The applicable law for commercial contracts in Germany is either determined by contractual agreement of the parties or, lacking such an agreement, by EU Regulation No 593/2008 on the law applicable to contractual obligations (Rome I). 

Parties are generally free to choose the law governing their contractual relationship (Article 3 Rome I). However, this freedom of choice is subject to limitations arising from mandatory provisions and public policy considerations (Article 3(3), 3(4), 9, 21 Rome I).

In the absence of an express or implied choice, the applicable law is determined pursuant to Article 4 Rome I, typically on the habitual residence of the party performing the characteristic obligation. For a detailed analysis, please see 2.1 Choice of Law.

In Germany, the principle of freedom of form applies unless a specific form is required by law. Under the German Civil Code (Bürgerliches Gesetzbuch, BGB), contracts are generally valid regardless of form and may be concluded orally, in writing, or electronically. Certain transactions such as real estate transfers, suretyships or wills require written or notarial form to be valid. For most commercial contracts, written form is not a validity requirement but remains standard practice for evidentiary purposes. For a detailed analysis, please see 3. Negotiation and Conclusion.

In Germany, the primary sources regulating commercial contracts are the German Civil Code (Bürgerliches Gesetzbuch – BGB) and the Commercial Code (Handelsgesetzbuch – HGB). The BGB sets out the general rules on contractual obligations (Section 145 et seq BGB), while the HGB contains specific provisions applicable to transactions between merchants, including commercial sales (Section 373  et seq), agency (Section 84  et seq), commission (Section 383  et seq), and forwarding contracts (Section 453  et seq).

Germany is a contracting state to the United Nations Convention on Contracts for the International Sale of Goods (CISG), which applies automatically to international sales of goods between parties whose places of business are in different contracting states, unless expressly excluded (Article 1(1)(a), Article 6 CISG).

While German commercial law (BGB and HGB) and the CISG share similar structures, there are notable differences.

• Notice of defects – under CISG, the buyer must examine the goods and notify defects within a reasonable time, with an absolute two-year cut-off (Article 38, 39 CISG). Under German law, merchants in B2B transactions must inspect immediately and notify without undue delay (Section 377 HGB); this duty does not apply to consumer contracts.
• Right to cure/specific performance – under German law, the buyer can demand repair or replacement for any defect (Section 439 BGB). Under CISG, replacement is only available for fundamental breach (Article 46(2) CISG), and repair is subject to reasonableness (Article 46(3) CISG).
• Property transfer – CISG does not regulate ownership (Article 4 CISG); under German law, ownership generally passes upon agreement and delivery (Section 929 et seq BGB).
• Limitation period – under German law, warranty claims generally expire two years after delivery (Section 438 BGB). The CISG does not set its own limitation period.

German law has mandatory rules for specific contracts or contractual situations which cannot be deviated from by agreement. The provisions either expressly state that they are mandatory or their mandatory nature can be inferred from the meaning and purpose of the provision. With regard to commercial contracts, the following provisions can be highlighted.

• With regard to agency relationships, there are several mandatory provisions, which follow from the Agency Directive – Directive 86/653/EEC. This includes inter alia Section 89b German Commercial Code (HGB), which corresponds to the provisions of Article 17 (2) of the Agency Directive (Directive 86/653/EEC) providing that an agent may be entitled to a termination payment in the form of an indemnity which cannot be waived by contracts. Under certain conditions, Section 89b HGB applies by analogy to distributor relationships. Also, the termination notice periods for agency agreements set out in the HGB are mandatory if the agent is active in the European Economic Area. 
• Commercial contracts, in particular distribution agreements, must observe the mandatory requirements of German and European competition law, irrespective of the governing law applicable to the contract. Commission Regulation (EU) 2022/720 (VBER), provides the principal framework which establishes an exemption from the general prohibition of restrictive agreements set out in Article 101(1) Treaty on the Functioning of the European Union (TFEU) and Section 1 German Act Against Restraints of Competition (GWB). This exemption applies provided that both the supplier’s and the buyer’s market shares do not exceed 30%, and the agreement does not contain any of the hardcore restrictions delineated in the Regulation.
• German Law on standard terms and conditions – the German Civil Code (BGB) contains special provisions relating to the incorporation and validity of standard terms and conditions into both consumer and commercial contracts (Section 305 to 310 German Civil Code), which are mandatory German law.

