According to Austrian procedural law (Zivilprozessordnung), each party to a legal dispute has to prove the set of facts supporting their own claim. In the case at hand, the claimant wanted to enforce a sales contract, the validity of which was disputed by the defendant. Under Austrian procedural law, the claimant had the burden to proof that the sales agreement was validly executed between the parties, because his claim was based on the sales contract.

The sales contract was signed by the officers of the defendant, but the board of directors of the defendant had to approve the sales contract in order to validate it. The board of directors of the defendant drafted a written resolution regarding the approval of the sales contract.

Under the Austrian Corporations Act, a written board resolution is only valid and binding if all the board members have been informed about the resolution and no board member has objections against it. However, in the case at hand, not all of the directors have signed the resolution and according to the defendant, one director was not even made aware of the resolution.

Because the burden to prove the validity of the sales contract lies with the claimant, he also has to prove that the board resolution approving the sales contract is valid and binding. The court of the first instance has held that it cannot be determined whether the one director has been made aware of the resolution in advance. Therefore, the claimant had failed to prove that the sales contract was validly executed.

Applying the general rule regarding the burden of proof under Austrian procedural law, the court of the first instance has held that the claimant thus had failed to prove that the contract was validly executed between the parties and dismissed the claim.

1. Decision of the Supreme Court

In a rather surprising decision, the Austrian Supreme Court has reversed this decision and has held that in some cases, the general rule regarding the burden of evidence is not applicable. According to the Supreme Court, it cannot be imposed on the claimant to prove the validity of a board resolution of the defendant. Therefore, the burden of proof has somehow shifted to the defendant, because he is “nearer” to the proof.

When applying this shift in the burden of proof to the case at hand, the result changes drastically. Now, the claim was granted by the Supreme Court, because the defendant failed to prove the invalidity of the resolution of the board of directors and thus the invalidity of the sales contract. Even though the defendant thus has had no chance to actually go ahead and try to prove the invalidity of the board resolution (which he had not tried in the first instance, because the burden of proof normally lies with the claimant), the Supreme Court has held that the contract would be valid and binding. The claim was granted to the claimant without a single court hearing in which the defendant would be given the opportunity to try and prove the invalidity of the board resolution and with it the sales contract.

2. Conclusio

This ruling of the Austrian Supreme Court chances one of the most fundamental rules of evidence under Austrian procedural law with one single surprising decision. This decision has been rendered by the Supreme Court in blatant disregard of Austrian procedural law. It is an example of case law against statutory provisions, which has been unheard of in the Austrian legal system so far.

It will remain to be seen whether this decision will be confirmed by further decisions of the Austrian courts. If this decision is upheld by the courts in the future, every company will always have to prove the validity or invalidity of the resolutions of its management, board of directors or shareholders in case of a legal dispute. Therefore, all companies should meticulously document every resolution of its officers, directors or shareholders in order to be able to do so. It is advisable to obtain legal support to optimize this process.