The 'fair consumer contracts' law

Highlights of the new regulations for consumer contracts

On 24 June 2021, the Bundestag passed the Fair Consumer Contracts Act (BT-Drs. 19/26915). The Bundesrat adopted this law in the version modified by the Legal Affairs Committee (BT-Drs. 19/30840) on 25 June 2021. The new regulations will enter into force in stages at different times:

The Fair Consumer Contracts Act comes into force in stages. The amendments to Sections 308 No. 9, 310 (1) BGB (new version) and Section 7a UWG (new version) came into force on 1 October 2021. § Section 309 No. 9 BGB new version came into force on 01/03/2022. § Section 312k BGB n. F. (‘cancellation button’) will come into force on 01.07.2022.

The German government wants to strengthen the rights of consumers, who are in a chronic power imbalance with companies. The revised regulations in the German Civil Code (BGB) and the Unfair Competition Act (UWG) are intended to protect against contracts that have been imposed by telephone or contracts with excessively long terms and cancellation periods. The focus is on continuing obligations such as contracts for fitness studios, energy supply contracts or contracts concluded online, such as streaming contracts.

An important innovation is the introduction of a cancellation button pursuant to Section 312k n. F. of the German Civil Code (BGB), which enables consumers to cancel consumer contracts in electronic commerce quickly and easily. Businesses must ensure that the cancellation button is clearly legible and marked with the words 'Cancel contracts here' or a similarly unambiguous wording. In the event of delayed implementation of this regulation until 1 July 2022, consumers may terminate a contract at any time and without observing a period of notice. § Section 312k (4) sentence 2 (new version) of the German Civil Code (BGB) also presumes that the notice of cancellation has been received by the company: The law presumes that a cancellation notice sent by clicking on the confirmation button has been received by the company immediately after it has been sent.

Impact on the law on standard terms and conditions: Previously, Section 309(9)(b) of the German Civil Code (Bürgerliches Gesetzbuch - BGB) permitted tacit renewal of the contract for up to one year in the case of a contractual relationship involving the regular delivery of goods or the regular provision of services or work by the user. According to the new version of sec. 309 no. 9 lit. b) BGB, a tacit renewal of the contract is only permissible if the contractual relationship is renewed for an indefinite period of time and at the same time the contractual partner is granted the right to terminate the renewed contractual relationship at any time with a notice period of one month. The materials on Section 309 No. 9 BGB-E do not provide any information on the calculation of the notice period. However, from the point of view of consumer protection, it is obvious that the calculation should be made to the day (e.g. termination on 5 March with effect from 5 April). The legislator's intention is that the person terminating the contract should not be bound by the contract for more than one month. In addition, the legislator has reduced the admissibility of agreeing a period of notice of three months before the expiry of the originally intended contract term to one month in Section 309 no. 9 c) new version of the German Civil Code.

The Act on Fair Consumer Contracts (19/26915) was published in the Federal Law Gazette on 17 August, thus completing the legislative process. The new law aims to improve the position of consumers vis-à-vis businesses, both in terms of the conclusion of contracts and the content of contracts. To this end, it provides for amendments to the German Civil Code (BGB) and the Unfair Competition Act (UWG).

Relevant changes

In order to further improve the position of consumers vis-à-vis businesses and to ensure that not only contracts are concluded on fair terms, but that the content of the contract is also subject to fair rules, the Act includes amendments to the BGB provisions on relevant general terms and conditions, the introduction of a "cancellation button" for consumer contracts in electronic commerce and stricter documentation and retention requirements for consent to telephone advertising, which are subject to a fine.

The Fair Consumer Contracts Act will come into force in stages. The amendments to Sections 308 no. 9, 310 (1) BGB (new version) and Section 7a UWG (new version) came into force on 1 October 2021. § 309 No. 9 BGB (new version) entered into force on 01.03.2022. § 312k BGB (new version) ("cancellation button") comes into force on 01.07.2022.

(1) Tightening the law on general terms and conditions

Unfair contractual clauses in general terms and conditions are cited as the main reason for the new regulations, which have made it more difficult for consumers to take advantage of market opportunities. This situation is now to be addressed through selective tightening.

Standard exclusion clauses prohibiting consumers from assigning their own monetary claims against the company to third parties are often found in general terms and conditions. This is no longer possible under the completely new Section 308 No. 9 lit. a of the German Civil Code (BGB). According to § 308 no. 9 lit. a) BGB (new version), the user of the standard terms and conditions (entrepreneur) is prohibited from excluding the assignability of monetary claims of the contractual partner (consumer) against him in his standard terms and conditions.