A recent decision of the Federal Court of Justice (BGH, 9 January 2025 – I ZB 48/24) clarified that a contractually agreed waiver of the application of Section 305 to 310 of the German Civil Code (German provisions governing standard terms and conditions) does not automatically lead to the invalidity of an arbitration clause contained in the same contract. The BGH emphasised that the arbitration clause remains effective irrespective of the law chosen. The assessment of the validity of the choice of law is the sole responsibility of the arbitral tribunal itself and is not subject to state jurisdiction in proceedings pursuant to Section 1032 of the German Code of Civil Procedure (ZPO). This decision strengthens party autonomy and may lead to more legal certainty in cross-border contracts.

Another major development stems from the new EU Vertical Block Exemption Regulation (EU 2022/720) and its Vertical Guidelines, in force since June 2022. The reform modernises the framework for distribution and franchise agreements, addressing online sales, dual distribution, and selective systems. The Vertical Block Exemption and the Vertical Guidelines has clarified several debated issues relating to online sales where the German Federal Cartel Authority has taken a stricter approach. German courts and the Federal Cartel Office (Bundeskartellamt) have begun to apply these rules in recent cases, marking a shift towards more flexibility for digital distribution models.

The Act to Strengthen Germany as a Centre of Justice, in force since April 2025, introduced English-speaking Commercial Courts for high-value disputes exceeding EUR500,000. This reform aims to make Germany more attractive for high-end corporate litigation and is expected to influence forum selection clauses in cross-border contracts.

ESG obligations are increasingly embedded in supply and distribution agreements, driven by the German Supply Chain Act and the EU Corporate Sustainability Due Diligence Directive. Audit rights, compliance undertakings and termination triggers for ESG breaches are becoming standard features in commercial contracts.

The German courts will generally recognise a choice of law in a commercial contract. Under Regulation (EC) 593/2008 on the law applicable to contractual obligations (Rome I), the primary principle is freedom of choice. Therefore, commercial contracts are usually governed by the law chosen by the parties (Article 3(1), Rome I).

However, the parties’ choice of law cannot supersede any mandatory rules of any other country to which the contract is connected (Article 3(2), Rome I). The German courts can also refuse to apply the provisions of a chosen law that would be clearly incompatible with the public policy of the forum. In certain consumer contracts, a choice of law must not deprive a consumer of the protection afforded to them by mandatory rules of the law of the country in which they are habitually resident (Article 6(2), Rome I).

If the parties do not make a choice of law, Article 4 (1) Rome I stipulates that the law applicable to the contract is determined according to certain principles. For example, contracts for the sale of goods are governed by the law of the country in which the seller has its habitual residence. Service contracts are governed by the law of the country in which the service provider has its habitual residence. Lease contracts for real estate property are governed by the law of the country in which the real estate is located. Franchise agreements are governed by the law of the country in which the franchisee has its habitual residence. Distribution contracts are governed by the law of the country in which the distributor has its habitual residence.

Pursuant to Article 3(3) of Rome I, if all the relevant elements (eg, the parties’ habitual residence, the place of performance and the subject matter) are located in one country, but the parties choose the law of another country as governing law, the chosen law will generally govern the contract, although the mandatory provisions of the country with the closest connection will still apply. The purpose of this provision is to ensure that the mandatory rules of the country with the closest connection to the contract are not circumvented by choosing a different law. Consequently, should the parties to a purely domestic contract choose the law of a different legal system, the contract will also be subject to the (local) mandatory provisions of the German legal system.

In most cases, German courts will recognise and enforce a choice of foreign jurisdiction in a commercial contract. Regulation (EU) 1215/2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (Recast Brussels Regulation) requires the courts of member states to give effect to the jurisdiction provisions set out in an agreement made between the parties, regardless of whether either one or both parties are domiciled in the member state, unless the agreement is null and void as to its substantive validity under the law of that member state (Article 25, Recast Brussels Regulation). However, member states have exclusive jurisdiction in relation to certain matters under Article 24 of the Recast Brussels Regulation. Exclusive jurisdiction cannot be excluded by a jurisdiction agreement. A jurisdiction agreement that seeks to exclude exclusive jurisdiction has no legal force (Article 25(4), Recast Brussels Regulation).

