Ten years after its last decision on this issue and six years after a decision of the VII Civil Senate that deviated from it (see here for the commentary at that time, in German), the IX Civil Senate of the German Federal Civil Court of Justice (BGH) in a decision from October 2022 once again deals with the question under which conditions agreements can be effective that allow one party to withdraw from the contract, for example, upon the occurrence of illiquidity or in the event of an insolvency petition by the other party (so-called “insolvency-dependent rescission clauses”).
In the case decided, the BGH held that a contractual provision providing for termination of the contract for “good cause” in the event that the “contractor [has] become unable to pay his debts, insolvency proceedings [are] pending against the assets of the contractor or […] the opening of such proceedings [has] been rejected for lack of assets” is valid.
Fortunately, the Senate already at the beginning elaborates on the opposing positions as they stand in view of the § 119 InsO after the decisions of the IXth and VIIth Civil Senates cited above. In particular, the BGH states that the law does not contain a sufficient basis for insolvency-dependent rescission clauses to always be invalid (para. 32). This applies in particular to insolvency-dependent rescission clauses that are linked to events prior to the opening of insolvency proceedings and are exercised prior to the opening of insolvency proceedings. According to the BGH, the insolvency administrator must generally take over a contract in the position in which he finds it when the proceedings are opened; in this context, contractually agreed termination rights generally continue to exist after the opening of the insolvency proceedings. However, these contractual provisions on termination rights are fundamentally subject to restrictions under insolvency law. Thus, pursuant to § 119 InsO, agreements are invalid which exclude or limit the application of §§ 103 to 118 InsO in advance, in particular if the insolvency administrator’s right to chose the continuation of a contract pursuant to § 103 InsO is impaired.
Generally effective provisions
According to the BGH, the right to choose is not impaired by a contractual rescission clause if it is closely linked to a statutory option to terminate the respective contract. This includes, for example, rescission clauses linked to circumstances that are not specific to insolvency, such as default or other breaches of contract, but also those that generally determine the existence of facts on the basis of which the continuation of the contract is unreasonable.
Generally invalid provisions
In contrast, an insolvency-dependent rescission clause, e.g. in a contract for work and services, which enables the customer to terminate the contract for cause on the occasion of an insolvency petition or the opening of insolvency proceedings, is invalid under § 119 InsO if, viewed objectively, circumvents the mandatory provision of § 103 InsO. This is the case if the insolvency-related circumstance in itself makes it possible to dissolve the contract and the rescission clause deviates from statutory solution options in terms of prerequisites or legal consequences without there being justified reasons for these deviations when viewed objectively ex ante at the time the contract was concluded on the basis of the mutual interests of the parties. In particular, the BGH assumes that insolvency-dependent rescission clauses in favor of a “monetary performance creditor” (“Geldleistungsgläubiger“) protected by §§ 320, 321 BGB regularly violate § 119 InsO and are therefore unlawful.
Block on exercise in the event of reorganization?
Even if a specific insolvency-related rescission clause is not generally invalid according to the aforementioned criteria, the exercise of such dissolution rights derived from it may under certain circumstances, however, violate good faith in the opinion of the BGH (see para. 55). Thus, with regard to § 44 StaRUG, it will have to be considered whether, in the case of self-administration (§ 270 et seq. InsO), the creditor’s interests in a rescission clause take a back seat.
Conclusion: Through its detailed examination of the individual contract types and the related clarification of the fundamental effectiveness of insolvency-dependent rescission clauses, the BGH develops a practical catalogue of effective clauses. In view of the previous state of opinions, the upholding of the rescission clause in the specific case is rather surprising, though – after all, it is very insolvency-related. The additional differentiation between the effectiveness and the exercise of a rescission clause may serve to facilitate corporate reorganizations. However, this bonus is accompanied by an increased need for examination in individual cases. Overall, this ruling fits in well with the BGH’s very own “Zeitenwende” (cf. here) in that it trims creditors’ rights in favor of the insolvency administrators’ sometimes escalating views on being bound by contracts even in insolvency.
BGH, Urt. v. 27.10.2022 – IX ZR 213/21(in German)