Contract law in Germany

Contract samples, drafting of contracts and Contract Law at Horak Attorneys at Law, in Hanover/ Munich:

Foundation of Contract Law:

Contract Law regulates the business relations between two or more legal entities (companies and / or consumers). The fundamental principle of freedom of contract is applied. Each party may freely determine the subject matter of the contract. This principle of contractual freedom is limited by mandatory provisions of the present law, legal prohibitions or principles of morality and therefore every contract conclusion shall be verified in order to ascertain that all the contractual provisions have been observed.

In most cases, fundamental problematics regard the intent of fraud, deception, threat, impossibility, violation of Terms and Conditions rights, and infringement of essential procurement requirements.

Most frequently mutually obtained GTC or used documents, order forms and related formulations, order confirmations or similar documents, which are sent in connection with the initiation or implementation of the contract, decide on certain contractual contents. Therefore, the entire process has to be carefully considered.

Company consistently conclude contracts such as: purchase contracts, manufacturing contracts, supply agreements, distribution agreements, licensing agreements, employment contracts, lease contracts or more uncommon types of contracts such as outsourcing agreements, Management buy-out agreements, publishing contracts etc. In those cases, can turn out that the concluded contract does not actually correspond to what have been previously agreed. Mistakes can be made, but it is important to avoid errors that could cause particular problems. Non-performing contracts could lead to huge financial losses and even cost the existence of a young company.

Basic knowledge of Contract Law in Germany

Every entrepreneur should have at least a basic knowledge of the contractual requirements of a performing agreement. Do not hesitate to contact our law firm; one of our competent attorneys will verify the efficacy of your most important contracts for you. Entrepreneurs have to act in respect of the more relevant trade practices and in accordance with applicable regulations and prevailing industry practices.

What should you carefully observe during the elaboration of a contract?

Liability/ Exact Obligations

Concluded contracts must be respected. Special attention must therefore be paid to the negotiations of the contract: each contracting party shall be able to fulfill the commitments made in the agreement.

Form of the contract

Contracts should generally be concluded in written form in order to avoid misunderstandings. Certain contracts also have to be drafted in written form; this is the case of most contracts agreed between companies and consumers (i.e. purchase transactions, consumer loan agreement etc.).

Terms of the contract

Contracts have to be agreed for a certain period of time or for an indefinite lapse of time. Fixed terms have the advantage to provide certain securities for both parties involved (i.e. the long-term utilization of a permanent business establishment etc.). Short periods of notice, on the other hand, are made for more flexibility: for instance, if the building has become too small for the growing company, it is relatively easy to get out of the contract. 

Termination

Generally, long-terms contracts have longer notice of termination periods. Before the conclusion of the contract, every party should consider the advantages and disadvantages of these periods of notice. Long notice periods offer more securities, short notice periods make the contract more flexible,

Interpretation of the contract

It is fundamental to adhere to the contents of the contract agreed by the parties, once you are sure that the individual clauses are legally effective. However, often happens that after the conclusion of the contract, uncertainties or particular situations, which have not previously been considered, occur.

Contract Law starts with the drafting of the contracts and goes up to the enforcement of addressed entitlements arising from the contracts.

Sample and drafting of contracts, Terms and Conditions (GTC)

It is possible to find samples or patterns for almost every type of contract. These samples are often generalizes on the basis of a fictitious fact, and their use is therefore not recommended for important contractual situations, if a legal examination has not been done.

Moreover, every pattern normally needs a correct adaptation. Not worked out and adapted or outdated contracts often include several central clauses that are legally ineffective. This generally happens with particular contracts, such as performers’ exclusive contracts, license agreement, industrial property transfer agreements or international contracts. In case of constantly recurring contractual situations however, it may be useful to create a contract sample that have to constantly been checked and adapted.

The GTC are not mandatory but if they are going to be used, it is important to formulate them correctly.  Every legal practice specialized in this area of law know how important the utilization of the “right” GTC terms can be: it may be useful to have at disposal differentiated GTC patterns (such as purchasing contracts GTC, foreign trade GTC; online trading GTC etc.).

Management of contracts

In addition to the designation of the contract, we also support our clients in contracts management. Please make sure to contact us for a more specific consultation on these matters.

Contract Enforcement, Litigation and Debt Collection

Contract enforcement as well as the defense of contractual claims is one of our main tasks in Contract Law alongside to contract design. You can find more information on debt collection/receivables at www.inkassora.de .