Contract law lawyer – legal advice

Contract law – What is regulated by contract law and what exactly is meant by it? Legal norms that regulate the formation (conclusion of a contract), the execution, the legal consequences and the breach of contracts are part of the topic of contract law. However, individual questions arise in particular in contract law in individual cases, such as:

• To what extent is it possible to rescind a legal transaction?
• What procedures are there to terminate a legally binding contract?
• What should be done if the other party to the contract does not pay?
• Are there any restrictions on the ability of the contracting parties to agree and what rules must they follow?
• How important is it to include terms and conditions?
• What are the options for agreement between the contracting parties?
• Do general terms and conditions have to be used in every transaction?
• Under what circumstances can a trader use a commercial agent?

All these questions on contract law are answered by the lawyers of the Herfurtner law firm on this page. We give you a clear overview of the topic and give you various examples in which contract law applies.

Topics in our legal advice

Would you like legal advice? Feel free to contact us at our offices in Munich, Hamburg or Frankfurt am Main. We are also available via video conference in Cologne, Berlin, Düsseldorf and Stuttgart.

Table of contents

1. Contract Law – Definition
2. International Contract Law
3. Threats and duress – Avoidance of contracts
4. A Commercial Agent – Tasks and Function
5. General terms and conditions & terms of use
6. Insight into different types of contracts
7. Difference between employment contracts and service contracts
8. Contracts: Letting and leasing commercial property
9. Contract law – a conclusion
10. Lawyer Contract Law

Contract law – definition of terms

Contract law is complex and covers many different laws and regulations. If an entrepreneur has a question about contract law, he should already know where to turn.

The term contract law refers to legal regulations in the formation and effect of private law contracts. It is also referred to as general contract law.

Specifically, it refers to the general part of the BGB (German Civil Code), including §§ 104 ff. (legal capacity), §§ 116 ff. (contract). This includes the basic conditions contained in the BGB (e.g. the formation of contractual obligations, etc.), but also the special BGB laws on the law of obligations, such as §§ 305 ff. of the German Civil Code (BGB).

In a broader sense, the word can also denote the uniqueness of the totality of contractual conditions. In this case, the word suffix is missing, such as “contract for work” or “travel contract law”. For the state, contracts can also be used as a means of action.

However, the term “public-law contract law” is less discussed because some problems with public-law contracts must be solved by a legal reference similar to the rules for private-law contracts (for example, the nullity provision of Section 59 (1) VwVfG).

Contract law – what is it? An overview

Contract law is the basis for all other areas of law, including multilateral legal transactions. A contract consists of at least two declarations of intent intended to bring about a legal result. Private individuals, companies, institutions and government agencies are examples of contracting parties.

To be valid, a contract does not have to be in writing.

Oral agreements are just as legitimate in law as, for example, a purchase on the internet. Accordingly, oral agreements can be just as legally valid as written contracts.

By signing a contract, the parties declare their willingness to be bound by the terms of the contract they have agreed upon. For a better understanding, three legal terms are defined below.

1. freedom of contract

Due to the concept of private autonomy, everyone in Germany can freely enter into contracts under German law. However, a legal transaction may not violate applicable law or morality or disregard legal restrictions.

2. legal capacity

Only those who have legal capacity can conclude a contract. This means that the contracting party is capable of entering into legal transactions and is aware of the legal implications.

A (too young) age or a significant illness, such as advanced and medically diagnosed dementia, can lead to a limited capacity to contract or even to incapacity to contract.

3. conclusion of contracts

If offer and acceptance are in concordant form, i.e. correspond with each other, a contract is deemed to have been concluded with legal effect.

Is contract law regulated in the BGB?

Contract law does not have its own place in legislation, as the legislator did not expressly include it. Accordingly, there is no chapter in the Civil Code entitled “Contract Law”.

Nevertheless, it can be found in the BGB, whose legal norms concerning contract law must, however, be read in their entirety. The issues of contract law are essentially spread over two volumes and are highly abstracted in their wording.

The first book of the general part of the Civil Code (BGB I) is devoted to the contract as the legal basis of contract law. The second book of the Civil Code (BGB II) deals with this subject under the title “Law of Obligations”.

How are contracts concluded & what is important to bear in mind?

