Publications

Publications
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            [post_date] => 2018-06-20 13:30:28
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            [post_content] => The German law on contracts has been amended. In this article, we briefly explain what has been changed and what this means for you as a Dutch entrepreneur.

Judgment of the Court of Justice
On 16 June 2011 (C-65/09 and C-87/09), the European Court of Justice ruled that an entrepreneur that supplies faulty products to an end-user (consumer) must also reimburse the installation and removal costs of the faulty product. This applies even if the consumer has installed the product itself or has had it installed by a third party and the installation was not part of the contract. If the installation costs are disproportionately high compared with the value of the goods, the seller will be obliged to bear only a proportional part of the installation costs.

In Dutch law, this is already arranged in B2C relations in Section 7:21 of the Dutch Civil Code (BW). It is in line with the legal system that such costs in B2B relations can be claimed as consequential damage. In the case of international B2B relations, this is also arranged in the United Nations Convention on Contracts for the International Sale of Goods (Vienna Sales Convention).

Legislative change
At the time, the above judgment caused a lot of commotion in Germany. The judgment was not in line with the German legal system and resulted in a lack of clarity. Up until this year, sellers of faulty products were liable only for the installation and removal costs in B2C relations. The seller could claim replacement or repair of the faulty product from its supplier, but remained liable for the installation and removal costs. This was unreasonable. Consequently, on 1 January 2018, a legislative amendment was made to the German law on contracts.

In Section 439, subsection 3, of the German Civil Code (BGB), the following has now been arranged. If the consumer has installed or integrated a faulty product, the seller will be obliged, in the context of its obligation to perform, to reimburse the consumer for the extra costs for removing the faulty product and the installation or integration of the replacement product.

Section 445a of the German Civil Code states that the seller has recourse against its supplier for these costs.

The amended legislation applies to both B2C and B2B relations.

German distributor
The judgment of the Court of Justice and the legislative amendment have caused a stir on the German market. Distributors are delighted with this legislative amendment, while suppliers will be forced to pay higher costs.

If you as a Dutch entrepreneur trade with your German distributor on the basis of German law, it will now be very easy for the distributor to hold you liable for the end-user’s installation costs if the product turns out to be faulty. Your German distributor will not be pleased in the context of the legislative amendment if your Dutch general conditions are applicable and such damage claims for installation costs are excluded in those conditions. It is important to maintain a proper relationship with your distributor and to discuss this topic if necessary.

If you have any questions about this subject or about other differences between German and Dutch law, please contact our German Desk.
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            [post_date] => 2017-06-26 11:48:02
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            [post_content] => Introduction
Much has been written in professional publications and our blogs about international contracting and the applicable law. This topic is often discussed in legal precedents too. Which law applies to an international contract? Which general conditions apply? How are things arranged? In this blog, I am summarising the rules that generally apply with regard to this subject.

Choice of law
If parties conclude an agreement, with the parties not being established in the same country, the matter of which law applies to this agreement is always an issue. In general, the parties can include a provision in the agreement in which a choice is made regarding the applicable law. The parties may choose the law of one of their places of residence. In some cases, it may be beneficial to opt for the law of a country where neither party is established. This is permitted.

A choice of law may also be included in general conditions. In that case, the choice of law is valid only if the general conditions also apply.

No choice of law
Parties sometimes conclude an international agreement without including a choice of law. If no general conditions apply, the law applicable to the agreement is determined on the basis of international treaties and European regulations.

For Member States of the European Union (with the exception of the United Kingdom and Denmark), the Regulation on the law applicable to contractual obligations (Rome I) applies. This Regulation stipulates which national system of law has to be applied. The Regulation has universal operation, which means that these rules apply irrespective of whether the designated law is the law of a Member State or of another country. On the basis of the Rome I Regulation, the main rule is that the law of the country of the party delivering the characteristic (most important) performance applies.

This main rule is interpreted as follows for the agreements below:

- purchase agreements: the law of the country of the seller;

- service agreements: the law of the country of the service provider;

- distribution, agency or franchise agreements: the law of the country of the distributor, agent or franchisee.

Remember: there are categories of agreements to which the main rule does not apply. Consumers and employees enjoy the extra protection of special rules. Other rules also apply to immoveable property.

The Vienna Sales Convention
Once it has been established which law applies to an international contract, it must be determined in the case of commercial purchase agreements whether the Vienna Sales Convention Applies. The Vienna Sales Convention (officially: the United Nations Convention on Contracts for the International Sale of Goods) applies by operation of law in the case of an agreement between commercial parties, involving the purchase of movable items.

Many countries worldwide are party to the Vienna Sales Convention. The Convention arranges the law on contracts and any disputes that may arise. The Vienna Sales Convention is seller-friendly. For instance, the Convention includes an obligation for the purchaser to investigate, with a short time limit for lodging a complaint. Dissolution of the purchase agreement is also less straightforward than, for instance, on the basis of Dutch Law. The Vienna Sales Convention may be explicitly excluded in an agreement or general conditions. This may be more beneficial for the purchaser.