The prohibition is comprehensive: it covers not only agreements that completely exclude the assignment of a claim, but also agreements that merely restrict the assignment. With the prohibition of clauses in sec. 308 no. 9 lit. a) BGB (new version) the legislator wants to ensure that consumers can use the services of registered debt collection companies for the enforcement of their rights. The prohibition of non-assignment also applies to other rights of the contractual partner against the user if this requires a balancing of interests. Pursuant to Section 308 No. 9 of the German Civil Code (BGB) (old version), exceptions apply to claims arising from payment service framework agreements and pension benefits under the German Occupational Pensions Act (Betriebsrentengesetz). Conversely, the new non-assignment clause also applies, for example, to employment law. If the employee notifies the employer of an assignment of a claim, the employer can only make payment to the new creditor (assignee) in discharge of the debt under the new law. However, if the employer pays the wages to the employee, the claim remains unsatisfied.

Pursuant to Art. 229 § 60 S. 1 EGBGB (with effect from 1 October 2021), § 308 No. 9 BGB (new version) will only apply to new contracts concluded after 1 October 2021. This means that the previous legal situation, according to which prohibitions of assignment included in the contract were considered permissible, will continue to apply to old contracts.

Under the previous law, tacit contract renewals of up to one year were permitted for contracts involving the regular supply of goods or the provision of services or work by the user. Under the new law, tacit contract renewals are only permissible if (1) the contractual relationship is renewed for an indefinite period of time and (2) the other party is simultaneously granted the right to terminate the renewed contractual relationship at any time with a notice period of no more than one month, see Section 309 no. 9 lit. b) BGB new version.

The materials on Section 309(9) of the German Civil Code (BGB-E) do not provide any guidance on the calculation of the period. However, from the point of view of consumer protection, it makes sense to calculate the period to the day (e.g. termination on 5 March with effect from 5 April). It is the intention of the legislator that the party giving notice should not be bound by the contract for more than one month. Cancellation at the end of the month, i.e. on the last day of the following month (e.g. cancellation on 21 January with effect from 28 February), is not permitted under any circumstances, if only because the period of 30 days would be exceeded (according to Section 191 of the German Civil Code, a month is 30 days). This would weaken the individual protection of the consumer. The main idea of the protection is to protect the consumer from unintentionally long contractual obligations. This also follows from the protective concept of § 309 no. 9 lit. c) n. F. BGB. This makes it clear that cancellation periods of more than one month are generally prohibited. Previously, the period of notice was three months. The one-month cancellation period therefore also applies to contracts relating to apps which, for example, stipulate that you pay for six months in advance and then receive a discount.

Pursuant to Art. 229 § 60 S. 2 EGBGB (with effect from 1 March 2022), § 309 BGB in the version valid up to that date applies to a contractual obligation that arose before 1 March 2022. § Section 309 BGB (new version) will therefore only apply to new contracts concluded after this date. The old legal situation, according to which implied contract renewals of up to one year and notice periods of up to three months were (or still are) possible, continues to apply to old contracts concluded before 1 March 2022.

Art. 229 Section 60 sentence 2 EGBGB recognisably aims to provide a practicable transition for the interests of entrepreneurs to enable them to make sensible arrangements and adapt to the new law. With the new legal situation, the legislator has - to the chagrin of some customers - not recognised the price advantages that the entrepreneur could offer his customers with a longer term.

From the consumer's point of view, the new regulation in Section 309 No. 9 of the German Civil Code makes it easier to switch to other contract models and providers. This significantly improves consumers' ability to take advantage of market opportunities.

(2) Consumer contracts: Introduction of a "cancellation button", § 312 k BGB n. F.

The new provision in § 312 k BGB n. F. enables consumers to cancel consumer contracts in electronic commerce with just a few mouse clicks. The trader must give the consumer the option of cancelling the contract by means of a "cancellation button" (the law refers to this as a "withdrawal button"), provided that the contract is a continuing obligation in electronic commerce for a fee. This button must be clearly labelled with the words 'Terminate contracts here' or other similar clear wording.

It should be noted that this obligation does not change if the website is operated by a third party, such as an intermediary portal. Anything else would be contrary to the spirit and purpose of the standard, as the cancellation option via the button could otherwise be easily circumvented.

The law also requires that, after clicking on the cancellation button, consumers must be taken to a confirmation page that prompts them and allows them to provide information on the following points:

• Type of cancellation (ordinary / extraordinary) and reason for cancellation
• Unique identifier and name of the contract
• Time of termination of the contract by cancellation and electronic transmission of the cancellation confirmation

It must also be possible to store the cancellation notice with date/time on a permanent data carrier (e.g. by downloading). The confirmation page must also contain a 'confirmation button' labelled 'Cancel Now' or an equivalent clear wording.

The trader must immediately confirm to the consumer in text form by electronic means the content, date and time of receipt of the cancellation notice and the time at which the contractual relationship is to be terminated by cancellation. In addition, the trader is deemed to have received the notice of cancellation immediately after it has been sent, Section 312k(4) of the German Civil Code (new version) and Section 5 of the German Civil Code (new version).

Pursuant to Art. 229 § 60 S. 3 EGBGB (with effect from 1 July 2022), the new obligations of § 312k BGB will also apply to contractual obligations that arose before 1 July 2022. This also creates a kind of retroactive effect for old contracts.