In all advanced legal systems, contracts are concluded according to the method of offer and acceptance. The development of media law has, among other things, brought about a new feature for the conclusion of contracts.

Thus, in Germany, general terms and conditions (AGB) according to § 305 BGB and/or special agreements are to be distinguished.

According to § 145 BGB, the provider in Germany is legally obliged. Revocation has no effect if it is made within a reasonable period of time.

Worldwide standardisation proves difficult due to the multitude of possibilities. Even if the offer is theoretically freely modifiable, Art. 16 para. 2 CISG provides for exceptions that exempt the most practically essential circumstances and declare the offer binding. This compromise is quite close to the German method.

International contract law

What should you consider when selling your products or services internationally? If one of the parties to the contract is located outside the country, the agreement is called cross-border.

Despite the fact that some EU rules have changed, in most cases two separate legal systems meet, making it difficult to integrate the two systems.

There is no doubt that when you enter into a contract with a foreign partner, the jurisdiction and the relevant laws must be the same.

Include an arbitration clause in your contract if you do business beyond the EU borders. The international enforceability of arbitration agreements is an advantage that German court decisions cannot always offer.

Avoidance of contracts in case of duress and threat

Mistake and deception are not the only grounds for rescission of contracts recognised by all continental legal systems. There is a difference between threats and physical coercion, and between threats and taking advantage of a pre-existing situation of coercion.

There is little difficulty in deciding cases involving physical coercion. Acts committed under threat of physical force are prohibited by law.

It is more difficult to detect threats to terminate or conclude a contract.

As a result, dangerous situations must be filtered out to remove those that are morally reprehensible.

The German Civil Code stipulates that the threat must be “unlawful” (§ 123 BGB), as does the Austrian § 870 ABGB, the Swiss Art. 29 para. 1 OR, and the Dutch Art. 3:44 para. 2 of the NBW.

Rescission of contract in contract law

It is not always the case that when signing a contract, both parties want to abide by the terms of the agreement. Anyone who wants to withdraw from a contract must either have a contractual agreement or a legal reason for doing so.

In the case of contracts that allow for early withdrawal under certain circumstances, the parties can easily part ways after agreeing to the terms of withdrawal. Statutory rescission, on the other hand, presents a special situation.

In the event of performance problems that make it difficult to fulfil the contract, one of the parties has the legal power to dissolve and rescind the contract.

The legal options for rescinding the contract include: revocation in the case of contracts in online commerce with consumers or in the case of contracts concluded by e-mail, fax, telephone, letter, etc. (= distance contracts), termination in the case of non-performance or performance not in accordance with the contract according to § 323 BGB.

§ 286 BGB (by reminder) declares that the supplier is in default due to non-delivery. In addition to the reminder, the recipient must set a second deadline (between 7 and 14 days) to withdraw from the contract. As soon as this deadline is missed a second time, the customer has declared withdrawal from the contract.

The withdrawal has the consequence that the services already rendered have to be returned.

Default on a contractual obligation

For various reasons, it may happen that the performance rendered does not correspond to that agreed in the contract. In reality, the debtor is unable to perform as agreed due to his circumstances.

Examples are:

• The agreed performance can be rendered, but only after a certain period of time has elapsed.
• The agreed performance is rendered, but not in the contractually agreed quality.
• The debtor breaches other obligations that were not included in the contract, although they are necessary to achieve the objective of the contract.

Whenever one of these situations occurs, the question arises whether the contract has lapsed and whether the creditor can continue to insist on performance or sue for damages.

Contract law: Legal steps to enforce contractual obligations

What can an entrepreneur do if a customer does not pay? Does the limitation period begin to run for claims arising from transactions between traders and non-traders or private individuals?

Rights and obligations are agreed in a contract. The creditor is given a time limit within which he can assert his claim if, for example, the purchase price is not paid. If he does not do so, the claim becomes time-barred and he is released from further payment obligations.

What is the limitation period for bringing an action?

With regard to limitation periods, it must be remembered that the year ends on 31 December. A limitation period always begins following the year in which a claim arose. According to §§ 195, 199 BGB, the normal limitation period is three years.

In addition, there are a variety of different limitation periods, each with a different time frame.

It is possible to suspend the statute of limitations. Since the limitation period continues after the inhibition, it is not part of the limitation period when you file your lawsuit. This extends the limitation period by an additional time.

