The German B2B Defect Standard: What Companies Should Know About the Sales-Law Reform

Since 1 January 2022, German sales law has applied a revised standard for determining whether goods are free from defects. Under the legal position discussed in this article, the requirements apply not only to consumer sales but generally also to B2B transactions. Goods must meet the subjective and objective requirements and, where relevant, the installation requirements. Clear contractual definitions of quality, intended use and permitted deviations are therefore particularly important.

1. Why the reform matters in B2B transactions

Germany’s sales-law reform entered into force on 1 January 2022. It implemented the EU Digital Content Directive and the EU Sale of Goods Directive and introduced new rules for digital products, goods with digital elements and the concept of defects under section 434 of the German Civil Code.

Although the EU directives primarily addressed consumer contracts, the German implementation also affects pure B2B transactions. Companies selling machinery, software-related products, components or other goods to business customers should therefore review how their contracts define quality and intended use.

2. The former defect standard

Until 31 December 2021, the agreed quality generally had priority. A good was initially free from defects if it complied with the quality agreed by the parties. Objective expectations became relevant particularly where no quality agreement existed.

This was important in B2B transactions because companies could tailor products to a customer’s individual requirements and define the contractual performance in detail.

3. The revised standard since 1 January 2022

The former hierarchy between subjective and objective requirements was abandoned. Under the legal position discussed in the article, goods must generally satisfy three categories cumulatively:

• subjective requirements,
• objective requirements,
• installation requirements, where applicable.

A good may therefore be defective even if it complies with the expressly agreed specification but does not meet the objective expectations applicable to goods of that type.

Subjective requirements

These include the agreed type, quantity, quality, functionality, performance data, accessories and instructions.

Objective requirements

These concern what a purchaser may normally expect from comparable goods, including ordinary suitability, customary quality and public statements by the seller or producer.

Installation requirements

For goods requiring installation, defective installation instructions or defective installation may be relevant to the assessment of conformity.

4. Why this can create problems for B2B contracts

B2B products are often customised. A special-purpose machine may intentionally differ from ordinary industry products. If the agreement does not clearly describe the intended use and the permitted deviations, a dispute may arise even though the product complies with its technical specification.

Relevant questions may include:

• What was the actual contractual purpose of the goods?
• Which additional properties could the buyer reasonably expect?
• Did product advertising or data sheets create further expectations?
• Was the buyer aware that the goods were used, customised or a one-off item?
• Were installation, instructions and accessories sufficiently described?

5. Contract-drafting options for companies

Companies should describe not only technical data but also the intended use of the goods. If the product deliberately deviates from industry standards, those deviations should be documented clearly.

Depending on the product, the contract may include:

• a detailed positive specification,
• an express description of the permitted operating conditions,
• a clear statement of limitations,
• a practical list of functions or uses that are not owed.

A negative list may help to clarify that the product is not intended for a particular application, does not contain certain interfaces or functions, or may only be used under defined conditions. The list should remain manageable and should not become an unwieldy catalogue.

For complex or customised products, an individually negotiated agreement may be more suitable than standard terms. The limits of German AGB law must be considered carefully.

6. Liability limitations in B2B transactions

In addition to defining the agreed quality, the parties may consider a liability limitation where legally permissible. An individually negotiated agreement may exclude or cap liability for certain defects.

The distinction between an individually negotiated agreement and standard terms is important. A clause included only in standard terms is subject to the stricter requirements applicable to German AGB.

7. Practical checklist

Companies should review the following points in new or amended B2B sales contracts:

• What exact quality has been agreed?
• Is the intended use expressly stated?
• What objective properties may the buyer additionally expect?
• Does the product deviate from industry standards?
• Is it customised, used or a one-off item?
• Are technical data, accessories and instructions complete?
• Are installation requirements sufficiently described?
• Do advertising and product data sheets create additional expectations?
• Is a practical negative list useful?
• Should the arrangement be individually negotiated rather than placed in standard terms?
• Are liability exclusions or caps legally permissible and effectively agreed?

Advice on German B2B sales contracts

Stroschein & Makowka advises companies on B2B sales contracts, quality specifications, delivery terms, standard terms, liability limitations, goods with digital elements and the enforcement or defence of warranty claims.