Contract with Protective Effect for Third Parties

Der Contract with Protective Effect for Third Parties is an important instrument in German civil law that grants a specific group of people – the so-called third parties – rights and claims, even though they are not themselves party to the underlying contract. This legal concept was developed to close gaps in tort law and to ensure comprehensive protection of persons who are particularly exposed to risk. The following article explains the development, prerequisites, legal effect, application areas, and significant case law regarding the contract with protective effect for third parties.

Origin and Legal Basis

The contract with protective effect for third parties is the result of legal interpretation and is not expressly regulated in the German Civil Code (BGB). Its basic principles were developed by case law and legal literature, especially to protect persons who are typically affected by the performance of a contract.

Historical Development

This concept developed in the 20th century to protect third parties, in addition to the contractual primary obligations, who could be endangered by the non-fulfillment of the contract. The need for extended protection was particularly recognized in the context of contracts for work, rental contracts, and transportation contracts.

Statutory Basis

Although the contract with protective effect for third parties is not expressly mentioned in the BGB, numerous judgments, particularly those of the Federal Court of Justice (BGH), rely on this construction. It constitutes an exception to the general rule in § 328 BGB (contract for the benefit of third parties), which grants the third party its own claim.

Concept and Systematic Classification

Distinction from the Contract for the Benefit of Third Parties (§ 328 BGB)

In contrast to the Contract for the Benefit of Third Parties (genuine protection of third parties), in which the third party is entitled to an enforceable claim for performance, the contract with protective effect for third parties grants the third party a claim for damages due to breach of protective duty (§§ 280, 241 para. 2 BGB) against the debtor of the main contract.

Characteristic Features

The third party does not become a contracting party.
However, he receives his own claim for compensation for damages arising from the breach of contractual protective duties.
The protective effect is based on an extension of obligations from the contractual relationship to the third party.

Prerequisites of the Contract with Protective Effect for Third Parties

Case law and legal literature have developed various prerequisites, which must be examined in practice, for the assumption of a contract with protective effect for third parties. These can be summarized as follows:

1. Proximity of the Performance to the Third Party

The third party must be particularly closely affected by the debtor’s performance. Typically, this means that the third party comes into contact with the item owed, the service, or an act and is thus also dependent on its proper execution.

2. Creditor’s Interest in Protection

The creditor must have a special interest in having the third party included in the protective scope of the contract. This interest in protection often arises from family, professional, or business relationships between the creditor and the third party.

3. Recognizability for the Debtor

At the time of concluding the contract, it must be apparent to the debtor that and why third parties will be affected by the contractual performance and should be protected.

4. Need for Protection of the Third Party

The third party must not have their own contractual claim against the debtor. The need for protection is denied if the third party already has contractual or tortious claims that provide comparable protection.

Legal Consequences of the Contract with Protective Effect for Third Parties

Extension of the Protective Effects of the Contract

The result of including a third party is that the group of persons to be protected under § 241 para. 2 BGB is expanded. The debtor is also liable to the third party for breaches of protective duties arising from the contractual relationship.

Claims of the Third Party

If there is a culpable breach of protective duties, the third party can assert claims for damages under §§ 280 et seq. BGB against the debtor. These are performance claims in addition to those of the creditor, whereby any defenses of the debtor from the main contract can also be raised against the third party.

Liability and Defenses

The debtor may raise all defenses and objections against the third party that he could assert against the original creditor based on the contractual relationship. Changes to the contract, terminations, or limitations of liability may therefore also have effect against the third party.

Areas of Application

Typical Case Groups

Lease relationship: The landlord is liable for the safety of the leased object also towards family members living in the rented premises.
Contract for work: In construction contracts, there is a protective effect for persons who regularly stay in the completed building (e.g., family members).
Transportation contract: In transport services, travelling family members or employees are included in the protective scope.
Service contract: Employees who make use of the obligor’s services can also be protected.

Further Examples from Case Law

Case law further recognizes contracts with protective effect for third parties in the context of hotel accommodation contracts (protection of co-travelers), medical treatment contracts (affected family members), and cleaning contracts.

Distinction from Other Legal Institutions

Contract for the Benefit of Third Parties (§ 328 BGB)

While the contract with protective effect for third parties exclusively provides protection and claims for damages, the contract for the benefit of third parties grants the third party an enforceable claim for performance.

Tort Law (§§ 823 et seq. BGB)

Tort law protects the third party independently of a contractual relationship. By contrast, a contract with protective effect for third parties presupposes a contractual relationship and fills gaps where tort law does not provide sufficient protection.

Gift in Favor of Third Parties

Furthermore, the gift in favor of third parties must be distinguished, as it also directly entitles the third party.

Critical Appraisal and Significance

The contract with protective effect for third parties is an instrument for filling gaps in the system of liability in German civil law. It ensures an appropriate balance of interests by including endangered persons in the protective scope of contracts. The construction prevents gaps in claims for those who are typically entitled to rely on the performance of the contract but have no personal claims under the main contract.