If the parties do not make a choice of jurisdiction and are domiciled in different EU countries, the German courts will apply the Recast Brussels Regulation to determine jurisdiction. Unless agreed otherwise, a person domiciled in a member state can be sued or sue in another member state in matters relating to contract if the place of performance of the relevant contractual obligation is in the member state where they wish to sue/are sued (Article 7(1)(a), Recast Brussels Regulation). The place of performance in the case of a sale of goods contracts is the place where the goods were delivered, or should have been delivered (Article 7(1)(b), Recast Brussels Regulation).

Arbitration clauses are routinely included in commercial contracts which are governed by German law. If the parties to a commercial contract chose arbitration, this does not automatically prevent a party from filing a complaint with a local court. Section 1032 paragraph 1 German Code of Civil Procedure provides that if an action is brought before a court in a matter which is the subject of an arbitration agreement, the court shall dismiss the action as inadmissible if the defendant objects before the commencement of the hearing on the merits, unless the court finds that the arbitration agreement is void, invalid or unenforceable. By this procedure, German law respects Articles II 3 and V 2 of the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Mandatory local laws for the protection of a national contract party will be applied by the arbitration tribunal in the same way as state courts will do.

Under German law, the general rule is that commercial contracts do not need to be concluded in a particular form. Most commercial contracts, such as those relating to supply, agency, distribution, franchising and services, can therefore be concluded in writing, orally or even by tacit conduct of the parties. However, to have legal certainty, it is recommended to avoid the conclusion of contracts concluded orally or by tacit conduct. German law also allows commercial contracts to be concluded through use of electronic means such as through exchange of e-mails, via a website or by using any type of (qualified or non-qualified) electronic signature.

In deviation from the above general rule, the conclusion of certain types of commercial contracts are subject to particular form requirements under German law. The following lists the key types of commercial contracts that are subject to form requirements.

• Rental contracts concerning residential space that are concluded for a term longer than one year need to be concluded in writing (ie, by wet signatures of both parties) or in electronic form (ie, signed by qualified electronic signatures) (Section 550, 126, 126a German Civil Code – Bürgerliches Gesetzbuch, BGB). Failure to comply with such form requirement does not result in the invalidity of the rental contract. Rather, the rental contract will in this case be deemed to be concluded for an indefinite term during which the lease may be terminated by either party within the statutory notice period.
• Rental contracts concerning office space that are concluded for a term longer than one year need to be concluded at least in text form (provided that such contract or amendment has been concluded after 1 January 2025; otherwise, the rental contract must still comply with the statutory written form requirements until 1 January 2026) – ie, each parties’ declaration to enter into the rental contract must at least be (i) made in a legible declaration in which the party that is making the declaration is named, (ii) submitted on a durable medium (eg, by e-mail) and (iii) recognisable to the other party as final (Section 578 BGB). Both declarations must also be clearly and expressly related to each other from the perspective of an objective third party. The consequence of failing to comply with such text form requirements is the same as set forth in the first bullet point above.
• A contract by which one party agrees to transfer or acquire ownership of a real property, such as a real property purchase agreement, must be recorded by a notary to be valid. Such a contract not concluded in this form however becomes valid with all its contents if a declaration of conveyance (Auflassung) and registration in the Land Register are effected (Section 311b (1) BGB).
• Consumer credit contracts need to be concluded either in writing (ie, by wet signatures of both parties) or in electronic form (ie, signed by qualified electronic signatures) (Section 492 (1), 126, 126a BGB). In deviation therefrom, the lenders’ declaration does not have to be signed if it is created with the help of an automatic device – eg, by means of a computer printout (Section 492 (1) sentence 2 BGB).

Furthermore, there is no specific language requirement under German law for the validity of a contract, and no translation requirement for contracts drafted in another language exist. However, in the case of B2C contracts, the contractual terms will in general have to be made available to the respective consumer based in Germany in the German language in order for them to become an effective part of the relevant contract. It is also worth noting that if a dispute concerning a contract drafted in a language other than German is submitted to a German state court, most likely a translation of at least the relevant provisions of the contract will be required.

Where the parties decide to prepare a translation of a contract, they should ensure that the (legal) meaning of the contractual terms is not affected by the translation. Where the parties wish to enter into a bilingual contract, the parties should agree which language version shall prevail in case of a conflict between the two language versions.

German law acknowledges the concept of culpa in contrahendo (Verschulden bei Vertragsschluss) in commercial relationships. Pursuant to Section 311 (2) BGB, an obligation with duties (Schuldverhältnis) according to Section 241 (2) BGB already comes into existence by the commencement of contract negotiations as well as in other comparable cases (set forth below).

