Relationship of Favour and Contract of Favour: Definition, Distinction, and Legal Significance
A relationship of favour (also referred to as a contract of favour or a service of favour) describes, in German civil law, a legal relationship in which a natural or legal person performs an act or renders a service for another person without the parties intending to enter into a legally binding relationship, i.e. without a will to be legally bound with regard to the typical legal consequences of a contract. The distinction between a non-binding relationship of favour and a legally binding contract is often difficult in practice and is regularly assessed by courts based on the circumstances of the individual case.
Term and Definition
Relationship of favour
A relationship of favour is characterized by the fact that a service is rendered out of pure courtesy—that is, within the context of a social interaction or as a favor for a friend—without the parties intending to enter into a legal obligation within the meaning of a contract. Typical examples include helping a neighbor, looking after a pet during someone’s vacation, or lifting items during a friend’s move.
Contract of favour
The contract of favour is not an independent, legally regulated type of contract in court rulings and legal literature, but describes a special contractual constellation in which the parties desire certain legal consequences but do not wish to be fully bound by all the rights and obligations provided for in the German Civil Code (BGB). The distinction between a relationship of favour and a contract of favour is of essential importance for liability and resulting claims.
Distinction between relationship of favour and contract
The legal classification depends largely on the so-called intention to be legally bound (animus contrahendi) of the parties. The decisive factor is whether, when performing the act, the parties evidently intended their relationship to be legally binding.
Criteria for determining the intention to be legally bound
- Degree of commitment: If the performance is to be regarded merely as a friendly gesture, this argues against a will to be legally bound.
- Significance and economic value of the performance: For significant values, an intention to be legally bound is more often presumed.
- Legal interest of the recipient: If there is a particularly worthy interest to be protected, willingness to contract is assumed.
- Recognizability for the parties: The person making the declaration must consciously or at least recognizably express their intention to be bound.
- External presentation and circumstances: If the action takes place in a social environment (e.g. among family members), there is generally no intention to contract.
Case examples
- Non-binding favour: Someone waters a neighbor’s plants during their absence.
- Binding agreement (contract of favour): An acquaintance regularly drives a child to school in exchange for reimbursement of expenses.
Legal consequences of the distinction
The distinction is particularly relevant for liability. While there is generally no obligation to compensate for damages in the case of pure favours, liability under contractual or even tortious standards may arise in the event of a contract of favour.
Legal classification and consequences
Liability in relationships of favour
If a pure favour is performed without intention to be legally bound, there is in principle no liability for damages caused. Compensation for damage or consequential damage is only conceivable if fault in the form of intentional or grossly negligent conduct can be proven (§ 276 BGB). In cases of slight negligence, there is generally no liability.
Liability in contracts of favour
In a contract of favour, contractual obligations generally arise. Depending on the agreed scope, this may result in claims for performance, damages for non-performance (§§ 280 et seq. BGB), or rescission. However, liability can be limited in certain cases by express agreement (exclusion of liability clauses).
Tortious liability
Regardless of the existence of a contract, so-called tortious liability (unlawful act, § 823 BGB) can apply in certain cases. This is relevant when a particularly protected legal interest (e.g. life, health, property) is infringed.
Special cases of duty to inform and position of guarantor
In special cases, an obligation to inform or protect may arise from a relationship of favour, for example, if the performing person has special expertise or if the actor assumes a position of guarantor.
Distinction from similar legal terms
Loan and gratuitous mandate
A common problem of distinction arises in comparison to the statutory types of contract of loan (§§ 598 et seq. BGB) and the gratuitous mandate (§§ 662 et seq. BGB). While these contracts involve legal obligations and certain rights and duties regulated by law, these are absent in pure favours.
Gift
Also, the gratuitous provision within the framework of a gift (§§ 516 et seq. BGB) is an independent contractual relationship with clear statutory requirements and should not be confused with simple favours.
Significance in jurisprudence and legislation
The classification of favours and their legal consequences is the subject of numerous decisions by German courts. The highest court rulings, in particular those of the Federal Court of Justice (BGH), regularly emphasize the importance of the individual circumstances and the discernible intention of the parties.
There is no established law for the comprehensive regulation of relationships of favour; what is decisive are general principles of civil law and § 242 BGB (good faith).
Practical relevance and typical controversies
Conflicts often arise after the occurrence of damage—for example, property damage during a favour performed. In these cases, the question is whether a legally binding relationship is to be assumed and whether this gives rise to liability.
