Germany's Draft Bill on Combating Late Payment in Commercial Transactions: Potential Consequences for Businesses on Both the Legal and Operational Level

by White & Case LLP
Contact

On April 1, 2014, the German cabinet (Bundeskabinett) agreed upon a draft bill on combating late payment in commercial transactions in order to transform certain articles of the Directive 2011/7/EU1 into German law.2 The legislators seek to spark a culture of prompt payment in B2B situations in order to protect the liquidity and to ease the financial management of undertakings.3

Amendments to the German Civil Code
If the draft bill is adopted as proposed, one of the consequences4 will be that businesses will face restrictions when agreeing upon payment terms and the duration of a procedure of acceptance (Abnahme). The draft bill proposes respective new provisions to be added to the German Civil Code (BGB).

Pursuant to the proposed sec. 271a para. 1 BGB, contractual clauses in B2B transactions between private entities that stipulate a period for payment in excess of 60 calendar days are legally invalid unless otherwise expressly agreed in the contract and provided it is not grossly unfair (grob unbillig) to the creditor. The consequences of late payment (Zahlungsverzug) like interest for late payment (Verzugszinsen) and damages5 shall generally apply after 60 calendar days. Sec. 271a para. 3 BGB introduces a supplemental, yet separate restraint: The parties of a B2B transaction are precluded from stipulating, as a condition for the due-date of a remuneration to occur, a duration of a procedure of acceptance (Abnahme) of more than 30 calendar days from the date the relevant goods or services are delivered for acceptance. Again, it is possible to expressly agree otherwise in the contract as long as this is not grossly unfair (grob unbillig) to the creditor. Sec. 271a para. 3 BGB shall prevent a circumvention of the regulations seeking to spark prompt payment. This is necessary because sec. 641 para. 1 BGB, for example, sets forth that in a contract to produce a work (Werkvertrag) the customer must pay the remuneration upon acceptance (Abnahme) of the work. Sec. 641 para. 1 BGB itself does not set forth any non-dispositive timeframes, i.e. the parties would, in absence of sec. 271a para. 3 BGB, be entirely free to contractually agree upon a longer duration of such procedure. This freedom will, at least to a certain extent, be confined once the draft bill becomes effective. The restraints set forth in sec. 271a para. 1 and para. 3 BGB, however, do not apply to agreed staggered payments (depending on the progress of activities) or instalments (sec. 271a para. 5 BGB).

In general terms and conditions (Allgemeine Geschäftsbedingungen), the possibility to stipulate extensive payment terms to the benefit of the user of the general terms and conditions (Verwender) will become even more restricted. Sec. 308 No. 1 lit. (a) BGB sets forth that unreasonably long payment periods are legally invalid, it being presumed that a period that exceeds 30 days after the date of receipt of the goods or services or the invoice (whatever occurs later) is unreasonable. The same concept applies to the duration of a procedure of acceptance (Abnahme): Pursuant to sec. 308 No. 1 lit. (b) BGB, the duration of such procedure must not be unreasonably long, it being presumed that a period that exceeds 15 days after the date of receipt of the goods or services is unreasonable. Businesses being active throughout the EU have to be aware that the periods set forth in sec. 308 No. 1 lit. (a) and lit. (b) BGB might be shorter than in other EU jurisdictions. The draft bill does not simply transform the Directive into national law, but goes beyond the Directive’s minimum requirements in this respect.

Consequences for businesses
Upon the draft bill becoming legally effective as currently proposed, buyers of goods and services will, for future B2B transactions, be well advised to take the amendments to the BGB into account. The customer must, in the event of a dispute, prove that the agreed payment period and/or duration of a procedure of acceptance (Abnahme) as a condition for the due-date of a remuneration claim is/are not grossly unfair to the creditor even though it/they exceed(s) the statutory limit(s), which may prove difficult in practice. During contract negotiations, a customer should hence ensure sufficient documentation as regards the reasons for respective clauses. Not only the customer’s legitimate interests in, for example, a longer payment period should be documented but also the reasons based on which the counterparty accepts the inherent disadvantages as not grossly unfair. For example, if the pricing of the supplier has expressly factored in a longer payment term, such longer payment term might not be grossly unfair. In the absence of those reasons, a customer may have to either adapt its operational processes regarding acceptance (Abnahme) so that these can be completed within the newly introduced timeframes or accept that the completion of the acceptance procedure (Abnahme) will no longer be the trigger for the remuneration to be payable.

The proposed amendments to the BGB also have an impact on existing long-term contractual relationships (Dauerschuldverhältnisse). Pursuant to the proposed amendment to Article 229 Introductory Act to the German Civil Code (EGBGB), the amendments to the BGB shall also apply to those long-term contractual relationships (Dauerschuldverhältnisse) where the performance that triggers a remuneration claim occurs after June 30, 2015. Hence, not only the customer’s general terms and conditions (Allgemeine Geschäftsbedingungen) intended for use after the draft bill’s effective date may need to be revised, but also individually agreed clauses on payment periods and acceptance procedures (Abnahmen) in existing contracts.


[1] - Directive 2011/7/EU of the European Parliament and the Council of February 16, 2011 on combating late payment in commercial transactions, available at http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2011:048:0001:0010:en:PDF (last accessed April 11, 2014).
[2] - See press release of the German Federal Ministry of Justice and Consumer Protection of April 1, 2014, available at 
http://www.bmjv.de/SharedDocs/Kurzmeldungen/DE/2014/20140402_Zahlungsverzug_im_Geschaeftsverkehr.html?nn=3433226 (last accessed April 11, 2014). The draft bill is available at the same web address.
[3] - Cf. reason No. 3 of Directive 2011/7/EU and sec. A, sub-sec. I, No. 2 lit. (a) of the draft bill's explanation.
[4] - Other regulations of the draft bill include amendments to sec. 288 BGB. The interest rate for late payment will be increased from 8 percentage points to 9 percentage points above the base rate, sec. 288 para. 2 BGB. Sec. 288 para. 5 BGB introduces a claim for liquidated damages in the amount of EUR 40 so that the creditor receives compensation for its costs for recovery. Additional damages may be claimed on the basis of a contractual damage claim provided that the creditor can prove their incurrence.
[5] - See Footnote 4.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© White & Case LLP | Attorney Advertising

Written by:

White & Case LLP
Contact
more
less

White & Case LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.