- •Contents
- •Introduction
- •Recognized Forms of Business Organizations
- •Establishment of a Company or Branch Office
- •The Acquisition of Closely Held Companies
- •Valuation of Business Enterprises
- •The Law of Contracts
- •General Terms of Business (AGB)
- •Torts
- •Real-Estate Property Law Germany
- •The Law of Insolvency and Security Interests
- •Unfair Competition
- •The Law of Public Procurement
- •Distribution Agreements
- •Private Public Partnerships
- •Copyright
- •Review of German Private Insurance Law
- •Transport Law and Forwarder Law
- •Customs Law
- •Liability of the State
- •Aspects of German Labor Law
- •Residence and Work Permit
- •Computer Law
- •Electronic Commerce
- •Protection of Internet Domain Names
- •Enforcement of Rights and Claims through the Courts and Arbitration Tribunals
- •Notaries in Germany
- •Institutions of the European Community
- •Antitrust Law in the European Community
- •German Tax Law
- •Trademark Protection in Germany and Europe
Electronic Commerce
R.E. Walch
1Applicable German Laws
In the world of E-Commerce it is of vital importance for both seller and buyer that closed contracts are legally binding and enforceable. Therefore, the knowledge of the respective applicable German laws and regulations is paramount for both the business-to-business (B2B) and the business-to-consumer (B2C) online distributors.
European Union legislation has induced the enactment of regulations in Germany in order to protect consumers (i.e. individuals dealing with traders) when contracting at a distance. These regulations cover most contracts for goods and services to be supplied to a consumer where the contract is made exclusively by means of distance communication. As part of the reform of the German contract law these dispersed acts and statutory instruments were incorporated into the system of the German Civil Code and can now be seen as the legal framework for all commercial transactions in open data nets.
In addition to the legislation in the German Civil Code (BGB) the Ordinance on the Duty to Provide Information to Consumers (BGB-InfoV) and the Telemedia Act of 2007 (TMG), replacing the Federal Information and Communication Service Act of 1998 (IuKDG), impose obligations on all operators of so-called “telemedia”, electronic information and communication services, which include private and commercial webpages, webshops and blogs, to inform the consumer. Liability and data protection is also within the scope of the Act.
2German Civil Code (BGB) – Law Pertaining to Contracts
2.1Closing of Contracts in Open Nets
Under German Civil Law a contract is concluded when there is a meeting of minds which means that the offer and its acceptance must come together. This basic rule
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for any contract is also applicable for those commercial transactions, which rely on the exchange of electronically transmitted acts by E-mail or mouse click.
The blank order form on a homepage (business-to-business or business-to-con- sumer) can be seen as the general invitation of the seller to the buyer to accept this offer (“invitation to treat”). By filling out the order form or by simply clicking on the OK-button the consumer accepts this offer and the contract is concluded. In most cases, however, order procedures are organized in a different way. If the seller only generally describes his products on the homepage and expects the customer to place the order then the contract is entered into when the order is finally accepted and confirmed by the seller.
Accordingly, it is also part of each business E-Commerce strategy to ensure the legal validity of business transactions by efficiently designing and organizing such order procedures.
The acceptance of an offer can be either explicit–the order confirmation is sent by mail or E-mail – or implicit by simply delivering the product to the customer.
Both offer and acceptance are binding and can only be retracted or revoked before being accepted (offer) or before reaching the offeree (acceptance).
The acceptance of the offer can be expected in 2–3 days – failure to do so would mean that the contract is not concluded. There is no rule that silence to an offer would mean acceptance except for B2B transactions where there is no need for consumer protection.
2.2Standard Terms and Conditions
For business-to-consumer transactions in open nets standard terms and conditions (“Allgemeine Geschäftsbedingungen”) are not automatically binding for the consumer but have to be incorporated, which obligates the seller to explicitly refer to its standard terms and conditions and allow the consumer to have access to them. The mere possibility to access them is sufficient, actual knowledge is not necessary. On the other hand electronic standard terms and conditions must be clearly structured and should not be too long because otherwise the detailed adjudication protecting consumers may apply.
Electronic commercial transactions using electronic information and communication services (“Telemedia”) follow different rules since the enactment of an European Directive on E-Commerce. Standard terms and conditions in B2B and B2C must be accessible to customer and consumers at the latest when closing the contract, and the technical means to save them on disc, CDs or hard drive must be ensured.
2.3Distant Sale Contracts and Electronic Business Transactions
Unlike traditional sale transactions, buyer and seller do not necessarily have physical contact when buying via the internet. As the buyer cannot see and touch the product before buying he or she can easily be deceived about its quality.
