Concept and Basics of Public Law Contracts
Public law contracts are a special institution in German administrative law that enable the contractual regulation of legal relationships in public law. They serve to flexibly and cooperatively shape legal relationships between the administration and private individuals or between different administrative bodies. The central legal basis is set out in Sections 54 et seq. of the Administrative Procedure Act (VwVfG).
Definition and Distinction
A public law contract is a contract that can replace or supplement an administrative act and is concluded solely in the field of public law. The contractual parties are distinguished by whether the administration is dealing with a private individual (e.g., citizen, company) or another administrative body. The most important distinguishing feature from private law contracts is the application of public law in terms of both form and substantive structure.
Statutory Regulations
Sections 54 to 62 VwVfG regulate in detail the prerequisites, formation, validity, and reversal of public law contracts. Depending on the type of contract, different requirements apply, such as written form (Section 57 VwVfG) and often the approval of higher authorities.
Types of Contracts and Areas of Application
Exchange Contract
In a public law exchange contract, the administration and the private party (or another administrative body) mutually undertake specific obligations (Section 56 sentence 1 VwVfG). An example is the administration’s obligation to grant planning permission in exchange for the contractual partner taking on certain conditions or carrying out compensatory measures.
Coordination Contract
Coordination contracts (Section 56 sentence 2 VwVfG) regulate mutual coordination between several public administrative bodies. This can be used to organize task allocation and cost sharing between municipalities, states, or agencies, for example.
Settlement (Section 55 VwVfG)
A public law settlement serves to resolve a dispute over a legal relationship by mutual concessions. It is similar to a civil law settlement, but is tailored to the specifics of administrative action and the requirement to observe law and legality.
Distinction from Other Legal Institutions
Distinction from Administrative Act
Whereas an administrative act is a unilateral, sovereign action, public law contracts are bilateral, consensual legal agreements. Both instruments are permissible in administrative action and are coordinated with each other. An administrative act can be replaced by a contract if provided for or permitted by law.
Public Law Contract and Private Law
Public law contracts fundamentally differ from private law contracts, particularly through governance by public law, special requirements regarding form and approval, and statutory reversal mechanisms.
Requirements and Validity
Admissibility of Contract Conclusion
The administration may only conclude a public law contract if this is not excluded by law or the nature of the matter. Contract formation is especially prohibited if the regulation is mandatorily required by an administrative act (so-called ban on compulsory contracts, Section 54 sentence 2 VwVfG).
Formal Requirements
A public law contract generally requires written form (Section 57 VwVfG). Exceptions are possible if provided otherwise by legal regulation.
Approval Requirements
In certain cases, the approval of a supervisory authority or another body is required, especially for contracts with far-reaching obligations or significant financial implications.
Nullity and Rescission Provisions
Nullity
A public law contract is void from the outset if it violates a statutory prohibition intended to protect the contracting parties or third parties, or if it is contrary to public policy (Section 59 VwVfG). Contracts that provide for unlawful services or relate to impermissible subject matter are also void.
Rescission
In addition, the rescission of public law contracts is possible under the prerequisites of Sections 119, 123 of the Civil Code (BGB) in accordance with Section 59 (2) VwVfG, for example in cases of error or fraudulent misrepresentation.
Reversal and Consequences of Invalid Contracts
The public law contract contains specific provisions for the reversal of invalid or partially void contracts (Section 60 VwVfG). The parties must return any performance received; as a rule, the provisions on unjust enrichment under Sections 812 et seq. BGB apply accordingly.
Legal Protection and Enforceability
Contractual Legal Protection
The obligations and claims arising from a public law contract can generally be enforced using administrative court legal remedies. The parties may file actions for performance, declaratory judgments, or mandatory orders with the competent administrative court.
Precedence and Effect on Administrative Discretion
Upon the conclusion of a public law contract, the administration loses the ability to issue a contrary administrative act at its own discretion. The administration is instead bound by the content of the contract, unless it is void or has been rescinded.
Practical Examples and Significance of Public Law Contracts
Public law contracts play a central role in construction and environmental law (e.g., urban development contracts under Section 11 BauGB), in public law planning processes, and in the provision of public services. Intermunicipal cooperation or agreements between federal, state, and local authorities are also often concluded in this contractual form.
