Contract Law

§Revoking contracts

A contract concluded online, by phone or on your doorstep can usually be revoked within 14 days. If the revocation notice is missing or wrong, the period is extended.

The right of revocation applies to consumer contracts concluded away from business premises or at a distance, and therefore also to contracts for work, services, tenancy, brokerage and introduction agencies (§§ 312g, 355 BGB). Consumer loans, timeshares, consumer building contracts, insurance and units in investment funds are covered too. Many businesses do not even know that their contract carries a right of revocation, and so give no notice of it.

After revocation, the business must refund all payments within 14 days. It can claim compensation for services already provided only under narrow conditions, and only up to market value. Without a notice, the right of revocation expires at the latest 12 months and 14 days after the contract was concluded; this limit does not apply to loans.

• Contract for work: a company had to repay the full price of €10,638.40 for an awning because it had not informed the customer of the right to revoke. The awning did not have to be removed (Flensburg Regional Court, 12 June 2020).
• Private preparatory colleges (Studienkolleg): foreign applicants book preparatory courses online for €5,000 to €10,000, often without understanding the terms. If the revocation notice was defective, the contract can be revoked even after the course has ended.
• Instalment and "hire-purchase" contracts, car purchases with linked financing, and loans: if mandatory information is missing, the period does not start.

Revocation is often disputed and frequently has to be enforced in court. Have the chances and risks assessed before you declare it.

§Subscription traps and payment demands from the internet

You do not have to pay, without checking, an invoice for something you believed was free.

People who register on a website to use what looks like a free offer often learn of a paid subscription only when the invoice arrives, frequently with a note that the revocation period has expired. Many pay without defending themselves.

Object to the claim in writing as a precaution; you do not need a lawyer for that at first, and we can give you a template letter. If a debt collector then writes, see Civil & Commercial Law. How weak such claims can be is shown by a case in which the Frankfurt am Main Regional Court dismissed a payment action pursued through a collection company (judgment of 1 April 2022, not final).

§Contractors, renovation and contracts for work

Acceptance is decisive: if you sign it without looking closely, you will struggle afterwards.

Under a contract for work the contractor owes a result, not just labour: a bathroom without defects, a working kitchen, a proper repair. Until acceptance, the contractor must prove that the work is complete and free of defects; after acceptance the burden shifts to the client. That is why some tradespeople push for a signature, say "just for the hours", while the small print states that the work is free of defects.

• While defects remain you may withhold payment and demand repair, a price reduction or damages.
• A contract for work can be terminated at any time; the contractor then keeps the price less the expenses saved.
• A contract for work needs no particular form. For larger jobs, only a written contract with a precise specification and a fixed price protects you from surprises; a mere cost estimate is not enough.
• Invoices from surveyors after an accident or water damage do not always have to be paid in full either.
• Damage caused by tradespeople to floors, wiring, doors or devices must be compensated.

§Sales law and buying a car

Since 1 January 2022 buyers have been much better protected, especially when buying a used car.

If a defect appears within one year of delivery, it is presumed to have existed at the time of sale; previously this applied for six months only. The buyer does not have to explain the cause. Dealers may now shorten the warranty on a used car to one year only under strict formal requirements; the earlier practice was contrary to EU law. For goods with digital elements, from navigation systems to smartphones, the seller must provide updates.

• Buyer's rights for a defect: first repair or replacement, then a price reduction, withdrawal or damages. The buyer may not simply refuse to pay or withdraw at once.
• The warranty period for new goods is two years.
• If the car was financed, revoking the financing is often the simpler route (see Banking & Capital Markets Law).
• For dealers, kitchen and furniture sellers and online shops: if you sell to consumers, your contract forms and complaint procedures should be adapted to the new law. We can help, including as an outsourced legal department (see Corporate Law).

§Recovering VAT when exporting a car

If a car bought in Germany is exported outside the EU, the dealer must refund the 19 % withheld as soon as the export is proven.

Many dealers keep the VAT as a deposit and do not pay it out, often because they are unsure of the tax rules. An export declaration is only formal evidence; what matters is that the substantive conditions for exemption under § 6 of the German VAT Act (UStG) are met. Prior clearance by the tax office is not required if the dealer has requested and received the documents the law provides for. In practice, a lawyer's letter explaining the law to the dealer is often enough.

§Leasing agreements: getting out and the final settlement

A lease usually cannot be terminated during its term, but there are ways out.

Leasing is used above all to finance expensive cars. Its drawbacks show when the instalment, insurance, tax and maintenance no longer fit the budget. If the lease is terminated for arrears, the lessor draws up a settlement: unpaid instalments, compensation for use and alleged damage such as scratched rims or doors. That settlement deserves close scrutiny.

• Revocation: a car lease is a paid financial accommodation (§ 506(2) BGB) and follows the rules for consumer loans. Many car banks used an inadmissible "collective notice" with cascading cross-references; following the ECJ (6 March 2020, C-66/19), many agreements signed between 11 June 2010 and 20 March 2016 can be revoked, even if they ended long ago.
• Termination by mutual agreement, or transfer of the lease to a third party.
• Nullity for usurious terms.
• Not every "hire-purchase" agreement is legally one; the terms and conditions decide and must be read carefully.

§Contract review

Without legal knowledge, time is your worst enemy: many problems can only be solved before you sign.

We review contracts before they are concluded, and existing contracts for ways out. Because Alexandra Barandt trained in both law and economics, we also see the financial consequences of a clause.

• Property purchases, property finance and reservation agreements
• Loan, car finance and leasing agreements
• Brokerage and agency agreements, recovery of commissions
• Life and payment protection insurance linked to loans
• Commercial leases and business contracts

An example: anyone buying a flat should know what happens if the financing is already signed but the notarised purchase contract never materialises.

§Tenancy: notices and termination agreements

Many landlords' notices are invalid for formal reasons alone.

• Form: written form (§ 568 BGB), signatures of all landlords, all tenants named as addressees; if a representative gives notice, the original power of attorney must be enclosed.
• Grounds: is there a statutory ground for termination, and is it adequately explained in the letter? As a rule the landlord must first issue a warning.
• Notice period and information: has the notice period been observed, and were you told of the form and deadline for objecting?
• Abuse: a criminal complaint used merely as a pretext for termination can render the notice invalid.

If a tenant wants to end a long lease early, for example because of a new job, a termination agreement (Mietaufhebungsvertrag) is often the best solution. It should settle the deposit, service charges and cosmetic repairs. Legal fees in tenancy disputes are usually based on the annual net rent, and legal expenses insurance often covers them.

§Buying property in Germany

A notarised purchase agreement decides six-figure sums, often in a language the buyer does not fully command.

• Understanding: tell the notary if you do not understand the contract. For investments from around €200,000, do not economise on an interpreter.
• Defects: the seller's warranty is routinely excluded in the contract. Hidden defects found later, such as damp, mould or failing pipes, can only be claimed if the seller fraudulently concealed them. Have a surveyor inspect the property beforehand and record defects in the contract. An estate agent is not obliged to check the property for defects.
• Representation: if an "unauthorised representative" acts for the seller at the notary appointment, the contract only becomes effective once the seller approves it.
• Reservation: reservation agreements with estate agents are not regulated by statute and are often invalid, in which case the reservation fee must be refunded.
• Selling from abroad: owners living abroad can sell through a power of attorney certified by a foreign notary and bearing an apostille. We accompany the sale through to handover.