I. Introduction

With the Directive on certain aspects concerning contracts for the supply of digital content and digital services and the Directive on certain aspects concerning contracts for the sale of goods, the German legislator had to implement two EU Directives into German contract law at the beginning of 2022. With the Directives, the EU pursued the goal of full harmonization, so that as far as possible the same standards apply throughout the EU. The most significant changes to the German Civil Code (Bürgerliches Gesetzbuch – BGB) are presented below.

II. Innovations in sales law

1. Material defect

§ 434 BGB, which applies both to business-to-business transactions and to transactions involving consumers, is revised as part of the new legislation. This amendment involves a partial shift away from the subjective concept of defect. In the future, more importance will be attached to the objective characteristics of an item, as the concept of defect will be divided into three cumulative requirements. These are the subjectively agreed requirements, the objectively attributed characteristics of an item, and the supplier’s installation obligations.
The subjective characteristics include, comparable to the previous legal situation, the agreed quality, the use presupposed in the contract and the already known obligation to provide the agreed installation and assembly instructions. In addition to the usual requirements for quality and quantity, the terms of compatibility and interoperability, which are of interest with regard to the “Internet of Things”, have also been included in the wording of the law. This refers to the ability of the goods to function with other hardware and software. This should not change too much in practice; the question of the existence of an agreement on quality could, at most, lead to a softening of the case law of the Federal Court of Justice (Bundesgerichtshof – BGH).
§ 434 para. 3 BGB (new version) lists the objective characteristics to be fulfilled in addition to the subjective requirements. The suitability for ordinary use and the usual condition correspond to the known criteria, any public statements, samples and specimens as well as the durability of the products are explicitly included in the assessment.
The possibility of concluding a negative quality agreement to the effect that an item does not have the usual or objectively expected quality will therefore be of particular importance, however, with higher hurdles in the case of the sale of consumer goods.

2. Update obligation

Further innovations are found in § 475b BGB (new verision), which, however, only applies to goods with digital elements in the case of a sale of consumer goods. Goods with digital elements are essentially those goods that contain digital products or are connected to them in such a way that the goods cannot fulfill their functions without these digital products. Digital products, in turn, are digital content, i.e., data provided in digital form, on the one hand, and digital services on the other, according to § 327 para. 1 BGB (new version). Digital services enable the consumer (a) to create, process or store data in digital form or (b) to share or otherwise interact with data uploaded or created in digital form by the consumer or by other users of the relevant service.
According to the new § 475b BGB, the seller of goods with digital elements, such as smart TVs, is subject to an update obligation. The individually agreed and objectively expected updates are a prerequisite to conform with the contract. However, it is necessary to differentiate more precisely, as this does not create an obligation to constantly provide the latest software, but only such updates as are necessary to maintain functionality and security (§ 475b para. 4 no. 2 BGB (new version)). A special feature arises from the fact that this update obligation also exists after the transfer of risk and thus represents an exception to the principle that absence of defects is to be assessed precisely (and only) at this point in time.
An update obligation applies for the relevant period agreed in the contract. However, the objective update obligation must also be taken into account, which depends on the type and purpose of the goods, advertising statements, materials and the purchase price in each individual case. The length of the update obligation is therefore still unclear.
Furthermore, it is the retailer who is obligated to update the software, but as a rule he cannot effectively fulfill this obligation. It remains to be seen how this will be handled in practice. For retailers, it will probably be necessary to contractually ensure with the manufacturer that the latter assumes the obligation (possibly also via an “intermediary” wholesaler).

3. Reversal of burden of proof

The already known reversal of the burden of proof for purchases of consumer goods for a period of six months is extended to one year in § 477 para. 1 BGB (new version). This means that if a defect becomes apparent within the first year after the transfer of risk, it is assumed that the defect already existed at the time of the transfer of risk. In the case of the supply of digital content with an update obligation, the reversal of the burden of proof applies for the entire agreed period, but at least for two years.

4. Subsequent performance

The right of subsequent performance under § 439 BGB (new version) in relation to the consumer remains essentially the same with the exception that § 475 BGB has been amended to the effect that the seller is now also entitled to a so-called right of total refusal (Totalverweigerungsrecht) in the event of disproportionality, i.e. he can refuse both types of subsequent performance.