Examples:
- Damage to a borrowed car during assistance with moving
- Damage to valuables while watering plants in the owner’s absence
- Injury to a child during gratuitous supervision by neighbors
Summary
The relationship of favour or contract of favour is an important legal constellation covering the space between social action and binding legal relationship. Its precise legal categorization determines, in the event of conflict, whether claims and obligations exist. Because of the dependence on the circumstances of each individual case, it is recommended that the parties communicate as clearly and openly as possible about their mutual expectations and the nature of their relationship, particularly for services of significant value or increased risk.
Note: This article serves as general information on the term relationship of favour and contract of favour in German civil law. For specific questions, it is recommended to carefully analyze all circumstances in light of current court rulings.
Frequently Asked Questions
What are the legal consequences of a relationship of favour compared to a contractual agreement?
In a relationship of favour, which is typically characterized by the absence of an intention to be legally bound by the parties, no contractual claims or obligations usually arise. By contrast, within the framework of a legal contract—such as by offer and acceptance—a legally enforceable binding arises, whereas in the relationship of favour, fulfilment of the ‘service’ remains purely in the nature of a friendly or neighbourly act. This means that in case of damage, such as gratuitous assistance during a move or occasional supervision of property, generally no contractual damages claims according to §§ 280 et seq. BGB can be made. Liability exists, if at all, only under very strict conditions (e.g. in cases of intentional or grossly negligent causation of damages). The precise legal classification, especially the distinction from mandate (§§ 662 et seq. BGB) or loan (§§ 598 et seq. BGB), is therefore always decisive for the question of whether and to what extent claims exist.
How is the absence of an intention to be legally bound established in a relationship of favour?
The absence of a will to be legally bound is the central distinguishing feature of a relationship of favour and is determined by assessing all the circumstances of the individual case. According to case law, the external declarations and behaviour of the parties as well as common practice—in other words, how a reasonable participant would interpret the conduct—are particularly relevant. Indicators include gratuitousness, a private setting, the absence of a specific promise of performance, and describing the act as a ‘friendly favour.’ In doubtful cases, an objectively ascertainable interest by the parties in legal certainty may weigh against a pure favour and instead indicate the formation of a contract.
What special liability limitations apply to relationships of favour?
Within a relationship of favour, liability for damages suffered by the beneficiary is significantly limited. The reason is that the service is rendered gratuitously and voluntarily. Liability is generally restricted to cases of intent or gross negligence. For slight negligence, those acting are usually not liable or only to a limited extent, unless particular circumstances apply, such as an agreement on the assumption of liability. According to case law, those providing assistance without personal benefit should not be subjected to undue risks. However, tortious claims (§ 823 BGB) remain unaffected, although here, too, a relaxation of liability is typically assumed.
How can parties protect themselves against risks in the context of a relationship of favour?
As contractual liability regulations are usually absent in relationships of favour, an explicit agreement on liability and any insurance solutions is recommended. For example, before a favour is performed (e.g. help between neighbors), an agreement should be reached as to whether and to what extent compensation for damages is to be provided. It should also be considered whether private liability insurance covers the relevant activity. Especially for valuable property or hazardous activities, it is advisable to clearly regulate liability in advance to avoid subsequent disputes or unresolved liability questions.
What role does gratuitousness play in the legal assessment of relationships of favour?
Gratuitousness is a central, but not exclusive, feature of a relationship of favour. While most relationships of favour are structured free of charge, a true relationship of favour can also exist when compensation for expenses is involved, provided it is clear that no contract with intent to be legally bound has been entered into. Conversely, even gratuitous activity, especially if it involves greater organizational effort or official arrangements, may give rise to a contract. Thus, the decisive factor is always the absence of the will to be legally bound, not merely the question of gratuitousness.
How does the contract of favour differ from related types of contract such as mandate and loan?
The distinction is made primarily based on the will to be legally bound and the contractual terms. In a mandate (§§ 662 et seq. BGB) or a loan (§§ 598 et seq. BGB)—despite being gratuitous—there is a clear will to be bound as well as certain obligations of a continuing nature, whereas this component is lacking in a relationship of favour. In addition, mandate and loan are subject to specific legal regulations, for example regarding liability, return or termination. In a simple relationship of favour, the relationship largely exists outside contract law, so that contractual classification and the rights and obligations associated with it do not apply.
What claims exist in the event of damage in a relationship of favour?
In the event of damage, no contractual claims generally arise as there is no contract under the law of obligations. Only tortious claims according to the principles of §§ 823 et seq. BGB may exist, whereby liability is limited to intent and gross negligence. If special agreements have been made, differing provisions may apply. For damage arising in connection with a typical service of favour (e.g. help with transport, watering plants), the injured party is generally unable to assert comprehensive compensation claims unless a quasi-contractual relationship exists. Only if the person acting is proven to have been grossly negligent or acted with intent does liability become a possibility.
