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German Sales Law 2022: News on Warranties and Digital Products
Far-reaching changes in sales law and contracts for digital products as of 1 January 2022
The sales law regulated in the German Civil Code will be radically changed as of 1 January 2022, and a new type of contract will be introduced. The reason for the “Act governing the sale of goods with digital elements and other aspects of sales contracts” is the implementation of two EU Directives of 20 May 2019, the EU 2019/771 concerning contracts for the sale of goods Directive and the EU 2019/770 digital content and digital services Directive. The new regulations will apply to all sales contracts and contracts for digital products concluded on or after 1 January 2022.
In addition to a comprehensive revision of the (purchase) warranty law, the German Civil Code was amended in §§ 327 ff. of the German Civil Code (new) with numerous special regulations in connection with the newly created category “contracts for digital products“. The changes do not only affect transactions with consumers, which are the focus of the directives, but also affect the relationship between business partners in the B2B area to a large extent.
Definition of material defect extended
According to § 434 of the German Civil Code (new), from January 2022, it is no longer solely a question of whether the object of purchase fulfils the (subjective) characteristics agreed between the parties, but at the same time, it must also meet objective requirements, i.e., the object of purchase must (also) be suitable for “normal use” and have a “normal quality”, for which, among other things, the standard is conformity with public statements by the seller or third parties (!) from the contractual chain.
Even “optimistic” advertising statements by an intermediary can, therefore, determine whether a good is free of defects in the legal sense. If the parties agree that, for example, a display item is to be sold at a reduced purchase price in order to take into account the traces of use, an express “negative” quality agreement is required, i.e., an agreement that the item falls short of general requirements so that the conditions of a defect-free delivery are met.
However, such agreements are only effective vis-à-vis consumers if they were expressly made aware of deviating properties before the conclusion of the contract, and the deviation was expressly and separately agreed in the (purchase) contract. In the case of digital products and things with digital elements, a defect-free delivery also requires the provision of updates during the contractually agreed period or, in the case of consumers, for the period for which the provision can be expected due to the nature and purpose of the goods, taking into account the circumstances and the nature of the contract. Finally, the term “defect” was expanded to the effect that a defect-free object of purchase now also includes the packaging and (suitable) instructions for use and assembly or installation.
Warranty when purchasing consumer goods
- 475d of the German Civil Code (new) regulates in numerous cases the dispensability of setting a grace period in the context of the assertion of warranty claims by consumers. A (fictitious) “reasonable” period for supplementary performance runs from the time the consumer notifies the consumer of the defect.
According to § 477 of the German Civil Code (new), the reversal of the burden of proof, according to which it is assumed that a defect already existed when the risk was passed, is extended from the previous six months to one year.
- 475e of the German Civil Code (new) provides that warranty claims do not become time-barred before the expiry of two months after their first occurrence, so that in extreme cases, the contractual warranty obligation is extended to 26 months.
If the respective transaction also includes the permanent provision of digital elements, claims based on a defect in the digital elements shall not become time-barred before the expiry of twelve months after the end of the provision period, § 475e of the German Civil Code (new). Claims due to a breach of the updating obligation shall not become time-barred in these cases before the expiry of twelve months before the end of the period of the updating obligation.
Finally, the new law has a very special surprise in store for transactions with consumers: according to § 475 para. 3 sentence 2 of the German Civil Code (new), neither the knowledge of the defect on the part of the purchaser, who is a consumer, at the time of conclusion of the contract nor his or her grossly negligent lack of knowledge shall exclude warranty claims. In B2B business transactions, however, such claims remain excluded if the buyer is aware of them.
Tightening of warranty regulations
According to § 479 of the German Civil Code (new), in the future, warranty declarations must be provided to consumers on a durable medium at the latest upon conclusion of the contract, they must contain detailed explanations on how they are to be asserted and a reference to the fact that the statutory warranty rights exist in addition and can be asserted free of charge.
Improved recourse against the supplier
To prevent resellers from being left stranded with their damages, the possibilities of sellers to take recourse against their suppliers have been improved by the fact that the previous time limit of a maximum of five years according to § 445b para. 2 sentence 2 of the German Civil Code (old) has been deleted without replacement.
Need for action for suppliers and sellers
The new regulations apply to contracts concluded on or after 1 January 2022. Contract forms, sales documents and, above all, GTCs therefore require timely adaptation. In particular, clear agreements on quality are just as important for the B2B sector as for business with consumers. For businesses with digital products and trade in goods with digital elements, the exact scope of the information and delivery obligations and their division between the seller(s) and their suppliers should definitely be regulated in a timely manner in order to take advantage of the opportunity to be able to place updating obligations on a clear, mutually defined basis. It should always be noted that the majority of the new regulations for the B2C area cannot be effectively waived.