Business basis

Definition and legal basis:

The basis of the transaction refers to the ideas shared by both contracting parties at the time the contract is concluded or the ideas of one of the contracting parties regarding the existence or future occurrence of certain circumstances on which the parties’ business intentions are based, which are recognizable to the other party and not objected to by it. The concept of the basis of the transaction is closely linked to the legal institution of frustration of contract, which is codified in Section 313 BGB. The doctrine of the basis of the transaction was originally developed by Paul Oertmann and found its way into the BGB through the modernization of the law of obligations in 2002.

Elements of the business basis:

The basis of the contract typically comprises the following elements: 1. common ideas:
circumstances that both parties assume when concluding the contract. 2. unilateral, recognizable ideas:
Ideas of one party that are recognizable to the other and not objected to. 3. materiality:
The circumstances must be of material importance for the conclusion of the contract. 4. forward-looking nature:
The ideas often relate to future developments.

Differentiation from other legal institutions:

The basis of the contract must be distinguished from related concepts: 1. Motive:
Purely subjective motives of a party are not part of the basis of the contract. 2. content of the contract:
Expressly agreed points are part of the contract, not the basis of the transaction. 3. error:
The error concerns the formation of the will, the basis of the transaction concerns the basis of the business intention.

Disruption of the business basis:

The practical significance of the concept of the basis of the contract is particularly evident when it is disrupted: 1. prerequisites (Section 313 BGB):
– Serious change in circumstances after conclusion of the contract
– The parties would not have concluded the contract or would have concluded it with different content if they had foreseen the change
– Unreasonableness of adherence to the unchanged contract for one party 2. legal consequences:
– Primary: adjustment of the contract
– Subsidiary: rescission or termination (in the case of continuing obligations)

Areas of application and examples:

The doctrine of the basis of the transaction applies in various areas: 1. economic changes:
– currency reforms
– extreme price increases 2. political upheavals:
– wars
– embargoes 3. natural events:
– floods
– earthquakes 4. personal circumstances:
– loss of the basis of the transaction in the case of gifts (e.g. separation of fiancés) 5. interference with purpose:
– loss of the jointly pursued purpose of the contract

Jurisdiction and development:

The case law on the contractual basis has evolved over time: 1. Restrictive application:
Courts apply the concept cautiously so as not to undermine the contractual obligation. 2. case-by-case fairness:
Emphasis on the need to comprehensively weigh up interests in individual cases. 3. corona pandemic:
New case law on applicability in the event of pandemic-related contractual disruptions. 4. international aspects:
Consideration in international contracts and in conflict with foreign legal systems.

Practical significance and design options:

The business basis plays an important role in contractual practice: 1. Risk allocation:
Explicit agreements on risk allocation can influence the business basis. 2. adjustment clauses:
Contractually agreed mechanisms for adjusting the contract in the event of changed circumstances. 3. force majeure:
Delimitation and interaction of the basis of the transaction and force majeure clauses. 4. due diligence:
Careful examination of the business basis in complex transactions.

Criticism and discussion:

The concept of the basis of the contract is not uncontroversial: 1. Legal uncertainty:
Critics criticize the vagueness of the term and the associated legal uncertainty. 2. contractual fidelity:
Tension between the principle of pacta sunt servanda and contractual adaptation. 3. economic efficiency:
Discussion about the economic effects of an overly generous application. In summary, the basis of the contract is a central concept of contract law that makes it possible to react flexibly to fundamental changes in circumstances after the contract has been concluded. It serves to strike a balance between contractual fidelity and fairness in individual cases and requires careful consideration of the interests of both parties. In an increasingly complex and volatile business world, the understanding and correct application of the concept of the basis of a contract is becoming increasingly important for lawyers and contracting parties.