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Supplementary Interpretation of Agreements when Referring to a Non-existent Price Index

An index clause may be effective even when it refers to a non-existent price index. This was the decision of the Higher Regional Court of Frankfurt am Main (Oberlandesgericht – “OLG”) in its judgment of 10 October 2014 (file no.: 2 U 245/12).

Background

In 1990, the legal predecessors of the parties entered into a lease agreement and a heritable building rights agreement. Both agreements contained an identical index clause. Accordingly, the agreed index was to be replaced with an economically comparable index if it were no longer determinable. It was furthermore agreed that the index clauses required approval from the national central bank in order to attain validity.

However, the price index which was agreed upon by the parties was non-existent to begin with. Merely a price index with a similar name existed. In February 2003, this index was replaced by the consumer price index, which was retroactively effective as of 1 January 2000. The original clause was approved by the national central bank, which was required according to the then applicable laws. The permits explicitly did not cover any other index than the agreed index.

Based on the index regulations, the plaintiffs demanded outstanding lease and heritable building rights interest, inter alia. The regional court (“Landgericht”) largely upheld the action.

Decision of the OLG Frankfurt

The OLG Frankfurt also decided in favour of the plaintiffs. It stated that the disputed index clause initially did not violate the transparency requirement, even though the agreed index was non-existent to begin with. The parties had explicitly considered the possibility that the selected index might cease to exist in future. However, they had failed to specify regulations in the event that the agreed index was non-existent to begin with. Therefore, a regulatory gap exists, which could be closed by a supplementary interpretation of the agreement, it being apparant that the parties wished to ensure the validity of the agreements, regardless of the future existence of the selected index.

The index clause is furthermore unlikely to violate the so called "pricing clause act" (law on the prohibition of use of pricing clauses when determining monetary debts (“Preisklauselgesetz”). In any event, a violation of the so called "pricing clause act" does not have retroactive effects, but would only take effect from the time at which its invalidity is legally determined. Therefore, the price adjustments for the period under dispute would be valid in any case.

Comment

The decision of the OLG Frankfurt is in line with the Federal Court of Justice’s (Bundesgerichtshof - "BGH") judgement on the supplementary contract interpretation of index clauses and thus expands it to the non-existent index. The recourse to supplementary contract interpretation was obvious, since at least, the case of a no longer existing index was explicitly regulated. The "severability clause" (“Salvatorische Klausel”) which is commonly used in agreements and according to which an agreement remains valid to the farthest possible extent in case of the existence of an invalid clause or contract gap, would consequently also result in a supplementary contractual interpretation.

In the event that an index clause is agreed upon, the parties should ensure that the pricing index exists, and the case that the agreed price index no longer exists should be regulated. Insofar as pricing clauses are part of General Terms and Conditions, it is furthermore necessary to ensure that the contractual partner is not inappropriately disadvantaged.

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