The following requirements must be met for a party to be entitled to claims under the concept of culpa in contrahendo.

• Pre-contractual obligation with duties – first, a pre-contractual obligation with duties is required. According to Section 311 (2) BGB, this is the case where the parties enter into contractual negotiations, initiate a contract or establish similar business contacts.
• Breach of duty – furthermore, a party must commit a breach of duty by breaching any of its pre-contractual duties of protection or consideration pursuant to Section 241 (2) BGB.
• Responsibility for the breach – the party in breach must be responsible for the breach – ie, it must have caused the breach intentionally or negligently. It will be assumed that the party in breach is responsible for the breach, unless it is able to prove the contrary (Section 280 (1) sentence 2 BGB).
• Causality and damage – the damage suffered by the injured party must be causal and attributable to the breach of duty.

If the aforementioned requirements are met, the injured party in particular has a claim for damage compensation in accordance with Section 249 et seq BGB against the party in breach. Irrespective of whether a contract is actually concluded by the parties after the breach of duty occurred, the injured party can generally demand to be placed in the same position as it would be in without the breach of duty for which the other party is responsible. The injured party’s damage compensation claim is therefore generally aimed at compensating for the negative interest (loss of trust), insofar as the contract would not have been concluded at all if the other party had acted in accordance with its duties. The negative interest includes the disadvantages suffered by the injured party as a result of its disappointed trust. However, the application of these principles can (exceptionally) lead to the injured party being placed in the same position as it would have been in if the effective legal transaction had been carried out. In these constellations, the loss of trust is exceptionally in line with the positive interest – ie, the interest of the injured party in performance.

If a standard contract or standard terms are used by one party and German law applies, the German rules on general terms and conditions must be taken into account. The German Civil Code contains special provisions relating to the incorporation into and validity of standard terms and conditions (T&Cs) of both consumer and commercial contracts (Section 305 to 310 German Civil Code).

T&Cs of one party can be included in the commercial contract (B2B contract) by a clear and concise provision in the offer or the contract documents which form the basis of the contract which states that the T&Cs of one party shall apply to the commercial contract. Moreover, the T&Cs must be attached to the offer or contract document or a clear reference must be made to where the T&Cs can be found or downloaded (ie, a webpage), so that the other party can easily access the T&Cs to be included. If the other party accepts the offer or the contract documents, the T&Cs are properly included into the contract.

The German rules on general terms and conditions do not apply to clauses which are individually drafted for a specific commercial contract or individually agreed between the parties. If a clause is individually drafted and agreed between the parties for a specific contract, an “individual agreement” exists and the German rules on general terms and conditions do not apply. Standard terms provided by one party which were then “negotiated” with the other party can also become individual agreements. However, German courts apply very strict requirements for parties intending to prove that standard terms were actually negotiated; this also applies in the B2B context. According to established case law, negotiation is more than merely “bargaining” and requires that the content of the clause is put up for serious negotiation; the contractual partner must be given the genuine opportunity to influence the content of the term.

The legislative intent behind the German rules on general terms and conditions is that standard terms which were provided by one party to the other party (ie, by the use of contract templates or T&Cs) shall be subject to a strict content review because the user of standard terms has unilateral power to draft the contract. The BGB contains a blanket clause (Section 307 BGB) which provides that standard terms deviating from the applicable statutory law and creating an unreasonable disadvantage to the other party (ie, are “unfair”) are invalid and unenforceable. If so, the applicable statutory law applies instead of the invalid standard term. By adopting Section 307 BGB, the courts have to take the practices and customs that apply in business dealings reasonably into account (Section 310 paragraph 1 s 2 BGB).

German courts use their discretion regarding the definition of an “unreasonable disadvantage” quite broadly. In the case of contract templates with standard terms, the T&Cs content review therefore strictly limits the leeway to deviate from the German contract law provisions contained in the BGB and the HGB in B2B-relationships. This applies, inter alia, to limitations of liability, exclusion of statutory claims, liquidated damages and penalties for delayed delivery and a reduction of the limitation period, to name just a few.

“Battles of the forms” arise when the parties use conflicting general terms and conditions. If German substantive law applies (CISG excluded), according to the case law of the German Federal Supreme Court, the so-called “knock-out” rule applies. Under the “knock-out” rule, the T&Cs of both parties are incorporated into the contract to the extent they comply with each other. All other provisions are not incorporated and instead German statutory law will apply.

