LEGAL+ NEWS
The Federal Ministry of Justice is getting serious with its plan to limit contract terms. In mid-August 2019, the press reported that the legislative project to “protect against cost traps” was well advanced. In terms of content, this involves, among other things, the welcome elimination of various abuses (e.g. in the area of telephone advertising). Another, less welcome subject of the project is the limitation of contract terms in certain sectors, e.g. in the areas of mobile telephony and energy supply. The corresponding draft bill is on the home straight.
A closer look at the proposed legislation raises considerable concerns from a legal perspective with regard to the planned limitation of terms. The planned law fundamentally restricts contractual freedom as an elementary component of constitutionally protected private autonomy. The necessary justification for this restriction of contractual freedom is not apparent.
The Federal Ministry of Justice’s plan to limit contract terms
According to its key issues paper “Protection against cost traps”, the Federal Ministry of Justice is planning the following changes:
“The prohibition of clauses relating to contract terms and extensions in Section 309 no. 9 of the German Civil Code (BGB) is to be amended to the effect that in future no longer than one year can be agreed by means of general terms and conditions. An automatic extension of the contract should only be possible by three months in each case if the contract is not terminated at least one month before the end of the agreed contract term.”
Justification of the project in accordance with the key issues paper “Protection against cost traps”
The Federal Ministry of Justice justifies the planned project in its key issues paper “Protection against cost traps” as follows:
“The structural imbalance between business and consumers often means that (…) consumers have to agree to contractual provisions that are not in line with their interests or are no longer up to date. The annoyance is often great.”
“In contracts for the supply of goods, services or work, consumers generally have little interest in long contractual commitments.”
“The The two-year contract terms currently possible and the automatic renewal of the contract for a further year are no longer in the interests of consumers. Renewal clauses in general terms and conditions are a particular annoyance in terms of consumer policy. They are simply overlooked by many consumers or are forgotten, so that contracts that are no longer wanted are often extended for further years against the consumer’s will because they failed to terminate them in good time.”
Legal assessment of the project
In my opinion, the planned limitation of contract terms is not compatible with the principle of freedom of contract. The arguments used by the Federal Ministry of Justice cannot justify the planned restriction:
The principle of freedom of contract
Freedom of contract is understood to mean the right of every individual to decide freely about
- to conclude a contract (so-called freedom to conclude a contract), and
- The parties are free to decide on the content of a contract (so-called freedom of design).
Freedom of contract is not expressly regulated by law; it is part of the constitutionally protected principle of private autonomy, according to which every individual is granted the right to freely organize their private living conditions.
Part of this is the freedom to conclude contracts and to determine their content. The latter is what is at issue here.
Permissible restrictions on freedom of contract
Both forms of freedom of contract – i.e. freedom to conclude contracts and freedom to form contracts – are subject to recognized restrictions.
In certain situations, there is an obligation to contract. One example is motor vehicle liability insurance. Here, insurance companies are obliged to contract in accordance with Section 5 of the German Compulsory Insurance Act (with the restrictions set out therein). The necessity here is obvious.
Freedom of design is also subject to certain restrictions in order to protect higher interests. For example, there are legal regulations in various areas of law that are of a mandatory nature and cannot be waived by contract; such regulations can be found, for example, in the law on general terms and conditions, which declares certain provisions in general terms and conditions null and void primarily for the protection of consumers. Further restrictions result from statutory formal requirements (written form, notarial form, etc.) as well as the statutory nullity order with regard to provisions that violate common decency(Section 138 BGB) or statutory prohibitions (Section 134 BGB).
No apparent justification for the planned restriction of design freedom
As stated at the beginning, I do not believe that the planned limitation of contract terms can be justified to any extent:
Act affects all future contracts in the sectors concerned
First of all, it should be noted that the law on general terms and conditions does not only apply to the proverbial “small print”. In practice – especially in the sectors affected here – every contract is subject to GTC law, as it would simply not be feasible to agree individual contract terms with every consumer. In short, the proposed legislation effectively covers every future contract in the affected sectors.
