Germany’s Federal Parliament Passes Sweeping New Rules on the Sale of Digital Products to Consumers | Morgana Lewis

A new type of contract has been introduced in the German Civil Code for the provision of digital content or services by companies to consumers in Germany: the German Federal Parliament has added 22 new sections (337-327u) on the provision of content and of digital services, starting January 1, 2022.

The law serves to implement two European directives on certain aspects of contract law relating to the supply of digital content and digital services[1]and applies to foreign companies if the consumer is established in Germany.[2]

1. WHAT ARE DIGITAL PRODUCTS?

Digital products are categorized into digital content and digital services. Digital content must be machine readable and may include computer programs, certain applications, video files, audio files, music files, digital games, as well as e-books and other electronic publications, even if are provided on physical data carriers such as DVDs. . Digital services are those relating to the creation, processing or storage of, as well as access to, data in digital form. Examples of digital services include software as a service, games offered in a cloud computing environment, social media, streaming services, live training, webinars, as well as the continuous provision of traffic data on a navigation system or training schedules on a smartwatch.

The application of the new law can be problematic for goods with digital elements-i.e. items such as smart home appliances or smartphones. However, if the goods sold cannot function without the software, both the goods and the software fall under the new law.

Digital products do not include service contracts that cover services that are not digital in nature, even if the actual service is provided in digital form (for example, online education, webinars and telehealth).

2. WHEN DO THE NEW RULES APPLY?

This new regulation applies exclusively to any contract with a consumer concluded after January 1, 2022 for the supply of a digital product. If such a contract was concluded before this date, the new regulations apply if the seller supplies the digital product to the consumer after this date.

3. WHAT IS A CONSUMER AGREEMENT FOR DIGITAL PRODUCTS?

The regulations only apply to consumer contracts for digital products (no B2B contracts). The subject of the contract must therefore be the supply of digital content or digital services by an entrepreneur to a consumer against payment of a price (or against provision of personal data by the consumer). Under German law, a consumer is any natural person who enters into a legal transaction for purposes which are primarily outside their trade, business or profession.

4. WHAT IS A DIGITAL PRODUCT DEFECT?

As with all products and services according to the German Civil Code (BGB), digital products must be provided free from defects in fact and in law. If the parties have stipulated an integration of a digital product (i.e. the connection/integration of a digital product with/into the components of the consumer’s digital environment), the digital product must also comply with the integration requirements if the integration has been carried out correctly be free from defects. The seller is contractually liable to the consumer for erroneous instructions provided by the producer of the digital product. Failure to provide required updates to the consumer on time may be considered a “defect”.

5. WHEN SHOULD THE SELLER PROVIDE THE CONSUMER WITH A DIGITAL PRODUCT UPDATE?

The requirements for the entrepreneur’s obligation to update are newly regulated in the BGB: The seller must ensure that the necessary updates for the digital product are provided in accordance with the contract. Updates must be provided to the consumer during the “relevant period” and the consumer must be duly informed of the availability of new updates. Required updates include security updates. The “relevant period” is the entire supply period in the case of permanent supply. Otherwise, it is the time that the consumer can expect depending on the nature and destination of the digital product and taking into account the circumstances and the nature of the contract. Deviating conditions can be agreed, but only if the seller informs the consumer before the execution of the agreement of these deviations and the deviations are explicitly agreed in a separate form.

The obligation to constantly provide updates to the consumer makes it more difficult for consumers to purchase and use digital products anonymously, as they generally have to create a user ID with the seller in order to be notified of updates. up to date and receive updates. Similar problems arise with the use of second-hand software.

6. WHAT ARE A CONSUMER’S STATUTORY WARRANTY RIGHTS FOR DIGITAL PRODUCTS?

If a digital product is defective, consumers have the following rights:

  • Repeat delivery (§ 327 l BGB)
  • Termination of contract (§ 327 m BGB)
  • Price reduction (§ 327 n BGB)
  • In some cases: Compensation for damages (§ 327 m al. 3 or § 280 BGB) and reimbursement of unnecessary expenses (§ 284 BGB).

(Unnecessary expenses are generally reasonable expenses of the consumer when receiving the expected service. For example, such expenses would be costs that arise when properly preparing the consumer device with which the consumer intends to use the digital product acquired by updating or improving this device.)

Details and modalities are regulated in the BGB. European and German laws on product liability and claims against a manufacturer remain unaffected by the new sections of the BGB.

7. TRANSFER OF THE BURDEN OF PROOF/BENEFITS FOR THE CONSUMER

If a digital product has a defect within one year of it being made available to the consumer by the seller, the new provisions of the BGB generally assume that this defect already existed at the time of delivery. In the case of permanently supplied digital products, it is presumed that the defect has existed for the entire period from the moment the product was first supplied. The consumer’s rights against the seller under clause 6 expire after two years from the date of supply (certain exemptions with longer periods may apply).

8. COMING SOON: OTHER RELEVANT CHANGES TO CONSUMER RIGHTS FOR ONLINE SALES

To prevent consumers from being bound by long-term contracts which they no longer need or can no longer fulfill or which are economically less advantageous compared to competing products or services (for example, telecommunications contracts ), the longest possible fixed initial term for most of these contracts will be set at two years from March 1, 2022. After the expiry of the first two years, the seller will now only be allowed to implicitly extend the contract for an indefinite period. Meanwhile, the consumer will now have the right to terminate the contract whenever he wishes, while only having to respect a notice period of up to one month.

To simplify the process for consumers to opt out of long-term contracts, from 1 July 2022 it will be mandatory for every seller contracting with consumers online (even if the contract is performed offline if an online contract is also proposed) to provide the consumer with a clearly visible button on the website to end this contract.

Law Clerk Leon Rady contributed to this LawFlash.

[1] Directive (EU) 2019/770 of the European Parliament and of the Council of 20 May 2019 on certain aspects relating to contracts for the supply of digital content and digital services Text with EEA relevance. (europa.eu) and Directive (EU) 2019/771 of the European Parliament and of the Council of 20 May 2019 on certain aspects relating to contracts for the sale of goods, amending EU Regulation 2017/2394 and Directive 2009/22/EC and repealing Directive 1999/44 /THIS.

[2] Details: Introductory Law to the Civil Code (EGBGB) in conjunction with Article 6(1) of European Regulation 593/2008.

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