Contractual adjustments due to disturbance of the basis of the contract

Overview of the current case law of the Federal Court of Justice (BGH) on contract adjustments due to disturbance of the basis of the contract pursuant to Section 313 of the German Civil Code (BGB)

The courts are currently dealing with a large number of cases arising from and in connection with the Covid 19 pandemic. There is an increasing demand for possibilities to adjust contracts retrospectively with regard to price increases, supply disruptions, etc. The provisions on the disturbance of the basis of the contract under Section 313 of the German Civil Code (BGB) can provide a suitable approach in this regard. This doctrine, which codifies the law of judges, is in conflict with the principle of "pacta sunt servanda" (Latin: contracts should be served or kept). It is handled restrictively by case law.

This year, the XIIth Civil Senate of the Federal Court of Justice (BGH), which is responsible for commercial tenancy law, has already published four decisions. This year, four decisions have already been published by the XII Civil Senate of the Federal Court of Justice (BGH), which is responsible for commercial tenancy law, in which the BGH addressed the question of whether contractual adjustments are permissible due to the closure of a retail store as a result of the Covid 19 pandemic. The III Civil Senate of the BGH also dealt with the change in the basis of the contract in a recent decision from 2022. It is to be expected that further decisions will be published in the near future in which the courts will assess the need of those seeking legal redress to adjust contracts.

• In the judgement of January 12, 2022, XII ZR 8/21, the Federal Court of Justice dealt with the "pandemic rent" for the first time. The BGH clarified that the closure of a retail store due to the Covid 19 pandemic was not to be regarded as a defect of the rental object within the meaning of Section 536 (1) BGB. The landlord would not be wholly or partially prevented from providing the contractually owed service of surrendering and maintaining the rental object in a condition suitable for use in accordance with the contract. However, in the event of a business closure due to a sovereign measure to combat the Covid 19 pandemic, a claim by the tenant of commercially used premises for adjustment of the rent due to disturbance of the basis of the business pursuant to Section 313 (1) of the German Civil Code (Bürgerliches Gesetzbuch - BGB) may be considered. On this basis, an adjustment could only be demanded to the extent that one party could not reasonably be expected to adhere to the unchanged contract, taking into account all circumstances of the individual case, in particular the contractual or statutory distribution of risk. As a result of the Covid 19 pandemic, a general risk of life had materialized which was not covered by the distribution of risk under the lease agreement without a corresponding contractual provision. Rather, this systemic crisis with its far-reaching consequences had led to a disruption of the major basis of business. The associated risk could regularly not be assigned to any contracting party alone. Even if the impairment of the use of the leased property associated with a pandemic-related plant closure cannot be assigned solely to the tenant's risk of use, this does not mean that the tenant can always demand an adjustment of the rent for the period of the closure. Whether it would be unreasonable for the tenant to adhere to the unchanged contract would require a comprehensive assessment in which all circumstances of the individual case would have to be taken into account. Here, any blanket solution is prohibited. In the weighing to be carried out, it is important which disadvantages the tenant has suffered as a result of the closure of the business and its duration. In this case, a decline in sales suffered in relation to the specific rental property had become decisive.

• The BGH also confirmed the aforementioned principles in its ruling of February 16, 2022, XII ZR 17/21, where it again dealt with the obligation to pay rent during the pandemic. In the decision, in which the plaintiff landlady was proven right, the BGH emphasized that the financial benefits that the tenant had obtained from state benefits to compensate for the pandemic-related disadvantages also had to be taken into account. On the part of the landlord, for example, the extent to which they were economically dependent on the rent could become important. It is not permissible to assume a rule-exception relationship that assumes a reduction of the rent by half and imposes the burden of presentation and proof on a contracting party willing to deviate.

• In the further judgment of 02.03.2022, XII ZR 36/21, the BGH dealt with the extent to which tenants would have to pay rent already paid (in connection with the holding of a wedding celebration with the planned catering of 70 persons), although the holding was not permitted due to various regulations in the Corona Protection Ordinance applicable at that time. It ruled that tenants of premises rented for a wedding celebration on May 1, 2020 remained obligated to pay the full rent if they did not agree to select a date suitable for them from a large number of possible alternative dates, also for the following year 2021. In weighing up the individual cases, which also took place in this case, the court also took into account, among other things, the fact that the couple had already married in 2018 and that nothing had been submitted as to why the ceremony had to take place on May 1, 2020 of all days.

• In its decision of April 28, 2022, III ZR 240/21, the Federal Court of Justice (BGH) ruled that the visit and exit restrictions imposed by the authorities as part of the fight against the COVID-19 pandemic would not entitle residents of a nursing home to a reduction in charges under Section 10 (1) WBVG. The background of the dispute was that the defendant's son had taken the defendant out of the accommodation in a nursing home to his home in view of the pandemic caused by the SARSCoV-2 virus. He did not vacate the room assigned to the defendant in the nursing home. From then on, the agreed fee was only paid on a pro rata basis. The BGH decided that the core services forming the focus of the (specific) nursing care contract (provision of living space and nursing and care services) could continue to be provided in full despite pandemic-related sovereign restrictions on visiting and going out. There was therefore no serious change in the basis of the contract within the meaning of Section 313 (1) of the German Civil Code. The visit and exit restrictions would primarily serve to protect the health of both the (particularly vulnerable) residents of the home and the staff of the home without calling into question the purpose of the contract. It was reasonable for the defendant to adhere to the unchanged contract, especially since the restrictions on social contacts ("lockdown") ordered to combat the COVID 19 pandemic covered the entire social coexistence, i.e. also non-home residents.

• In the judgement of May 4, 2022, XII ZR 64/21, the Federal Court of Justice (BGH) assessed the question of whether the operator of a fitness studio was obliged to repay membership fees that it had collected from a customer by direct debit during the period in which it had to close its fitness studio due to the sovereign measures to combat the COVID 19 pandemic. The BGH ruled that the plaintiff member had a claim for repayment of the monthly fees paid for the period of closure pursuant to sections 275 (1), 326 (1) sentence 1 and (4), 346 (1) BGB. The operator of the fitness studio cannot counter this claim for repayment by arguing that the contract should be adjusted due to a disturbance of the basis of the contract pursuant to Section 313 (1) BGB to the effect that the agreed term of the contract was extended by the period during which the fitness studio had to be closed. The operator's claim to the requested adjustment of the contract was ruled out in the present case, inter alia, because Article 240, Section 5, Paragraph 2 of the Introductory Act to the German Civil Code (EGBGB) contains a more specific provision which precludes recourse to the general principles on the adjustment of contracts due to disruption of the basis of business in the present case.

Currently, the courts are dealing with a large number of cases arising from and in connection with the Covid 19 pandemic. Corresponding disputes are taking place as a result of the war of aggression on Ukraine, the sanctions imposed in this connection, the procurement crisis and the price increases taking place. Further case law on the subject of possible contract adjustments is expected. The case law is being closely monitored.