Opinion of the German Federal Constitutional Court

The Germany Federal Constitutional Court addressed two cases in each of which a party had become a surety for another, raising issues of unconstitutional burden. In the first, the bank (plaintiff) of a real estate broker and businessman asked the man’s 21-year-old daughter (defendant) to become a surety for her father’s past and future debts. The daughter had limited education, no formal job, and received welfare benefits for her son. The bank officer told the daughter there was nothing to worry about; it was a mere formality. The bank officer also convinced her to waive all protective provisions in the surety agreement, which she did not understand but agreed to do. The father defaulted, leaving the daughter liable for a debt she could not repay in her lifetime. The bank sued to enforce the surety agreement, and the trial court agreed the agreement was enforceable based on its express terms. In the second case, a wife (defendant) agreed to become a surety for her husband’s loan, the proceeds of which were to be used for home-improvement purposes. The wife had no income and spent her time caring for the couple’s two young children. The husband defaulted, and the bank (plaintiff) brought an action to enforce the loan. The trial court enforced the surety agreement based on its express contractual terms. The two cases were referred to the Germany Federal Constitutional Court to address constitutional issues relating to basic rights about good morals, honest trade, and good faith.