Furthermore, if the debtor acknowledges the claim, the limitation period can start anew. If a new item is delivered as part of the subsequent performance of a purchase contract, the limitation period also starts anew.

Requirements for dunning procedures in contract law

Extrajudicial dunning procedures can be used by the creditor to enforce his (not time-barred) claim. This procedure is recommended in order to secure the creditor’s rights more quickly and at lower cost.

If the creditor succeeds in obtaining an enforcement order from a German dunning court, he can also enforce it throughout Germany and the European Union.

Agreement by handshake = legally binding contract

A contract does not necessarily have to be in writing to be binding and enforceable. Contracts can be signed orally or even with a handshake and a smile. Moreover, a handshake is a legally binding agreement that can be enforced in court.

When a contract is signed with a handshake (often in follow-up contracts in business), the parties must of course demonstrate their trustworthiness and reliability.

If both parties agree, it is sufficient to refer to the previously proven execution of the contract. Once these details have been clarified, the project can move forward.

A commercial agent – tasks and function

A commercial agent is a self-employed tradesperson who is commissioned by an entrepreneur to broker or conclude transactions on the entrepreneur’s behalf. The German Commercial Code (HGB) contains the relevant provisions, namely §§ 84 – 92 c HGB.

There are 3 different types of commercial agents.

1. Goods representative
2. Insurance agent
3. Representatives of building societies

A commercial agent can only be entered in the commercial register if he or she reaches a certain size or has a certain legal form and registers with the Trade Licensing Office (e.g. GmbH).

Within the scope of his contractual territory, the commercial agent has the task of selling contractual objects or brokering transactions in the name of the entrepreneur (and on his account). He is thus responsible for maintaining relations with existing customers as well as for acquiring new customers.

The entrepreneur is responsible for supporting the commercial agent in his efforts. As soon as a deal is approved or rejected, he must inform him and provide him with all the facts about the change.

Contract law: What are the duties of the commercial agent?

The commercial agent is self-employed and has full control over his working hours. In addition, he must inform the principal about all business transactions and follow the principal’s instructions, provided they do not interfere with his freedom of action.

In most cases, the commercial agent is entrusted with the simultaneous representation of several companies. However, these should not be in direct competition with each other.

After the entrepreneur has left, the commercial agent can claim remuneration for the customer base he has built up for the entrepreneur within the framework of the so-called compensation claim. After expiry of the contract, he is prohibited from disclosing trade or business secrets.

The duration of the contract is usually at least one year, but it can be terminated within the negotiated notice period if the terms of the contract are not met (1 to 6 months) or, if not met, within the statutory notice period.

It is important to keep in mind the one-year limitation period for claims for damages when making a claim under the contract. A claim becomes time-barred in 3 years from the day it arose and/or the commercial agent learned of the circumstances giving rise to it.

Detailed information on the terms of use (GTC)

In many situations, a contracting party will have pre-formulated terms and conditions that it unilaterally hands over to its business partner when it enters into a contract. At the very least, the contractual partner will not be prepared to negotiate the specific terms and conditions set out in the GTC.

But even if this is not the case, the user must expressly refer to the GTCs when concluding the contract for them to be lawful.

§ Section 305 (2) of the German Civil Code (BGB) requires that they be included in the contract only afterwards. If the GTC are shown on an order form or a contract, for example, this means that the reference cannot be overlooked even if the customer quickly peruses it.

In the case of oral contracts, the validity of the GTC must be expressly stated. Otherwise, the GTC are not legally binding for the contracting parties!

Another criterion is that the customer can reasonably obtain the content of the GTC. For the GTC to be valid, the customer must accept their application.

Although the duty to inform does not apply as strictly to entrepreneurs as it does to consumers, it is nevertheless desirable in terms of legal certainty to point out the GTC to the user if possible.

Contract law – General terms and conditions for online businesses

E-commerce companies such as online shops also often use general terms and conditions. However, certain rules apply here. Anyone who includes GTCs in a contract must ensure that the contractual partner can (technically) view and understand them.

If an online customer can browse the GTC clauses with a mouse click, potential perception is sufficient here.

In addition, the provider must ensure that his contractual partner can retrieve and save the GTC.

Otherwise, the criterion of comprehensibility must be met. In order to be effective, the provisions must be written in simple language that can be understood by non-lawyers. Obviously, they must be legible – for example, in a sufficiently large font size.

