The Legal Relevance of Formally Valid Gift Promises
Intangible and tangible transfers in the form of gifts play a significant role both in family and economic contexts. However, the statutory requirements for the effectiveness of a gift promise are often underestimated. The judgment of the Regional Court of Coburg dated 7 February 2014 (Ref.: 22 O 68/13) illustrates that promises of gifts lacking proper formality have no legally binding effect. The following provides an in-depth presentation of the essential legal aspects, practical pitfalls, and the consequences of failing to obtain notarization.
Importance of Formal Requirements for Gift Promises
Statutory Regulation of Gift Promises
According to the provisions of the German Civil Code, a promise of a gift in accordance with § 518 para. 1 BGB is generally only binding if the declaration has been notarized. This formal requirement serves to protect all parties involved: it ensures an informed and considered decision by the donor and protects against hasty or ill-considered transfers of assets.
Lack of Notarization as an Obstacle to Validity
A violation of the required form has the consequence that the gift promise is generally invalid. This means that the recipient cannot derive any legal claims to the promised transfers from an invalid promise.
In the specific case decided, the plaintiff had relied on the alleged promise; however, the required notarization was not carried out. The Regional Court of Coburg therefore dismissed an action for the transfer of the promised property shares. The decision emphasizes that such promises, without compliance with the statutory form, are necessarily void, unless the gift has already been executed (§ 518 para. 2 BGB).
Typical Scenarios and Risks of Gift Promises Lacking Proper Form
Common Areas of Application
In practice, gift promises are particularly used in the transfer of real estate, company shares, or large sums of money. Especially in such economically significant transactions, compliance with the forms is mandatory, as otherwise significant legal uncertainties and liability risks may arise.
Impacts on Business Succession and Asset Transfers
Within the context of business succession, restructuring, and inter-company relationships, gift promises lacking proper form can have serious consequences. The parties risk becoming embroiled in extensive disputes over allegedly existing claims if the mandatory formal requirements are not observed.
It is also regularly the case that the civil and tax law consequences of a gift are not sufficiently considered in advance. In many cases, it is also overlooked that there are specific reporting obligations from a tax perspective, the non-observance of which can entail substantial risks.
Practical Consequences and Protection Against Unintended Asset Transfers
Prevention of Precipitous Gifts
The requirement for notarization serves in particular to prevent hasty gifts. Through the involvement of a neutral notary, it is ensured that the declarant is fully informed about the implications of their declaration of intent and any possible side effects. This can help to avoid later disputes and lengthy disagreements.
Rescission and Execution
Gift promises are frequently the subject of judicial disputes because the execution—such as via transfer in the land register—has not taken place and the donor later wishes to invoke the defect in form. The situation is different if the gift promise has been performed: in these cases, the defect in form is subsequently remedied, and, as a rule, what has been provided cannot be recovered in practice. Nevertheless, careful consideration of the specific circumstances of each individual case is required here.
Conclusion
Adhering to the requirement for notarization of gift promises is of considerable practical significance for both businesses and private individuals. Not only does it prevent hasty decisions, but it also ensures the transparency and enforceability of economic transactions. The case law, as highlighted by the Regional Court of Coburg, makes it clear that gift promises lacking proper form cannot give rise to enforceable claims.
For entrepreneurs, investors, and high-net-worth individuals, it is advisable to strictly observe the existing legal requirements in connection with asset transfers, gifts, or succession planning and to have legal risks reviewed at an early stage. Should you have any questions regarding this subject, the Rechtsanwälte of MTR Legal are available to advise you nationwide and internationally.