Most commercial contracts, such as those relating to supply, agency, distribution, franchising and services, can be concluded without having to comply with a certain form (for more details, see 3.1 Necessary Form). Where no particular form requirement exists, neither a wet signature nor notarisation is required. The parties can for instance decide to conclude the respective commercial contract by using any type of (qualified or non-qualified) electronic signature.

Where the German law foresees that a commercial contract needs to be concluded in writing – ie, by wet signatures of both parties, this written form can (unless statutory German law leads to a different conclusion) also be met by the parties entering into the respective commercial contracts in electronic form – ie, by qualified electronic signatures (QES) of both parties (Section 126 (3), 126a BGB). What qualifies as a qualified electronic signature in the meaning of Section 126a BGB and therefore satisfies the written form requirement (unless statutory German law leads to a different conclusion) follows from Article 3 No 12 of Regulation (EU) 910/2014 on electronic identification and trust services for electronic transactions in the internal market and repealing Directive 1999/93/EC (eIDAS Regulation). Accordingly, a qualified electronic signature in the meaning of Section 126a BGB requires (i) an electronic signature (Article 3 No 10 eIDAS Regulation), (ii) that has the characteristics of an advanced electronic signature (Article 3 No 11 eIDAS Regulation, Article 26 eIDAS Regulation) and (iii) also meets the security requirements for a qualified electronic signature (Article 3 No 12, No 15 and No 23 eIDAS Regulation). It is understood that DocuSign offers a solution that meets these requirements.

There is no requirement under German law to officially register certain types of commercial contracts.

Like for all contracts, in order for commercial contracts governed by German law to be effectively concluded, there needs to be a mutual agreement of the parties on the essential elements of the relevant contract – ie, on:

• the identity of the contract parties;
• the subject matter of the contract and therefore the type of the respective contract (eg, the object of sale in the case of a sales contract); and
• the amount payable (eg, the purchase price in the case of a sales contract).

If the parties fail to mutually agree on any of these essential elements of the relevant contract, the respective contract is not effectively concluded and therefore without legal effect.

In addition, it is important to determine whether German law requires a particular form to be followed when establishing a contract of the respective type (for more details, see 3.1 Necessary Form).

Unlike B2B contracts, B2C relationships under German law are governed by a comprehensive framework of mandatory consumer protection provisions, which cannot be waived or modified to the disadvantage of the consumer. These provisions are primarily set out in the German Civil Code (BGB), the German Unfair Competition Act (Gesetz gegen den unlauteren Wettbewerb, UWG) and the German Price Indication Ordinance (Preisangabenverordnung, PAngV). Together, they implement directives of the European Union, including Directive 2011/83/EU on consumer rights, Directive (EU) 2019/770 on contracts for the supply of digital content and digital services, and Directive (EU) 2019/771 on the sale of goods. In addition, these EU Directives are supplemented by the Omnibus Directive (EU) 2019/2161, which introduced far-reaching cross-sectoral amendments to consumer protection law. These provisions aim to safeguard consumers against unfair contract terms, misleading commercial practices and lack of transparency in pricing and product information.

During the pre-contractual phase, traders entering into B2C contracts are required to provide a set of mandatory pre-contractual information (inter alia, pursuant to Section 312a and 312d BGB as well as Article 246 and 246a of the Introductory Act to the German Civil Code (Einführungsgesetz zum Bürgerlichen Gesetzbuch, EGBGB). The mandatory pre-contractual information must clearly describe, inter alia, the main characteristics of the goods or services, the total price including all taxes and delivery costs, the terms of payment and performance, the trader’s contact details, and the existence and conditions of the right of withdrawal. It must be presented in a clear and comprehensible manner using plain and intelligible language.

For the incorporation of standard contract terms, such as general terms and conditions of sale or purchase, there must be a clear reference to the standard terms and conditions, they must be provided or easily accessible and the other party must agree to their application. While this rule applies in both B2C and B2B contexts, stricter standards apply for B2C contracts, particularly regarding accessibility and clarity.