The following rules essentially apply to the content of the GTC: Discriminatory provisions that contradict the requirements of good faith are invalid, and clauses must not be so unusual that the other party to the contract must not have expected them.

Terms such as:

• Delivery and default,
• terms of payment,
• formation of contract,
• liability and retention of title,
• price,
• Liability for defects

should be regulated in the General Terms and Conditions (until full payment of the object of purchase).

Do consumer contracts have to be concluded in writing?

The termination of a consumer contract used to require a handwritten signature and a lot of paperwork. A handwritten signature was also required for notifying defects or changes.

This has no longer been required since 1 October 2016.

In addition to fax and scanned PDF, electronic ways of amending the contract have been available since then (so-called text form).

After 1 October 2016, all those who have agreed that such declarations can only be revoked in text form must revise their GTC.

Important: Contracts concluded before the entry into force of this regulation are not affected by this and require the written form as before.

With the exception of terminations of employment contracts, tenancy agreements and notarial agreements, for which the written form is still required, the written form is no longer required.

For all other consumer contracts, text form is used instead of written form.

For consumer contracts concluded after 1 October 2016, the general terms and conditions must be revised to reflect the new requirement that the contractual partner must be informed in writing of terminations, amendments or revocation.

Insight into different types of contracts

Different types of contracts can be distinguished according to the content (subject matter) of the contract or the contracting parties involved. The purchase contract is the most common contract in everyday life.

Private law also includes employment contracts, construction contracts, property purchase contracts, loan contracts, leasing contracts, credit contracts, rental contracts and insurance contracts, to name but a few.

In public law, there are many different types of contracts, but the public law contract is the most significant. States conclude state treaties or international law treaties among themselves.

Difference between employment contracts and service contracts

Every time a contract is concluded, the question arises as to the future legal relationship between employer and employee or principal and contractor.

For the employment of freelancers and entrepreneurs working on their own account, a service contract (§§ 611 ff. BGB) or a contract for work (§§ 631 ff. BGB) can be used.

Neither form of contract is perfect, but both have advantages and problems that legally distinguish them from each other.

Contract for work and services: A contract for work and services employee undertakes to perform a specific task. His remuneration depends largely on whether he successfully completes that particular task. Economic independence is a characteristic feature of the contract for work model.

An employee’s intention to be successful is recorded in his service contract. Even if his attempt to contribute to the success of the business fails, the declaration of intention is sufficient to fulfil the terms of a service contract and receive remuneration. A service contract already includes remuneration for the work performed.

Contracts: Letting and leasing of commercial property

To what extent are goods rented and to what extent is there a tenancy agreement? The decisive factor for the demarcation is whether or not the “fruit enjoyment” of the rented property is part of the (objective) content of the contractual terms.

However, this does not mean any fruit or even a fruit in the conventional sense. Rather, the lessee is often expected to be enabled by the characteristics of the leased property to generate income (including financial gain).

However, the lessee must allow precisely this use. It does not matter whether the leased property was misnamed in the contract. The exact classification is determined later on the basis of the agreements made and the expressed wishes of the parties.

Self-employed persons and small business owners are protected by contract law

Contract law protection, a benefit of business legal protection, is not offered by all insurance providers.

Each case is examined on an industry-specific basis. Above all, tradespeople should think about contract legal protection, because it covers the costs of court proceedings for purchase contracts, contracts for work and services, contracts for work and materials and even financing contracts

If the client refuses to pay because of a defect after the service has already been provided, contractual legal protection can be of great importance for the individual business.

In certain cases, the insurer will cover the costs of lawyers’ and experts’ fees, reminders and court costs, among other things. Contractual protection, on the other hand, covers disputes with suppliers, tax advisors and banks.

Contractual legal protection is generally available as a supplementary package to private and professional legal protection for the self-employed or as special legal protection for companies.

Contract law – interim conclusion

Entrepreneurs are bound by several obligations in contract law. In order to be able to assert and enforce contractual claims, one must be well versed in the legal framework of multilateral legal relations.

Whenever an entrepreneur works with a commercial agency and/or wants to include general contractual provisions in his or her own contracts, it is highly advisable to seek legal advice immediately in order to secure his or her interests contractually.

