Legal Change in a Codified System: Recent Developments in Germany Suretyship Law

Abstract

Until recently, the German courts did not regard the contract of suretyship as subject to the precepts of commutative justice. This attitude prevailed even when the contract was unduly burdensome for the surety. A startling decision of the Federal Constitutional Court from October 1993 has changed the legal position. It enjoined the civil courts, when applying the general provisions of the BGB (such as the “contra bonos mores” clause), to pay due attention to the guarantee of the autonomy of private individuals, as enshrined in art 2 I of the Basic Law. Such autonomy is not always consistent with unrestricted freedom of contract. The civil courts are thus bound to intervene in unusually burdensome contracts where there is inequality of bargaining power. The present article analyses the general background and the consequences of this decision. It examines the way in which the Federal Supreme Court now deals with contracts of suretyship by close family members. Moreover, it draws attention to significant changes in judicial attitude concerning two related problems which have also resulted in increased protection of the surety: the tightening up of the judicial control of so-called declarations of purpose; and the stricter attitude adopted by the Federal Supreme Court towards the form requirement for suretyship contracts prescribed by the BGB.