It should also be noted that the Vienna Sales Convention is considered to be part of the national system of law. Although it is true that the Convention prevails over national law, it does not arrange all matters that may be involved in the case of a purchase agreement. Examples include the calculation of statutory interest. In that case, parties have to rely on the applicable national law. It therefore remains important to agree not only on the applicability of the Vienna Sales Convention, but also on the system of law that will arrange other subjects.

Which general conditions?
It may be that an agreement does not contain provisions about a choice of law and/or the applicability of the Vienna Sales Convention. In that case, it is important to check whether general conditions apply to the agreement.

The general conditions often contain a choice of law. If both parties apply their general conditions in an international context, this can lead to problems. Which general conditions apply and which law applies to the agreement as a result?

According to Dutch law, the general conditions of the party that has first declared these general conditions to be applicable will apply to the agreement. This is also referred to as the first-shot rule.

Within another system of law, it may be that a later set of conditions has become applicable (last shot) or that both sets of conditions are not applicable (knock out). According to German law, the general conditions of both parties are compared and only the 'common denominator' of both general conditions will be part of the agreement. The other provisions in the general conditions will not become part of the agreement.

However, more problems may occur regarding the applicability of general conditions. If a purchase agreement is involved, the question of whether the general conditions are applicable to this agreement has to be answered on the basis of the Vienna Sales Convention. This is the case even if the general conditions exclude the Vienna Sales Convention. As stated above, the Vienna Sales Convention is considered to be part of the national system of law and this Convention prevails. A striking aspect with respect to many national systems of law is that the Vienna Sales Convention imposes strict conditions regarding the applicability of general conditions. In addition to the fact that the general conditions have to be declared applicable, the other party must have had the possibility to familiarise itself with the general conditions. It is therefore necessary, before the agreement is concluded, to forward the general conditions by post or e-mail so that no problems will occur.

The above examples show that various systems of law deal differently with the issue of which general conditions are applicable. If the Vienna Sales Convention is applicable, the situation becomes even more complicated. Consequently, it is essential to make the correct choice of law. As a seller or service provider, you will hope to avoid a situation in which liability limitations do not appear to apply, while a purchasing party will attach great importance to guarantee provisions. A situation in which the applicability of another system of law results in the exclusion of general conditions may easily occur.

In conclusion
Agreements are concluded in all shapes and sizes. In the case of cross-border contractual arrangements in particular, it is vital to determine which law applies to the agreement. It is also important to investigate whether general conditions also apply, and if so, which set will prevail if several sets have been declared applicable. It is vital to clearly lay down a choice of law and the applicability of general conditions in the agreement, so that no disputes may arise about this in the future.

International legislation includes many exceptions with regard to the applicable law. We will be pleased to offer you constructive advice in drawing up your agreement or your general conditions. By stipulating the applicable law in the correct manner, you can avoid a great deal of legal debate.

If you have any further questions about this subject or other international subjects, please contact our colleagues at the German Desk or International Desk.
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            [post_date] => 2016-10-26 14:27:57
            [post_date_gmt] => 2016-10-26 12:27:57
            [post_content] => The 7th edition of the German-Dutch Trade Day will be held in Mönchengladbach on 9 November 2016. Boels Zanders Attorneys’ German Desk will once again be in attendance. We invite you to visit our booth, where our team can answer your questions regarding legal and cultural problems in Germany.

In the meantime, here are ten tips to help you avoid legal issues in Germany:

Tip 1: Cultural differences: in addition to knowing the German language, make sure you know the cultural and business practices. Hierarchy is more important in Germany than in the Netherlands.

Tip 2: Choice of law: carefully consider which law you wish to specify in your terms and conditions. Dutch law is not always the best choice.

Tip 3: Disputes: dispute resolution can be time-consuming and expensive. When drafting your terms and conditions, make a cost-benefit analysis to determine which court or arbitration institute to submit your disputes.

Tip 4: Terms and conditions: state your terms and conditions in the earliest possible stage of the business relationship and send the other party a copy. This can prevent unexpected problems at a later stage.

Tip 5: Representation: are you ready for the next step? Rules regarding agency and distribution can differ considerably. When making your decision, take your company and type of service into account.

Tip 6: Foreign branch: it can be advantageous to start a German sister company or subsidiary, both culturally and legally. We can provide advice on establishing a GmbH or AG.

Tip 7: Personnel: do you already have a German branch and want to hire people? We can advise you regarding the differences in German employment law.

Tip 8: Liability: we can advise you on the German product requirements and liability rules. This can prevent unpleasant surprises.

Tip 9: Real estate: it is not always easy to purchase real estate in a foreign country. We are happy to advise you in this regard.

Tip 10: Impecunious counterparty: adapt your accounts receivable and after sales system to the German system.

We look forward to seeing you in Mönchengladbach on 9 November 2016!
            [post_title] => 7th Edition of the German-Dutch Trade Day
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