In a judgment dated 21 / 04 / 2015 – XI ZR 200 / 14 – the Federal Court of Justice (BGH) held that extending the limitation period for a claim under a guarantee from three years to five years in terms and conditions is admissible.
The defendant had agreed to provide an absolute fixed liability guarantee for existing, future and contingent claims of the claimant bank against the principal debtor. The claimant asserted a claim for payment against the defendant based on this absolute guarantee. According to the guarantee document, the guarantee was to become payable when the claimant claimed against the principal debtor or when insolvency proceedings were opened in relation to the principal debtor’s assets. The guarantee document also included the following provision:
“The claims under the guarantee shall expire at the end of five years, beginning with the end of the year in which these claims become due.”
The claimant claimed against the defendant under the guarantee after insolvency proceedings were opened in relation to the principal debtor’s assets. The defendant refused to pay and objected that the claim had expired. He took the view that the extension of the limitation period contained in the T&Cs was null and void. The BGH rejected the defendant’s appeal.
According to the BGH, the claim under the guarantee had not expired. It held that the clause was effective as it did not breach mandatory law, nor did it unreasonably disadvantage the defendant contrary to the requirements of good faith.
The Court stated that the standard limitation period under section 195 of the German Civil Code (BGB) is among the core concepts underpinning the law on limitations, such that in case of doubt the contracting partner would suffer an unreasonable disadvantage in the event of any deviation from the statutory period being incorporated in terms and conditions. However, this assumption does not apply if the relevant clause does not unreasonably disadvantage the customer overall, after comprehensive consideration of the respective interests. In the opinion of the BGH, there is no unreasonable disadvantage if the benefit to the user is offset by benefits for the user’s contractual partner.
Applying these principles accordingly, the BGH stated that the clause at the centre of the dispute did not only extend the limitation period, but simultaneously provided benefits for the defendant, i.e. the guarantor. In addition to replacing the standard limitation period, the clause also displaced the maximum limitation period of ten years irrespective of knowledge in accordance with section 199 sub-section 4 of the BGB. Furthermore, the Court pointed out that the limitation period began as of the end of the year in which the claims under the guarantee become due, irrespective of knowledge or grossly negligent lack of knowledge on the part of the beneficiary of the guarantee regarding the emergence of the claim. By way of derogation from the statutory regulations in section 199 sub-section 1 no. 2 of the BGB, the start of the limitation period is therefore not dependent on the beneficiary of the guarantee obtaining knowledge of the circumstances giving rise to the claim and of the identity of the debtor, or only not having such knowledge due to gross negligence.
As such, the disputed clause takes reasonable account both of the interests of the principal and of the interests of the beneficiary of the guarantee. According to the Court, the valid interest of the beneficiary of the guarantee in an extension of the limitation period for claiming under the guarantee arises from the fact that the claim only comes about when the collateralised principal amount becomes due. As a result of the sometimes lengthy period of time before realisation of collateral, enforcement of the claim under the guarantee could be rendered more difficult in a given case. At the same time, extending the period of limitation also benefits the guarantor, since the beneficiary is not forced to assert a costly early claim. Furthermore, the guarantor benefits from the fact that he no longer has to demonstrate and prove the subjective circumstances set out in section 199 sub-section 1 no. 2 of the BGB.
The BGH has confirmed in the past that standardised extension of limitation periods of up to two years is admissible where it is justified on an objective basis and the interests of the contracting partner are adequately taken into account. In such cases, the overall contractual content must be considered, including the reciprocal rights and obligations, as part of a comprehensive weighing of interests. The judgment outlined above means that for the first time the BGH has carried out such an assessment in relation to extending the limitation period of a claim under a guarantee.
Standardised extension of limitation periods will need to be measured against these principles in future. When drafting corresponding clauses, care must therefore be taken that they include concessions to the other party, e.g. in relation to the start of the limitation period and its maximum duration.