Swiss Code of Obligations (OR)
by Kurt Siehr
The Swiss Code of Obligations (Obligationenrecht (OR)) of 30 March 1911 is Part 5 of the Swiss Civil Code (ZGB)) and entered into force on 1 January 1912, together with the ZGB. The general provisions of the OR on conclusion, performance and extinction of contracts also apply, according to Art 7 ZGB, to ‘similar relations of a civil law character’ (eg to marriage and succession contracts regulated in the ZGB). The OR was not new in 1911. A Federal Code of Obligations of 14 June 1881 had entered into force on 1 January 1883. The old code, however, needed to be adjusted to the newly enacted ZGB and to be modernized accordingly.
Until 1883 in Switzerland the cantonal law prevailed. The Constitution of 12 October 1848 for the newly established Federation did not provide for federal legislative competence with respect to private law. The private law of Switzerland varied considerably between cantonal jurisdictions. (1) The cantons of western and southern Switzerland relied very much on the French Code civil. (2) The Berne group (Aargau, Berne, Lucerne, Solothurn) took the Austrian Allgemeines Bürgerliches Gesetzbuch (ABGB) as a model. (3) For the canton of Zurich Johann Caspar Bluntschli (1808–81) prepared the Private Law Code (Privatrechtliches Gesetzbuch (PGB)) of 1853/55 as an independent and comprehensive code which also served as a model for other cantons. For example, in Graubünden, Peter Conradin von Planta (1815–1902) drafted the Bündnerisches Civilgesetzbuch—the Civil Code of Graubünden—of 1862, and similar codes were drafted in Schaffhausen, Thurgau and Zug. (4) The other cantons stuck to case law and special statutes (eg Appenzell, Basel and St Gallen).
This lack of unity was unsatisfactory given the new Federal Constitution of 1848 had effectively removed some significant cantonal barriers such as customs, post and coinage, and had thereby promoted commerce and trade between the different cantons of Switzerland. The process of overcoming the fragmentation of Switzerland’s private law began in Berne. The canton of Berne asked Walther Munzinger (1830–73), a professor of commercial, private and federal law at the University of Berne, to draft a commercial code for that canton. This initiative was welcomed by the Federation, and the Bundesrat (the Federal Government) asked Munzinger to draft a commercial code for all of Switzerland. Munzinger made use of the French Code civil, the General German Commercial Code of 1861 and later the Dresden Draft of a General German Act on Obligations of 1866 in compiling his draft, which he submitted to the Federal Assembly in 1864. The cantons, however, wanted a general code of obligations (Code unique), not just a code for merchants, and therefore asked Munzinger to rework his draft into a general Code of Obligations. In 1871 this draft was ready. Munzinger died in 1873, and the Zurich Professor Heinrich Fick (1822–95) took over the task and again redrafted Munzinger’s work. After the Federal Constitution of 19 April 1874 had given competence over obligations to the Federation, the OR was passed by Parliament on 14 June 1881 and entered into force on 1 January 1883. Almost 30 years later the OR of 1911 replaced the old code of 1881.
The OR deals, in five chapters, with general problems such as the creation, effect and termination of obligations (Arts 1–183), individual contracts (Arts 184–551), corporations and co-operatives (Arts 552–926), the commercial register, commercial firms and commercial accounting (Arts 927–963) and negotiable instruments (Arts 965–1186).
The OR can be characterized by seven features.
(1) It is less locally or nationally orientated than the ZGB in the areas of family and succession law. Thus, even concerning terminology, the OR very seldom deviates from the one normally used in civil law countries. However, there are exceptions. For example, the mandate of the OR extends to contracts for services against compensation and is not limited—as it is in Germany—to gratuitously rendered services. Also, in the law of corporations the OR has similarly independent terminology and effect. Corporations are governed by the Verwaltungsrat (governing council) which also represents the corporation externally.
(2) The OR deals with civil and commercial obligations. Switzerland deliberately refused to have a separate commercial code (see 1. above).