5. Supplier`s recourse

The amendments regarding subsequent performance are adjusted to the effect that the seller now also has a right of recourse against the supplier for the costs of taking back the goods in accordance with § 439 (6) BGB (new version). The absolute limitation period of 5 years regulated in § 445b para 2 BGB (old version) has been deleted without replacement. This is likely to be mainly due to the update obligation, as this can theoretically exist for much longer.
The update obligation also has further effects on supplier recourse. According to § 445a BGB (new version), the seller can also claim expenses incurred due to a breach of an objective update obligation against its supplier. However, this possibility does not apply in the case of purely subjective update obligations agreed between the buyer and seller.

III. Consumer contracts for digital products

The second set of topics covered by the two EU Directives includes new regulations in the general law of obligations on “contracts for digital content” with §§ 327 – 327k BGB (new version). According to § 327 para. 1 BGB (new version), this means that the new regulations apply regardless of the type of contract, i.e. regardless of whether it is a contract for services or a contract for work and services, for example. The prerequisite is that the contracts are consumer contracts for the supply of digital products (see above under II.2.) and the consumer is obligated to pay a price (for example, social media or streaming services). Unlike the new rules of the law on the sale of goods with digital elements, this includes contracts for the sale of hardware that merely serve to transfer digital products (for example, USB sticks).

1. Personal data as remuneration

The wording in § 327 para. 1 BGB (new version), according to which a price must be paid, means that not only money is considered remuneration, but also the digital representation of a value (e.g. Bitcoins) as well as the provision of personal data. Personal data is eventually only considered as remuneration if it is provided to the entrepreneur for commercial use. If the entrepreneur needs the data in order to be able to provide the digital products at all or to comply with legal requirements, this data does not fall under the concept of remuneration.

2. Warranty rights

The digital products must also be provided free of defects. This separate warranty right is governed by §§ 327d et seq. BGB (new version), which are, however, strongly oriented to the standards under sales law. § 327e BGB (new version) also includes subjective and objective requirements combined with integration requirements. This may also include any accessories or after-sales service. In this case, too, a deviation from the objective requirements pursuant to § 327h BGB (new version) is possible after entering into a different agreement.
If a product turns out to be defective, §§ 327l to 327n BGB (new version) regulate the familiar rights to subsequent performance, price reduction, termination of the contract and damages. If the entrepreneur does not fulfill his obligation to provide the goods without delay even after being requested to do so by the consumer, the consumer may terminate the contract pursuant to § 327c para. 1 BGB (new version). If the supply is impossible, the remaining provisions of the general law of obligations apply.

3. Update obligation and reversal of burden of proof

In the case of contracts for digital products, the entrepreneur also has an update obligation in accordance with § 327f BGB (new version). This also concerns the maintenance of contractual compliance and security updates. The obligation applies both in the case of permanent supply for the agreed period and in the case of one-time supply for a period that the consumer may expect.
§ 327k BGB (new version) contains a reversal of the burden of proof similar to that of § 477 BGB (new version). An exception to the presumption exists if the consumer’s digital environment is incompatible or if this cannot be determined due to the consumer’s lack of cooperation.

4. Entrepreneurial recourse

In the case of contracts between entrepreneurs for the supply of digital products pursuant to §§ 327 et seq. BGB (new version), there is the possibility of recourse against entrepreneurs according to §§ 327t and 327u BGB (new version). If an entrepreneur (retailer, supplier, etc.) is obligated to pay expenses to a consumer due to a failure to provide the product, defective performance, or violation of the update obligation, he can have these expenses reimbursed by his contractual partner if the latter is responsible for them. This relationship is also subject to the reversal of the burden of proof under § 327k BGB (new version).

IV. Conclusion

The innovations are likely to be of interest to a wide range of market participants. For companies operating internationally, the intended total harmonization may result in increased legal certainty. Changes for all retailers and manufacturers are likely to result primarily from the more objective definition of defects in sales law. For this reason alone, it is worth taking a look at one’s own general terms and conditions to see whether they are still up to date in view of the changed legal situation. This applies all the more to companies dealing with “smart” products. There is likely to be a greater need for adaptation as a result of §§ 327 et seq. BGB (new version) for companies offering digital products in the B2C sector, particularly with regard to the expanded concept of remuneration. Overall, however, many questions remain unanswered, which will only be clarified in the future.