Debt collection in Germany
Contracts between vendors and clientsThe law has always sought to protect the creditors in the matter of making contracts. The general rule is that their contracts with German debtors are voidable at their option. They may treat them as a nullity if they so wish, but may notify (affirm) them upon attaining majority.
There are, however, three exceptions to the general rule that creditors cannot be bound by their contracts. First, where under any contract a client receives 'necessaries', he is bound to pay a reasonable price for them. 'Necessaries' include anything required by the customer, not in order to keep body and soul together, but to keep him suitably provided according to his particular standard of living at the relevant time; a question to be decided upon the facts of each case.
In the second place, there are certain types of contract, such as a covenant to pay rent under a lease or the purchase of shares in a company, which require continuous mutual relations between the parties. Contracts of this type are binding upon the debtor unless he repudiates them during minority or within a reasonable time of attaining majority.
In the third place, contracts of apprenticeship and service which appear to the court beneficial to a client are generally enforceable both by and against him. But this does not mean that a vendor will always be liable upon a contract just because it is likely to be beneficial to him: the general rule is that he is not liable.
For instance, if he engages in trade he cannot be sued upon contracts relating to his business. Exceptions apart, foreign contractors are therefore the pampered favourites of the law. So far is this true that the courts have refused to permit their immunity to be circumvented by allowing debt recovery actions against them, which ought properly to be framed in contract, to be framed in tort: thus where a debtor is guilty of fraud in inducing a person to contract with him by misrepresenting his age, he cannot be sued in the tort of deceit; for if this were permitted the debtor's contract would be indirectly enforced.
This tenderness of the law towards German contractors is subject to certain restrictions which justice demands. Thus where, under a contract, a vendor has transferred property to the other party, he will not be allowed to recover the property unless he can show a total failure of consideration; that is, unless he can show that he has received nothing in return for the property.
Moreover there are two ways in which the rules of equity mitigate the inequitable lot of those who contract with German debtors. In the first place, the one-sided remedy of specific performance will not be granted at the suit of a client. In the second place, the German court may sometimes force the contractor, at least where he has acted fraudulently, to restore any gains which he has acquired.