Verwirkung (Estoppel)

From Max-EuP 2012

by Filippo Ranieri

1. Formation of the doctrine

As early as the beginning of the 1920s one can observe the case law of the German Imperial Supreme Court (Reichsgericht) (Reichsoberhandelsgericht (with Reichsgericht)) increasingly reverting to the legal concept of exceptio doli as developed under the ius commune in order to prevent one party from unfairly exercising a legal right and thus acting contrary to a reasonable reliance which had been engendered in the other party. A typical example of this is the doctrine of Verwirkung (estoppel). According to this doctrine, someone who does not exercise his right for a substantial period of time forfeits his legal position if the other party has thereby been induced to believe in good faith that that right would, also in future, no longer be exercised. German courts consistently applied and developed this doctrine over the last few decades. The two central requirements for Verwirkung are thus the lapse of time and a specific reliance being engendered in the other party. The doctrine of Verwirkung represents one of the most remarkable developments of German case law in the years following World War I. Verwirkung initially mainly concerned industrial property rights but the Reichsgericht later applied it as a general principle. The legal consequence is remarkable. The exclusion of the creditor’s right in order to avoid an inequitable disappointment of the reliance engendered introduces a de facto prescription before the statutory prescription period has expired. It should be noted that, conversely, German courts also grant the exceptio doli to the creditor himself against the debtor. Thus, a party pleading the defence of prescription abuses his legal position if he has engendered reasonable reliance in the other party that he would not invoke that defence. Initially, the Reichsgericht used § 826 Bürgerliches Gesetzbuch (BGB) to justify its approach and thus limited the doctrine’s field of application to cases where a party had acted both fraudulently and contra bonos mores (contrary to public policy). Subsequently, German courts relied on § 242 BGB and expanded the doctrine into the general principle of a prohibition of an disloyal venire contra factum proprium (eg RG, 23 September 1927, RGZ 117, 358 ff). During the 1930s Wolfgang Siebert (1905–59) conceptualized Verwirkung as an abuse of law. The courts have, to this day, relied on a creative understanding of the principle of good faith which is seen to be inherent in § 242 BGB.

Recent research has analysed the special precondition on the level of legal theory and legal policy which enabled courts in Germany to develop this idea in the 1920s. It continues to exist today. However, the German Federal Supreme Court (Bundesgerichtshof, BGH) has, in recent times, applied the legal doctrine of Verwirkung in an increasingly restrictive way. Whether the exercise of a legal right is excluded because of Verwirkung cannot be answered by simply referring to the expiration of a substantial period of time. Rather, the particular circumstances of each individual case must be taken into consideration. Especially Verwirkung can only be applied if the exercise of a legal right would result in absolutely unbearable consequences for the party concerned (BGH, 18 October 2001, NJW 2002, 669 ff, 670; BGH, 16 March 2007, NJW 2007, 2183 ff). Moreover, in 2002, the law of prescription in the BGB was comprehensively modernized, reducing the general prescription period from 30 to three years (§ 195 BGB new version). As a result of this rigorous reduction, it may be assumed that the practical significance of Verwirkung will decline considerably in the future.

2. The doctrine in Europe

In France and Italy the predominant concern, in legal doctrine and legal practice, was that the recognition of a general principle of good faith would entrust the judge with too much discretionary power. Other legal systems in continental Europe, however, were influenced by the prohibition of the venire contra factum proprium as developed by the German courts in order to prevent harshness that would result from a strict and formal application of the law. It served as a model particularly for Swiss, and subsequently also for Austrian and Dutch case law. Thus, the Swiss Federal Supreme Court has also recognized the doctrine of Verwirkung for a number of decades on the basis of Art 2 Swiss Civil Code (ZGB). The aforementioned German case law has also attracted interest in Austrian law. The Allgemeines Bürgerliches Gesetzbzuch(ABGB) initially did not recognize a legal concept of exceptio doli and, similarly, the part reforms of 1914–16 failed to codify a general principle of good faith. It was only in the last few decades that the Austrian Supreme Court of Justice began to adopt the solutions found in German practice. However, Austrian courts avoid reverting to a general formula of a disloyal abuse of law. Rather, they tend to find the legal basis for the exceptio doli in §§ 863 and 914 ABGB. As a result, Austrian courts have adopted the legal concept of Verwirkung, though the loss of the legal right is justified by the assumption that the person entitled to it impliedly waived it.

The doctrine of Verwirkung has also been received in other European legal systems over the last few decades. For example, Polish courts exceptionally acknowledge the possibility to plead the defence of abuse of law if the defence of prescription is raised. Similarly, Greek courts allow the doctrine to be pleaded against an abuse of law (§ 281 Greek Civil Code). Finally, Dutch case law may be mentioned that has developed very similar solutions by using the doctrine of rechtsverwerking. Consequently, the new Dutch Burgerlijk Wetboek (BW) of 1992 expressly codified in Art 6:2 BW the principle that ‘creditor and debtor must act in accordance with the precepts of good faith’. In contrast, whether such legal principle has found its way into the case law of the European Court of Justice seems to be questionable; at any rate, the ECJ has never expressly recognized it.

