BGHZ 56, 81 VII. Civil Senate
05 April 1971
Translated by:
Raymond Youngs
Professor Basil Markesinis

The married couple St had a six-storey business and residential complex erected in H, but before it was completed they ran into financial difficulties. After calling a meeting of creditors, they commissioned the defendant, a financial and real estate agent, to look after further financial issues in relation to the building, as well as the sale of the business units and the residential accommodation. They gave him comprehensive powers. Amongst other things, it was agreed that further building works were only to be carried out with his agreement. But in the ensuing period the client and his architect made further efforts to allocate these works. After several tradesmen had stopped their activities, they obtained an offer from the claimant for the continuation of the metal building work. The defendant learnt about this and let the intended written contract be signed by the client. The claimant carried out the work he had taken over, but did not receive any payments.

The claimant now claims compensation from the defendant for the loss (which it calculates as totalling 19,007.58 DM) which it alleges it has suffered because, in view of the consent given by the defendant, it relied on being able to take on the work to be carried out without any guarantee of payment for it.

The Landgericht rejected the claim. The Oberlandesgericht allowed it. The defendant's appeal in law was unsuccessful.


I. (…)

1. The initial position taken in law by the appeal court is in harmony with the consistent case law of the Bundesgerichtshof. According to this, the duties from the statutory obligation relationship based on the initiation of contractual negotiations by an agent apply in principle to the person the agent represents. But under special circumstances the agent himself must also be responsible for the violation of these duties, in particular such as a duty of explanation. This occurs if special reliance was placed on him personally by the other contracting party, or if he had an economic interest of his own in the conclusion of the transaction. (…)

3. The decisive issue is therefore whether the principles developed by the case law and doctrine about an agent's own liability from the angle of fault in contractual negotiations may be applied to the defendant because he has claimed personal trust from the claimant to a special extent, and has thereby influenced the contractual negotiations.

a) In these cases letting an agent be liable for his own fault on conclusion of a contract appears to be justified when he has gone beyond the normal trust in negotiations which always exists in the initiation of business relationships - or at least ought to exist. This is because he has thereby offered the partner in the negotiations an additional guarantee by himself personally (and possibly even the only such guarantee) for the existence and fulfilment of the prospective legal transaction; and this guarantee was a significant factor in the other party's decision. Such special reliance placed in the agent can, for instance, be based on his special technical knowledge of the subject matter of the contract. But it can also be based on his personal reliability, or the power which he has to influence the implementation of the contract. This is particularly at issue when serious doubts exist about the financial capacity of the principal (see eg BGH LM no 4 at § 276 (Fa) BGB). Above all, this special case of reliance must be applied to a person who appears as a sort of financial adviser who seeks to bring the most diverse interests into harmony with one another.

This kind of claim to personal trust by the agent does not however in any way assume that the agent conducts the negotiations himself. He can also act through a sub-agent, who is then to be regarded as his assistant in performance (Erfüllungsgehilfe) in the sense of § 278 of the BGB for possible pre-contractual duties applying to him. The senate has already decided this in a case in which an architects' association had engaged a project manager who negotiated with the tradesmen for the removal of defects (LM no 37 on § 278 of the BGB). It is thus decisive that the special situation of trust has been created by the agent himself, or is in some way attributable to him, and that it has decisively influenced the conduct of the other negotiating partner.

b) But then it is impossible to see why, according to the principles mentioned, liability should only attach to the person who claims the special trust of the negotiating partner as required in the case law by appearing as agent of a party in the negotiations. There are no effective objections to applying these principles also to the adviser of a contracting party who keeps himself in the background during the negotiations, and only establishes his own relationships with the other negotiating party indirectly via the negotiating partner who is his client. This occurs when he consents to the intended conclusion of the contract, his declaration to this effect is brought to the knowledge of the other party, and it is the determinative factor inducing him to conclude the contract.

This is because from the viewpoint of the other party to the contract, it makes no difference whether he was induced to conclude the contract by special reliance on an agent of the other party to the negotiations who met him face to face, or whether he relied on the agreement to the intended transaction, produced by his direct contracting partner, of an adviser appointed by him. In both cases the co-operation of a third party who has a particular claim to personal trust has decisively influenced the decision of the other party.

But from the viewpoint of the third party the position appears to be the same. Whether he conducts the negotiations himself, or he leaves them to his client with his own express agreement to the intended conclusion of the contract, he always - if he is in the position of trust required by the case law - has to take into account the possibility that the other party to the negotiations will orientate himself to his, the third party's, attitude. This is especially true if it appears to be the only determinative one in all the circumstances.

A third party may be involved in the conclusion of a contract and he may know (or should know) that particular reliance is placed in him by the negotiating partners. They may both make their actions depend on his agreement. It would not be reconcilable with the principle of good faith if he could simply withdraw from his consequential responsibility by not appearing as his client's agent, but letting the client conclude the contract himself with the third party's express consent.
In such cases, the interests are the same so the legal assessments must be the same. Therefore the duties from the obligation relationship based on the initiation of contractual negotiations apply to an adviser of a contracting party who has a particular claim to the trust of the other party, and on whose decision in the given circumstances the conclusion of the intended legal transaction finally depends. It does not matter whether he appeared as agent of one party in the contractual negotiations or whether he merely gave his agreement to the conclusion of the contract and this was communicated to the other party to the negotiations.

4. The appeal court assumes that the defendant, after the further financial supervision of the extensive and ailing building project had been transferred to him, acquired a special position of trust not only as against the client, but also in the relationship with the building tradesmen and the client's creditors. There is no objection to this on legal grounds. In this connection the persons involved were entitled to assume that the defendant would cope with his task of overcoming the financing difficulties which had arisen so far and effecting completion of the building work with all the care to be expected, but also in such cases required, from a financial expert, which he is.

Full approval should therefore be given to the appeal court's view that all the persons involved were entitled to rely on the defendant agreeing to further building works only if he had previously scrupulously examined them, found them to be necessary and regarded them as financially achievable in the ordinary course of events. For the building tradesmen and the claimant who were to co-operate in the completion of the building, the defendant was therefore much more important than the client and his architect. (…)

5. The appeal court was therefore correct to assume that the duty to explain all the circumstances which were of substantial importance for the claimant's decision to take on the works, which would otherwise only have applied to the direct contracting partner (the client in this case), applied also to the defendant himself as a result of the special trust which the claimant showed towards him personally. According to the recognised case law (references omitted), the facts which should be revealed under the principle of good faith include the probability of hindrances to fulfilment of the prospective contract, or its fulfilment within a time limit. (…)