The flexible rule of the BGB

As far as Germany is concerned, this chapter in the history of the laws against usury drew to a close in 1867. In this year, under the influence of economic liberalism, all limitations on interest rates were abolished.^[911] In practice the usury laws were very often circumvented^[912]" and were regarded as arbitrary and unjustifiable restrictions on the freedom of contract.

However, in the years that followed, complaints about usurious exploitation increased. The liberalistic hopes and theories turned out to be castles in the air: with the abolition of criminal sanctions the criminal behaviour itself does not normally disappear. Thus, some control had to be reintroduced. But there was no return to the old policy of fixing maximum rates.^[913] Any limit would have been entirely arbitrary. On what basis could 5 % (or any other amount) be regarded as legal and 5,5 % as illegal and punishable? Therefore, a flexible rule was introduced in 1880, first in the field of criminal law. This provision was extended in 1892 to cover contracts other than loan; in 1896 it was incorporated into the new codification of private law.¹³² There it is considered as a special case of a legal transaction contra bonos mores:

"A legal transaction is also¹¹¹ void whereby a person exploiting the distressed situation, inexperience, lack of judgmental ability or grave weakness of will of another, causes to be promised or granted to himself or to,i third party in exchange for a performance, pecuniary advantages, which exceed the value of the performance to such an extent that, under the circumstances, the pecuniary advantages are in obvious disproportion to the performance."¹¹⁴

If one compares this to the policy adopted in Roman law, one will find at least tour differences: there is no fixed limit, but a flexible one that has to be decided on in each individual case before the courts;¹³⁵ the rule is applicable not only to contracts of loan but also to contracts of sale, lease, contract for work, etc.; certain subjective criteria have been introduced that have to be satisfied if a contract is challenged on the basis of being usurious, i.e. an obvious disproportion between performance and counterperformance per se is not sufficient; and we are dealing with a lex perfecta, that is, any contract in violation of § 138 II BGB is void.

This latter point, incidentally, leads to problems concerning the law of restitution. If the capital has been handed over to the borrower and it later transpires that the contract of loan is usurious and therefore void, the lender will usually try to get back his capital by means of an unjustified enrichment claim (condictio indebiti). This action, however, seems to be barred by virtue of the fact that the "in pari turpitudine" rule¹³'^[914] ^{^[915] has to be applied analogously in cases of turpitudo solius dantis.¹³⁷ But does this mean that the party who was exploited in the first place is now allowed to make a comfortable profit by being able to keep the money (for ever^[916] ^{^[917] or at least for the time that the parties had—in their invalid contract—agreed upon) without paying interest at all? This, indeed, is the prevailing opinion today.^[918] I think, however, that a case can be made out for granting to the usurer an action against the borrower, based on unjustified enrichment, for the value of the use of the money.^[919] III.}}

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Source: Zimmermann R.. The Law of Obligations. Roman Foundations of the Civilian Tradition. Juta & Co, Ltd,1992. — 1241 p.. 1992

The flexible rule of the BGB

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