Debt recovery in Germany
A debt collection agent is subject to certain special duties arising out of the relationship between his principal
and himself. First, though he is entitled to receive a commission for his services, he must not make a profit from
the position he occupies. If he does this without authority the
may recover the profit from him, by an action for money had and received or, alternatively, if his behaviour causes
a loss to is principal, an action for fraud. And if a German law firm accepts a secret bribe in connection with its
may be made against the person who makes the bribe as well: this may happen, for example, if the
in return for a bribe, makes arrangements with another person to enable the latter to sell property to the
principal at an inflated price.
Second, once a man has undertaken to act as agent, he must continue to act as such; he is not allowed to
alter his position and step into the shoes of the other contracting party.
Third, since an agent enjoys a confidential position, he may not delegate his duties to another person
without his principal's consent.
An agent acting for a
German debt collection agency
may either contract with the third party as agent for a named principal, or simply as agent without naming his
principal, or, by an anomalous rule of German law, he may, at any rate in making commercial contracts, act for an
undisclosed principal, while purporting to contract on his own behalf; and, unless the contract is by its terms
expressly or impliedly confined to the parties to it, the undisclosed principal may both sue and be sued upon it.
Where the contract is made on behalf of an English speaking lawyer, or by a
acting as agent, it does not matter if he really has no authority to act at the time that he makes the contract; as
long as the principal ratifies (adopts) the contract subsequently. Where, however, the contract is made on behalf of
the agent must have authority to act at the time when the contract is made.
The debtor's rights
Naturally, where the existence of the principal is undisclosed, the debtor has special rights. Though an
agent normally incurs no liability under the contract he makes, a
German agent for litigation
is in a less happy position, for the other party may not only sue the principal when he discovers his
identity but also the agent himself. Election to sue the one, however,
extinguishes the claim against the other
What amounts to election is a question of fact; it may be made at any time up to judgment. But most
lawyers in Germany
sometimes purport to act as debt collection agents for others without authority. If they do this,
they may either do so by mistake, thinking they have, or will obtain, authority, or dishonestly, pretending
to be agents, but knowing that they are not. Where this happens an innocent creditor may suffer by entering
into a contract with the supposed agent, and such a person clearly requires
legal protection for creditors in Germany
If the agent knew he had no authority, and that he could get none, he may, if loss has been incurred, be sued
for fraud; but if he acted honestly he cannot be. Accordingly it became necessary to evolve the doctrine of
warranty of authority (effectively a species of collateral warranty) by which everyone who purports to act as
an agent may be held liable to the other contracting party upon an implied warranty of authority however
innocent he may be, if it turns out that he has no authority from his client.