Reciprocity Agreement

Synallagmatic contract (Latin: synallagmatic contract) is a contract in which both parties have reciprocal obligations and their performances are legally interdependent. In real estate law, the purchase agreement is the most important example: The seller is obligated to transfer ownership, and the buyer is obligated to pay the purchase price-both performances are contingent upon each other. The principle of “performance for consideration” is at the heart of the reciprocal contract.

Legal Significance of Synallagma

The mutual dependency of the performances (synallagma) has important consequences under the German Civil Code (BGB):

Defense of non-performance (§ 320 BGB): Each party may refuse to perform until the other party has rendered its consideration. In a real estate purchase, this means: The seller is not required to transfer possession until the purchase price has been paid; the buyer is not required to pay until the cancellation of encumbering real property liens has been secured.

Withdrawal in Case of Non-Performance (Section 323 BGB): If a party fails to perform despite a deadline being set, the other party may withdraw from the contract. In a real estate purchase, however, this is structured through the notarial settlement (due date of the purchase price, release from encumbrances) in such a way that both parties are protected simultaneously.

Impossibility of Performance (Section 326 BGB): If performance by one party becomes impossible, the other party’s obligation to provide consideration also ceases. If the sold property cannot be transferred (e.g., due to a municipal right of first refusal), the buyer’s obligation to pay the purchase price expires.

Reciprocal Contract in Real Estate Sales

The notarized real estate purchase agreement is a classic reciprocal contract. In practice, mutual protection is ensured by the following mechanisms:

• Priority notice of conveyance: Protects the buyer by reserving the property for them until ownership is transferred
• Due date of the purchase price: The notary determines the due date only once cancellation authorizations and approvals have been obtained
• Release from encumbrances: The seller’s land charges are redeemed with the purchase price

Thanks to this safeguard system, neither the buyer nor the seller is required to make an advance payment. The notary acts as a neutral intermediary, ensuring that both parties fulfill their obligations step by step.

The Reciprocal Contract in Other Areas of Real Estate Law

Synallagma is found not only in the purchase agreement but also in many other real estate contracts:

Lease Agreement: The landlord is obligated to provide uninterrupted use of the property, and the tenant is obligated to pay the rent. Both obligations are part of the synallagma. If the landlord provides a defective apartment, the tenant may reduce the rent-the extent of the tenant’s obligation to pay is reduced in proportion to the defect.

Contract for Work and Materials (Construction Work): The contractor is obligated to deliver defect-free work, and the client is obligated to pay the contract price. Here, too, acceptance and payment of the final installment must be made simultaneously. Material defects entitle the party to refuse payment.

Brokerage Agreement: Unlike a purchase agreement, a brokerage agreement is not a classic reciprocal contract-the broker is not obligated to ensure a successful outcome, but only to perform services. The commission is only due upon the conclusion of a contract brokered by the broker.

Practical Tip for Property Owners in Nuremberg and Franconia

The synallagma of the purchase agreement protects both parties-provided that all ancillary agreements are included in the notarized purchase agreement. We recommend that our clients in Nuremberg and Franconia include all agreements (payment terms, closing dates, included fixtures and fittings) in the purchase agreement without exception. Verbal promises are worthless in the event of a dispute and undermine the security framework of the reciprocal contract.

In practice, we occasionally observe that buyers and sellers believe they can settle certain ancillary matters verbally-such as that certain furnishings are included in the sale or that the seller will carry out certain repairs before the handover. Such agreements outside the notarized contract are subject to notarization and are therefore void if they constitute an essential part of the contract. We therefore take great care when preparing for the notary appointment to ensure that all relevant agreements are recorded in writing.

Frequently Asked Questions

Is a lease agreement also a reciprocal contract?

Yes. In a lease agreement, the landlord is obligated to provide the leased property, and the tenant is obligated to pay the rent. Both obligations are part of a synallagmatic relationship. If the tenant fails to pay rent, the landlord may refuse to continue granting use of the property and terminate the contract; if the landlord fails to pay for cosmetic repairs that they are obligated to make, the tenant may, if applicable, reduce the rent.

What is the difference between a reciprocal contract and a unilateral contract?

A unilateral contract obligates only one party, e.g., a gift: Only the donor owes something; the recipient owes nothing. In a reciprocal contract, both parties are mutually obligated, and the obligations are interdependent.

As a buyer, can I withhold the purchase price if there are defects?

Within narrow limits: In the case of significant defects that existed at the time of transfer of risk, buyers may withhold a reasonable portion of the purchase price or declare their withdrawal from the contract. As a rule, however, notifying the seller of the defect is the first step; a right of retention presupposes that the claim for rectification of the defect still exists.

How does the notary resolve the “simultaneous performance” issue in a real estate purchase?

The notary structures the settlement so that neither the buyer nor the seller has to make an advance payment: Only when all conditions for payment (discharge authorizations, approvals, priority notice of conveyance) are met does the notary issue the notice of payment due. The buyer pays the purchase price; the seller’s bank releases the mortgage; the notary applies for the transfer of title. This system makes the notary a neutral safeguard for the reciprocal contract.

What happens if a party permanently refuses to perform its obligations under the reciprocal contract?

If a party to the contract seriously and definitively refuses to perform, this constitutes a serious and definitive refusal to perform-setting a grace period is unnecessary in this case. The other party may immediately withdraw from the contract and demand damages in lieu of performance. In the context of a real estate purchase, such a scenario means: If the buyer fails to pay the purchase price despite the notice of due date and declares that they do not intend to pay, the seller may withdraw from the contract without setting a further deadline and claim damages-such as the difference between the agreed purchase price and a later, lower resale price. In our practice in Nuremberg, we occasionally encounter such cases when the buyer’s financial situation has deteriorated between the notarization and the payment. We recommend that sellers in such situations immediately consult a specialist attorney for real estate law.

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