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BGH: Intermediary's Liability due to False Information on German Deposit Guarantee Fund

Updated: Jan 25

The intermediary is a welcome link between the investor and the borrower. However, if the investment does not run as expected, he regularly stands in the fire as a possible liable party. The judgement of the German Federal Supreme Court (Bundesgerichtshof, BGH) of 11.01.2007 (Ref.: III ZR 193/05) once again illustrates the high relevance that is to be attached to the correctness of, in particular, written information provided by the intermediary. In order to avoid liability risks, intermediaries must ensure that their own documents and information are properly drafted and should seek professional legal advice in cases of doubt.

Facts of the Case

The plaintiff managed the assets of a foundation. The defendant acted as a representative of a bank and arranged a time deposit for the plaintiff with this bank. In this context, the intermediary (defendant) also stated that the bank belonged to the Deposit Protection Fund of the Association of German Banks, which was not actually the case. After the bank was closed by BaFin and insolvency proceedings were opened against its assets, the plaintiff filed a claim for damages against the intermediary (defendant).

Court confirmed the Intermediary's Liability

The German Federal Supreme Court affirmed the liability of the intermediary (defendant) based on a concluded information contract.

In the context of investment brokerage, an information contract between the prospective investor and the investment intermediary is concluded at least tacitly if the prospective investor makes clear his wish to make use of the intermediary's special knowledge and connections with regard to a certain investment decision and the intermediary starts the desired activity.

This principle contributes to the protection of the investor. The situation of interests in the mediation of capital investments is characterised by the regularly considerable economic importance for the investor and a need for clarification on his part which also regularly exists. In the vast majority of cases, this need for information could only be adequately satisfied by the intermediary. Conversely, the intermediary's expertise was generally to be expected.

According to the court, an information contract can also be concluded by implied declarations. In the case at hand, the plaintiff, by asking whether the bank belonged to the Deposit Protection Fund of German banks, recognisably wanted to use the specific knowledge of the intermediary (defendant) about the details of the capital investment offered and made his investment decision dependent on it.

As a result, the intermediary acted in breach of duty, as he provided factually incorrect information about a deposit guarantee fund that did not actually exist, based on an incomplete factual basis. This constituted a culpable breach of contract obliging the agent to pay damages.


Attorney-at-law, LL. M. (UCL)

Hendrik Müller-Lankow

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