Facts: The K farm, which the plaintiffs owned and managed, lay close to a commercial airport and there were plans to build an autobahn feeder-road and a suburban railway through the farm. The plaintiffs accordingly decided to sell it to the authorities and buy a substitute property. On 17 November 1977, in furtherance of this plan, the plaintiffs obtained from Frau A a notarised offer of sale of a property she owned in Lower Saxony, the offer to be binding until 28 February. The plaintiffs accepted this offer subject to their own farm being formally sold to the airport company by that date, and on 20 February made their acceptance definitive, the sale of their own farm to the autobahn authority and the airport company having been concluded four days earlier.
Meanwhile, however, Frau A had sold her property by notarial act to the defendant, the Bundesrepublik, which wanted it as land to be granted in exchange for land it needed for the construction of the Hanover-Würzburg autobahn. The events leading up to this were as follows. Frau A had to seek the county's authority for the sale of her property to the plaintiffs, and on 5 December, when she did so, the county wrote to the defendant with the news of the proposed sale and asked whether the highway authorities would be interested in purchasing the land themselves. When the defendant replied that it was extremely interested, the county refused its consent to the sale on 20 January, on the ostensible ground that the plaintiffs wanted it only as an investment and that in any case the land was leased out until 1984. The defendant then approached Frau A with a view to acquisition, and the negotiations resulted in the sale contract of 18 February. The price was the same as that agreed by the plaintiffs on 17 November, but the defendant was to pay Frau A the sum of DM 7.5 million forthwith, securing itself by a charge in the land register, and also promised an extra payment of DM 168,000 in 'partial satisfaction of the costs and arrangements which the seller had had to make'. The defendant further agreed to indemnify Frau A against all claims in connection with her offer of sale of 17 November, including any claims