Definition and Nature of the Public Law Contract
Der public law contract is a legal instrument regulated under German law, entered into between public authorities (such as authorities or public law bodies) and private individuals, or between various public authorities. Its purpose is to establish, modify, or terminate a public law legal relationship. Public law contracts fall within the scope of administrative law and serve as a genuine alternative to the unilateral administrative act.
Distinction from Other Contracts and from Administrative Acts
The legal system differentiates between various types of contracts. One of the most important distinctions is between private law and public law contracts. Private law contracts are those where both parties act on an equal footing and the provisions of the Civil Code (BGB) apply. Public law contracts, on the other hand, are characterized by the fact that at least one contracting party acts as a public authority and performs sovereign functions.
The public law contract stands alongside the administrative act as a cooperative instrument of action. The administrative act is a unilateral action of the authority, whereas the public law contract is established by mutual declarations of intent with regulatory effect.
Statutory Foundations
The central legal basis for public law contracts is provided by the Administrative Procedure Act (VwVfG, in particular §§ 54 ff. VwVfG). Special provisions exist for certain administrative areas (e.g. Social Code, Building Code).
§ 54 VwVfG: Permissibility of the Public Law Contract
According to § 54 paragraph 1 VwVfG, authorities may, under certain conditions, enter into contracts to regulate a legal relationship under public law, unless otherwise prescribed or permitted by law.
Further Provisions
- § 55 VwVfG: Types of Contracts (Settlement Contract, Exchange Contract)
- § 56 VwVfG: Written Form
- § 57 VwVfG: Nullity
- § 58 VwVfG: Appeal, Withdrawal and Termination
Types of Public Law Contracts
There are various types of public law contracts, distinguished by their regulatory subject matter:
Exchange Contract
In the case of an exchange contract, the contracting party undertakes to perform a service, while the authority in return refrains from issuing an administrative act or from other conduct. Typical examples include urban development contracts pursuant to § 11 BauGB.
Settlement Contract
Settlement contracts (settlement) are concluded in order to amicably resolve a dispute or uncertainty regarding a public law legal relationship (§ 55 VwVfG).
Coordination Contract
In coordination contracts, several administrative bodies regulate their mutual rights and obligations among themselves in order to fulfill public functions.
Requirements and Effectiveness
Formal Requirements
According to § 57 VwVfG, public law contracts generally require written form. This serves legal certainty and traceability.
Contractual Freedom and Binding Effect of Law and Justice
Whereas contractual freedom is virtually unrestricted in private law, public law contracts are bound by the principle of legality of the administration. The administration may not conclude contracts that violate the law or undermine the “relationship of superiority and subordination.”
Balancing of Interests
The conclusion of a public law contract generally requires a balancing of interests between the parties. Unlawful concessions (so-called negotiation prohibitions (§ 56 II VwVfG), in particular no unlawful consideration for approval of an applied measure) may not be agreed.
Invalidity and Nullity
A public law contract is void if it violates statutory prohibitions, good morals, or public order. § 59 VwVfG stipulates the requirements of nullity, which are similar to the principles of the BGB for private law contracts.
Legal Protection and Disputes
Appeal, Withdrawal and Termination
§§ 58 and 59 VwVfG regulate the contestability, withdrawal, and termination of public law contracts. The authority may rescind a public law contract retroactively, or withdraw from it, if it was concluded under unlawful duress, fraudulent misrepresentation, or similar circumstances.
Jurisdiction of Administrative Courts
In the event of disputes over public law contracts, administrative courts are generally competent (§ 40 para. 1 sentence 1 VwGO), as the contract is inherently of a public law nature.
Areas of Application
Public law contracts are applied in numerous areas, including:
- Urban development contracts under § 11 BauGB
- Contracts in social administrative proceedings (SGB X)
- Cooperation between municipalities, special-purpose associations, and other public authorities
- Settlement agreements in approval procedures
Significance and Practical Relevance
The increasing importance of public law contracts results from the need for flexibility and cooperation in the field of public administration. They enable tailored solutions beyond the rigid administrative act and promote the participation of affected citizens and businesses in administrative decisions.
Summary
The public law contract represents a central instrument of cooperative administrative action. It provides a combination of legal certainty, flexibility, and efficiency in the regulation of public law matters. The statutory provisions in the VwVfG ensure transparency and legal protection, while numerous special regulations specify the respective administrative sector. Public law contracts are gaining in importance as the state and administration modernize.
