The German Civil Code (BGB) has been getting increasingly
complex for years, in part due to several EU Directives and in part
due to domestic legislative changes. This development constantly
creates new challenges for companies and might lead to an increased
application of the "United Nations Convention on Contracts for
the International Sale of Goods" (CISG).
The CISG is an international law for trading of goods, which
contains its own legal system of rights and obligations for buyers
and sellers. It is recognized in 97 Contracting States, includ-ing
most European nations and many others like the USA, China or Japan.
In theory, the CISG would apply to most cross-border commercial
contracts for the sale of goods, as long as the contract is subject
to the law of one of the Contracting States. In fact, many
contracts exclude the application of the CISG, because companies
and their legal advisors favour their familiar domestic civil
codes.
Regarding the German jurisdiction, it might be worth to
reconsider. The CISG is easy to un-derstand, less complex than the
German Civil Code and allows greater freedom of contract.
In the past years more and more provisions have been added to the
German Civil Code, e.g. provisions on the sale of consumer goods or
provisions on recourse. "Recourse" means a sellers claim
against his supplier. It differs partially from general warranty
claims that the seller might be entitled to and only applies to
contracts on certain goods, such as consumer goods or newly
manufactured things.
As of January 1st 2022 the Directive (EU) 2019/770 ("Digital Content Directive") and the Di-rective (EU) 2019/771 ("European Sales of Goods Directive") have been implemented into domestic law. Since then, the German Civil Code also contains special provisions on the sale of digital products and the sale of goods with digital elements, each with their own pro-visions on warranty and recourse. The changes of 2022 have also abolished the fixed limita-tion period for recourse. And the changes have extended the period of shifted burden of proof, regarding defects of consumer goods, up to one year. Many of these new provisions are mandatory rules, that can not be modified by contract.
In contrast, the CISG does not differentiate between different types of products and only con-tains one set of provisions. It only stipulates general warranty rights, like claims for damages, reduction of price or declaring the contract avoided. These rights are time-barred after a peri-od of two years. Furthermore, most provisions of the CISG are default rules and subject to modification by the contracting parties. Overall the CISG is subject to less legislative change compared to the German Civil Code.
In conclusion, the CISG might be a suitable alternative for cross-border sales contracts. It enables contracting parties to agree on terms and conditions that would be invalid under domestic German law. Finally, because the CISG is recognized in many countries, it allows for the use of the same contract template for business dealings in different countries.
Originally Published by Unyer GLOBAL ADVISORS
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.