Statutory Law in Germany

Germany is a statute law country. Almost every part of German private and public law is based on statutes. Based on a large number of statutes in private law German business law covers a part of

• the Civil Code (Buergerliches Gesetzbuch - BGB),
• the Commercial Code (Handelsgesetzbuch - HGB) as well as the
• UN Convention for the International Sale of Goods (CISG)

Only a solid individual agreement can prevail these legal stipulations. In most business cases, where the parties did not agree on an applicable law, the following convention will govern the cases:

• United Nations Convention on Contracts for the International Sale of Goods (CISG)
• Member Status of CISG

More than 63 States have adopted the CISG as national law.

Germany has become a member state of the United Nations Convention on Contracts for the International Sale of Goods / abbreviation CISG. Declarations and reservations have not been declared, but Germany has, however, filed minor remarks on the CISG.

The UN Convention thus is German domestic law and replaces all national legal regulations regarding sales of goods.

Trade and Sales Transactions ruled by CISG

CISG applies only to commercial sales transactions between merchants within the scope of contracts for the international sale of goods:

• The deal must be an international sale,
• The buyer and seller must have their places of business in different states.

Additionally, either:

• Both of the states must be contracting parties to the convention, or
• The rules of private international law must lead to the application of the law of a Contracting State.

Opting in and out:

• The parties to a contract may exclude or modify the CISG’s application by a "choice of law" clause.
• Whether parties can exclude a domestic law and adopt the CISG in its place depends on the rules of the state where the case is heard.

CISG is part of the domestic/national German Law

During negotiations, when drafting the contract or by ordering goods, it is mostly not taken into consideration by the parties that the United Nations Convention on the Sale of Goods (CISG) is automatically applicable regarding most of the foreign contractual partners.

A major part of the contracts with German business partners therefore are exclusively governed by CISG. It has to be pointed out that when the parties choose the law of a Contracting State (in the case at hand: Germany) as the law governing the contract, CISG is applicable even if no express reference is made by the parties to the application of CISG. It has further to be noted that the choice of the law of a Contracting State does not in itself amount to an implied exclusion of CISG, which is part of the domestic law of that State.

It is estimated that nearly the overall German export-business and approximately  3/4 of all import cases to Germany are ruled by the CISG.

If applicable to a given trade transaction, the CISG supplies rules that govern contract formation and set forth the rights and obligations of the buyer and seller.  The CISG provides, however, that express contractual provisions take precedence over the default provisions of the CISG. Thus, contracting parties remain free to specify whatever law or terms they wish to apply to their transaction, and may exclude altogether the application of the CISG to their contractual relationship.

If the parties are not aware of the validity of CISG, judicial and economic disadvantages may arise. In some cases the parties are unaware of the specific rights and legal consequences of CISG and as a result do not take appropriate action. This legal uncertainty needs urgently to be addressed in negotiations prior to the conclusion of the contract.

Domestic German Civil Law is applicable

If CISG is excluded by the parties or not applicable and German law is chosen to be the governing law of the contractual relationship, then general principles of German domestic civil law will apply.

The various types of trade contracts are classed under different agreement categories, each of which carries specific rights and legal consequences under the German Civil Code (Buergerliches Gesetzbuch - the “Code”) and the German Trade and Commercial Code (Handelsgesetzbuch).. Consequently, the parties’ rights and obligations under the agreement will be determined according to the type of contractual agreement entered into. The legal standing of the parties will depend upon whether or not the terms and conditions provide a remedy for a specific legal issue.

Additionally German statute law regulates the interests of the parties where their rights and obligations have not been expressly set out by the contract. Indeed, depending on the interests of the parties, it may be more advantageous to rely upon German civil law, rather than contractual terms, to resolve legal issues. As a result, agreements governed by German law often tend to provide fewer contractual rights and obligations and astonishes foreign  business partners.

This divergence in Germany’s legal treatment of agreements has effects on the contract management after the conclusion of an agreement. Specialised experienced legal advice upon local law is often essential especially for contractual partners who are not familiar with the German legal system.

Other laws than German law applicable in the debt collection case

There may be cases in which other laws than German domestic law (or integrated laws therein) may expressively be agreed upon by the contractual parties or, according to the German international private law, foreign law might be applicable.

If foreign law governs the case it is of utmost importance to inform the German court carefully and completely about any aspects of this foreign law which are relevant in the respective case. Foreign law has to be applied officially but foreign law is characterised to be a fact and therefore German judges obtain evidence with regard to foreign law. One can avoid that by producing documents and affidavits with regard to the foreign law.

Important: Please note that the legal professional liability of the law office does not include questions concerning laws other than German and/or European Law. This will be clearly stated in an agreement on the restriction of professional liability that has to be signed by the client.