OGH: Fictitious Managing Director's Salary as Compensation for Damages

Aug 26, 2022 Benn-Ibler Rechtsanwälte

In case a contract-fulfilling party does not conclude a coverage agreement, only the abstract calculation of damages can be considered.

A lease agreement for a hospitality business was concluded between the plaintiff (lessee) and the defendant (lessor). At the time of signing the contract, the plaintiff did not have the funds with him for his outstanding payments under the contract. Furthermore, the plaintiff already knew before signing the contract that he would not be able to raise the money and that there are delays in transferring the funds from Iran, from where the money was to be received. The plaintiff was 45 minutes late for a subsequent meeting with the manager, whereupon the manager announced that, as far as he was concerned, the contractual relationship was over. Thereupon, the defendant continued to run the business by herself.

The plaintiff demanded repayment of the money already paid, whereas the defendant replied that the sum had remained unpaid despite a grace period, and in turn demanded, as compensation, the forgone lease payments as well as an appropriate management salary for the manager who had to be appointed by the defendant.

While the lower courts considered the withdrawal from the contract after having set additional deadlines and having claimed damages to be lawful, the Austrian Supreme Court (Oberster Gerichtshof, OHG) considered the case as threefold:

The Austrian Supreme Court found the withdrawal caused by the debtor's delay in the lease contract to be lawful. However, the Court also stated that a delay of 45 minutes did not justify withdrawal from the contract insofar as the plaintiff had already established this situation by being several weeks in arrears with his payments. With regard to damages for loss of rent, the Austrian Supreme Court was in favour of a claim for differences only. Since the defendant did not conclude coverage, which would allow for a specific calculation of the claim, only an abstract calculation method could be considered, for which the findings are still lacking.

The Austrian Supreme Court ruled in favour of the defendant with regard to compensation for expenses incurred in the rescue of the company (i.e., the manager’s salary). An expense is reimbursable if it was actually incurred, if it was essential, and if it served the purpose of defending against damages. The salary for the business’s continued operation by the defendant is therefore a compensable expense. In this respect, it makes no difference whether the injured party had remedied any damages themselves, as any time invested in remedying a damage is also compensable.

OGH 4 Ob 82/22w (24.05.2022)