There are countless legal transactions. You have to imagine that a number of rights and obligations are established with a legal transaction. But what exactly are legal transactions and what do they contain?
A legal transaction always includes at least one declaration of intent. This is aimed at bringing about a specific legal consequence and must be submitted by a legally competent person. However, this legal consequence does not occur through the declaration of intent itself, but only through the legal transaction that comes about through the declaration of intent.
As a rule, full legal capacity is attained when you come of age, i.e. when you turn 18. Before that, namely from 7 to 17 years, you have limited legal capacity. This means that the declaration of intent made only becomes effective with the consent of the person authorized to represent (usually the parents). Children under the age of 7 are legally incompetent and cannot conclude legal transactions.
Legal transactions – types
A distinction is made between unilateral and bilateral or multilateral legal transactions.
- In the case of unilateral legal transactions, only a declaration of intent is required for them to become effective
- In the case of bilateral or multilateral legal transactions, two or more declarations of intent are required in order for them to become effective
In the case of multilateral legal transactions, it is important that all declarations of intent agree with one another. If the two contracting parties have not yet reached an agreement, no legal transaction can arise.
Would you like to learn more about the conclusion of the contract through the declarations of intent? Then take a look at our article «Declaration of Intent».
Imagine you go to a café and order a cup of cocoa for €1.00. However, the cocoa costs €1.50 and the saleswoman also asks you for this price. In this case, the declarations of intent are not congruent and therefore no legal transaction has arisen. This purchase contract is a bilateral legal transaction and you have not yet agreed on the purchase price with the seller.
Unilateral legal transactions
In the case of unilateral legal transactions, a distinction must be made between legal transactions that require and those that do not.
- In the case of legal transactions with declarations of intent that must be received, the contract is only concluded when the declaration of intent has been received by the business partner.
- Legal transactions with declarations of intent that do not require receipt are effective as soon as the declaration of intent has been made.
Examples of unilateral legal transactions with declarations of intent that require receipt are:
- Notices of Withdrawal
- powers of attorney
Examples of legal transactions with declarations of intent that do not require receipt are:
- abandonment of property
- Claim (this includes, for example, search or missing person reports with a promise of reward)
Bilateral or multilateral legal transactions
A bilateral legal transaction requires two corresponding declarations of intent. However, this does not automatically mean that both sides enter into obligations. Here again a distinction is made between unilaterally and bilaterally binding legal transactions.
- In the case of a unilaterally binding legal transaction, only one person assumes the obligations arising from the contract
- In the case of a legal transaction that is binding on two or more parties, all contracting parties assume the obligations
This can be a bit confusing. In the case of bilateral or multilateral legal transactions, to put it simply, two or more corresponding declarations of intent are required, but it can still be the case that only one person has to assume an obligation from the contractual relationship.
Examples of unilaterally binding legal transactions:
- donation contract
- surety contract
Examples of mutually binding legal transactions:
- Purchase contract
- loan agreement
- rental contract
- loan agreement
- employment contract
- training contract
- service contract
- work contract
- loan agreement
- insurance contract
In the case of bilateral or multilateral legal transactions, it is important for you to know that these must always be received. The two declarations of intent that come about as part of a bilateral legal transaction are called application and acceptance.
Legal transactions – delimitations
The legal transaction is to be distinguished from:
- a real act
- a legal act that is only aimed at actual success (e.g. bringing things into rented rooms)
- business-like actions
- e.g. B. Default by reminder
- e.g. B. An invitation to dinner
Legal transactions – obligation & disposal transaction
According to German civil law, legal transactions are divided into obligatory and disposal transactions.
- Obligatory transactions create the obligation to do, tolerate or refrain from doing something
- e.g. B. Rental contracts oblige the landlord to let the tenant rent an apartment
- Disposal transactions have a direct effect on a right through transfer, encumbrance, cancellation or change of content
- e.g. B. Transfer of ownership of a purchased item, i.e. the actual transfer to the new owner
These two legal transactions are distinguished from one another and are effective independently of one another. This is also known as the principle of separation and abstraction.
