The Decision of the Supreme Court file no. 29 Cdo 3863/2010 dated 29 November 2011

i.      Applicable law 

In this particular case, the court dealt with the question whether it is possible to negotiate the reservation of title clause pursuant to Section 445 of the Commercial Code in the framework purchase agreement as an innominate contract within the meaning of Section 269 para 2 of the Commercial Code.

ii.     Facts

In the framework purchase agreement, the purchaser and the seller agreed that the ownership title to the goods delivered based on the framework agreement will be transfered to the purchaser only on the day of the full payment of the respective invoice.

The purchaser was declared bankrupt and the unpaid and delivered goods were included in the bankruptcy estate.

Based on the reservation of title clause, the seller claimed the exclusion of the goods from the bankruptcy estate.

The lower court dismissed the claim on the grounds that the framework purchase agreement, which does not contain all requered elements of a purchase agreement pursuant to Section 409 of the Commercial Code, is an innominate agreement within the meaning of section 269 para 2 of the Commercial Code. The court concluded that it is not possible to agree a reservation title clause in an innominate agreement and that such reservation of title clause is invalid.

iii.    Decision of the Supreme court and its explanation

The Supreme court did not uphold the above decision and reasons of the lower court and issued a decision as follows:

a)     If the framework purchase agreement does not contain all required elements of a purchase agreement within the meaning of Section 409 of the Commercial Code, such agreement must be treated as an innominate contract pursuant to Section 269 para. 2 of the Commercial Code

b)    Regardless of the fact that the reservation of title is otherwise regulated in the Commercial Code as a so called “side provision” to the purchase agreement, it is possible to agree a reservation title clause in the innominate agreement.

c)     The court used the teleological interpretation of Section 409 of the Commercial Code and concluded that it is not against the purpose of the reservation of title, if the reservation of title is agreed before the ownership title is  transferred to the purchaser.  

d)     According to the court it is not relevant, whether the reservation of title is agreed in the purchase agreement, amendment thereto, or for instance in the framework agreement. However, it is necessary that the subject of the reservation is sufficiently specified.