General contract drafting, including international contracts

This year’s overview deals with the most important developments in general contract law. We take a look at court rulings regarding WhatsApp messages fulfilling the requirement of written form, price adjustment clauses in standard terms and conditions, individually negotiated contract terms, warranty exclusions and waivers of the need to set time limits before terminating contracts. We also present some upcoming legislative changes such as the EU Data Act and the new EU Product Liability Directive.

“Oops 😬 ”: WhatsApp messages and emojis equivalent to written form?

Munich Higher Regional Court (Oberlandesgericht München) (judgment of 11 November 2024 – 19 U 200/24 e) examined the questions of what is necessary for declarations to comply with the requirement of written form and the role of digital communications in the context of contract amendments. The case related to the termination of a purchase contract for a sports car due to delayed delivery. The decision focused on communications using WhatsApp regarding an (alleged) mutual extension of the delivery period, since the claimant responded to a message about the later delivery date in a WhatsApp message by writing “Oops 😬 ”.

In this case, the parties had agreed that any changes and additions to the contract had to be in written form (Schriftform). The Higher Regional Court found that digital messages by WhatsApp are in principle suitable for meeting the requirements for transmission by telecommunications (section 127(2) of the German Civil Code (Bürgerliches Gesetzbuch)) and therefore to satisfy an agreement on written form provided that they exist as (written) characters and are reproducible. However, not all types of WhatsApp messages are equally suitable (e.g., voice messages are not). The court also made it clear that, like any other means of communication, emojis are open to interpretation. It said that their meaning depends on the context and cannot be automatically interpreted as consent or refusal. In this case, the “grimacing face” emoji (😬) together with the expression “Oops” was not viewed as being consent to an extension of the delivery period. The court took a different view of the “thumbs up” emoji (👍), which it said could regularly be interpreted as consent.

The judgment highlights the broad and open-ended scope for interpretation of the legal concept of “transmission by means of telecommunications” where written form has been agreed, making it difficult to distinguish from simple “text form” (Textform), which is also defined in the German Civil Code (sec. 126b). Given this, companies wishing to exclude certain means of communication should ensure that they define exactly what is meant by written form, particularly that any agreements amending a contract are restricted to documents intended for this purpose and to avoid misunderstandings.

Requirements for effective price adjustment clauses

Berlin Higher Regional Court (Kammergericht Berlin) (judgment of 15 November 2023 - 23 U 15/22; appeal pending under Case III ZR 407/23) outlined the requirements for price adjustment clauses in standard terms and conditions of business (“standard terms”). The case involved a video streaming platform whose standard terms included a clause allowing it to unilaterally adjust prices based on changes in costs. The clause did not provide for an explicit duty to pass on price reductions if the costs fell.

The Higher Regional Court emphasised that unilateral price adjustment clauses constitute a deviation from the principle of mutual consent and are only permissible if the party using the standard terms has a legitimate interest. In the present case, such an interest was missing in since the streaming contracts had a short notice period and adjustments in prices could also be achieved by obtaining the customer’s consent.

Furthermore, the Higher Regional Court highlighted the requirement of reciprocity, which prevents users of standard terms from profiting from cost reductions without having to pass them on to customers. It stated that it was necessary to prevent only the users of standard terms from benefiting from cost reductions, in line with the “balance principle”. Finally, the court found that the customer’s option of terminating the contract did not redress this unfair disadvantage. It reasoned that customers were disadvantaged by either the price increase or the inconvenience of ending the contract, which contradicts the intention of German law on standard terms and conditions.

The decision, which related to the B2C sector, underscores how important it is to make sure that price adjustment clauses in general terms and conditions of business are balanced. Companies should ensure that price adjustments do not place an unfair burden on their business partners and should also consider the possibility of reducing prices. Failure to do so could result in the clauses being contested in a court on
the grounds of invalidity.

Requirements for individually negotiated agreements as distinct from unilateral standard terms

Dusseldorf Higher Regional Court (Oberlandesgericht Düsseldorf) (judgment of 23 November 2023 – 2 U 99/22) classified contractual penalty clauses in boilerplate cease-and-desist declarations drafted by lawyers as standard terms. It found that a genuine individually negotiated agreement did not exist since the essence of the contractual penalty clause was not put up for discussion and deletions in other clauses were not sufficient to achieve this. The court held that under German law on standard terms and conditions the contractual penalty clause was unreasonably disadvantageous to the other party because it excluded any possibility of combining separate breaches into one breach. The plaintiff’s attempt to save the clause by deleting the exclusion of continued breaches being considered as the same breach (“blue pencil test”) was assessed as being an inadmissible reduction of an unfair term in order to preserve its validity.

