Germany: 259. Reform of German Law of Obligations

Last Updated: 3 June 2002

Dr. Horst Schäfer and Michael Richter
KPMG Beiten Burkhardt GmbH, Cologne

For editorial cut-off date, disclaimer, and notice of copyright see end of this article.

1. Introduction

The Act Modernising the Law of Obligations took effect on 1 January 2002, or 102 years to the day after the entry into force of the German Civil Code, of which the law of obligations is a part. While the primary impact of the new legislation is in the area of contract law, certain changes – notably those to the statute of limitations – apply to obligations arising in tort or for other legal reasons.

The reform transposes EU guidelines on e-commerce, late payments, and the purchase of consumer goods into German law. At the same time, it modernises major parts of the German Civil Code (Bürgerliches Gesetzbuch or BGB). The primary modernisation measures are as follows:

  • Incorporation of separate protective laws into the Civil Code
  • Restructuring of the statute of limitations
  • Overhaul of breach of contract rules
  • Changes in the law governing purchase contracts and works contracts

The new law applies to obligations arising on or after 1 January 2002. Obligations arising before this date are in general governed by prior law. However, the applicability of prior law to contracts of continuing obligation (Dauerschuldverhältnisse) terminates no later than 31 December 2002.

2. Integration of consumer protection legislation

The following previously distinct laws have now been incorporated into the Civil Code:

  • Law regulating general terms and conditions; now §§ 305 ff. BGB
  • Law regulating sales in the home or in other private settings; now §§ 312 BGB
  • Law regulating e-commerce and other consumer sales without face-to-face contact, now §§ 312b ff. BGB
  • Law regulating consumer credit transactions; now §§ 491 ff. BGB
  • Law regulating residential time sharing arrangements, now §§ 481 BGB

3. Statute of limitations

3.1 Statute of limitations periods

The standard statute of limitations period of § 195 BGB has been reduced from 30 years to 3 years. Situations previously subject to special 2-year and 4-year statutes of limitations are now covered by the standard 3 year period.

As before, there are numerous exceptions to the general statute of limitations. These are now as follows:

Exceptions under §§ 196, 197 BGB

• Rights to real property

10 years

• Rights to possession

30 years

• Rights under family or inheritance law

30 years

• Rights under final court judgements

30 years

Purchase contracts: defects in thing purchased (§ 438 BGB)

• Generally:

2 years (previously 6 months)

• Cases involving deception or fraud

3 years

• Purchase of buildings or building materials

5 years

Works contracts: defects in work delivered (§ 634a BGB)

• Contracts for the manufacture, maintenance, or modification of an object and for planning or supervising such work

2 years

• Building construction and construction planning

5 years

• Otherwise

3 years

3.2 Running of statute of limitations (§ 199 BGB)

Under the general provision of § 199 BGB, the statute begins to run at the end of the year in which the claim has accrued and the obligee has knowledge of the circumstances giving rise thereto and the identity of obligor, or but for gross negligence would have had such knowledge.

§ 199 (4) BGB imposes an absolute limit for most claims of 10 years from the time the claim accrued without regard to any knowledge on the obligee's part. The absolute limit for damage claims by reason of harm to specially protected interests such as life, liberty, health, or bodily integrity is 30 years.

3.3 Restart and suspension of the statute (§§ 203, 212 BGB)

Under prior law, the statute was restarted when suit was filed on a claim or application was made for a summary payment order (Mahnbescheid). Under the new law, these actions suspend the statute, but do not restart it. Negotiations between the obligee and the obligor with respect to a claim likewise suspend the statute. The statute is restarted by:

  • admission of the claim, such as by partial payment, payment of interest, or provision of security, or by
  • judicial or government claim enforcement actions.

4. General provisions on breach of contract

The changes in this area relate largely to the theory and terminology by which the law regulates situations in which a party to a contract breaches its obligations or is prevented from performing them.

  • New § 280 BGB uses the term "breach of obligation" (Pflichtverletzung) to refer collectively to all instances of non-performance, deficient performance, and late performance of contractual obligations irrespective of fault on the part of the breaching party.
  • New §§ 281, 323 BGB preserve the traditional German principle that the primary remedy of the non-breaching party in the event of breach of obligation is to compel performance by the breaching party. The obligee may thus in general only rescind the contract, claim damages, or pursue other remedies after setting a final deadline for performance by the obligor. There are exceptions to this rule, however.
  • New § 323 BGB permits the obligee to rescind the contract by reason of its obligor's breach of obligation regardless of the obligor's legal responsibility for the circumstances that caused the breach (Vertretenmüssen). Rescission is thus possible where the breach is caused by circumstances beyond the obligor's control.
  • New § 325 BGB permits the obligee to claim damages for non-performance in addition to rescinding the contract where the obligor is legally responsible for the breach, e.g. at fault. This is essentially the same as under prior law.
  • New § 241 BGB codifies the court developed doctrine of the violation of implied duties of mutual protection between parties to a contract (positive Vertragsverletzung).
  • In conjunction with new § 241 (2) BGB, new § 311 BGB codifies the court developed doctrine of liability by reason of damage culpably inflicted on the other party in the pre-contract negotiation phase (culpa in contrahendo).
  • New § 313 BGB codifies the court developed doctrine of frustration of contract (Wegfall der Geschäftsgrundlage).
  • New § 314 BGB codifies the court developed doctrine of termination of ongoing contracts (contracts of continuing obligation) for important cause (aus wichtigem Grund).
  • New § 286 BGB regulates late performance. As before, damages may generally not be claimed for late performance per se, but only for late performance constituting default (Verzug). Default occurs when the obligee demands that the obligor perform an overdue obligation. However, the exceptions to this rule have been expanded. Notably, default on or money debts (Entgeltforderungen) occurs automatically 30 days after the due date and receipt of an invoice. Consumers must be specifically notified of this provision, however. Interest for late payment in business dealings is fixed by new § 288 BGB at 8 percentage points over the basic rate, which is adjusted twice annually under new § 247 BGB with respect to the refinancing operations of the European Central Bank. The initial basic rate is 3.62 %. For consumer transactions, the interest rate for late payment is 5 percentage points over the basic rate.