The requirements for the inclusion of third parties are handled restrictively by the case law, especially to avoid an unlimited extension of the debtor’s liability. The decisive factors are always the circumstances of each individual case and the parties’ interests.

Summary

The contract with protective effect for third parties is an essential legal concept in German contract law. It allows third parties – who are not themselves directly contracting parties – to be included in a contract’s protective regime and grants them claims for damages in the event of the breach of protective duties. The prerequisites have been comprehensively developed in case law and legal literature and are subject to careful individual assessment. This concept makes a significant contribution to effectively safeguarding the protection of persons who are dependent on the proper fulfilment of the contract.

Literature References

Palandt, BGB Commentary, § 328 para. 15 et seq.
Medicus/Petersen, Civil Law, 26th edition, para. 447 et seq.
BGH, Judgment of 28.11.1973 – VIII ZR 255/72 (leading decision on protective effect for third parties)

Frequently Asked Questions

What prerequisites must be met for a contract with protective effect for third parties to arise?

To assume a contract with protective effect for third parties, several requirements must be met in accordance with established case law in German civil law. First, there must be an effective main contract between the original contractual parties, e.g., a contract for work or a service contract. Furthermore, it is required that the third party is to be intentionally included in the protective scope of the contract. This presupposes that, at the time of contracting, the parties either expressly or implicitly intended to include certain third parties in the contract’s protective effects or that this is objectively necessary due to the contract’s purpose. It must also be considered that the third party must come into contact with the main performance and is thereby typically exposed to risks affecting life, physical integrity, property, or other legal interests. In addition, the third party must be in need of protection, i.e., must not have their own contractual claim against the debtor. Finally, there must be no legitimate interests of the debtor opposing such inclusion. The classification as a contract with protective effect for third parties is regularly the result of balancing all circumstances of the individual case.

In which case groups is a contract with protective effect for third parties frequently recognized in practice?

Contracts with protective effect for third parties are recognized in a variety of typical case constellations. This is particularly relevant in tenancy law, for example when family members of the tenant who live with him/her are injured by a defect in the rental object. The protective effect is also recognized in contracts for work, for example when third parties who are intended to come into contact with the service are affected by defects (such as relatives of the building owner on a construction site). In service contracts, such as medical treatment contracts, relatives may also be protected if they are intentionally included in the risk situation of the contract. Custody and transportation contracts (e.g., passengers in a taxi) may also provide protective effects for third parties. The permissibility and scope of such inclusion must always be specifically justified and depend on the purpose of the contract and the typical interests involved.

What rights does the third party obtain in the event of a contract with protective effect for third parties?

The third party included by virtue of the protective effect obtains direct contractual claims for damages or for the removal of performance disruptions against the debtor of the main contract. These claims exist independently of any contractual relationship between the third party and the debtor (e.g., landlord, contractor). However, the third party is neither a contractual party nor entitled to dispose of the contract or assert claims relating to the main performance against the debtor. Their rights are typically limited to secondary claims, such as compensation for damages or pain and suffering, provided, for example, that there is a defect or a breach of duty in connection with the main performance. Otherwise, the debtor may raise all defenses available to him against the principal creditor also against the third party.

How does a limitation of liability in the main contract affect the third party?

Limitations of liability agreed in favor of the debtor in the main contract with the creditor (e.g., liability caps or exclusions of liability) generally also apply to the third party included by virtue of the protective effect. This follows from the principle of accessory nature, according to which the rights and obligations of the third party must not exceed those of the original contracting party. In particular, all defenses and exceptions from the main contract remain available to the debtor against the third party. A different rule requires an express contractual agreement. For the third party, this means that he or she is bound to the limited compensation claims to the same extent as the main creditor.

Can the third party assert claims directly against the debtor, or is he/she dependent on assertion by the principal creditor?

The third party included in the protective scope of a contract can assert his claims independently and directly against the contractual debtor. He does not need the principal creditor (i.e., the actual contractual partner of the debtor) to act or to assign claims. However, the other prerequisites for a contract with protective effect for third parties must be present, and the third party must have actually suffered damage as a result of a breach of duty. The claim exists independently but is subordinate to and limited in scope by any claim of the principal creditor if the debtor’s resources are limited.

Are there statutory provisions on the contract with protective effect for third parties, or has this concept been developed exclusively by case law?

The concept of the contract with protective effect for third parties is generally not expressly regulated by statute in German civil law, but results from the development of case law, especially by the Federal Court of Justice and the subsequent legal literature. The doctrinal basis is supplementary contract interpretation (§§ 133, 157 BGB) and the principle of good faith (§ 242 BGB), as well as the protection principle in the law of performance disruptions. Only in certain special laws are comparable constructs to be found (e.g., § 328 BGB for the genuine contract in favor of a third party), but not for the ‘non-genuine’ protection for third parties discussed here. Its exact form and scope are therefore essentially determined by the relevant individual case law, the parties’ interests, and the interpretation of the contract.

Contract with Protective Effect for Third Parties