To describe the functions of principles we can say that all of them are fundamental basis of an area of law. They declare or solve concrete debates between the parties. If there is a problem with interpreting of a rule in the civil code, judges has this helping hand. In Germany the development of principles in the field of contract law has a really unique historical root. At the time of BGB’s birth, the German Civil Code did not accept any exculpation under the rule pacta sunt servanda. Moral philosophers acknowledged that a contract as private interest of the parties needs special protection from the state. It is not only a personal relationship, because self welfare leads to welfare of the public. The law has to regulate this field and give instruments of protection for both parties to ensure peace and equality in the field of public relations and moral.

After the First World War, Rechtsmark (German currency) had its deepest point in its history. The inflation was so high that the performance of a contract made before the war was absolutely unfair for the supplier. For the cost of one galloon gas anyone could buy the entire stock after the war. There was a too late and too small reaction from the state for this situation. An Act had been accepted in 1925 about revalorization. The main fault of this Act was the strict and very small applicability in the field of contracts. The regulations of it were applicable only for contracts with large economic potential.

German jurisdiction had to solve the problem. The most difficult part of this process was how to dissolve the strict paradigm of pacta sunt servanda. Oertmann, a German legal expert created the collapse of the foundation of the transaction. It meant that changed circumstances deprive the contract from its ground, the need of the party. Anybody who signs a contract has a need and tries to create all conditions of that specific contract to harmonize with his or her needs and interest. In case of an essential change of circumstances this interest modifies and the original transaction became tremendously onerous for him or her. The doctrine of Oertmann was insisted on pacta sunt servanda, so after the change of circumstances the whole contract failed.

Jurisdiction in Germany accepted Oertmann’s doctrine with a completion. Judges vindicated the right for themselves to modify the contract to be suitable for the new interests of the parties. This modification meant the implementation of clausula rebus sic stantibus into German contract law. It became applicable worldwide in the field of long term relationship of the parties.

In this essay I examine not only the development of these contractual principles in Germany but the effectiveness and functions of them. I describe and define the legal interest of regulating contracts and what is the connection between private and public interest in the field of the law of contracts. As a defect of the contractual procedure non-performance and other breach of a contract have special importance in civil law. Good faith is a basic principle of civil law in Hungary too and in most European civil codes. The interpretation of German good faith theory (Treu und Glauben) is significant from the viewpoint of the judicial modification of contracts. In case of clausula rebus sic stantibus if the party wants to ground his or her claim, he or she has to prove the good faith as a moral standard to be an exculpation under the heavy burden of pacta sunt servanda. The conclusion is that in Germany the basic element of private contracts is not the consent of parties but good faith of them. The socially excepted moral appears through the requirement of good faith of the parties. The law has to ensure that in any period of a contractual relationship this good faith exists.