5. Purchase contracts

The distinction between purchase of fungible goods and purchase of a specific thing is eliminated in that the purchased item must be free of defects in both cases.

New § 434 states that the purchased product is defective if it lacks the agreed characteristics or is not suited to the contractually agreed purpose or to its customary purpose or lacks some feature that the purchaser is entitled to expect, for instance by reason of advertising statements or product markings. Differences in the definition and consequences of flaws in title (Rechtsmängel) as opposed to flaws in the product itself (Sachmängel) are generally eliminated under the new law.

Changes are made in the warranty obligations in the event of delivery of a defective product. § 437 BGB gives the purchaser the following remedies, which are similar to those under general contract law (sec. 4 above):

  • As under prior law, the primary remedy is subsequent performance (Nacherfüllung). This can consist in rectification of the defect or delivery of a defect-free substitute product (§ 439 BGB).
  • Rescission (§ 440 BGB).
  • Reduction in price (§ 441 BGB)
  • Damages (§ 442 BGB)

New § 474 ff. BGB shifts the burden of proof from the buyer to the seller with respect to consumer warranty claims against commercial sellers.

New § 443 BGB regulates the purchaser's rights in the event the manufacturer or seller guarantees characteristics or product durability over and above the basic warranty.

As noted above, the warranty period is extended from 6 months to 2 years.

Each seller is given a right of recourse against its respective supplier in the event the buyer asserts warranty claims against the seller. This right of recourse is available to every distributor in the chain of delivery and is subject to a special statute of limitations.

6. Works contracts

German law distinguishes between purchase contracts, where the seller is required to deliver the purchased item, and works contracts, where the contractor is required to achieve a specific contractually defined result, e.g. by constructing a building, modifying a machine, or designing a computer programme for a specific purpose. The changes in the law governing works contracts include the following:

  • The concept of a defective work under works contract law has been aligned with that of a defective product under purchase contract law.
  • The customer's rights in the event of defects in the commissioned work have been aligned with the buyer's rights in the event of a defective product under purchase contract law (subsequent performance, self-rectification, rescission or reduction in contract price, damages or reimbursement for useless expenditures).
  • See sec. 3 above regarding the statute of limitations.

7. E-Commerce

New § 312e BGB implements the EU E-Commerce Directive (2000/31/EC) in conjunction with the revised version of the German electronic signature law. Businesses that offer to enter into contracts by electronic means must configure their systems to meet certain requirements so that the counterparty is aware at what stage a contract is concluded and can cancel the transaction or make corrections in the agreed terms prior to crossing this threshold. Certain information must be provided to the counterparty and receipt of the counterparty's order must be immediately confirmed by e-mail. Breach of these obligations can render the business liable in damages and/or permit the customer to void the contract.

8. Concluding remarks

All businesses should review their contracting procedures in light of the new legislation. General terms and conditions should be a particular area of focus. This article sketches the broad contours of the voluminous new legislation and is not intended as a substitute for legal counsel.

Editorial cut-off date: 20 March 2002

Disclaimer and notice of copyright

This article treats the subjects covered in condensed form. It is intended to provide a general guide to the subject matter and should not be relied on as a basis for business decisions. Specialist advice must be sought with respect to your individual circumstances. KPMG Germany in particular insists that the tax law and other sources on which the article is based be consulted in the original, whether or not such sources are named in the article. Please note that the article is current only through its editorial cut-off date shown immediately above (not to be confused with the later date as of which the article was placed online – the date appearing at the article's outset). Related developments subsequent to the editorial cut-off are not necessarily reported on in later articles. Please note as well that later versions of this article or other articles on related topics may have since appeared on this database or elsewhere and should also be searched for and consulted. While KPMG Germany's articles are carefully reviewed, it can accept no responsibility in the event of any inaccuracy or omission. Any claims nevertheless raised against KPMG Germany on the basis of this article are subject to German substantive law and, to the extent permissible thereunder, to the exclusive jurisdiction of the courts in Frankfurt am Main, Germany. This article is the intellectual property of KPMG Germany (KPMG Deutsche Treuhand-Gesellschaft AG). No use of or quotation from the article is permitted without full attribution to KPMG Germany and the article's stated author(s), if any. Distribution to third persons is prohibited without the express written consent of KPMG Germany in advance.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.