When drafting standard contract terms, traders must not only ensure proper incorporation into the agreement but also consider, inter alia, whether the content complies with the fairness requirements under German law on standard terms and conditions. In B2C contracts, the law provides detailed rules aimed at protecting consumers from unfair clauses. This includes a general fairness test (Section 307 BGB) and specific prohibitions (Section 308 and 309 BGB). In some cases, this may lead to the application of statutory default rules or even affect the enforceability of the entire agreement. In B2B contracts, the same rules apply, albeit less strictly. For more details, see 3.5 Ineffectiveness of Standard Terms due to Unreasonable Disadvantage.

Further, in B2B contracts, the German Commercial Code (Handelsgesetzbuch, HGB) imposes on the buyer in a sales contract the duty to inspect the delivered goods without undue delay and to notify defects to the seller (Section 377 HGB). The failure to do so will result in the loss of warranty claims for defects which could have been identified during such inspection. Hidden defects which are identified at a later point in time must also be notified without undue delay. Otherwise, the buyer will also lose its warranty rights for such claims. In B2C contracts, there are no inspection or reporting obligations and the consumer will benefit from reversal of the burden of proof, which presumes that defects identified within the first 12 months from the delivery were already present at the time of delivery, which is the relevant time when the products must be free from defect.

Limitations of liability, limitations of warranty rights, the shortening of the statutory warranty periods and the choice of foreign law or jurisdiction are generally permissible in B2B contracts, at least where they are individually negotiated by the parties and therefore not subject to the German law on standard terms and conditions (see above). This is generally not permissible in B2C contracts.

Under German law, consumer protection in B2C contracts is governed by a mandatory and detailed legal framework aimed at ensuring transparency, fairness and legal certainty. The relevant provisions are primarily found in the BGB and the EGBGB. The main consumer rights when contracting with traders can be summarised as follows.

Right of Withdrawal

Consumers have the right to withdraw from a distance or off-premises contract within 14 days of receiving the goods or concluding the contract, without stating any reason and without incurring costs other than return shipping costs. This right of withdrawal is governed by Section 312 and 355 et seq BGB, which also set out the trader’s obligation to inform the consumer about the existence and conditions of the right of withdrawal.

The withdrawal period begins only once the consumer has received clear and comprehensible information about its right of withdrawal. If the trader fails to provide the information as required by law or provides incomplete information on the right of withdrawal, the withdrawal period does not commence and may therefore be extended by up to 12 months. Once a consumer has exercised its right of withdrawal, the trader must reimburse all payments received from the consumer within 14 days, using the same payment method, unless otherwise agreed.

Exceptions to the right of withdrawal can, in particular, be found in Section 312g (2) BGB. The provision distinguishes between two categories. In certain cases, the right is excluded from the outset due to the nature of the goods or services and the circumstances present at the time of contract conclusion, for example, in the case of custom-made products, perishable items or time-specific leisure services. In other cases, the right initially exists but may expire after delivery, such as when the seal of hygiene-sensitive goods or software is broken, or when goods are inseparably mixed with others.

Comparable expiry provisions are contained in Section 356 BGB. The right of withdrawal may lapse if the consumer expressly agrees to the immediate performance of a service or the supply of digital content and acknowledges the loss of the right. In both cases, the trader must confirm this agreement on a durable medium.

Statutory Warranty of Conformity

In the context of a sales contract, the trader is liable to the customer under Section 437 et seq BGB if the goods are defective within the meaning of Section 434 BGB. A defect, inter alia, exists where the goods deviate from the agreed condition or fail to meet the expectations typically placed on goods of the same kind, including functionality, durability, compatibility and safety. Liability also extends to legal defects under Section 435 BGB.

These statutory warranty rights apply to all sales contracts (ie, B2B and B2C), but special protective rules apply in B2C transactions. These include the following.

• Entitlement to reimbursement and advance payment (Section 475 BGB) – consumers may claim reimbursement for costs related to remedying the defect, including transport, removal and reinstallation and to claim an advance in that regard.
• Simplified contract rescission and damage claim (Section 475d BGB) – in certain cases, consumers may rescind the contract or claim damages without having to set a deadline for performance.
• Restrictions on contractual deviations (Section 476 BGB) – the trader cannot rely on any agreement that limits the consumer’s statutory warranty rights if it was concluded before the consumer notified the trader of a defect – unless the consumer was clearly informed in advance and the deviation was expressly and separately agreed.
• Reversal of the burden of proof (Section 477 BGB) – if a defect becomes apparent within 12 months of delivery, it is presumed to have existed at the time of delievery, unless this presumption is incompatible with the nature of the good or the defect.