3. Verwirkung in the doctrine of Romanistic legal systems

In the past, the majority of Italian writers strictly opposed a legal concept involving judicial control over the exercise of legal rights based on the German model. More recently, however, the picture has changed considerably. In particular, the formula according to which the principle of good faith constitutes a general limit on the exercise of legal rights has been tremendously successful in Italian scholarship. Usually, Art 1375 Codice civile is invoked in this context. During the last few years, the Italian Corte di Cassazione has adopted the new approach mapped out by legal doctrine. However, the German model has not been adopted completely in Italy. Both Italian scholarship and Italian courts have up to now unanimously and decisively refused to accept the German solutions, based on the principle of good faith, relating to the defence of prescription. The Italian Corte di Cassazione recently specified to what extent the defence of exceptio doli generalis can be applied in contemporary Italian law (Cass. civ., 7 March 2007, No 5273, Banca, borsa e titoli di credito 2007, II, 710 ff).

Similarly, the French Code civil already contained in its original version of 1804 (Art 1134 (3)) a reference to bonne foi in the context of performance of contract (performance and its modalities). The same provision can be found in the Avant-projet de Réforme du droit des contrats (Avant-projet Catala) of 2005. Despite the increasing interest of French legal scholarship displayed towards this provision, the Cour de Cassation remains very reluctant to take direct recourse to Art 1134 (3) Code civil. A realistic and functional assessment of French case law, however, discloses that it converges with the solutions adopted by other continental legal systems under the auspices of the doctrine of Verwirkung. Unlike German or Dutch courts, however, French counterparts do not refer to the principle of bonne foi. Instead, they tend to use the device of an implied, or fictitious, waiver of legal rights. Consequently, French courts sometimes interpret a failure to assert one’s rights as a declaration to waive those rights (eg Cass. civ. 1e Chambre, 10 May 1961, Dalloz 1961, Jurisprudence 446; Cass. civ. 31 January 1995, Bull. civ. 1995, I, No 41).

Similar observations can also be made when analysing Italian law. However, the current position of Italian courts remains inconsistent and unclear. Recently the Corte di Cassazione had the opportunity expressly to refer to the legal concept of Verwirkung in other European legal systems. However, the Court refused to recognize it for Italian law (Cass. civ., 15 March 2004, No 5240, Foro it. 2004 I, cols 1394 ff). It should also be mentioned that two decades ago the Belgian Cour de Cassation rejected the doctrine of rechtsverwerking in a leading case. That doctrine was considered incompatible with the French and Belgian Code civil (Cass. Civ. belge, 17 May 1990, Pacrisie belge 1990, No 546, 1061 ff). The Belgian courts nevertheless frequently revert to the device of an implied waiver, or to the legal notion of abus de droit (abuse of law). Finally, it is worth mentioning that Spanish courts have also developed the doctrine of actos proprios for such cases. Recently the Spanish Supreme Court (Tribunal Supremo) emphasized the close connection between this doctrine and the German concept of Verwirkung (Trib. Supremo, 24 June 1996, Rep. Jur. Aranzadi 1996, No 4846). Recourse to a fictitious intention in the Romanistic legal systems thus occasionally seems to hide a necessary correction ex fide bona of a legal or contractual rule.

4. Verwirkung and estoppel by acquiescence

The general principles relating to the legal concept of ‘estoppel by acquiescence’ developed within the framework of equity in English law can also serve as a model for the categorization of the continental European case law described above. ‘Estoppel’ is referred to in cases where a person is precluded from adopting a certain legal position because he has bound himself by his own prior conduct and a change would damage other parties who have relied on this conduct. Thus Lord Steyn in Republic of India and Others v India Steamship Co Ltd [1997] UKHL 40; [1998] AC 867 (HL) stated: ‘That brings me to estoppel by acquiescence. The parties were agreed that the test for the existence of this kind of estoppel is to be found in the dissenting speech of Lord Wilberforce in Moorgate Mercantile Co Ltd v Twitchings [1977] AC 890. Lord Wilberforce said that the question is “… whether, having regard to the situation in which the relevant transaction occurred, as known to both parties, a reasonable man, in the position of the ‘acquirer’ of the property, would expect the ‘owner’ acting honestly and responsibly, if he claimed any title to the property, to take steps to make that claim known …”: at 903. Making due allowance for the proprietary context in which Lord Wilberforce spoke, the observation is helpful as indicating the general principle underlying estoppels by acquiescence’. Numerous French authors have, in recent years, recognized the true significance of the above-mentioned French case law and its proximity to both the German doctrine of Verwirkung and the English doctrine of estoppel.

Literature

Wolfgang Siebert, Verwirkung und Unzulässigkeit der Rechtsausübung (1934); Egon Merz, ‘Die Generalklausel von Treu und Glauben als Quelle der Rechtsschöpfung’ [1961] Zeitschrift für schweizerisches Recht 335; Gerhard Kegel, ‘Verwirkung, Vertrag und Vertrauen’ in Festschrift Clemens Bleyer (1986) 515; Hans-Peter Haferkamp, Die heutige Rechtsmissbrauchslehre. Ergebnis nationalsozialistischen Rechtsdenkens? (1995); Reinhard Zimmermann and Simon Whittaker (eds), Good Faith in European Contract Law (2000) particularly 18–25; Antoni Vaquer, ‘Importing Foreign Doctrines: Yet Another Approach to the Unification of European Private Law? Incorporation of the Verwirkung Doctrine into Spanish Case Law’ (2000) ZEuP 300; Giovanni Meruzzi, L’exceptio doli dal diritto civile al diritto commerciale (2005); Benedicte Fauvarque-Cosson (ed), La confiance légitime et l’estoppel (2007); Filippo Ranieri, Europäisches Obligationenrecht (3rd edn, 2009), 1812 ff, 1836 ff, 1858 ff.

Retrieved from Verwirkung (Estoppel) – Max-EuP 2012 on 25 May 2022.

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