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Contractual withdrawal instructions for teak investments: current supreme court case law
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On 17 May 2024 (case no. VIII ZR 226/22), the Federal Court of Justice addressed questions concerning the obligation to provide withdrawal instructions in so-called teak investment contracts. The central issue was whether contracts under which consumers invest in teakwood plantations meet the requirements for the necessary withdrawal instructions, and what impact this has on the enforceability of claims.
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Initial situation: contractual terms in teak investments
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Numerous investors have invested in teak investments in which they contractually participate in the cultivation and management of teak trees on third-party plantations. The participations were often concluded through intermediaries and outside business premises—so-called doorstep transactions—which are subject to the protective mechanisms of consumer protection law.
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Point in dispute: omitted withdrawal instructions
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The focus of the proceedings was the fact that, when the contracts were concluded, the provider had not given the investors proper information about any right of withdrawal. Under the relevant case law, such an omission may result in the withdrawal period not being triggered, meaning that the right of withdrawal continues to exist for a longer time.
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Decision of the Federal Court of Justice
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In its judgment, the Federal Court of Justice made clear that proper withdrawal instructions are an essential component of contracts concluded outside business premises, provided they fall under consumer protection law. If correct instructions are missing, the consumer may, under the system of §§ 312g, 355 of the German Civil Code (BGB), still be entitled to a right of withdrawal. The court did not accept contrary clauses or the argument that certain types of business models should not be affected by this. In addition, it was emphasized that there was no ground for excluding the right of withdrawal.
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Significance for similar contractual structures
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The supreme court decision is of considerable significance for providers and investors alike. Companies that offer participation opportunities in agricultural projects outside classic capital investments must ensure that they fully comply with their duties to provide information and instructions. From the perspective of investors who concluded contracts without proper withdrawal instructions, questions arise regarding existing rights and possible claims for rescission and unwinding of the transaction.
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The BGH’s decision confirms the consistent application of the consumer-protective provisions to atypical contractual models and tightens the requirements for contractual practice in this advisory field.
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Legal framework for action and need for advice
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Not only the teak investment contracts mentioned, but also other comparable investment structures are therefore increasingly coming into focus of regulatory and civil-law requirements. In the event of disputes, the relevant bases for claims and legal consequences must always be examined taking into account the individual contract design.
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If there are uncertainties regarding the contractual design or the relevant information obligations, a comprehensive legal analysis of the individual situation is recommended. The legal assessment and implementation of contractual and information obligations in the area of investment transactions require in-depth knowledge of the relevant provisions and current case law. Anyone who needs a well-founded legal assessment in the area of banking law in connection with investments, especially in the context of teak investments, can find further information and support at MTR Legal Attorneys at the following link: Legal advice in banking law.
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