Separation principle means that a distinction must be made between the obligation and the disposal transaction.
You go to a bakery and order five rolls. The seller then nods, packs the rolls in a bag and puts them on the counter. You put the money on the counter, take the bag and go home.
Your order and the nod of the seller are the declarations of intent that establish a sales contract between you. This obliges you to pay for the rolls and the seller to give you the rolls. The contract of sale is the binding transaction.
By putting the money on the counter and the clerk accepting it, you agree that the money should go to the clerk. The same happens with regard to the buns. In this case, the transfer of money and rolls is the transaction of disposal.
principle of abstraction
The principle of abstraction means that a commitment transaction and a remuneration transaction can be effective independently of one another.
You want to buy a German book from a classmate that costs ten euros. However, you make a mistake and say «English book». Then you get the English book and give your classmate the ten euros. So you agree that you should own the book and your classmates should own the banknote. When you realize it’s the wrong book, you successfully contest the purchase agreement.
You have to pay 10€ and your classmate has to give you the book and assign it to you. After the rescission, the purchase contract is ineffective from the beginning.
Transfer of ownership of the German book and transfer of ownership of the bank note are initially not affected by the void purchase agreement. The disposal transactions must be challenged separately.
Legal transactions – forms
The form in which legal transactions are concluded is, at least as far as possible, optional in our legal system (basic freedom of form). The following forms are conceivable:
- verbally or by telephone
- in written form
- through simple action
Since it would be very problematic to conclude every contract in writing in order for it to be valid, freedom of form allows our economic system to function smoothly. Nevertheless, there are exceptions to these regulations in this area, as in almost every other area. There are a number of legal transactions in which the legislature has specified a form in order to protect the people involved.
- There are legal transactions that must be in writing. This means that the respective legal transaction is created in writing and signed by the parties involved. This is the case, for example, with employment or rental contracts.
Section 126 Written form (1) If written form is required by law, the document must be signed by the issuer himself by signing his name or by means of a notarized hand sign. (2) In the case of a contract, the parties must sign on the same document. If several identical documents are included in the contract, it is sufficient if each party signs the document intended for the other party. (3) The written form can be replaced by the electronic form if the law does not provide otherwise. ( 4) The written form is replaced by the notarial certification.
- Certifications require the written form and also a notarized or officially certified signature of the parties.
Section 129 Public certification (1) If public certification is prescribed by law for a declaration, the declaration must be in writing and the signature of the declarant must be certified by a notary. If the declaration is signed by the exhibitor using a show of hands, the certification of the show of hands prescribed in Section 126 (1) is necessary and sufficient. (2) The public certification is replaced by the notarial certification of the declaration.
- A certification requires not only the confirmation of the signatures, but the certification of the entire document. The signatures must be submitted here in the presence of the confirming person.
§ 128 Notarial authentication If notarial authentication of a contract is prescribed by law, it is sufficient if first the application and then the acceptance of the application is authenticated by a notary
A legal transaction that is subject to a formal requirement is the purchase of real estate. A corresponding purchase contract is only effective if it has been notarized, § 311b BGB.
Legal transactions – freedom of contract
Freedom of contract means that everyone is free to decide how and whether they want to conclude a contract. The content of the contracts can be freely determined, but applicable laws must not be violated.
Freedom of contract is already enshrined in the Basic Law (general freedom of action, Art. 2 Para. 1 GG). Economic entities entering into a contract can negotiate freely. Freedom of contract aims at four factors:
- Freedom of conclusion
- Should a contract be concluded or not?
- Content Freedom
- What does the contract include?
- freedom of form
- In what form will the contract be concluded?
- Exception: mandatory form for certain legal transactions
- right of cancellation
- It must be possible for both economic entities to withdraw from a concluded contract.
Void Legal Transactions
It can happen that legal transactions are void due to certain circumstances. This means that they are ineffective from the start and do not trigger any legal consequences.
…breaking the law.
A cashier sells liquor to…