Complete elimination of the option of 2-year contracts
As a result, the option to conclude a two-year contract, which is extended by one year in the absence of termination, will no longer be available in future.
How can we justify taking this option away from the parties? In my opinion, nothing:
Freedom of contract means that the parties themselves can (and must) determine what is subjectively right for them within the limits of good morals and the recognized general laws limiting freedom of contract. No one can or may take this decision away from them.
The legislator, insofar as it wishes to uphold private autonomy, must respect this self-determination of the legal subjects and must not allow itself to be tempted – e.g. driven by political sentiment – to determine what is right through laws that (impermissibly) restrict contractual freedom.
“Consumer protection” as a mere pretext for limiting contract terms
In principle, consumer protection is an unquestionable motive for restricting freedom of contract. However, consumer protection must not be abused – as in my opinion in this case – to justify politically driven projects.
According to its own statements, the Federal Ministry of Justice is of the opinion that terms of two years are “unfair” and a “nuisance” for consumers. It overlooks the fact that consumers in all the sectors targeted (mobile telephony, energy supply, etc.) have a wide variety of contract models from a large number of providers to choose from. In particular, consumers always have the option of entering into contracts without any commitment. Conversely, they can – at least so far – choose to enter into commitments and often receive considerable benefits in return (e.g. significantly more favorable conditions, discounted hardware, etc.). In other words, consumers today can choose between a variety of contract models and decide for themselves what is “right” for them. This also includes the assessment of the disadvantages associated with a contract commitment, which is the sole responsibility of the consumer. It can therefore be of no relevance from a legislative perspective that consumers may be “annoyed” after some time by an existing contract commitment that they consciously entered into some time ago.
Competition law already offers sufficient protection
After all, the consumer only needs protection to the extent that he is not misled by a contract offer, e.g. in that essential contractual conditions are not sufficiently recognizable for him. However, this is the responsibility of competition law, which has always fulfilled this task adequately.
Conclusion
With regard to the limitation of contract terms, the planned “cost trap law” represents an unjustifiable (further) curtailment of contractual freedom and a further step in the direction of a politically desired or at least condoned departure from the principle of private autonomy.
LATEST ARTICLES
Guide to International Civil Procedure: Recognition and enforcement of foreign judgments in Germany
Once a judgment has been successfully obtained against a German debtor abroad (in a third country), the creditor is faced with the important practical question of how to actually get his money.
If the German debtor does not pay voluntarily, only the enforcement of the judgment will help. However, since in most cases the German debtor only has assets in Germany that could be enforced, the foreign judgment must be enforced in Germany. This requires that the foreign judgment has first been declared enforceable by a German court. This declaration of enforceability is the subject of separate court proceedings against the debtor in Germany, at the end of which, if successful, an enforcement order will be issued.
The following article deals with the content of these proceedings.
Guide to appeal law – Importance of the content of the grounds of appeal for the scope of review by the court of appeal
The view that the content of the grounds of appeal determines the scope of review by the court of appeal is widespread. According to this view, the grounds of appeal must contain all complaints regarding the first instance judgment that the appellant wishes to have reviewed by the court of appeal. If the appellant omits a complaint, this would mean that the court of appeal itself would have to ignore legal violations that it has recognized and deemed to be significant.
Possibilities of contesting a settlement concluded in court
Civil proceedings are often concluded by way of a settlement between the parties during the course of the proceedings. This is often done with the help of the court. Practice shows that such a settlement, despite the involvement of the court, is not without its pitfalls. I would like to provide an overview below.
CONTACT
+49 (40) 57199 74 80
+49 (170) 1203 74 0
Neuer Wall 61 D-20354 Hamburg
kontakt@legal-plus.eu
Benefit from my active network!
I look forward to our networking.
This post is also available in: DE
