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Thursday, September 6, 2012

The Irregular Deposit in German Law

Contract law in modern Germany is part of Civil law (Bürgerliches Recht), and the most important source for this is the Civil Law Book (Bürgerliches Gesetzbuch, BGB), which came into effect on January 1, 1900 and since then has been Germany’s official civil law code, although it has been amended on a number of occasions.

Section 700 deals with the irregular deposit, and is reproduced here in both German and an English translation:
Ҥ 700
Unregelmäßiger Verwahrungsvertrag
(1) Werden vertretbare Sachen in der Art hinterlegt, dass das Eigentum auf den Verwahrer übergehen und dieser verpflichtet sein soll, Sachen von gleicher Art, Güte und Menge zurückzugewähren, so finden bei Geld die Vorschriften über den Darlehensvertrag, bei anderen Sachen die Vorschriften über den Sachdarlehensvertrag Anwendung. Gestattet der Hinterleger dem Verwahrer, hinterlegte vertretbare Sachen zu verbrauchen, so finden bei Geld die Vorschriften über den Darlehensvertrag, bei anderen Sachen die Vorschriften über den Sachdarlehensvertrag von dem Zeitpunkt an Anwendung, in welchem der Verwahrer sich die Sachen aneignet. In beiden Fällen bestimmen sich jedoch Zeit und Ort der Rückgabe im Zweifel nach den Vorschriften über den Verwahrungsvertrag.”

“Section 700
Irregular safekeeping contract

(1) If fungible things are deposited in such a way that ownership is to pass to the depositary and the depositary is to be obliged to return things of the same type, quality and quantity, then in the case of money the provisions on loan contracts apply, and in the case of other things the provisions on contracts for the loan of things apply. If the depositor permits the depositary to consume fungible things, then in the case of money the provisions on loan contracts apply and in the case of other things the provisions on contracts for the loan of a thing apply from the point of time when the depositary appropriates the things on. In both cases, the time and place for return are, in case of doubt, determined under the provisions of the safekeeping contract.”

http://www.gesetze-im-internet.de/englisch_bgb/englisch_bgb.html#p2973
So in German law the irregular deposit is to all intents and purposes the equivalent of the mutuum, the loan contract.

Sections 598 to 610 in the Bürgerliches Gesetzbuch deal with what in Classical Roman law would be called the commodatum (loan for use) and mutuum (loan for consumption), and the latter seems to govern the rules of irregular deposit.

This in German law the irregular deposit in fractional reserve banking is the essentially the functional equivalent of the loan: there is not a shred of evidence here for the unorthodox definition of the irregular deposit held by Huerta de Soto (2012).

BIBLIOGRAPHY

Huerta de Soto, J. 2012. Money, Bank Credit and Economic Cycles (3rd edn.; trans. M. A. Stroup), Ludwig von Mises Institute, Auburn, Ala.

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