(3) The OR contains elements of the eastern and western Swiss traditions. In contracts for sale of goods the OR follows the eastern Swiss model for property transfers with the requirement of delivery of possession (Art 714 ZGB; exception in Art 235(1) OR for sale by auction), whereas Art 41 OR on the law of delict copies the French model (Art 1382 Code civil). All in all the balance has been successful. Article 185(1) OR is an exception. This provision deals with the transfer of risk. It determines that risk is transferred, ‘unless special circumstances or agreements create an exception’, at the time of conclusion of the contract. This was thought to be a concession to western Switzerland, where property also passes with the conclusion of the contract, and a deviation from eastern Swiss law where property is transferred only by delivery (Art 714 ZGB). The provision has been dubbed an ‘uneasy compromise’ by Eugen Bucher.
(4) Very few types of obligations are not covered by the OR. One exception is insurance law which is regulated by the Insurance Code of 1908. Today, however, there is a certain movement towards ‘decodification’ by special statutes which operate alongside the OR. Examples are the Statute of 1993 on Product Liability, the Statute of 2001 on Consumer Credit and the Statute of 2003 on Mergers.
(5) The OR was originally quite a liberal codification, based on the assumption that adult citizens may conclude contracts and that they are responsible for their unlawful acts. The era of mass production, aggressive and subtle advertising and mass consumption had not yet arrived. Rather late, the OR was amended by articles on consumer protection (see 3.(5) below).
(6) The OR does not refrain from giving discretion to the courts, for instance, with respect to the measures of damages to be awarded against a tortfeasor (Arts 42–44 OR). In such cases or in cases in which the OR takes account of special circumstances or important reasons, the court ‘must base its decision on principles of justice and equity’ (Art 4 ZGB).
(7) The style and language of the OR can be described as succinct and precise. The reason for this may be the necessity of making available the text of Swiss federal laws in three different official languages—French, German and Italian—and the fact that all these versions are equally authentic. The requirement of trilingual federal statutes leads automatically to legal texts which express themselves in clear and simple language.
3. Further Development
The OR has changed considerably over time. There are at least eight modern developments which have left their traces on the OR.
(1) The law of the sale of immovables (Arts 216–221 OR) was changed when the law of agriculturally used immovables was amended, and provisions on pre-emptive and re-emptive rights were introduced (Arts 216a– 216e, 218 OR) (see BBl 1988 III 955).
(2) The law of landlord and tenant (Arts 253-274 OR) was completely changed by the Federal Statute of 15 December 1989 because throughout Switzerland tenants of apartments and commercial premises complained about unfair rents and unjustified terminations of their contracts. The new provisions tried to avoid these abuses but also to strike a fair balance between the interests of landlords and those of tenants.
(3) The title of the OR on labour contracts deals with the individual labour contract (Arts 319–343 OR), specifically addressing three different types (apprenticeship contracts, contracts of commercial agents and contracts relating to work at home: Arts 344–355 OR), collective labour agreements (for all labour relations) and standard contracts for specific types of employment relationships (Arts 356–360 f OR). These provisions were fundamentally revised in 1971 in order to strengthen the position of employees and to protect them against unfavourable changes in working conditions (see Art 362 OR on the enumeration of provisions which cannot be changed by contract to the detriment of employees). Finally, federal provisions for special types of labour contracts contained in different federal statutes were transferred into the OR.
(4) The law of corporations has been several times revised over the years. In 1936 the limited liability company was added to the OR, according to the German model, and corporation law was amended to provide for more publicity and transparency regarding company ownership. The substantial corporations law reform of 1991 started in 1968. Its main idea was to protect shareholders and creditors by giving them more information, to strengthen corporations by raising their equity, and to improve the structure and functioning of corporate organs (general meetings of shareholders, boards of directors and auditors). Between 1995 and 2005 the law of limited liability companies was fundamentally revised and the federal statute of 16 December 2005 was passed. Limited liability companies are now open to small business companies with personal participation and activity of their members. The law of foundations is part of the ZGB (Arts 80 ff) and was revised by a federal statute of 6 October 2004 which entered into force on 1 January 2006. The initial plan to ban enterprise foundations was not accepted. Outside of the OR the federal act of 3 October 2003 was passed, which deals with mergers, changes in and transfers of property held by foundations, pension funds and institutions of public law.
