Duty of loyalty ends where additional assets must be committed
As a general rule, the parties to a contract that is pending invalidity must endeavour to satisfy the requirements for it to take effect. However, this contractual duty of loyalty does not require a party to commit substantial assets that are not the subject matter of the contract. This follows from an indicative order issued by the OLG Frankfurt am Main (Higher Regional Court of Frankfurt am Main), indicative order dated 13 August 2026 – 3 U 53/26 (case no.).
Property purchase subject to a condition precedent
The claimant had sold a property located outside the built-up area of a municipality in the Hochtaunuskreis district to the defendant property development company for EUR 1.3 million. When the purchase agreement was concluded in 2018, the property was a green area containing a quarry. The defendant intended to develop and build on the property.
Among other things, the purchase agreement was only to take effect once planning permission had been granted. The transport connection required for this purpose did not exist when the agreement was concluded. The development works envisaged by the defendant could not subsequently be implemented.
Development possible only via an additional property
Municipality’s development plan changes the initial situation
In 2022, the municipality adopted a development plan. Under that plan, the property sold could only be developed by incorporating an additional property, which was also owned by the claimant. The claimant did not agree to the use of this additional land and rescinded the purchase agreement.
The following circumstances were therefore particularly relevant to the further assessment:
- The purchase agreement was conditional upon planning permission being granted.
- The necessary transport connection was already lacking when the agreement was concluded.
- The development works originally envisaged by the defendant proved unfeasible.
- Under the municipality’s plan adopted four years later, development required the use of an additional property owned by the claimant.
- This additional property was not part of the subject matter of the sale.
Dispute over the registered priority notice
A priority notice had been entered in the land register to secure the defendant’s claim for the transfer of title. Following rescission, the claimant demanded that the defendant provide the consent required to cancel the priority notice.
The Landgericht Frankfurt am Main (Regional Court of Frankfurt am Main) upheld the action and entered judgment against the defendant in accordance with the relief sought by the claimant. The defendant appealed against this judgment.
No entitlement to require the commitment of assets outside the contract
Rescission extinguished the secured obligation
The competent 3rd Civil Senate of the OLG Frankfurt am Main also considered the appeal unfounded. In its assessment, the claimant was entitled to demand cancellation of the priority notice. As a result of the rescission, the defendant’s claim for the transfer of title secured by the priority notice no longer existed.
The court emphasised that, as a general rule, the parties to a contract pending invalidity are required to work towards it taking effect. However, this obligation is not unlimited. If exceptional new circumstances arise that make it unreasonable for one party to remain bound by the contract, the corresponding duty of loyalty comes to an end.
The Senate found such a circumstance in the municipality’s subsequent planning. It was only as a result of the development plan adopted four years after the agreement had been concluded that development became dependent on the claimant also making her additional property available.
Duty to have regard to the other party’s interests does not extend to every financial sacrifice
In the Senate’s view, the duty to have regard to the interests of the other contracting party does not require substantial assets outside the scope of the contract to be committed in order to achieve the purpose of the agreement. Yet that was precisely what would have been required in this case. The claimant would have had to facilitate the development by tolerating the use of her additional property.
Five years after the purchase agreement had been concluded, the court considered it foreseeable that the municipality would not approve the application unless the claimant made an unreasonable financial sacrifice. Under these circumstances, it was unreasonable to expect the claimant to continue to adhere to the purchase agreement.
Withdrawal of the appeal and finality of the judgment
Following the indicative order issued by the Oberlandesgericht (Higher Regional Court), the defendant withdrew its appeal. As a result, the preceding judgment of the Landgericht Frankfurt am Main dated 26 March 2025 – 2-23 O 193/20 (case no.) became final and binding.
The decision illustrates the limits of contractual duties to cooperate and duties of loyalty in connection with a property purchase concluded subject to conditions. Anyone with questions regarding property purchase agreements, conditions precedent, priority notices or rights of rescission can obtain legal advice on real estate law from MTR Legal.
