Fair Consumer Contracts Act

Since August 17, 2021, the Fair Consumer Contracts Act has been adopted, bringing with it a strengthening of consumer rights and correspondingly extended obligations for businesses.While certain new provisions will only come into force at different points of time in 2022, the other amendments will already be applicable from 1 October 2021.

The Act is also regarded as a reaction to the increasing digitalisation of business transactions. In particular, the amendments will have an impact on the drafting of contracts within the scope of sales contracts, framework supply agreements, service and work contracts, and general terms and conditions.

It should be noted that this Act also pertains to businesses that apply foreign law in their contracts or general terms and conditions by means of a “choice of law” clause. The logic behind this is that the legally embedded level of consumer protection should not be lowered by the “flight into another law”. As such, even in the instance of choosing foreign law, statutory regulations in favour of consumers in Germany are mandatory.

On the specific content of the Act:

I. Invalidity of prohibitions of assignment of monetary claims, Section 308 No. 9 of the German Civil Code (BGB)

The newly introduced Section 308 No. 9 of the German Civil Code (BGB), which will come into force in March 2022, will render agreements that exclude or restrict the assignment of consumer monetary claims as invalid. Furthermore, this shall also apply to other consumer claims and rights, provided that the business has no protectable interest, or the legitimate interest of the consumer takes precedence. Consumers should be able to sell their monetary claims to third parties and thus facilitate the private enforcement of their rights (e.g., claims for damages or repayment) with the help of service providers.

II. Amendment of the requirements for automatic contract renewal clauses, Section 309 No. 9 b) of the German Civil Code (BGB)

The Fair Consumer Contracts Act also restricts the possibility of automatic contract renewal clauses based on general terms and conditions. In the future, contracts that have as their object the regular provision of goods or services and work may be terminated with a notice period of no more than one month before the expiry of the contract term. However, the previous notice period of three months will continue to apply to contractual obligations that came into existence or will enter into existence before the regulation comes into force on 1 March 2022. In the case of contractual relationships that come into existence before this date but are subsequently extended, the transitional provision is likely to be based on the initial conclusion of the contract.

In addition, a tacit extension of such a contract for a further minimum term is prohibited. The extension can now only be for an indefinite period and the user’s contractual partner must be given the option to terminate the contract with one month’s notice. The intention of this amendment is to make it easier for consumers to switch to another provider and to thereby promote competition.

Contracts for the supply of goods sold together and insurance contracts are legally exempt from these provisions.

III. Introduction of a termination button to simplify the termination of continuing obligations, Section 312k of the German Civil Code (BGB)

In order to prevent complicated termination processes between consumers and businesses, from 1 July 2022, businesses will be obliged to introduce a termination button on their homepage for continuing obligations. The obligation applies to businesses who enable the conclusion of the same contract in e-commerce at the time of termination, and also applies to contracts entered into before this date. Consumers must be able to declare both ordinary and extraordinary terminations via this button.

For ordering transactions in e-commerce, the “order button” is already mandatory pursuant to Section 312j (3) sentence 2 of the German Civil Code (BGB). A corresponding button used for termination must be unambiguously labelled, which should enable the consumer to terminate a continuing obligation with just a few clicks. In addition, an electronic confirmation of termination should provide certainty about the receipt of the termination. If the business fails to comply with its obligation to provide a corresponding button, the consumer is granted a right to terminate the continuing obligation without notice.

IV. Strengthening of consumer rights in the case of unauthorised telephone advertising, Section 7a of the German Act against Unfair Competition (UWG)

From as early as 1 October 2021, telephone advertising to consumers is only permissible if the consumer’s express consent has been adequately documented. A consultation procedure is currently underway in which the Federal Network Agency is giving all interested parties the opportunity to comment in writing on the draft version of its interpretative guidance on appropriate consent documentation.

The documentation must be retained for 5 years. In the event of violations of the documentation obligation, the advertiser must expect fines of up to EUR 50,000.00.