The parties to the case decided by the German Federal Supreme Court were in dispute over the validity of a global assignment of debts owed to the party seeking credit and a charge over property in a warehouse with variable content (Sicherungsübereignung). The plaintiff granted credit to the debtor, whose liquidator became the defendant to the action. The aforementioned means of security served to secure the advance - in addition to charges over immovable property and over machinery. The standard form for global assignment of debts owed to the party seeking credit of 7 February 1992 provided, inter alia:
"In establishing the level of cover, the relevant factor is not the nominal value of the debts assigned but their security value. The security value of each cdebt is to be determined by the bank in accordance with the principles of valuation common in banking practice. The security value of the debts assigned is to amount to 120% of the claims that the bank is seeking to secure. In establishing the level of cover, other forms of security provided to the bank and the security value thereof, are to be taken into account."
"The bank is obliged to grant a release concerning the rights acquired under this contract when it has been satisfied in relation to all the claims secured thereby against the debtor. The bank must, on application by the person providing the security, grant a partial release concerning a right acquired by it under this contract if the agreed level of cover is exceeded on a more than temporary basis. The right to be released will be selected by the bank."
Paragraph 2 of the standard form contract establishing a charge over property (Sicherungsübereignung), entered into on the same day stated:
"In establishing the level of cover, the relevant factor is not the nominal value of the goods subject to the charge, but rather their security value … The security value of the goods subject to the charge is to amount to 120% of the claims that the bank is seeking to secure. In establishing the level of cover, other forms of security provided to the bank, and the security value thereof are to be taken into account. In the case of a claim on the part of the person providing the security for the grant of a release, reference is made to para. 12 of this contract."
The release clause referred to was in the same form as para. 13 of the global assignment. In addition, both standard form contracts referred to the plaintiff's general conditions of contract. These were in conformity with the 1986 General Conditions of Banking Contracts. § 20(2) of these Conditions provided:
"Notice of the fact that the security is to be realised is not required. Nor is the observance of a period within which settlement can be made, or a demand for immediate cash payment. No variation of the usual form of enforced sale may be requested. The bank will, so far as possible, communicate the form, place and time of the sale."
The plaintiff brought an action for a declaration, inter alia, that the global assignment and the charge over the warehouse were valid. The Landgericht dismissed the claim, the Oberlandesgericht allowed an appeal. A further appeal to the Federal Supreme Court was unsuccessful.
In the opinion of the Supreme Court, the nullity of the rules on realisation of security in § 20(2) of the 1986 General Conditions of Banking Contracts did not affect the validity of global assignments and charges over property (§ 6(1) of the Law on General Conditions of Contract (AGBG)). The invalidity of the rules on realisation of security does not unreasonably disadvantage the provider of the security - in contrast to the position where wages or salary are attached - because under § 6(2) AGBG the ordinary rules of law fill the gap left by the invalid rules on realisation. As to the question whether it is an unreasonable hardship within the meaning of s 6(3) AGBG to hold a contracting party to the terms of the contract - the relevant time European Review of Private Law