Term (economy)
Under the term of one understands the economy the period for which contracts validly concluded and financial instruments or financial products offered are. The term is terminated by a specified time limit or termination .
General
In particular, contracts with a financial effect that cannot be fulfilled immediately by at least one of the contracting parties usually contain a period within which a subjective right must be asserted or an obligation must be fulfilled. The contract term or contract duration is the period between the establishment of a contractual relationship (start of the contract ) and its termination or due date , which automatically occur when the deadline expires. Up to that point in time , the debtor has to provide the contractual service . The period of time within which a debtor has to pay is called performance time . The legislature attaches various legal consequences (in particular default of debtor , contractual penalties ) to compliance with or failure to meet the deadline .
species
A distinction is made between a limited and an unlimited term . Temporary maturities include a calendar- specific date on which the contract period ends. Typical examples are the fixed-term contracts , the credit agreement (particularly in installment loans and repayment loans completed the repayment term with payment of the last repayment installment ), financial products such as call money and time deposits , savings bonds , bonds / debentures , fixed-term funds , derivatives and reverse transactions or financial instruments such as the change in the expiry date is even a legal component ( Art. 1 No. 4 WG ). There are often indefinite terms for long-term obligations ( rental agreement , loan agreement , lease agreement , leasing , insurance contract , electricity supply contract or open-ended employment contract ) or for financial products such as sight deposits , call money accounts and savings deposits . The terms of life insurance contracts typically extend over decades. Also overdraft facilities are usually made for an unlimited period. While the fixed-term contracts end automatically when the deadline expires, termination by one of the contracting parties is required in the case of unlimited contracts.
Legal issues
The civil law often deals with the term and its legal consequences. Unless otherwise agreed, the term begins at the time the contract is concluded. In the case of a continuing obligation, the term that is binding on the contractual partner begins with the conclusion of the contract and not only at an agreed later point in time when the service is provided. According to § 309 No. 9a BGB , the duration of long-term obligations may not exceed two years, with the exception of the regular delivery of goods or the regular provision of services or work . In the case of continuing obligations, regulations on extraordinary termination options are indispensable due to the long term. If there is no information on the term or the right of termination in the consumer loan contract, the borrower is entitled to terminate the contract at any time ( Section 494 (6) BGB). After § 557a BGB during the term of a graduated rent a rent increase according to § § 558 to § 559b excluded BGB.
In order to avoid undermining the existing protection of residential property and employment in tenancy and labor law , fixed-term contracts in this area are only permitted under special conditions ( Section 575 (1) BGB, Section 14 TzBfG ). Otherwise, the law aims to limit the binding of the contracting parties to a permanent contract in order to preserve their economic freedom of choice through termination rights. There are therefore rights of termination for rent and lease terms of more than 30 years ( Section 544 , Section 594 BGB), for loans after 10 years ( Section 489 (1) No. 2 BGB), for service and employment contracts for more than five years Years ( § 624 , § 15 Abs. 4 TzBfG). In the case of contracts between companies , the threshold is generally beyond a term of 15 years, because commitments for more than 20 years, if only because of their length of time, are suitable for restricting economic freedom of movement and independence in an unacceptable manner.
Accounting
Terms play an essential role in accounting , because with certain assets and debts , their terms determine the allocation to a certain balance sheet item . As corporations, non-banks must separately state their liabilities in accordance with Section 285 No. 1a HGB with a remaining term of more than five years in the notes . Credit institutions must provide more detailed information in their annual financial statements . According to Section 8 (1) RechKredV , notice periods are decisive for indefinite financial products when they are broken down into residual terms; for fixed-term receivables and liabilities, according to Section 8 (2) RechKredV, the remaining term is the period between the balance sheet date and the due date . According to Section 8 (3) RechKredV, only those receivables and liabilities that can be accessed at any time without prior notice or for which a term or notice period of 24 hours or a business day has been agreed may be shown as “due daily”. In Section 9 (1) RechKredV, the receivables and liabilities are then listed, which are to be broken down according to remaining terms. According to Section 9 (2) RechKredV, certain remaining terms are decisive (up to three months, more than three months up to one year, more than one year up to five years and more than five years). According to § 2 RechKredV, this information must also be given in the appendix.
meaning
The term of the contract leads to ties between the contracting parties who, simply because of the term , can restrict or even lose their economic freedom of action and independence . From the provider's point of view, this enables customer loyalty to be achieved by means of a lock-in effect , which makes it difficult or even impossible for customers to switch to competing providers. Sanctions provide for contractual penalties , rewards take the form of volume discounts or bonus systems (such as Payback ). In the case of financial instruments and financial products, a longer term results in a higher investment risk , which is shown by higher interest / profits / income / returns compared to shorter-term investments. The longer the term and thus the capital commitment , the more uncertain are the forecasts about future market developments . Short running times increase the forecast quality and therefore reduce the risk.
The maturity differences are one of the reasons why the interest rate level on the capital market is higher in normal times than on the money market . Even with financial products is premature termination - if ever provided - usually only with losses ( exchange loss ) or penalties ( interest penalty , penalty interest rate , prepayment penalty ) possible. These threatened losses are intended as exchange costs to force the investor to adhere to the obligations originally entered into by him until the end of the intended term.