There are simply too many factors to consider when drafting contracts. Even general terms and conditions, which apply to many of one’s contracts and must be legally secured in all directions, must be applied in the same way.

If one takes into account the ever-changing legal landscape and the changes necessitated by new technological advances, knowledge of the current legal situation becomes even more important.

Contract law lawyer helps

Contract law raises an almost unlimited number of legal issues. Initial contract discussions and the inclusion of general terms and conditions can be difficult and complicated, jeopardising the success of the contract.

1. The performance of contractual obligations, the assertion of rights and obligations, and the termination of contracts are all areas where conflicts can arise. In the case of complicated contractual structures, you should definitely instruct an experienced lawyer to represent your interests.
2. Your contracts and general terms and conditions will be reviewed and prepared by our contract lawyers. In doing so, we also pay attention to compliance with formal requirements and to the special features of transactions conducted via the Internet.
3. Our team of lawyers will also assist you in enforcing contractual rights in and out of court and in defending against unjustified claims by other contracting parties.
4. When it comes to legal difficulties arising from contracts of any kind, our team of contract lawyers is there for you. At our offices in Hamburg, Munich and Frankfurt, as well as throughout Germany, we will advise you according to your wishes.

We advise both private individuals and companies of various sizes from Germany, Austria and Switzerland in the broad field of contract law.

General principles of contract law

It is important to remember that general contract law forms the basis for all contracts, no matter how specific.

Regardless of which area of law or type of contract your particular matter falls into, our legal experts from numerous disciplines can always help you with your general contract law questions.

Our legal assistance in drafting contracts and general terms and conditions is an essential part of our out-of-court work.

In contract discussions, it is important that we, as a litigation partner, ensure precise and legally secure formulations, compliance with formal requirements and alignment with the overall interests of the contract.

In order to avoid misunderstandings, we thoroughly review contractual provisions, model contracts and general terms and conditions before the contract is signed.

We also take on the judicial and extrajudicial enforcement of your rights and claims arising from a contract or the bringing about of the effective termination of a contract through revocation, rescission, termination or cancellation agreement for you after the conclusion of a contract.

Contract drafting and review

In order to safeguard one’s own interests in the future contractual partnership, clarity and precision are often required. This means that using sample contracts from the internet is often not a good idea. This is especially true if the contractual relationship is to regulate a private, complicated matter.

Drafting, amending and optimising contracts is a subject in which we are happy to provide legal assistance. The same applies to contract negotiations.

The decision-making process and the final contract as a result of the discussions are in line with the current legal situation and are based on the latest supreme court rulings when concluding and drafting contracts.

Before signing contracts, it is important to check them for possible invalidity, unenforceability, voidability or incompleteness.

In many cases, formal and didactic standards are not observed or are poorly executed until a dispute arises. In order to avoid this, the examination of the proposed or submitted contract must take place in advance.

Even after a contractual relationship has been established, it is still possible to conduct a thorough contract review and pursue your rights and claims. In addition, we defend against unreasonable, invalid, void or contestable claims and demands by reviewing the existing contract after the fact.

Special aspects of internet contract law

With the growing number of platforms for internet commerce and e-commerce, the number of contracts concluded via the internet is also increasing.

Drafting and concluding contracts in this way has become a necessity in modern business life. However, some standards must be met when customers and online shop operators conclude contracts via the internet.

We also advise our clients on the drafting of smart contracts. We check these so-called smart contracts for you for correctness and completeness.

There are certain criteria for a legally valid internet presence, which we inform you about. In addition, you will learn how ordering processes should be regulated and which instructions are necessary.

With regard to the conclusion of contracts via the internet, we monitor the current legal situation and keep you up to date on changes in the law or relevant supreme court rulings.

In general, we can support and advise both clients and online traders in the following areas:

1. Assertion and enforcement of contractual rights and claims.
2. Examination of your online contracts for voidability, invalidity or inconsistency
3. Examination and improvement of general terms and conditions on the internet
4. Determination of a suitable procedure for termination
5. Modification of order procedures in accordance with legal requirements
6. Data protection conformity and preparation of data protection declarations
7. Incorporation of new legal and supreme court rulings into the design of your website
8. Guidelines on formalities

For different types of contracts there are different formalities that must be complied with by the contracting parties. Failure to comply with formalities can have significant legal and possibly contractual consequences.