If companies do not implement the required cancellation buttons and confirmation pages in good time before they come into force on 1 July 2022, affected consumers will also be able to terminate the relevant contracts at any time and without observing a period of notice in accordance with Section 312k (6) of the German Civil Code (new version).

With the new regulation, the legislator is reacting to a phenomenon that has often been observed in the past, according to which companies do everything in their power to enable consumers to conclude contracts online and with as little effort as possible, but at the same time try to prevent any possibility of online cancellation.

(3) Consent to Telephone Advertising, Paragraph 7a UWG (new version)

§ 7a UWG (new version) amends the previous provision on consent to telephone advertising in the interests of greater consumer protection. According to Section 7a(1) UWG (new version), any consent must be documented in an appropriate form.

No special form (such as text form, see Section 126b BGB) is required. Initially, this should have no practical impact, as there was already a de facto obligation to provide proof of consent prior to the amendment under the General Data Protection Regulation (GDPR) and the Unfair Competition Act (UWG). What is new, however, is the obligation for companies under paragraph 2 to retain consent for telephone advertising for five years from the time it is given and after each use. This retention period corresponds to the comparable provision in Section 83 (8) of the German Securities Trading Act (WpHG). The Government Draft (p. 10) justifies the alignment with Section 83 (8) WpHG with the following arguments:

In administrative offence proceedings, however, the authorities must first prove that the offence has been committed, for example by questioning witnesses. This makes the process long and complicated. Some advertisers try to exonerate themselves by claiming that the consent form could no longer be kept for data protection reasons and was therefore destroyed. The introduction of a documentation requirement for consumer consent, which is one of the proposals in the final report, is intended to make the sanctioning of unauthorised telemarketing more efficient overall and to reduce the incentives for non-compliance. The documentation requirement will also make it easier for advertisers to verify the effectiveness of consent.

However, it is problematic that the new version of the UWG does not clearly clarify whether the consent in Section 7(2) No. 2 of the UWG is to be understood in terms of data protection law in the sense of Directive 2002/58/EC or in terms of prior consent in the sense of the UWG. In any case, the Federal Government assumes that consent to advertising (presumably) also constitutes consent under data protection law. This could be problematic to the extent that Section 7a UWG (new version) contains specific requirements for the documentation of consent, which are not regulated in the directly applicable GDPR. Due to the primacy of Union law, a national regulation that violates or contradicts the higher-ranking GDPR cannot be applied per se.

However, the government draft of the amended Section 7a UWG assumes that the provision does not violate the GDPR.

The government draft considers Section 7 UWG as amended to be "a special fulfilment of the distribution of the burden of proof of the data processor's obligation to provide evidence of consent to data processing in the area of telephone advertising provided for in Article 7 (1) GDPR".

This is certainly justifiable: no specific form is required for the consent itself, or for the proof. Nor does the GDPR impose any formal requirements for consent. However, it is doubtful whether the obligation to retain data for five years under Section 7a(2) of the new version of the Unfair Competition Act (UWG) is covered by Article 7(1) of the GDPR.

Consent under the GDPR is not tied to a specific time limit and, in principle, does not expire after a certain period of time. It must therefore be assessed on a case-by-case basis. In general, the processing of personal data on the basis of consent is possible until the previously specified, clear and legitimate purpose has been achieved or until the data subject withdraws his or her consent (Article 7(3)(1) GDPR). Furthermore, the GDPR stipulates that valid consent itself must be verifiable, but does not stipulate that evidence must be kept from the time it is given "and after each use". In this regard, the Federal Government explains that Article 15a of Directive (EU) 2002/58/EC requires Member States to impose sanctions for infringements of the national provisions transposing the Directive and to take the necessary measures to ensure their enforcement. The penalties must be effective, proportionate and dissuasive. The obligation to document and keep records, which is subject to fines, is necessary to ensure effective sanctions, as the burden of proof in administrative offence proceedings differs from that in civil proceedings.

Precise definitions of what constitutes "appropriate documentation" are not available in the law itself or in the official explanatory memorandum. However, the Federal Network Agency, as the competent authority, can publish guidance on how it will interpret the vague legal term "appropriate documentation".

In future, particular attention should be paid to detailed and accurate documentation - as incomplete or incorrect documentation can result in a fine of up to €50,000, see Section 20 of the German Act against Unfair Competition (UWG) (new version).

Conclusion

In summary, the Fair Consumer Contracts Act aims to further improve the position of consumers vis-à-vis businesses and to subject the conclusion and content of contracts to fairer rules. In order to achieve these two goals, the Act includes amendments to the provisions of the German Civil Code (BGB) on the drafting of relevant general terms and conditions, the introduction of a "cancellation button" for consumer contracts in electronic commerce, and documentation and retention obligations for consent to telephone advertising, which are subject to a fine. This places a significant implementation burden on businesses in the B2C sector. In particular, the new retention and documentation obligations under Section 7a of the German Act against Unfair Competition (UWG) (new version) have been affecting companies for several months. Corresponding conversion processes should already have been initiated.