For contracts concerning goods with digital elements or purely digital content, Section 327 et seq BGB impose additional obligations to ensure in particular continued functionality and the provision of necessary updates.

Right to Receive Clear and Complete Information

Transparency is a fundamental principle of consumer protection under German contract law. Prior to the conclusion of a contract, consumers must be provided with mandatory pre-contractual information enabling them to make an informed decision, including, inter alia:

• mandatory pre-contractual information under the BGB and EGBGB – as outlined in 4.1 Different Laws, traders are required to provide pre-contractual information under the BGB and the EGBGB;
• PAngV – the PAngV ensures that consumers receive clear and truthful pricing information. It requires the trader to provide information about pricing prior to entering into a contract, including elements such as value-added tax, delivery charges and any additional costs that may affect the total price; and
• sector-specific regulations – additional transparency requirements apply in regulated sectors such as financial services.

In Germany, the concept of liability is based in both contractual and tort law, governed primarily by the German Civil Code. Liability arises when a party breaches a legal duty – either contractual or statutory – is responsible for the breach and this breach causes a material or immaterial damage to another party. The key principle is that everyone is fully liable for the damage they have caused (culpably).

The core concept includes:

• fault-based liability – most liability claims require proof of fault, typically negligence or intent;
• causality and actual loss – the claimant must prove a causal link between the breach and the damage, and that the damage is real and quantifiable;
• compensatory nature – German law focuses on restoring the injured party to the position they would have been in had the breach not occurred. This includes direct damages and foreseeable consequential damages such as loss of profit, but not punitive damages; and
• no punitive or exemplary damages – damages are strictly compensatory and cannot serve to punish the defendant or deter future conduct.

German law does not recognise punitive damages. Courts may only award damages that compensate for actual loss or damage. Even in cases of serious misconduct, the purpose of damages is not to punish but to restore.

If a claim for damages arises, the associated liability is generally unlimited in terms of both amount and scope as there is no statutory cap on damages under German law. However, parties may agree to contractual limitations, such as:

• exclusion of certain types of damages (eg, indirect damages, loss of profit);
• liability caps (eg, limited to the order value or a fixed amount); and
• time limitations for claims.

German law recognises strict liability (Gefährdungshaftung) in specific areas where the law imposes liability regardless of fault or negligence. Examples include:

product liability (Section 1 ProdHaftG) – under the Product Liability Act, manufacturers are strictly liable for defective products that cause harm. In addition to manufacturers, retailers, suppliers and importers may also fall under the scope of the Product Liability Act;

environmental liability (Section 1 UmweltHG) – operators of facilities that pose environmental risks may be held liable without fault; and

liability for medicinal products (Section 84 AMG) – pharmaceutical companies are subject to strict liability for personal injuries caused by medicinal products, meaning they are liable for damages even without fault, provided the product was used as intended and the injury is causally linked to the product.

Under German law, parties to a contract may agree to limit liability, but the enforceability of such clauses depends on the contractual context. If the limitation is individually negotiated, it is generally valid as long as it does not contravene mandatory legal provisions – for instance, liability for intentional misconduct cannot be excluded. In contrast, clauses contained in general terms and conditions or standard contracts are subject to stricter scrutiny under Section 305 to 309 BGB. These provisions prohibit exclusions of liability for intent, personal injury, death or health-related damages, and also restrict limitations concerning essential contractual obligations, known as cardinal duties. Clauses limiting liability must be clearly worded, transparent and not unexpectedly disadvantageous to the other party. Even in B2B contracts, courts apply a reasonableness test under Section 307 BGB, which may render overly one-sided clauses invalid.

It is important to note that limitations of liability can only be agreed upon between the contracting parties. Such limitations do not extend to third parties who are not part of the contract. For example, if third parties suffer damages caused by a delivered product, they are entitled to claim compensation for their losses, regardless of any liability limitations agreed upon in the supply contract. Contracts that impose obligations or limitations on third parties without their consent are not legally permissible under German law.

German law does not expressly define “force majeure” in the BGB. Nonetheless, the general concept used to describe situations like those falling within the scope of a force majeure event is essentially reflected in the concept of supervening impossibility (nachträgliche Unmöglichkeit) as covered by Section 275 BGB, which provides that a party is released from its obligation to perform if performance becomes impossible for anyone, including due to events outside the party’s control (eg, natural disasters, war, pandemics). A party which is released from an impossible obligation cannot demand performance from the other party. This statutory provision applies even if the contract does not contain a specific force majeure clause.

