Facts
The X. AG rented to B. as of August 1, 1992, a 4 1/2-room apartment in K. The rental agreement of April 23, 1992, was concluded for a period of five years, first terminable on July 31, 1997. B. terminated the rental agreement prematurely on July 31, 1994, with the reason that she could no longer afford the apartment. The X. AG contested the premature termination and called upon the Cantonal Conciliation Authority for Rental and Lease Disputes. The President of the Cantonal Court of the Canton of Obwalden recognized that the rental agreement had been dissolved as of July 31, 1994, pursuant to Art. 266g CO, and that B. had to compensate the X. AG for the premature contract termination with CHF 12,000.--. The Higher Court Commission of the Canton of Obwalden reduced the compensation to CHF 2,500.--.
Considerations
The Federal Court had to decide whether the reduction of the compensation from CHF 12,000.-- to CHF 2,500.-- was justified. The lower court had considered the financial situation of the parties and the circumstances of the individual case when setting the compensation pursuant to Art. 266g para. 2 CO. The plaintiff alleged a violation of Art. 266g para. 2 CO and claimed that the lower court had made a one-sided balancing of interests.
The Federal Court stated that the determination of the financial consequences of a premature termination is largely based on judicial discretion. The lower court had rightly assumed that a compensation of CHF 12,000.-- would be unfair, as it would likely set the defendant and her…