In implementing the new Sale of Goods Directive 2019/771/EU and the Digital Content Directive 2019/770/EU into national law, in June 2021 the legislator passed
- the Act regulating the sale of goods with digital elements and other aspects of the contract of sale, and
- the Act transposing the Directive on certain aspects of contract law relating to the provision of digital content and digital services.
Since 01.01.2022, this largest change to general civil law since the major reform of the law of obligations in 2002 has been in force and applies to contracts concluded since that date.
The purpose of the new regulation was to harmonise the law on sales within the European Union and to adapt it to the new digital age, while at the same time increasing the level of consumer protection. Due to the rapidly advancing technological development in many areas, the amendment was necessary. As these were so-called fully harmonising directives, the European Member States had no leeway in the implementation in order to avoid different levels of protection in the states.
In the following, we would like to give you an overview of some of the essential changes:
The amendment of the concept of material defect in section 434 of the German Civil Code (BGB)
According to section 434 BGB, which determines when a sold object is defective, the subjective concept of defect applied until 31.12.2021. According to this, a defect existed if the object of purchase did not have the agreed quality. If there was no agreement, the assessment of a defect depended on whether the object was suitable for the use stipulated in the contract and otherwise whether it was suitable for common use and had the quality customary for corresponding objects.
This graduated concept of defects has given way to a cumulative concept of defects:
According to the reformulated section 434 BGB, the item is free of material defects if it cumulatively meets both the subjective requirements, the objective requirements and the assembly requirements at the time of transfer of risk.
The question of when an item meets the subjective requirements is governed by the new version of section 434 (2) BGB. According to this, it is important that the item has the agreed quality, is suitable for the use stipulated in the contract and is handed over with the agreed accessories and the agreed instructions, including assembly and installation instructions. Unless otherwise effectively agreed, the item complies with the objective requirements pursuant to section 434 (3) BGB if it is suitable for common use, has a quality that is customary for items of the same kind and that the buyer can expect, corresponds to the quality of a sample or specimen that the seller provided to the buyer before the conclusion of the contract and is handed over with the accessories including packaging, assembly or installation instructions and other instructions that the buyer can expect to receive.
Thus, while under the old legal situation there was no defect if the sold item only had the agreed quality, today the objective requirements are additionally relevant, unless otherwise agreed. In this respect, considerable requirements apply to dealings with consumers: Indeed, the requirements under section 434 (3) BGB can only be deviated from if the consumer was specifically informed before submitting his contractual declaration that a certain characteristic of the goods deviated from the objective requirements and the deviation was expressly and separately agreed in the contract.
Inclusion of new categories of terms and contracts
In times of increasing digitalisation, more and more products are becoming “smart”. Without the corresponding software and online connection, some of these can no longer be used at all. It was therefore time to make the German Civil Code fit for the future in this respect as well.
A whole new category has therefore found its way into the BGB: the contract of sale of goods with digital elements, such as the purchase of a games console. According to section 327a (3) BGB, goods with digital elements are those that contain or are connected to digital products in such a way that the goods cannot fulfil their functions without these digital products. The term “digital products” is also new and defined in section 327 (1) BGB as the provision of digital content or digital services. Digital content, in turn, is data that is created and provided in digital form. 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 by the consumer or by other users of the relevant service.
In future, for example, a separate concept of material defect according to section 475b BGB (deviating from section 434 BGB) will apply to contracts for the sale of consumer goods with digital elements. In light of this, whether the delivered item is free of defects is also determined by whether the consumer is provided with updates that are necessary to maintain the conformity of the goods with the contract during the period that he can expect due to the nature and purpose of the goods and their digital elements and taking into account the circumstances and the nature of the contract, and whether the consumer is informed about these updates. It follows that – unlike under the old legal situation – goods delivered for the first time under German law can also become defective subsequently.
Obligation to update
For companies, the regulation just described results in an obligation to update. However, the legislator has not specified how long this update obligation applies. Instead, it is abstractly based on a period of time that the consumer can expect due to the type and purpose of the goods and their digital elements as well as taking into account the circumstances and the type of contract.
In this respect, businesses therefore face considerable legal uncertainty. Case law will only in the future be able to develop criteria to further define the period owed. Until then, businesses should proceed cautiously and rather assume longer periods, but at least two years.
Extension of consumer protection
With the exception of the above described obligation to update, the principle applies that a defect must already be present at the time of the transfer of risk. The legislator had already seen earlier that it could be very difficult for consumers to prove that a defect that only became apparent after some time was already present or at least “inherent” in the product at the time of the transfer of risk. For this reason, there was already a reversal of the burden of proof before the current amendment to the law, according to which it was assumed that a defect was already present at the time of the transfer of risk.
While it used to be six months from the transfer of risk in purchase contracts with consumers in which it was legally presumed that a defect was already present at the transfer of risk, the duration of this reversal of the burden of proof has now been extended to one year with the new legal regulation in section 477 BGB. Only in the case of contracts for the sale of animals does the former period of six months continue to apply.
In sections 475d and 475e BGB, the legislator has also extended the conditions for rescission in favour of consumers and adjusted the regulations on the statute of limitations, also to the detriment of businesses.
Payment with cryptos or personal data
The legislator has recognised that the consideration to be provided by the consumer for a (often digital) service does not necessarily have to be a payment. Through Facebook, Instagram & Co. we have learned that data also has a significant value for companies.
Accordingly, section 312 (2) BGB (likewise section 327 (3) BGB) now orders that the regulations on consumer contracts are also to be applied in such cases in which the consumer provides or undertakes to provide personal data to the entrepreneur – instead of payment. This does not apply only if the trader processes the personal data provided by the consumer exclusively to fulfil his obligation to perform or legal requirements imposed on him and does not process them for any other purpose.
Section 327 (1) sentence 2 BGB further provides that a payment to a trader may be “also a digital representation of a value”. Although this term is not defined by the legislator, electronic vouchers, cryptocurrencies, such as bitcoin, or so-called tokens are likely to be encompassed by this.