Sales Law 4.0

Digitalization is advancing at an ever faster pace and slowly but surely the German legislator is following suit. The latest German digitization efforts by law have their classic origins in two European directives (EU 2019/770 “Digital Content Directive”, EU 2019/771 “Consumer Goods Directive”) and will properly turn German sales law in the German Civil Code (“Bürgerliches Gesetzbuch – BGB”) upside down in general and with regard to digital products.

Consumers can look forward to new standards and rights in digital goods transactions, while there is an increased need for action for entrepreneurs with or before the changes come into force on 01.01.2022. Overall, the project should lead to more international legal certainty in digital legal transactions and strengthen consumers and SMEs.

Traditional sales law

Material defect § 434 BGB n.F.

Starting with the most striking change - the concept of material defect is newly defined in three ways. According to the new version of § 434 para. 1 BGB, which will apply from 01.01.2022, an object is free of material defects if it cumulatively meets the subjective requirements, the objective requirements and the assemblyrequirements. With the new regulation, the requirements are of equal rank, whereas they were originally hierarchically graded by the different paragraphs. The requirements are also now defined in detail in § 434 paras. 2 - 4 BGB.

Subjective requirements, § 434 para. 2 BGB

These include the agreed quality, the suitability for the contractually presumed use, as well as agreed accessories and instructions (including assembly and installation instructions).

Sentence two states that the agreed condition extends to the type, quantity, quality, functionality, compatibility, interoperability and other features of the product for which the parties have agreed requirements.

Objective requirements, section 434 para. 3 BGB

The objective requirements are based on the premise "unless otherwise effectively agreed".

They cover the suitability for ordinary use that can be expected of "products of the same kind and quality to be expected by the buyer", taking into account the kind of products (sentence two: quantity, quality and other features such as functionality, compatibility and safety), or public statements by the seller or other link in the contractual chain (exception in sentence three - non-negligent ignorance), especially in advertising or on the label. Furthermore, the objective requirements include that the quality of the product corresponds to a sample or specimen provided to the buyer before the conclusion of the contract and also includes accessories including packaging and instructions which the buyer can expect to receive.

Here, in addition to the tightening of the characteristics of freedom from material defects in sentence two, a reference to digital products is recognizable.

Interim conclusion

The requirements for freedom from material defects have been raised by extensive definitions. Here, the seller can act with detailed contractual provisions on the individual points in terms of positive as well as negative (what can my product NOT do) quality agreements, but must observe the limit of surprising clauses, especially in GTCs.

Further changes in § 439 BGB

The seller's obligation to reimburse installation and removal costs remains. A new provision in § 439 para. 5 is that the buyer must make the product available to the seller for the purpose of subsequent performance. If the seller replaces a defective product, he must take back the replaced product at his own expense, section 439 para. 6 sentence two BGB.

Remuneration - Pay with Your Data

The original principle of payment for consumer contracts has now been reformulated in several places. For example, § 312 para. 1, para. 1a as well as § 327 para. 1, para. 3 BGB now clearly speak of the "payment of a price" or the provision of data.

Digital sales law

Consumer contracts on digital products, §§ 327 et seq. BGB

Consumer contracts on digital products have been completely newly regulated in 21 standards, §§ 327 - 327u BGB.

Scope of application

The scope of application including basic definitions is clarified in § 327 BGB. Accordingly, digital products are the provision of digitalcontent (para. 2 sentence one – data created and provided in digital form) or digitalservices. Digital services are described in detail in para. 2 sentence two nos. 1 & 2. Digital services are services that enable the consumer to create, process or store data in digital form or to access such data, or to share or otherwise interact with data uploaded or created in digital form.

Also covered are contracts for things that contain or are connected to digital products, § 327(2) BGB. Sections 327 et seq. BGB are in this respect only applicable to the digital part. However, as a reverse exception, "goods with digital elements" that cannot fulfil their function without the digital element are fully subject to the provisions of 327 et seq. BGB (and § 475b BGB) are applicable.

