘recipient’s horizon test’, 224 Third party, 58–59, 264 and assignment, 255–256 contract at the expense of, 239 contract for the benefit of, 238, 240–243, 244 contract implying the protection of, 55, 59, 141, 244–245 contractual duties to protect a, 55, 58, 227 promise for the benefit of, 240 promise of performance in favour of, 240 ‘true contract’ in favour of, 241 Third party benefit insurances, 240 Third person performance by, 239 Time lapse of time and extinction of a debt, 288 payment/performance, 264, 276 Time-sharing of property, 135, 569 Title, 32, 188, 365, 469 and modus assignment, 250 deficiency, 329 legal/equitable title, 79 Titulus, 469 and modus, 369 Torts Tortious liability, 53–59 and contracts, 53–59 Transaction see legal transaction business transaction, 566 rebuttable presumption, 566 cause, 32

27

Index commercial transaction, 563–569 consumer transaction, 555–562 obligational/dispositional transaction, 32 Transfer contractual rights, 246–256 money, 275, 277 ownership, 32, 188 causal transfer of ownership, 205 the (entire) obligation, 260 Transfer of ownership for security, 81 Treatises (finding the law), 107–108 Tripartite system ABGB, 94–95 Trust, 79–84 administrative trust, 81 in self-interest, 81 ‘silent’ trust, 80 to the interest of another, 81 Ultra vires doctrine, 167 UNCITRAL-Convention, 93, 307, 329, 336, 363–367, 473 remedial system, 364–367 remedies of the buyer, 364–365 remedies of the seller, 366–367 Unfair clause, 199 Unilateral legal transaction, 29, 32, 114 Unilaterally binding legal transaction, 32, 43, 223 Unjust enrichment, 62–65, 251, 309 Unreasonability and impossibility, 312 Usages prevailing in commerce, 223, 228 prevailing in honest transactions, 215 Use contract of lending, 399–410 loan contract, 411–424 permission for use upon petition, 410 Usurious contract, 198–199, 210, 420 Usus modernus pandectarum, 36 Validity conditions of substantive validity, 160–212 lack of consequences, 206–212 other conditions of, 198–203 Value disproportion, 186–187, 198

27

Vicarious liability, 55, 140, 339 Violation ‘positive violation of a contract’, 338, 342–345 Vis absoluta, 168 Wagering gambling and wagering contracts, 549, 554 Waiver, 286 of contractual rights, 218 of warranty, 490 Warehouse-cases, 154–157 Warn duty to work contract, 537 Warranty, 329–335, 489–494 and condition, 214 and damages (concurring remedies), 346–350, 494 commercial law, 493 consumer transaction, 557–560 deficiency of title/defect of quality, 330 leasing, 523 notification of defects, 493 sale, 489–494 system of remedies, 331, 333 tenancy, 513 work contract, 535 waiver, 490 Warranty remedies common characteristics, 335 concurrence with damages, 346–351 limitation period, 337 price reduction, 336, 349 reduction of the price, 333, 336 repair, 331–332, 349 replacement, 331–332, 349 rescission, 333–335, 349 supplementary performance, 332 Welser, 143, 145, 153, 350 Work contract for work and materials, 543 performance of work and subcontracting, 262 Work contract, 525, 530–543 and contract for work and materials, 543 and service contract, 525, 530 based upon an estimate, 539 characteristic elements, 531–533 consideration, 533 contribution by the principal, 539, 542

Index duties of the contractor, 534–537 duties of the principal, 538–539 duty of care and assistance, 538 duty to warn, 537 end, 541–542

relation to sale contract, 543 result, 532 risk of loss, 540 warranty, 535 Writing ( see legal forms)

27

Index

27

Contract Law in Austria WILLIBALD POSCH Derived from the renowned multi-volume International Encyclopaedia of Laws, this practical analysis of the law of contracts in Austria covers every aspect of the subject – definition and classification of contracts, contractual liability, relation to the law of property, good faith, burden of proof, defects, penalty clauses, arbitration clauses, remedies in case of non-performance, damages, power of attorney, and much more. Lawyers who handle transnational contracts will appreciate the explanation of fundamental differences in terminology, application, and procedure from one legal system to another, as well as the international aspects of contract law. Throughout the book, the treatment emphasizes drafting considerations. An introduction in which contracts are defined and contrasted to torts, quasi-contracts, and property is followed by a discussion of the concepts of ‘consideration’ or ‘cause’ and other underlying principles of the formation of contract. Subsequent chapters cover the doctrines of ‘relative effect’, termination of contract, and remedies for non-performance. The second part of the book, recognizing the need to categorize an agreement as a specific contract in order to determine the rules which apply to it, describes the nature of agency, sale, lease, building contracts, and other types of contract. Facts are presented in such a way that readers who are unfamiliar with specific terms and concepts in varying contexts will fully grasp their meaning and significance. Its succinct yet scholarly nature, as well as the practical quality of the information it provides, make this book a valuable time-saving tool for business and legal professionals alike. Lawyers representing parties with interests in Austria will welcome this very useful guide, and academics and researchers will appreciate its value in the study of comparative contract law.