According to the concept of section 125 sentence 1 of the German Civil Code, a legal transaction is void if a formal requirement is not complied with.

It is important to know that there are various exceptions and deviations from this rule. However, for some types of contracts it is crucial that formalities are observed.

Our lawyers have extensive experience in determining whether the formal criteria are met and can help you to ensure that the contracts you wish to enter into are free from ambiguity.

This way you do not have to fear that your legal transaction is void.

The strictest legal form is the public form (notarial certification; authentication). This means the notarisation of contracts or declarations by a notary public, which are read to the parties involved and approved by them before they are signed before the notary public.

A notarised signature or declaration proves its accuracy. The term “public certification” refers to certification by a notary, while “official certification” refers to certification by another authority.

Contracting parties: What are their obligations and rights?

The wording of the respective rights and obligations should be completed or at least checked by a lawyer if the contract involves a significant financial or long-term obligation for the contracting party.

A clear understanding of the scope, manner and timing of specific contractual responsibilities and the remedies provided in the event of a breach should be made clear from the outset.

It is easier to enforce the rights and obligations of the contracting parties in the event of a dispute if they have been agreed in detail in advance. Even if you did not get what you paid for, our contract lawyers will make sure you get what you are entitled to.

If an out-of-court settlement cannot be reached, we will also represent you in court. We respond to deadlines and reminders from contractual partners and defend you against unjustified claims from the other side.

Options for terminating the contract

In addition, we take care of the legal aspects of contract termination for you. A contract can be terminated in a number of ways, for example by giving notice, withdrawing from the contract or entering into a cancellation or termination agreement.

You can rely on us to assess your individual circumstances and advise you on the best course of action.

Before deciding on legal alternatives, you should consider whether the individual contractual provisions already provide for possibilities to terminate the contractual relationship.

If a contractual relationship has existed for a longer period of time, it may make sense to enter into a termination agreement and, if possible, to withdraw from the contractual relationship amicably.

In this situation, it is important to consider and document possible future benefits, repayments or claims for damages in the termination agreement. Regardless of the circumstances, our experienced team of contract law lawyers will find a viable way to help you terminate your contracts.

Legal advice & support on general terms and conditions

As part of our out-of-court contract law services, we also draft, negotiate and evaluate general terms and conditions (GTC). In doing so, particular attention must be paid to the adherence to effective and court-proof formulations.

In both B2C and B2B business, we attach great importance to the legality of GTC provisions. The use of unlawful general terms and conditions can have significant financial and legal consequences.

Even years after the conclusion of a contract, insufficient GTC clauses can lead to the nullity of the contract.

This means that effective general terms and conditions are crucial in all contracts, but they are even more important in consumer contracts due to EU law and case law favouring consumers.

Because of the significant potential for damages, it is important to get a competent lawyer involved as soon as possible. The contract lawyers in our team check during contract discussions whether GTCs are suitable for your project and the respective field of expertise and whether or not they are in line with current changes in the law and court rulings.

In addition, we check the General Terms and Conditions (GTC) in the contract proposals for their validity.

We ensure that the GTC do not harm you and your contractual interests and carefully consider the subtleties of the respective field of law.

Due to our multidisciplinary perspective, we can offer general terms and conditions in:

• Sales law
• IT law
• Real estate law
• Labour law
• Commercial and company law
• banking and capital market law

and other areas of law.

Law of sales contracts

The contract of sale under § 433 of the German Civil Code (BGB) is one of the most frequently used forms of contract in everyday life.

The modalities of the purchase, the formalities or the effects of the conclusion of the contract can have a significant impact on the complexity of a purchase contract, as is the case in company law with a company purchase contract. In the case of complex purchase agreements, the appointment of a contract law lawyer is strongly recommended.

In the case of a real estate purchase contract, this lawyer can ensure that your rights are protected even before the contract is signed, that there are no unfavourable individual agreements or general terms and conditions and that all legal procedures are complied with.

Our lawyers can also help you in contract law if difficulties have already arisen with your purchase contract.

Depending on the facts, we will determine which legal steps make the most sense and then enforce your warranty rights.

Our team will support you in finding a solution to your problem.

If you have invested in or made payments to one of the companies on this list, our lawyers will be at your disposal at short notice.