The special provisions of §§ 327 et seq. BGB apply to physical data carriers that are exclusively carriers of digital content alone to the exclusion of large parts of the "general" law of sales, § 475a para. 1 BGB.

Content

The subsequent provisions of § 327 BGB regulate in detail the provision (b, c), defectiveness (d - g) and secondary rights resulting therefrom as well as limitation and possibilities of deviation. Sections 327t and u BGB regulate the contractual relations of entrepreneurs in the case of digital products.

§ 327e, f BGB

The material defect is specifically regulated and defined in § 327e BGB for consumer contracts on digital products. It stands out in particular that a suitable integration of the product is extensively covered by law according to § 327e, para. 4 BGB. In particular, functionality, compatibility and interoperability of the digital product are explicitly defined and safeguarded.

A new obligation of the seller is created by § 327f BGB. He has to provide the updates necessary to maintain the conformity with the contract and to inform the consumer about them. This will be the subject of future disputes, as the relevant period according to § 327e para. 1 sentence two BGB is either the provision period of the digital product or the "period that the consumer can expect based on the nature and purpose of the digital product and taking into account the circumstances and the nature of the contract". A period of about two years is assumed here.

The original purchase contract for a digital product may therefore become a partial continuing obligation. Whether and how the obligation to update can be satisfied in all products remains to be seen.

Sections 327p, q BGB

The further use of the digital product after termination of the contract is regulated in § 327p BGB. While the consumer may continue to use it, the trader may also prevent it. Section 327q BGB states that the exercise of any rights under data protection law by the consumer shall in principle not affect the validity of the contract. In exceptional cases, the trader may then terminate the contract, but claims for damages are excluded.

Sections 327r, s BGB

Changes to the digital product and the associated contracts are only possible under the relatively narrow prerequisites of §§ 327r, s BGB.

Entrepreneurial relationships

Although the provisions of §§ 327ff BGB are designed for B2C, they also apply to entrepreneurial relationships according to § 327t BGB. The mandatory recourse provisions affect the supply chain according to § 327u BGB.

Consumer sales contracts for goods with digital elements, §§ 475a ff. BGB

Goods with digital elements

The consumer goods contracts on products with digital elements are particularly regulated in §§ 475a ff. BGB. As described above, this concerns products that are not functional without their digital elements, such as a smart watch.

Regulatory content

Here, too, an extensive regulation of freedom from material defects in § 475b BGB with references to the objective requirements from § 434 para. 3, to the updating obligation from § 327f and installation requirements must be emphasized. The obligation to update exists for the period of provision or "during the period that the consumer can expect due to the nature and purpose of the item and its digital elements and taking into account the circumstances and the nature of the contract" (§ 475b para. 4 no. 2 BGB), but at least for two years according to § 475c para. 2 BGB.

According to § 475d BGB, the consumer can withdraw from the contract under eased conditions. The limitation rule in § 475e BGB regulated several scenarios:

(1) Claims for defects in the case of permanent provision of digital elements become time-barred at the earliest twelve months after the end of the provision period. (2) Claims for breach of the obligation to update become time-barred at the earliest twelve months after the end of the period of the obligation to update. (3) If a defect occurs during the limitation period, the limitation period shall end at the earliest four months after the defect has become apparent. (4) In the event of subsequent performance, the limitation period shall end at the earliest two months after the handover of the repaired goods.

Deviating agreements according to § 476 BGB are still possible, but with regard to § 434 para. 3 BGB (objective requirements) and § 475b para. 4 BGB (obligation to update) only possible if the consumer is expressly informed about these deviations before conclusion of the contract (concrete deviation of the objective quality) and the deviation was expressly and concretely agreed in the contract.

The reversal of the burden of proof in § 477 BGB was generally extended to one year and, for goods with digital elements where the provision of these was permanently agreed, to two years from the transfer of risk.

Conclusion

The new provisions are one of the most comprehensive changes to the law of sales in recent years. There is likely to be a great need for changes and design with regard to the drafting of contracts as well as the design of the procedures for initiating and concluding contracts. The new regulations have a direct impact and via the recourse mechanisms far into the respective supply chains.

Author: Korbinian Hauf