Frequently Asked Questions
Under what conditions is the conclusion of a public law contract permissible?
A public law contract may only be concluded if there is statutory authorization for it. In principle, the so-called principle of legality of the administration is binding on the administration, so every sovereign measure requires a legal basis. According to § 54 of the Administrative Procedure Act (VwVfG), a public law contract is possible if the administration acts in place of an administrative act and no mandatory public law reasons prevent it. Another essential requirement is compliance with the form requirement, i.e. the contract must be concluded in writing (§ 57 VwVfG). In addition, the contract’s provisions must not violate statutory prohibitions or public morals. Furthermore, a valid offer and acceptance between the contracting parties are generally necessary, so that there are mutually consistent declarations of intent. Finally, the admissibility of certain contract types, such as settlements (§ 55 VwVfG) or subordinate law contracts (§ 54 sentence 2 VwVfG), may be subject to specific limitations or requirements.
What is the binding effect of a public law contract compared to an administrative act?
A public law contract, in contrast to an administrative act, has a contract-specific binding effect: The contracting parties—typically an authority and a private individual or another legal entity under public law—are mutually bound to the contractual agreements. While an administrative act unilaterally establishes a legal relationship with sovereign authority, the public law contract is based on the principle of private autonomy with reciprocal declarations of intent. The parties can, unless mandatory provisions prevent it, largely tailor the content and conditions individually. The contract cannot be unilaterally amended or rescinded by administrative act or other sovereign measure, but only by means provided for in the contract or permitted by law, such as contestation or withdrawal in accordance with §§ 59 ff. VwVfG.
What special provisions apply regarding the nullity of a public law contract?
A public law contract is wholly or partially void if the requirements of § 59 VwVfG are met. Nullity may result, for example, if the contract was concluded in violation of a statutory prohibition, is obviously unlawful, or contains immoral agreements. Individual provisions may be separately void, provided that the contract otherwise remains effective. In the event of nullity, the authority has a special public law restitution instrument at its disposal (§ 60 VwVfG). The legal consequences of nullity thus differ significantly from those of civil law contracts. Of particular importance is the examination of whether there is an improper substitute contract—that is, a contract regulating a matter that, by law, must be handled by administrative act, as this would always be void.
Can third parties be affected in their rights by a public law contract?
Yes, third parties can be affected by a public law contract. In principle, a public law contract is only binding inter partes, i.e. between the contracting parties. If, however, the contract contains provisions that have a direct or indirect effect on third parties’ rights, special protective mechanisms must be observed. According to § 54 para. 2 VwVfG, a contract must not impair the rights of third parties unless such impairment is legally permitted and the third party has been appropriately involved, for example through a hearing or consent. Unlike the administrative act, there is no direct external effect, but the protection of third parties is ensured by corresponding statutory provisions and, if applicable, by independent rights of action, e.g. under administrative procedure law.
What rules apply to the adaptation and termination of a public law contract?
The adaptation and termination of a public law contract are generally subject to the agreements between the contracting parties as well as to the statutory provisions of §§ 59 ff. VwVfG. Adaptation of the contract, such as in the case of loss of the basis of the contract, is possible unless the contract contains a final provision in this respect and the principles of administrative procedural law apply. Withdrawal or termination by a party is only possible if there is a corresponding statutory or contractual reason. In addition, the law provides for specific options for revocation and contestation, for example, in the event of a serious breach of obligations by a contracting party or in the case of incorrect or incomplete information that was material for the conclusion of the contract (§§ 60, 61 VwVfG).
To what extent is the public law contract subject to judicial review and what types of actions are possible?
A public law contract is subject to comprehensive judicial review by the administrative courts. Primarily, the court examines the formal and substantive legality of the contract, i.e. whether both the formal requirements (such as written form) and the substantive prerequisites (e.g., permissibility of the arrangement) have been met. The types of actions possible are varied: In addition to the general performance action and the declaratory action, the action for a declaration of nullity pursuant to § 61 VwVfG can be brought, enabling the court to determine the annulment of a contract. Furthermore, actions seeking a declaration of continuation or, where applicable, administrative appeals are conceivable, in each case subject to the specific legal protection mechanisms set out in the Code of Administrative Court Procedure (VwGO). Third parties affected by a contract may also bring an action under certain conditions, provided their own rights are affected.
