New BGB contract law - focus on goods with digital elements and digital services

The advancing digitisation in all areas of our society is increasingly also forcing legislators to make adjustments to account for digitisation.

In this context, two federal laws were promulgated on 30 June 2021, which provide in particular for significant amendments to the German Civil Code (Bürgerliches Gesetzbuch - "BGB"). The amendments will come into force on 1 January 2022. With these laws, Germany is implementing the European Directive on certain aspects concerning contracts for the sale of goods (“Sale of Goods Directive” (EU) 2019/771) and the Directive on certain aspects concerning contracts for the supply of digital content and digital services (“Digital Content Directive” (EU) 2019/770). Since the reform of the law of obligations in 2002, the upcoming modernisation of (consumer) contract law is doubtlessly the most comprehensive reform in this area. While consumer protection is being strengthened on the one hand, companies will face new obligations. It is therefore essential that companies - especially those in the digital sector - prepare themselves for the legislative changes. Standard contracts and general terms and conditions have to be adapted to the new requirements. In case of infringements, there is a particular risk of being issued a warning by consumer protection associations.

Transposition of European directives

Digital services are becoming increasingly important as an economic factor and are particularly suited to global trade. Until now, German consumer contract law has not contained any specific provisions on contracts concerning digital products. As some EU member states have already introduced corresponding regulations, both the Sale of Goods Directive and the Digital Content Directive were enacted in 2019. Both directives aim to fully harmonise contract law within the EU with regard to digital services and to counteract legal fragmentation within the European Union.

The requirements of the Sale of Goods Directive replace the Consumer Sales Directive ((EU) 2011/83) and are intended to ensure the functioning of the digital single market while maintaining a high level of consumer protection by setting uniform requirements for consumer contracts concerning goods with digital elements (e.g. cloud connection for game consoles, apps for using smart watches). The Digital Content Directive is in supplementation of the Sale of Goods Directive and concretely standardises consumer contracts on digital content (e.g. video games, audio files) and services (e.g. cloud and streaming services).

Overview of the main changes

New definition of material defects

First of all, the introduction of a new definition of material defects in the law on sales contracts is crucial. The seller still has to provide the buyer with the item free of material and legal defects. Until now, the law has stipulated the precedence of the so-called subjective definition of a defect. Accordingly, the item is free of material defects if it has the agreed quality at the time of the transfer of risk. Less subjective circumstances only become progressively relevant when the item’s quality has not been agreed.

In this absolute form, this will certainly no longer apply to sales contracts concluded on or after 1 January 2022. According to the new § 434 (1) BGB, the item is free of material defects if it meets the subjective requirements, the objective requirements and the assembly requirements at the time of the transfer of risk. The regulation clearly defines what is to be understood by these requirements. In summary, it is no longer sufficient that the item has the agreed quality, as this is only one of several requirements to be met. In addition, the item must, among other things, be suitable for the contractually required use and for normal use, and must have the usual quality for items of the same type and which can be expected by the buyer. In the future, therefore, an item which has the agreed quality can still be defective.

Requirements for goods with digital elements

For consumer sales contracts for goods with digital elements, where the entrepreneur undertakes to provide the digital elements himself or through a third party, the newly introduced §§ 475b, 475c and 475e BGB additionally apply. Goods with digital elements are goods which contain or are connected to digital products in such a way that the goods cannot fulfil their functions without these digital products. According to § 475b BGB, these goods are also defective if the updates agreed in the sales contract for the digital elements are not provided during the relevant period as contractually agreed. In addition, the seller must also provide the updates necessary to maintain the goods in the contractually conform condition during the period in which the consumer can expect such updates because of the nature and purpose of the goods in particular. § 475e BGB contains special provisions for the limitation period. Thus, claims for breaching the update obligation do not become time-barred before the expiry of twelve months after the end of the term of the update obligation. Deviating agreements are only possible in accordance with § 476 BGB, which has also been amended.

Reversal of the burden of proof

Not just sales contracts for goods with digital elements, but all sales contracts with consumers are affected by the amendment of § 477 BGB. For future sales contracts, the period for reversing the burden of proof is generally being increased from six months to one year. If a defect becomes apparent within one year of the transfer of risk, it will be assumed that the goods were already defective at the time of the transfer of risk. If, in the case of goods with digital elements, the permanent provision of the digital elements is agreed in the contract of sale, the reversal of the burden of proof may apply even longer.

Consumer contracts on digital content and digital services

Another change - independent of the law on sales - is the introduction of §§ 327 et seqq. BGB for consumer contracts on the provision of digital products. The law defines digital products as both digital content and digital services. Digital content is data that is created and delivered in digital form. Digital services are, for example, services that enable the consumer to create, process, store or access data in digital form. For this type of contract, the new §§ 327e et seqq. BGB provide for an independent warranty law regime with independent regulations - also with regard to the statute of limitations. Here as well, the entrepreneur is also obliged to update the digital products. Deviating agreements are only permissible within the legally defined framework.

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