Contract provisions

Types of contract

Describe the various types of private banking and wealth management contracts and their main features.

There are several different types of private banking contracts. The types prevalent for private banking are typically investment advisory agreements, bank account agreements and asset management agreements. The agreements are often accompanied by a general framework agreement (such as the General Terms and Conditions of Private Banks). The general framework agreement specifies general aspects of the banking relationship, in particular the duty to secrecy and the bank’s security interests in bank accounts. The main features of the other types of contract are in line with their names (ie, investment advice for investment advisory agreements, etc).

The contracts are governed by the German Civil Code and, where relevant, supplemented by the German Securities Trading Act. Whether a client can ask for variations of the contracts is a matter of negotiation strength rather than mandatory law.

Liability standard

What is the liability standard provided for by law? Can it be varied by contract and what is the customary negotiated liability standard in your jurisdiction?

The default liability standard provided for by law is liability for every negligent breach of contract. The default liability can be varied if individually negotiated. If the liability is not individually negotiated, banks may deviate from the default standard only to a very limited extent. For instance, the General Terms and Conditions of the Private Banks provide for the default liability standard, but exclude liability in the case of force majeure.

Mandatory legal provisions

Are any mandatory provisions imposed by law or regulation in private banking or wealth management contracts? Are there any mandatory requirements for any disclosure, notice, form or content of any of the private banking contract documentation?

In general, there are no mandatory provisions or requirements imposed by law or regulation specifically with regard to the contents of private banking contracts.

However, private banking contracts are supplemented, where relevant, by the ancillary duties imposed by the German Securities Trading Act and the MiFID II Regulations. These duties require, for instance, a written framework agreement between the financial institution and its private client. The framework agreement must set out the main duties and rights of the parties. Furthermore, financial institutions are obliged to provide certain mandatory information to their clients when opening a business relationship (such as a general overview on the financial institution, types of financial instruments and costs associated with the offered financial services).

Limitation period

What is the applicable limitation period for claims under a private banking or wealth management contract? Can the limitation period be varied contractually? How can the limitation period be tolled or waived?

The applicable limitation period for claims under a private banking contract is three years. The period can be varied in individual negotiations or waived.