If impossibility is only temporary, the obligation to perform is suspended for the duration of the impediment. Liability for damages is excluded if the party is not at fault (Section 275, 276 BGB).

To successfully invoke relief from performance due to such a force majeure/impossibility event, the following conditions must generally be met:

• the event must render the performance objectively impossible, not merely more difficult or economically burdensome;
• the event must be beyond the control of the obligated party and not attributable to any fault or negligence on their part; and
• the obligated party must demonstrate that it made all reasonable efforts to fulfill the contract but was prevented from doing so due to the force majeure event.

Additionally, force majeure events may be addressed through the doctrine of frustration of contract (Section 313 BGB), allowing for contract adjustment or termination when fundamental circumstances that both parties relied upon have significantly changed after the contract was concluded.

It is standard practice in German commercial contracts to include a force majeure clause. Such clauses typically define what constitutes force majeure, specify the legal consequences (eg, suspension or termination of the contract), and set out notification requirements.

The absence of a force majeure clause does not prevent a party from relying on the statutory provisions of German law (in particular, Section 275 BGB). Also see 6.1 Concept of Force Majeure.

German law recognises the concept of “frustration of contract” (Störung der Geschäftsgrundlage), in Section 313 BGB. If, after conclusion of the contract, unforeseen circumstances fundamentally change the basis of the contract and it would be unreasonable to hold a party to the original terms, that party may request an adjustment of the contract or, in exceptional cases, termination. This applies only if the risk was not allocated to one party and the change is substantial. The key requirements are:

• a shared or evident assumption forming the basis of the contract;
• a serious and unforeseeable change in those circumstances; and
• the resulting unreasonableness of expecting one party to adhere to the original contract terms.

In Germany, commercial contracts – especially those with international scope – often contain hardship clauses, although such provisions are not legally required to access statutory remedies. This clause is generally included to provide mechanisms for renegotiating the price or other relevant elements of the agreement in good faith, in order to periodically update the price (in contracts on an ongoing basis) based on price indices (eg, published by the German Federal Statistical Office) or to restore balance following an unforeseeable situation. Importantly, the absence of a hardship clause does not bar a party from seeking legal remedies due to excessive burden arising after the contract was formed.

German law provides a structured system of statutory warranties (Mängelrechte), particularly in sales contracts (Section 434–437 BGB), in case a product or work is defective. A defect can be a material defect (Section 434 BGB) whereby a good is defective if it does not have the agreed quality or is unsuitable for its usual or contractual purpose or a legal defect (Section 435 BGB) which exists if third-party rights interfere with the buyer’s use or ownership.

If a defect exists, the buyer may demand:

• subsequent performance (Section 439 BGB);
• price reduction (Section 441 BGB);
• withdrawal from the contract (Section 323 BGB); or
• damages (Section 280, 281 BGB).

For general breaches of contract, including delayed performance (Section 286 BGB) or impossibility (Section 275 BGB) statutory law provides specific remedies as inter alia stated in the following.

• General breach of duty (Section 280 BGB) – if a party breaches a contractual duty, the other party may claim damages, unless the breaching party can prove it is not at fault. This applies to both primary and secondary obligations (eg, duty of care, confidentiality).
• Right to withdraw (Section 323 BGB) – if the debtor fails to perform (despite a warning and reasonable grace period), the creditor may withdraw from the contract. No warning and grace period is needed if performance is definitively refused or impossible.
• Damages in lieu of performance (Section 281 BGB) – if performance is defective or delayed, and a deadline passes without cure, the creditor may claim damages instead of performance.

In cases of pre-contractual breaches or failed negotiations, German law allows reimbursement of fruitless expenditures.

In B2B contracts, the parties may generally exclude or modify statutory warranty and remedy rights. However, limitations apply to standard terms (Section 305 et seq BGB). For example, liability for intent and gross negligence, as well as for injury to life, body or health, cannot be excluded.

Individually negotiated clauses are subject to fewer restrictions, provided they do not violate mandatory law/public policy.

In B2C contracts very limited deviations from the consumer protection laws are permissible and where such deviations shall be agreed via general terms and conditions or in standard contracts, these will generally not be valid and enforceable.