The written form as required for long-term lease agreements is already observed if the lease agreement is documented in two (identical) written copies, which are each signed by only one of the parties, even if the copies are subsequently not sent to the respective other party.
(BGH, judgement of 7 March 2018 – XII ZR 129/16)
INTRODUCTION: The German Civil Code (Bürgerliches Gesetzbuch – BGB) prescribes the written form for the effective agreement on a term over one year in lease agreements. In the past, Section 126 BGB was referred to for the criteria necessary for this. This section prescribes that either the document is signed by both parties on the same copy or two identical copies determined each for the other party, each signed by one party only. It was concluded from this that the written form is only complied with in case of separate signing if the copies were also received by the respective other party, that is, if the signed copies were exchanged between the parties. In earlier decisions, the German Federal Court of Justice (Bundesgerichtshof – BGH) had merely judged that it is insignificant where the signed documents are subsequently located or whether they later still exist at all. Now, the BGH rejects the requirement to exchange the copies and differentiates between questions on the compliance with the written form and on the valid conclusion of a contract – in line with earlier decisions, for instance on delayed acceptance due to great time differences between the signing of the contract documents by both parties.
THE DECISION: The decision was based on an agreement about a long-term use of the roof and open spaces of a property in order to construct and operate a photovoltaic system. This was signed in each case by one party on separate copies, and only sent to the other as a copy by fax. The owner subsequently terminated the contract. The legal dispute concerned the issue of the continuation of the contract. The BGH also did not consider Section 126 BGB to have been comprehensively satisfied because it is not in any case proper form to conclude a contract via fax. It stressed, however, that in order to meet the written form required for lease agreements it is only a matter of compliance with the "pure written form of the declarations" as the outer form, irrespective of how such a contract would be subsequently concluded. The written form is also complied with if the lease agreement, "with terms identical to the contract terms set out in writing", were only concluded verbally or by implication. This would satisfy the protective purpose of the written form both in regard to providing information to a buyer as well as for the provability of long-term agreements and as a warning against thoughtlessly entering into long-term commitments.
IMPACT ON DAY-TO-DAY BUSINESS: The BGH's judgement is only ostensibly a relief for practice. Legally, the distinctions between the features of Section 126 BGB appear to be amply constructed. Above all, however, the case law still entails risks for the practice in the form of possible massive evidence problems, both regarding the effective conclusion as well as whether the contract effectively concluded actually has the same content as the written version(s). Thus, it is recommended to continue to adhere to documented written contractual conclusion of lease agreements through the exchange of separately signed copies or joint signing on one contract document.
Mayer Brown is a global legal services provider comprising legal practices that are separate entities (the "Mayer Brown Practices"). The Mayer Brown Practices are: Mayer Brown LLP and Mayer Brown Europe – Brussels LLP, both limited liability partnerships established in Illinois USA; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales (authorized and regulated by the Solicitors Regulation Authority and registered in England and Wales number OC 303359); Mayer Brown, a SELAS established in France; Mayer Brown JSM, a Hong Kong partnership and its associated entities in Asia; and Tauil & Chequer Advogados, a Brazilian law partnership with which Mayer Brown is associated. "Mayer Brown" and the Mayer Brown logo are the trademarks of the Mayer Brown Practices in their respective jurisdictions.
© Copyright 2018. The Mayer Brown Practices. All rights reserved.
This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.