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Because the buyer and the seller have no personal knowledge of each other and because the product initially only exists in the virtual world, the German legislature implemented an EU directive by way of the Act on Distant Sale Contracts on 30th of June 2000, which is now incorporated into the German Civil Code. Granting a right of revocation and increasing the seller’s obligation to inform the buyer before and after the contract have maximized consumer protection.
If applicable, the law protects private consumers insofar as they have – under certain conditions – the right to rescind and ship back the product already bought back.
Such consumer protection is threefold:
●The seller has to fully inform the buyer about the key details of the contract including his right to return the product within 2 weeks
●The seller has to give a written confirmation of all key-information given before closing of the deal
●The buyer has the right to fully and unconditionally return the product with a full money back guarantee within 2 weeks
However, the consumer is only entitled to these benefits if a so-called “Distant Sale of Goods and Services” between consumer and non-consumer (trader) can be identified. Following the legal definition a contract must be prepared and finally closed with the exclusive use of such means of communication which lack simultaneous physical contact: letters, catalogues, telephone calls, facsimiles, E-mails and broad- cast-services, tele-services and media-services are examples for such means of communication.
The law does not apply to those tradesmen who have no distant sale distribution structure but only use telephone, telefax or E-mail from time to time for selling their products. It is the seller, however, who has to prove that he does not have such an organized distribution structure.
There are a variety of exemptions for a number of services offered on the online marketplace such as home delivery services, distant learning offers and the sale of real estate. For these services the law does not apply by definition. Financial Services, however, such as banking services, lending, insurance, pension schemes, financial investment and payment are no longer exempt from the law.
The obligation to inform the consumer is detailed in an Ordinance on the Duty to Provide Information to the Consumer (BGB-InfoV). It obligates the seller to reveal the following core details of the contract before placing of an offer (list not complete):
●Name and address of the seller (including company register number and name of legal representative)
●All steps which lead to the closing of the contract
●Net price (tax and other costs included)
●Payment and delivery
●Delivery and shipping costs
●Cancellation of the contract and right to send back the product
●The commercial purpose of the deal
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For financial services more detailed pieces of information have to be disclosed beforehand.
These details can be electronically transmitted but need to be clear and understandable for the average consumer.
Once the customer knows all the above details before closing of the contract the same has to be effectively handed out to the customer in written form or confirmed in an E-mail plus additional information as follows:
●Conditions and legal consequences of the cancellation of the contract (including shipment back to the seller)
●Address of the complaint department and the legal address of the seller including the name of one legal representative
●Information on customer services, legal warranties and given guarantees
●Conditions of cancellation of the contract for long-term contracts
The written form (“textual form”) requires that there is a signature (scanned but no digital signature necessary) on the confirmation sent to the customer, which must reach him once but at the latest when the product is shipped. It is no longer sufficient to present the prescribed (compulsory) information on a website before the contract is closed without written confirmation of the same after closing.
The sanctions for not informing the consumer in the described way are considerable:
Infraction of pre-contractual obligations to inform the consumer may lead to damage claims and may also lead to a prolongation of the 2-week revocation period to a maximum of 6 months.
This means that the seller may be exposed to a contract revocation for as long as 6 months, if the buyer changes his mind.
Also, consumer protection agencies can sue the seller for omission of wrong or insufficient information.
The European Directive on Electronic Commerce has considerably extended the scope of required information disclosures. With its transfer into the German Civil Code not only contracts between tradesmen and consumers but also B2B contracts with “customers” have to follow specific rules on the disclosure of information. Only if B2B or B2C contracts for the delivery of goods or services are closed using telemedia (which includes all online shops) the law applies and the seller (trader) has to
●Establish effective technical means which allow the customer to discern operational errors and to correct them before the offer is placed
●Electronically confirm the receipt of the customer’s order without delay
●Inform the customer beforehand about the technical steps which proceed and finally lead to the closing of the contract
●Whether the contractual document is saved by the tradesman after closing and whether it is accessible for the customer
●About the establishment of effective technical means for the correction of operational errors
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●About the languages which are available for the transaction
●About the code of conduct or practice which may be applicable or which accepts the tradesman as binding for himself
●Establish technical means for the electronic access to the contract details including the seller’s standard terms and conditions and the possibility to save them
The law does not apply if the contract has been closed by E-mail correspondence without the use of telemedia (individual communication) or if customer and seller have agreed on the exclusion of these obligations (only for B2B contracts!). No such exclusion is allowed neither for B2B nor for B2C contracts for the latter of the above duties: The electronic access to the contract details including the seller’s standard terms and conditions must be ensured at all times.