Good Faith (Treu und Glauben) in German Private Law

The principle of good faith (Treu und Glauben) is the most important general clause in German private law. Codified in section 242 of the Bürgerliches Gesetzbuch (BGB), it provides that a debtor is obliged to perform in such a manner as good faith requires, having regard to ordinary usage. This concise formulation has served as the foundation for extensive judicial development of German contract law. The Federal Court of Justice (Bundesgerichtshof) has used section 242 BGB to create new legal institutions, impose duties of consideration, and control the exercise of contractual rights. The principle functions as a safety valve that prevents the abstract rules of the BGB from producing unjust results in individual cases.

Historical Origins and Development

The concept of Treu und Glauben has historical roots in Roman law’s bona fides, which governed the interpretation and performance of good faith contracts. The drafters of the BGB adopted the principle as a general clause applicable to all contractual obligations, rejecting the Roman distinction between strict law and good faith contracts. Section 242 BGB was intended to give judges flexibility to adapt the law to changing circumstances. The provision acquired its central importance through the work of the Reichsgericht and later the Bundesgerichtshof, which used it to develop principles of contractual fairness that went far beyond the original intentions of the legislators. The principle now governs the entire law of obligations and extends to the exercise of rights, the interpretation of contracts, and the modification of contractual obligations when circumstances change.

Culpa in Contrahendo

The doctrine of culpa in contrahendo (fault in contracting) was developed by the courts on the basis of section 242 BGB. The Reichsgericht held that parties negotiating a contract owe each other duties of care and disclosure even before a contract is concluded. Breach of these duties gives rise to a claim for damages based on the principle of good faith. The doctrine was codified in section 311(2) and (3) BGB in the 2002 reform of the law of obligations, but its content continues to be shaped by judicial development. Culpa in contrahendo imposes duties to inform the other party of circumstances that might affect the decision to contract, to refrain from breaking off negotiations without justification, and to protect the other party’s interests during negotiations. The duty of disclosure is particularly intensive where one party has specialised knowledge that the other party cannot reasonably be expected to possess. The doctrine also applies to third parties who are relied upon in negotiations, such as experts and agents, extending liability to those who are not themselves parties to the prospective contract.

Positive Vertragsverletzung: Positive Breach of Contract

The positive breach of contract (positive Vertragsverletzung or pVV) was another judicial creation based on section 242 BGB. The BGB originally provided remedies only for impossibility and delay in performance, leaving a gap for cases where a debtor performed but performed defectively or breached a secondary duty. The Reichsgericht filled this gap by holding that any breach of a contractual duty that is not covered by the rules on impossibility or delay gives rise to a claim for damages under the principle of good faith. The doctrine encompassed defective performance, breach of ancillary duties (Nebenpflichten), and breach of duties of care. The 2002 reform of the law of obligations integrated positive breach of contract into the statutory framework by introducing a general concept of breach of duty (Pflichtverletzung) in section 280 BGB. The reform codified the case law developed under the positive Vertragsverletzung doctrine while maintaining the essential content developed by the courts.

Wegfall der Geschäftsgrundlage: Intervening Change of Circumstances

The doctrine of Wegfall der Geschäftsgrundlage (collapse of the basis of the transaction) is the most dramatic judicial development based on section 242 BGB. It addresses cases where circumstances that formed the basis of the contract change fundamentally after the contract is concluded, making performance excessively onerous or meaningless. The Reichsgericht developed the doctrine in the inflationary crisis of the 1920s, holding that the principle of good faith requires parties to adapt or terminate contracts when the underlying economic conditions have changed so radically that performance can no longer be expected. The Bundesgerichtshof refined the doctrine, distinguishing between the collapse of the subjective basis of the transaction (when both parties shared a mistaken assumption) and the collapse of the objective basis of the transaction (when external circumstances change). The doctrine was codified in section 313 BGB in the 2002 reform, which requires the court to adapt the contract if retention of the original terms would be unreasonable, having regard to all circumstances and the principles of good faith.

Good Faith as a Control Mechanism

Section 242 BGB also functions as a control mechanism on the exercise of rights. The prohibition of abuse of rights (Rechtsmissbrauch) prevents a party from exercising a legal right in a manner that is manifestly unreasonable or contrary to the purpose for which the right was granted. The courts have developed specific categories of abuse, including the prohibition of contradictory conduct (venire contra factum proprium), the requirement to exhaust other remedies before exercising a right of termination, and the principle that rights must be exercised within a reasonable time. The principle of good faith also imposes duties of consideration (Rücksichtnahmepflichten) requiring parties to take account of each other’s legitimate interests in the performance of the contract. These duties extend beyond the contractual obligations strictly defined and require cooperation in achieving the purposes of the contract. The general clause of section 242 BGB thus serves as the constitutional foundation of German private law, embodying the requirement of fairness that underlies the entire system of contractual obligations.