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ReferenceStandard Terms

As far as legally permissible? Not a good idea.

A contract clause with the rider “to the extent permitted by law” is invalid. In a forum-selection clause, this becomes a serious problem.

Peter Poleacov4 min

As far as legally permissible? Not a good idea.

Starting point

Forum-selection clauses (and other contract clauses) often carry a rider along the lines of “...to the extent permitted by law”. Either the drafter copied the clause without thinking (which is always a bad idea), or the drafter did not know what is permitted by law in the first place. Either way, such a clause can backfire.

Case law

The Bavarian Supreme Regional Court (BayObLG) addressed the validity of the following forum-selection clause in standard terms in a contract between two businesses:1

“The exclusive place of jurisdiction for all disputes arising from this contract is Stuttgart, to the extent permitted by law.”

The BayObLG held this clause to be invalid. Unlike the two lower courts, it did not turn to the relevant rules of the German Code of Civil Procedure (in particular Section 38 ZPO). It struck the clause down for breach of the transparency requirement under the rules on standard terms (Section 307(1) sentence 2 BGB).

The court first notes that the contract text in which the forum-selection clause is embedded has, both in its outward appearance and in its content, the character of a form used by the claimant, and therefore qualifies as standard terms.

The court considers the forum-selection clause non-transparent even in B2B because of the “to the extent permitted by law” rider, with the consequence that it is invalid.

The Federal Court of Justice has not yet ruled on whether a savings clause in standard terms can exceptionally be considered valid where the legal position is uncertain, or where the user should be spared, in the interest of readability, from drafting exceptions for unusual situations. Where the legal position is clear for the matter the standard terms are meant to regulate and readability is not the concern, savings clauses in standard terms cannot be validly agreed, including in B2B. The user is then required to draft standard terms clearly. The user cannot leave it to the courts to cut back a broadly and carelessly drafted clause to what is permitted by law and thereby give it substantive content in the first place; that is, however, what a savings clause amounts to.

The court’s view is correct and not surprising. The Federal Court of Justice (BGH) had already held in 19952 and in 20123 that savings clauses of the “to the extent permitted by law” type in standard terms cannot be validly agreed where the legal position is not seriously in doubt. In this context, the prohibition on validity-preserving reduction also applies: it is the user of standard terms that bears the risk if the clause is not clear and intelligible. It is not for the courts to cut the clause back to the maximum still permitted by law.

That prohibition has a limit, however, and that is where the real way out lies. Where a clause is severable both in wording and in substance, it is not struck down as a whole. Review is then carried out separately for the provisions that are only formally combined in one clause, and the permissible part survives. Whether a clause is severable is determined by deleting the invalid part, the so-called blue pencil test. That is not a validity-preserving reduction, because the separation is already built into the terms the user itself drafted.4 Draft your provisions so they separate cleanly, rather than trying to rescue them with a savings clause, and you lose only the invalid part when it matters.

What applies instead?

The question that matters most in practice only arises once the clause is gone. Where a clause falls away, the statutory rules take its place under Section 306(2) BGB, and the rest of the contract stays valid. For a forum-selection clause that means the statutory rules on jurisdiction apply, and in cross-border trade within the EU the Brussels Ia Regulation. The user who wanted Stuttgart then sues and defends wherever the law directs, in case of doubt at the other party’s seat abroad. That is precisely what the clause was meant to prevent. The rider therefore costs not just the clause but the home-court advantage.

Practice tip from the user’s perspective

Avoid the “to the extent permitted by law” rider in your pre-formulated clauses, in particular in forum-selection clauses. The rider does not buy you safety; it makes the clause invalid. The same goes for similar riders such as “unless mandatory provisions provide otherwise” or “to the extent the law does not mandatorily provide otherwise”. What the loss of such a clause means commercially is put in context by the article “Contract management decides your margin”.

Practice tip from the other party’s perspective

You have a strong argument for the invalidity of the clause and can use that knowledge tactically in a dispute.

Notes

  1. BayObLG, order of 26 October 2021 – 101 AR 148/21. ↩

  2. BGH, judgment of 12 October 1995 – I ZR 172/93. ↩

  3. BGH, order of 20 November 2012 – VIII ZR 137/12. ↩

  4. BAG, judgment of 3 December 2019 – 9 AZR 44/19. ↩

Reference: Poleacov, P. (2025). As far as legally permissible? Not a good idea.. INN.LAW. https://inn.law/en/perspectives/as-far-as-legally-permissible/