German lawyers must advise clients on alternative legal options when negotiating settlement agreements, the Federal Court of Justice (BGH) ruled. They must inform clients about the prospects of a lawsuit, including the amount of potential claims, the court clarified.
Lawyers Must Disclose Litigation Prospects
Rechtsanwälte are required to give complete advice on the pros and cons of a settlement agreement. This duty can only be omitted if the client already has the necessary information to make an informed decision. Lawyers must then prove in court that no further consultation was needed, the BGH stated in a ruling dated September 17, 2026 (case no. IX ZR 91/25).
The case involves a woman who became paralyzed in a traffic accident at age 14 in the year 2000. A lawyer represented her in negotiations with the liability insurer of the at-fault driver. Based on this advice, she concluded a settlement in late 2015. The agreement covers a 75 percent share of liability.
Settlement Details and Client’s Concerns
Under the agreement, the insurer pays 2,500 euros monthly. This includes 1,600 euros for lost earnings and 900 euros for other personal claims, which can be adjusted if the woman’s life circumstances change.
The woman is now dissatisfied with the settlement. Only 120 euros of the 900-euro payment is allocated to care costs. She accuses her former lawyer of failing to calculate or claim her increased care needs. She also claims he did not inform her that she could seek compensation for care provided by family members. She argues that with proper advice, she would have sued instead of accepting the settlement.
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The woman sued her former lawyer for damages of nearly 470,000 euros. She also sought a declaration that the lawyer is liable for future damages. The regional court (LG) Bad Kreuznach and the higher regional court (OLG) Koblenz dismissed her case. The BGH has now overturned the ruling and sent the case back to the OLG for a new trial.
Court Rejects Lower Courts’ Reasoning
The OLG had found no breach of duty. It argued that the lawyer’s obligation ends if he has “reasonable grounds” to assume the client does not need further advice. The court suggested the woman and her father, who accompanied her to negotiations, were sufficiently informed.
The BGH corrected the OLG’s legal standard. It stated that a lawyer’s duty to advise is not fulfilled simply because he believes the client is knowledgeable. The duty ends only when the client already possesses all necessary information about the advantages and disadvantages the lawyer is required to explain.
If a lawyer forgoes complete advice, he must prove in a lawsuit that the client was not in need of it. The OLG failed to make sufficient findings on this point, the BGH noted.
In cases involving substantial settlement claims, a lawyer must not only point out the finality of the agreement. He must also advise on the prospects of a possible lawsuit, including the potential amount of claims. The lawyer must advise against the settlement if it would be an unreasonable disadvantage for the client and if there is a reasonable expectation of achieving a significantly better outcome through litigation. The higher court must now make further findings on whether the lawyer met these obligations.
