Act on combating late payment in commercial transactions in force – New requirements for the agreement of payment deadlines

On 29.07.2014, the new Act on Combating Late Payment in Commercial Transactions came into force. It applies for all contracts and general terms and conditions entered into as of this date. Some continuous obligations entered into prior to this date, which can also include master agreements, may also need to be amended. The German implementing act, which is nearly one and a half years overdue, brings numerous changes and detailed regulations in connection with payment, verification and acceptance deadlines. Despite detailed and drawn-out discussions during the legislative procedure, unfortunately this new legislation does not above all for the formulation of payment deadlines in contracts and general terms and conditions, in particular procurement and purchasing terms, create the legal certainty required for commercial transactions:

According to the new regulation in the revised version of Section 271a (1) of the German Civil Code (BGB), payment deadlines of more than sixty days are “only valid if they are expressly agreed and are not grossly unreasonable with respect to the interests of the creditor”. Neither the Director nor the implementing act state exactly what is meant with “grossly unreasonable” and case law which is very specific to the individual case is therefore to be expected in future.

The term “expressly agreed” is not defined more precisely either. It is, however, specifically being used with increasing frequency in European legislation and will probably have to be interpreted in the context of the new regulation of late payment autonomously, i.e. uniformly across the EU. Due to the implementation of the Consumer Contracts Directive on 13.06.2014, this requirement can now, for example, be found in Sections 312 a (3) sentence 1, 356 (4), 357 (3) and (8) of the German Civil Code. Further examples are Sections 247 (2), 244 (1), 700 (2) and 1059 a No. 1 of the German Civil Code. With respect to Sec. 247 (2) of the German Civil Code, the German Federal Court of Justice (BGH) already emphasized in a ruling it handed down in the 1980s that the requirement terms have to be expressly agreed has a warning function and the protected consumer must “be given completely clarity with respect to the legal situation”. “Expressly” therefore means more than just “not implied”, particularly since pre-formulated general terms and conditions pursuant to Sec. 305 (2) of the German Civil Code ultimately also become binding for the contractual partner even without any contractual intention on the part of the contractual partner in relation to the individual clause. An intentional declaration of both contractual parties, which can also in principle be included in general terms and conditions if it is clearly visible (but may not be “hidden” there), will probably be sufficient but necessary.

The new act (unlike the drafts discussed in the last legislative period) now explicitly states in the revised version of Sec. 308 No. 1a of the German Civil Code that payment deadlines in general terms and conditions of more than thirty days are “in cases of doubt” invalid. Pursuant to the revised version of Sec. 310 (1) of the German Civil Code, this prohibition of such clauses (also) applies to commercial business transactions. This clarification, however, only apparently removes the basis of the discussion to date on the model function of the revised version of Sec. 271a of the German Civil Code with its sixty-day deadline. It therefore still remains unclear under which circumstances payment deadlines of between thirty-one and sixty days may be permissible:

In light of the legislative evaluation of the revised version of Sec. 271a of the German Civil Code, it could possibly be argued in the case of deadlines in general terms and conditions (i.e. which have been unilaterally pre-formulated) of between thirty-one and sixty days in the context of the evaluation of reasonableness pursuant to Sec. 308 No. 1a of the German Civil Code that the assumption of invalidity does not apply if the contractual partner of the party using the general terms and conditions expressly in the meaning of the revised version of Sec. 271a of the German Civil Code, i.e. consciously, confirms the clause, for example as part of a master agreement. In this respect, a separate reference in the general terms and conditions to the longer payment deadline should in principle be sufficient. A separate signature of the contractual partner is, however, recommended for evidence purposes. Based on the case law regarding payment deadlines in general terms and conditions (to date the general requirement of Sec. 307 of the German Civil Code was relevant), the decisive factor is not how such deadline are incorporated into general terms and conditions or that the terms are expressly agreed, but that there also has to be an objective reason for deviating from the statutory principle. What reasons can come into consideration here is just as unclear as the term “grossly unreasonable” in the revised version of Sec. 271a of the German Civil Code. The assumption of invalidity will probably, however, then remain if the payment deadline which is longer than thirty days is “hidden” among the many provi-sions of classic general terms and conditions and only becomes part of the contract subject to the provisions facilitating inclusion contained in Sec. 305 (2) of the German Civil Code (i.e. acknowledgement by the contractual partner of the terms and conditions with the payment deadline is possible but not necessary).

It remains to be seen how the legal situation will develop in case law and in the literature. Any party using general terms and conditions as a debtor (i.e. in particular in the context of procurement), is, as has already been the case to date, only certainly on the safe side if payment deadlines of a maximum of thirty days are used.