In a recent case decided by the Federal Court of Justice (judgment of 15 November 2012 – IX ZR 169 / 11), an energy supplier had entered into a contract with a customer “which should also terminate without notice if the customer makes an application for insolvency or where preliminary insolvency proceedings are initiated or opened based on an application by a creditor”. When the customer was forced to declare insolvency, the energy supplier and the customer’s insolvency administrator entered into a new energy-supply contract at higher rates, subject to a review of the legal position. However, as the insolvency administrator subsequently only made payments at the level set out in the old contract, the energy supplier brought proceedings for payment of the difference. The action was unsuccessful. The issue of whether insolvency-dependent rescission clauses in contracts for the continuous supply of goods or energy are invalid under section 119 of the Insolvency Act (InsO) because they preclude in advance the insolvency administrator’s existing ability to terminate contracts under section 103 of the InsO had not previously been clarified at Federal Court (BGH) level. The BGH has now ruled that insolvency-dependent rescission clauses are only valid if they conform with a rescission option provided by statute. According to the court, the purpose of the insolvency administrator’s freedom to terminate contracts is to protect and increase the assets in the interests of satisfying all creditors equally. This purpose would be frustrated if the debtor’s contractual partner was able to rescind a contract purely based on insolvency that was otherwise beneficial to the company’s assets. The court held that when passing the InsO, the legislator had wanted to avoid any detrimental effects of this kind on the continuation of business operations. If the insolvency administrator’s right to choose between fulfilment or non-fulfilment of a contract is removed by a contractual rescission clause in relation to a contract which is beneficial to the assets, this would contradict the legislator’s intention when introducing section 103 of the InsO.

Attention must thus be paid in future to the BGH’s ruling on independence from insolvency when drafting rescission clauses. Citing default or other breaches of contract is one possible way of avoiding circumstances which are specific to insolvency.