When the assets and rights have been specified for the sale of the company, they have to be included in the contract in such a way that the requirements laid down by German law are met. The abstraction principle under German law plays a major part in this respect. This principle separates the contractual transaction, i.e. the actual conclusion of the contract relating to the purchase and sale of a company, from the transfer of the company itself. As mentioned above, the buyer only has a contractual claim to the transfer of a company when the contract is concluded. This right of the buyer is only settled by the in rem transfer, i.e. conveyance of the assets of the company from the seller to the buyer. If difficulties arise with the execution of the purchase contract and if the buyer would have to enforce his/its transfer right in judicial proceedings for example, the assets, rights and obligations which are to pass to the buyer have to be clearly specified in the contract.

The definitiveness principle which prevails in the law of property particularly applies for the in rem execution. This principle states that the assets to be transferred must be easily distinguished from other assets in the contract at the time of the transfer of ownership. A mere definition of the assets based on the contract does not meet the aforesaid requirement. In view of the fact the purchase of a company normally concerns the acquisition of the aggregate of assets, or at all events part of the aggregate of assets, the necessary definitiveness can only be achieved with the help of qualitative definition criteria and not from quantitative definition criteria. Qualitative definition criteria can be those relating to physical or temporal facts or to factual qualities.

This definitiveness principle has to be observed with every contract formulation if insuperable problems are to be avoided in the event of difficulties experienced with the execution of the contract.

For further information please contact Dr Erich Michel, Wessing Berenberg-Gossler Zimmermann Lange, Freiherr-Vom-Stein-Strasse 24-26, Frankfurt am Maim 60323, Frankfurt, Germany- Tel: +496 997 1300, Fax: +496 997 130100.

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