(5) The law of consumers can be found in the OR (Arts 6a and 40 ff on the revocation of doorstep sales, Art 227a ff on hire-purchase agreements), as well as in special federal statutes on package travels (1993) and on consumer credit (2001) (consumers and consumer protection law). Most of these statutes took EC directives (directive) as a model. Switzerland adjusted to the European standard of consumer protection in a process that has been called ‘voluntary performance’, as Switzerland is not bound by EU law. By conforming to European standards, discrimination against Swiss citizens is to be avoided and, at the same time, Switzerland can remain competitive vis-à-vis EU Member States. It is interesting to see that Switzerland, as yet, has not codified the law of standard contract terms. While Swiss law recognizes special rules as to how standard terms become part of a contract, it is reluctant to establish any comprehensive control of general terms validly incorporated into a contract. This is likely to change in the future. The law of standard contract terms is again on the agenda of the Swiss legislature.
(6) A statute on electronic signatures was introduced in 2003 and the OR was changed accordingly (eg Art 14(3), 59a, 929a).
(7) New types of liability risks are—according to a Swiss tradition (cf the liability for car accidents in Arts 58 ff of the Road Traffic Act of 1958 and the liability for transportation in the federal statute of 1905)—dealt with in special statutes, eg the Federal Statute on Product Liability of 1993 (product liability).
(8) New types of contracts have only rarely been inserted into the OR. It was done with regard to agency contracts in 1949 (Arts 418a–418v OR) and concerning the services of marriage brokers in 1998 (Arts 406a–406h OR). All other modern contracts, as for example leasing, factoring or franchising, are left to party autonomy.
The OR is a mature product of the common European development of the law of obligations of the late 19th and early 20th centuries. It is a liberal codification of the entire law of obligations, including commercial law, which still refrains from excessive paternalism vis-à-vis citizens and consumers. These qualities of the OR have contributed to the OR being regarded as suitable for reception by Turkey in 1926. That reception did not cause considerable problems and so the OR continues to be applied in present-day Turkey (Turkish Civil Code and the Turkish Code of Obligations). Also, in the Far East (China, Taiwan) and in northern Africa, the OR has left its traces.
Hans-Peter Benöhr, ‘Der Dresdner Entwurf von 1866 und das Schweizerische Obligationenrecht von 1881. Motivationen der Redaktoren und Lösungen in den Kodifikationen’ in Hans Peter, Emil W Stark and Pierre Tercier (eds), Hundert Jahre schweizerisches Obligationenrecht (1982); Hans Merz, ‘Das schweizerische Obligationenrecht von 1881’ in Hans Peter, Emil W Stark and Pierre Tercier (eds), Hundert Jahre schweizerisches Obligationenrecht (1982); Adrian Staehelin, ‘Der Entwurf eines schweizerischen Handelsrechts von 1864’ in Hans Peter, Emil W Stark and Pierre Tercier (eds), Hundert Jahre schweizerisches Obligationenrecht (1982); Pio Caroni (ed), Das Obligationenrecht 1883–1983. Berner Ringvorlesung zum Jubiläum des schweizerischen Obligationenrechts (1984); Ibrahim Kaplan, ‘Das schweizerische Obligationenrecht in der Türkei’ in Gedächtnisschrift für Ernst E Hirsch (1986); Urs Fasel, Handels- und obligationenrechtliche Materialien (2000); Peter Gauch and Jörg Schmid (eds), Die Rechtsentwicklung an der Schwelle zum 21. Jahrhundert. Symposium zum Schweizerischen Privatrecht (2001); Swiss-American Chamber of Commerce (ed), Swiss Code of Obligations (2001, 2003 and 2005); Urs Fasel, Bahnbrecher Munzinger (2003); Susanne Genner, Dekodifikation. Zur Auflösung der kodifikatorischen Einheit im schweizerischen Zivilrecht (2006).