OGH: Expanded Court on Laesio Enormis in Options Contracts

May 5, 2023 Benn-Ibler Rechtsanwälte

In a decision by an expanded court, the Austrian Supreme Court (Oberster Gerichtshof, hereinafter OGH) has provided clarification on the exercise of laesio enormis (lesion beyond moiety) as well as its statute of limitations with regard to options contracts.

The original case had been about an options contract between two (former) partners. In 2009, the defendant had granted the plaintiff an unlimited (value-protected) option to purchase a property including a warehouse for EUR 60,000. In 2009, the market value of the property was EUR 130,000; by 2018, the value had risen to EUR 250,000. The plaintiff asserted his options right in 2018 by way of an action. The defendant objected, claiming, among other things, lesion beyond moiety pursuant to Section 934 of the Austrian Civil Code (Allgemeines Bürgerliches Gesetzbuch, ABGB).

One of the points at issue was the moment at which laesio enormis should be applied to an options contract, referring to either the point in time at which the option was granted or the point in time at which the right to exercise the option is invoked. Associated with this is the issue of the onset of the statute of limitations.

Since the OGH’s rulings on this issue have so far been inconsistent, an expanded Supreme Court was required to resolve the issue.

When examining the relation of value of the principal contract offered in the options contract, what matters is the time of the right to opt, i.e. the time at which the opting party is bound by their declaration to opt. This is because laesio enormis is intended to serve as a defence against any evil that may have existed from the onset. In addition, letting the statute of limitations begin running at the time of exercising the option would lead to an undue suspension of the risk of value-development typical for options contracts.

The three-year statute of limitations for rescission due to laesio enormis begins to run with the objective possibility of opting. It is irrelevant whether or not and when the option holder makes use of their opting right. The existence of an initial disproportion is already apparent at the time the right to opt is granted.

For the original case, this meant that the right of rescission was already time-barred, and the right to opt had been exercised in effect.

OGH verstSen 4 Ob 217/21x (28.03.2023)