Stipulation of a place of jurisdiction abroad may prevent set-off

The Higher Regional Court of Munich (13 October 2016, Case No. 23 U 1848/16) has ruled that an agreement under which the exclusive place of jurisdiction and performance for all obligations arising from the agreement is to be the registered office of one of the contracting parties, which is located abroad, is to be interpreted such that set-off can no longer be asserted in domestic proceedings.

Until now, it was unclear whether a defendant could defend itself in a legal action by setting off the claims in question against its own counter-claims against the plaintiff even if those counter-claims would have to be enforced in another state based on a place of jurisdiction clause. The Higher Regional Court of Munich has now clarified that it cannot do so without an express agreement.

In cases where more than one contractual relationship exists between the parties (e.g. a distribution agreement and various sales contracts), it must therefore be ensured that the place of jurisdiction clause covers all of these contractual relationships, at least insofar as their subject matters are related. This applies not just for distributors, but for supplier-customer relationships as well. Otherwise, the supplier runs the risk that the customer may demand bonus payments under the framework agreement despite failing to pay for the merchandise under the individual sales contracts.