Summary
Public law contracts enable a flexible balance between statutory requirements and practical needs of administrative practice. They provide instruments for consensus-oriented regulation of complex legal relationships and significantly contribute to a modern administrative culture. The conclusion, validity, and enforcement of public law contracts are governed by special statutory requirements that are intended to uphold the rule of law principles as well as the interests of the contracting parties.
Frequently Asked Questions
What formal requirements must be observed in public law contracts?
Public law contracts must, according to Section 54 sentence 2 VwVfG, generally be concluded in writing. However, the requirements on form may vary depending on the type of contract. While simple written form is sufficient for the exchange contract (Section 54 sentence 1, alternative 1 VwVfG), the so-called subordination contract (Section 54 sentence 1, alternative 2 VwVfG) is partially subject to a more formalized procedure, particularly if the contract replaces a provision that would otherwise be issued as an administrative act with hearing and reasoning requirements. In individual cases, special laws may stipulate further requirements, such as notarization for land-related contracts in certain contexts. Violations of formal requirements usually lead to the contract’s nullity (Section 59 (1) VwVfG), unless the remedial provisions of Section 60 VwVfG apply.
What substantive limits exist for public law contracts?
The drafting of public law contracts is limited by the principle of legality in administration. According to Section 59 (1) VwVfG, a public law contract is void if its content violates statutory prohibitions, public policy, or the constitutional order. So-called “contractual statutes” are inadmissible, meaning that contracts must not serve to circumvent mandatory statutory provisions, especially not to the detriment of third parties or the public interest. Content-related limits thus arise both from administrative law and from other areas of law governing administrative action (e.g., environmental law, budgetary law). The content must also be definite and sufficiently regulated; unclear or incomplete contract provisions jeopardize validity.
Who is authorized to conclude a public law contract?
In principle, all public law entities, i.e., municipalities, states, the federal government, as well as other corporations, institutions, and foundations, are authorized to conclude public law contracts as long as they act within their respective administrative competence. Contracting parties must have the requisite subject matter and local jurisdiction, as specified by special laws, municipal statutes, or administrative rules of competence. On the side of the contracting partner, it may be a private individual (natural or legal person under private law) or another public law entity. The respective representation regulations must be observed; this may require, for example, a municipal council resolution or a special power of attorney.
What protective mechanisms exist to safeguard the public interest?
To safeguard the public interest, the Administrative Procedure Act provides various mechanisms. In particular, the provisions on nullity (Section 59 VwVfG) protect against contracts that are substantively inadmissible. Additionally, for certain contract types, there is a duty to involve third parties whose rights might be affected, for example by hearing or including them in the procedure. Further instruments include the rescindability of the contract due to defects in consent (Section 58 VwVfG) and special sanctions up to and including administrative powers to rescind or amend. In certain sensitive areas, approval or consent requirements (e.g., by supervisory authorities) are prescribed to prevent undesirable developments.
Is there a right to conclude a public law contract?
There is generally no direct right to conclude a public law contract. The decision to conclude such a contract is at the discretion of the participating administration, unless the law expressly imposes a contractual obligation (so-called duty to contract). According to Section 54 VwVfG, the authority may enter into a public law contract instead of an administrative act but is generally not obligated to do so. However, the principle of equality (Art. 3 GG) requires that decisions on contract conclusions avoid arbitrariness and must be made in a proper and error-free manner.
How can public law contracts be rescinded or amended?
The rescission or amendment of public law contracts is primarily governed by the contractual agreements between the parties (so-called amendment clauses). If such agreements have not been made, amendment is only possible by mutual declaration of intent of both parties. In addition, the law provides for the possibility of unilateral termination (withdrawal) within narrow limits, for example, in the case of serious breaches of duty by the contracting partner or subsequent inadmissibility of the contract (Sections 60, 62 VwVfG). Adjustment according to the principles of the cessation or modification of the basis of the contract (Section 60 (1) No. 2 VwVfG in conjunction with Section 313 BGB analogously) is also possible under certain circumstances. In any case, the public interest must be sufficiently considered.
