Coronavirus pandemic: Cologne Higher Regional Court on procurement of masks using open-house procedure – “Open House 2”

In late March 2020, a supplier of masks submitted an offer to deliver 15 million FFP2 masks and 10 million surgical masks, using the preformulated offer prescribed for the open-house procedure. The supplier was awarded the corresponding contract, which contained the following provisions, amongst others:

“The latest delivery date shall be 30 April 2020, within business hours […]. If the latest delivery date is not met, the contracting parties’ mutual obligations shall cease to exist; late delivery shall not constitute fulfilment of the contract by the contractor (absolute fixed-date transaction).”

Following an inquiry by the supplier of the masks, the company commissioned by the Federal Health Ministry to handle the matter offered only later delivery dates, as accepting all the deliveries by 30 April 2020 was not feasible. In fact, only a fraction of the FFP2 masks were delivered after 30 April 2020; the supplier endeavoured in vain to obtain delivery slots for the majority of the masks. The Federal Health Ministry then gave notice of partial rescission, without setting a grace period, with regard to the outstanding deliveries, pointing out that the delivery date had been a fixed date.

The Cologne Higher Regional Court considered the partial rescission of the contract by the Federal Health Ministry without the prior setting of a grace period to be invalid and ordered the Federal Health Ministry to pay the purchase price of EUR 85,644,300 plus interest. According to the Cologne Higher Regional Court, a grace period should have been set, as neither an absolute nor a relative fixed-date transaction was validly agreed. The Cologne Higher Regional Court denied leave to appeal on points of law.

The Cologne Higher Regional Court held that the agreement on the absolute fixed-date transaction in the form of general terms and conditions was invalid, according to the law governing general terms and conditions. Absolute fixed-date transactions are characterised by the fact that compliance with the time allowed for performance is of the utmost importance and that if the date of performance or the deadline for performance is not met, performance becomes impossible. Notice of rescission is not mandatory in this case, but is nevertheless provided for by law (§ 326 (5) German Civil Code).

According to the Cologne Higher Regional Court, the agreement on the absolute fixed-date transaction in the form of general terms and conditions was unexpected and incompatible with essential basic ideas underlying the statutory provisions and is, therefore, invalid. The Cologne Higher Regional Court made reference to the rulings of the German Federal Court of Justice, according to which the omission of the requirement to set a grace period in the event of rescission places the other party at an unreasonable disadvantage.[2]

[2] Cf. Federal Court of Justice, judgment of 17 January 1990 - VIII ZR 292/88, NJW 1990, 2065, 2067.

Moreover, according to the Cologne Higher Regional Court, the contractual agreement also cannot be interpreted as a relative fixed-date transaction. A relative fixed-date transaction is deemed to exist if timely delivery at a specified date or within a specified period is so important that the transaction is intended to be strictly conditional upon timely performance, which means that late performance is not in the creditor’s interest. As a legal consequence of a relative fixed-date transaction, the creditor may rescind the contract without first setting a grace period (§ 323 (2) No. 2 German Civil Code).

In the opinion of the Cologne Higher Regional Court, the fact that an absolute fixed-date transaction was agreed according to the wording of the clause is an argument against a relative fixed-date transaction. Even though the use of the word “latest” in combination with a date can normally be an indication of a relative fixed-date transaction, in particular the unambiguous wording of the clause (“absolute fixed-date transaction”), including the correct description of the legal consequence of an absolute fixed-date transaction, indicates otherwise. With this unambiguous designation, it can be ruled out, in the opinion of the Cologne Higher Regional Court, that the Federal Health Ministry referred to the relative fixed-date transaction as an absolute fixed-date transaction by mistake.

According to the Cologne Higher Regional Court, there are also no other indications that a relative fixed-date transaction was agreed. Even though the quick delivery of masks was of great interest to the Federal Health Ministry because of the pandemic and the associated risk to the population, there was, due to the ongoing pandemic, nothing to suggest to the supplier of the masks that the delivery of the masks, if made after 30 April 2020, would no longer be of interest to the Federal Health Ministry, in the sense of a relative fixed-date transaction.

That the transaction was intended to be strictly conditional upon timely performance is contradicted by the fact that the deliveries were postponed to periods after 30 April 2020. This postponement is, in the opinion of the Cologne Higher Regional Court, an indication that the transaction was not a fixed-date transaction.

As for the question of whether an absolute fixed-date transaction can be validly agreed in general terms and conditions, the decision is in line with the rulings of the Federal Court of Justice, which held a fixed-date transaction agreed in general terms and conditions to be invalid as early as 1990.[3]

The Cologne Higher Regional Court flatly rejected the attempt at reinterpreting the clause to constitute a relative fixed-date transaction – as it had already done in the parallel proceedings – primarily in view of the postponement of the delivery dates by the Federal Health Ministry. This makes sense, as the Federal Health Ministry’s own inability to adhere to 30 April 2020 is incompatible with its claim that the transaction was intended to be strictly conditional upon this date being met.

By contrast, in the lower instance the Federal Health Ministry had successfully claimed that the wrong designation had been used by mistake (Regional Court of Bonn, judgment of 28 June 2023 - 1 O 221/22). The Bonn Regional Court later abandoned its line of reasoning in this respect in the series of simile actions.[4]

[3] Federal Court of Justice, judgment of 17 January 1990 - VIII ZR 292/88, NJW 1990, 2065.

[4] Bonn Regional Court, consent decree and final judgment of 20 December 2023 - 1 O 156/21, NJOZ 2024, 882.

The judgment shows that even in exceptional situations such as the procurement of masks at the beginning of the COVID-19 pandemic, a transaction cannot readily be considered to be an absolute or relative fixed-date transaction. When drafting contracts, the validity of the relevant clauses must, even in such exceptional situations, be carefully examined in light of the law governing general terms and conditions (if applicable).

Given the Federal Health Ministry’s victory in the court of first instance, the substantial amount in dispute and the significance of the case for the series of similar actions, it comes as no surprise that the Federal Health Ministry has announced its intention to challenge the judgment by appealing to the Federal Court of Justice against the denial of leave to appeal on points of law. An according procedure is already pending. However, even if the Federal Court of Justice should allow an appeal on points of law, it will be difficult for the Federal Health Ministry from a factual perspective to refute the argument that the postponement of the delivery date is an indication against a relative fixed-date transaction.