Last Updated on June 27, 2021 by LawEuro
German Civil Code (BGB) German law
Title 5
Agency and authority
Section 164
Effect of a declaration made by the agent
(1) A declaration of intent which a person makes within the scope of his own power of agency in the name of a principal takes effect directly in favour of and against the principal. It is irrelevant whether the declaration is made explicitly in the name of the principal, or whether it may be gathered from the circumstances that it is to be made in his name.
(2) If the intent to act on behalf of another is not evident, the lack of intent on the part of the agent to act on his own behalf is not taken into consideration.
(3) The provisions of subsection (1) apply with the necessary modifications if a declaration of intent to be made to another is made to his agent.
Section 165
Agent with limited capacity to contract
The effectiveness of a declaration of intent made by or to an agent is not adversely affected by the agent having limited capacity to contract.
Section 166
Absence of intent; imputed knowledge
(1) Insofar as the legal consequences of a declaration of intent are influenced by an absence of intent or by knowledge or by constructive notice of certain circumstances, it is not the person of the principal, but that of the agent, that is taken into account.
(2) If, in the case of a power of agency granted by a legal transaction (authority), the agent has acted in compliance with certain instructions given by the principal, then the latter may not invoke the lack of knowledge of the agent with regard to circumstances of which the principal himself knew. The same rule applies to circumstances which the principal ought to have known, insofar as constructive notice is equivalent to knowledge.
Section 167
Conferment of authority
(1) Authority is conferred by declaration to the person to be granted authority, or to the third party in relation to whom the authority is to have effect.
(2) The declaration is not required to be in the form laid down for the legal transaction to which the authority relates.
Section 168
Expiry of authority
The expiry of the authority depends on the legal relationship on which its conferment is based. The authority is also revocable if the legal relationship is continued, unless this relationship leads to a different conclusion. The provision under section 167 (1) applies with the necessary modifications to the declaration of revocation.
Section 169
Authority of the authorised representative and the managing partner
To the extent that the expired authority of an authorised representative or a managing partner is deemed to continue in accordance with sections 674 and 729, it is not effective in favour of a third party who, when a legal transaction is undertaken, knows or ought to know of the expiry.
Section 170
Period of effectiveness of the authority
If authority is granted by declaration to a third party, it remains in force in relation to this third party until he is notified by the principal of the expiry thereof.
Section 171
Period of effectiveness in the case of announcement
(1) If a person has announced by separate notice to a third party or by public notice that he has granted authority to another, the latter, on the basis of the announcement, is authorised to represent the person to that third party in the former case, and to any third party in the latter case.
(2) The authority remains effective until the notice is revoked in the same manner in which it was made.
Section 172
Letter of authorisation
(1) If the principal has delivered a letter of authorisation to the agent and the agent presents it to a third party, this is equivalent to a separate notification of authorisation by the principal.
(2) The power of agency remains effective until the letter of authorisation is returned to the principal or declared to be invalid.
Section 173
Period of effectiveness in the case of knowledge and negligent lack of knowledge
The provisions of section 170, section 171 (2) and section 172 (2) do not apply if the third party knows or ought to know of the termination of the authority when the legal transaction is entered into.
Section 174
Unilateral legal transaction by an authorised representative
A unilateral legal transaction that an authorised representative undertakes in relation to another is ineffective if the authorised representative does not present a letter of authorisation and the other rejects the legal transaction without undue delay for this reason. Rejection is excluded if the principal notified the other of the authorisation.
Section 175
Return of the letter of authorisation
After the expiry of the authority, the authorised representative must return the letter of authorisation to the principal; he has no right of retention.
Section 176
Declaration of invalidity of the letter of authorisation
(1) The principal may, by public notice, declare the letter of authorisation; the declaration of invalidity must be published in compliance with the provisions of the Code of Civil Procedure [Zivilprozessordnung] that govern the service of a summons by publication. The declaration of invalidity becomes effective at the end of one month after its last appearance in the official newspapers.
(2) The local court [Amtsgericht] in whose district the principal is subject to general jurisdiction and the local court [Amtsgericht] which would have jurisdiction over the action for the return of the letter of authorisation are equally competent to authorise the publication, irrespective of the value of the matter in dispute.
(3) The declaration of invalidity is ineffective if the principal may not revoke the authority.
Section 177
Entry into contract by an unauthorised agent
(1) If a person enters into a contract in the name of another without power of agency, then the effectiveness of the contract to the benefit or detriment of the principal requires the ratification of the principal.
(2) If the other party requires the principal to make a declaration as to whether or not he ratifies the contract, the declaration may only be made to that other party; a ratification or a refusal of ratification declared to the agent before the demand is without effect. The ratification may only be declared before the expiry of two weeks after receipt of the demand; if it is not declared, it is considered to have been refused.
Section 178
Right of revocation of the other party
Until the ratification of the contract, the other party is entitled to revoke it, unless he knew of the lack of power of agency when he entered into the contract. The revocation may also be declared to the agent.
Section 179
Liability of an unauthorised agent
(1) A person who has entered into a contract as an agent is, if he does not furnish proof of his power of agency, obliged to the other party at the other party’s choice either to perform the contract or to pay damages to him, if the principal refuses to ratify the contract.
(2) If the agent was not aware of his lack of power of agency, he is obliged to make compensation only for the damage which the other party suffers as a result of relying on the power of agency; but not in excess of the total amount of the interest which the other or the third party has in the effectiveness of the contract.
(3) The agent is not liable, if the other party knew or ought to have known of the lack of power of agency. The agent is also not liable if he had limited capacity to contract, unless he acted with the consent of his legal representative.
Section 180
Unilateral legal transactions
Agency without authority is not permitted for a unilateral legal transaction. However, if the person in relation to whom such a legal transaction was to be undertaken did not, when the legal transaction was undertaken, question the power of agency the agent claimed to have, or if he was in agreement that the agent might act without authority, the provisions on contracts apply with the necessary modifications. The same applies if a unilateral legal transaction is undertaken in relation to an unauthorised agent with his consent.
Section 181
Contracting with oneself
An agent may not, unless otherwise permitted, enter into a legal transaction in the name of the principal with himself in his own name or as an agent of a third party, unless the legal transaction consists solely in the performance of an obligation.
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