The implications of the Sale of Goods Directive for the laws governing contracts of sale
The European Commission has consistently aimed to create a higher level of protection for consumers, particularly in light of the increasing growth in electronic retail, and the Commission took the view that the Consumer Goods Directive which was previously in effect, Directive 1999/44/EC, no longer ensured an adequate level of consumer protection. This led to the adoption on 30 June 2021 of implementing acts for Directive (EU) 2019/771 on certain aspects concerning contracts for the sale of goods (the Sale of Goods Directive) and Directive (EU) 2019/770 on certain aspects concerning contracts for the supply of digital content and digital services (the Digital Content Directive) , which will implement these Directives into national law. This will create extensive changes as of 1 January 2022 in the general law of obligations and in the laws governing contracts for the sale of goods. The most important changes from implementation of the Sale of Goods Directive will be explained below, along with key practical notes.
Changes as of 1 January 2022
Among the most important changes are the change in the definition of “material defects” (§ 434 of the Civil Code) and the expansion of consumer rights (§§ 474 et seq. of the Civil Code).
Until now, the presence of material defects was largely determined by the agreements between the parties, as the agreed-upon specifications for the purchase object. Objective criteria, such as whether the products are suitable for their customary use or whether they are of normal quality, were of secondary importance and could be applied to determine whether a product is defective only in the absence of a contractual agreement. The new definition of “material defects” states that products are only considered to be defect-free if they conform to the subjective requirements agreed upon by the parties as well as meeting objective criteria. As a result of this expanded definition of “material defects,” products which conform to the contractually stipulated quality are nevertheless considered to be defective if they are unsuitable for the purpose for which they are normally used or if they lack the normal quality.
Contrary to the situation at the European level, German lawmakers have further decided to adopt a single definition of “material defects,” meaning that the new definition of “material defects” will apply without limitation for both B2C and B2B transactions.
Under a newly enacted statute, § 475b of the Civil Code, this definition of “material defects” will also apply for goods with digital elements. Sellers of goods with digital content will also be required to update this content in the future in order to ensure that their goods remain defect-free. The duration and scope of the objective requirement to provide updates cannot be arranged contractually, but are rather determined by objective criteria. The decisive consideration is what a consumer may reasonably expect given the circumstances of the contract and the type and purpose of the object. Additional update requirements may be agreed upon by the contracting parties on an individual basis.
In addition, the period during which the burden of proof for defects is reversed in favor of the buyer pursuant to § 479 of the Civil Code will be extended from six months to one year.
Practical notes
Implementation of the Sale of Goods Directive into German contract law on 1 January 2022 will affect not only B2C transactions, but the B2B market as well. Accordingly, manufacturers should find out in a timely manner which specifications will apply for their products, including objective criteria, so that they can be taken into account in development and production. On the contractual level, attention should be paid to securing recourse options all along the supply chain, which will present a challenge, particularly in view of the new objective definition of “defects.”
We will report separately on the implications of the act implementing the Digital Content Directive.
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