The Higher Regional Court’s decision demonstrates that boilerplate provisions drafted by lawyers can be subject to a review to assess the validity of standard terms. For this reason, it is necessary to ensure that evidence of serious negotiations regarding material terms of contract can be provided – in particular as the courts review every clause individually to determine its nature as a standard term. Additionally, considering this strict application of the blue pencil test, it is advisable to exercise cautiously when drafting the wording of standard clauses.

No effective warranty exclusion in agreements on qualities and characteristics

The German Federal Court of Justice (Bundesgerichtshof) (judgment of 10 April 2024 – VIII ZR 161/23) clarified the distinction between agreements on qualities and characteristics and warranty exclusions in sales contracts. In the case at question, the buyer had purchased a car that was almost 40 years old from a private seller, with the air conditioning system was described as being in “full working order”. However, an extensive exclusion of material defects was agreed in the sales contract. After the car was handed over, it was discovered that the air conditioning system was defective.

The Federal Court of Justice clarified that an agreement regarding the existence of certain characteristics could not be negated by a general exclusion of warranties. This means that the agreement exists independently from the general exclusion of warranties. The fact that the car was very old and typically susceptible to wear and tear were not sufficient grounds for the Federal Court of Justice to move away from this principle, as otherwise the agreement on qualities and characteristics would be worthless for the buyer.

The judgment confirms the line taken by case law up to now. Sellers should therefore be aware of the legal implications of representations or assurances made by them outside any warranty statements because general exclusions of warranties do not limit liability for characteristics for which express representations have been given. Conversely, buyers should clearly define the properties that are particularly important to them.

No waiver of the requirement of written form when terminating a contract

Cologne Higher Regional Court (Oberlandesgericht Köln) (judgment of 21 June 2024 – 6 U 112/23) ruled that notice of termination without setting a time limit for performance is ineffective, even if the standard terms for a supply contract contain a clause defining delayed delivery as failure to perform the contract at all (i.e., transaction for delivery by a fixed date where time is absolutely of the essence – “absolutes Fixgeschäft”). The dispute arose from a termination of a purchase agreement for protective masks that were acquired by the German Federal Ministry of Health through an “open-house procedure”.

The Higher Regional Court ruled that full release from the obligation to set a time limit for performance was not compatible with the rationale behind the statutory provisions and constituted an unreasonable disadvantage for suppliers. This leads to the clause being ineffective also in b2b transactions under German law on standard terms and conditions. The court held that a delivery date specified in the supply contract (“30 April 2020 at the latest”) was also not sufficient to establish a less strict fixed date transaction (i.e.,, where delivery could still take place later – “relatives Fixgeschäft”) in which compliance with the deadline was material for performance of the contract. Instead, such transactions only exist if the on-time delivery is so essential that the entire contract depends on it.

The judgment underlines the strict requirements for designing transactions involving fixed delivery dates – even in exceptional circumstances such as the coronavirus pandemic. When formulating standard terms and conditions of business, companies should make sure that the requirement to set a time limit for performance is not generally waived.

Outlook on legislative reforms

At the European and national levels, the following developments will have an impact on how contracts are drafted:

The Data Act (Regulation (EU) 2023/2854), which is set to come into force in September 2025, aims to set down clear rules for accessing and using personal data and other data generated by connected products (“Internet of things”, or IoT) and associated services in the B2B sector. The intention is that Article 13 of the Data Act will provide a framework for reviewing clauses in order to combat unfair contract terms which unreasonably restrict rights to access and use data. In a similar manner to the German law on standard terms and conditions, the Data Act intends to prevent an unreasonable imbalance between contracting parties created by clauses unilaterally provided by one party. Since the provisions also apply retrospectively in certain circumstances, companies will not only have to review new contracts but also check and amend ongoing contracts where necessary.

The new EU Product Liability Directive (Directive (EU) 2024/2853) brings significant changes and obligations for industry. It extends the scope of application to include software (including AI) and digital services. The Directive expands the rights of injured persons, including by identifying more operators as liable parties and waiving the ceilings for liability. The national legislatures have until December 2026 to incorporate the Directive into directly applicable law.

Following on from last year’s Commercial Update, in April 2025 the German Act to Strengthen Germany as a Place of Jurisdiction (Justizstandort-Stärkungsgesetz) will come into force. The Act will enable the establishment of “Commercial Courts” and allow parties to agree on the jurisdiction of these courts, provided that claims amount to a minimum of EUR 500,000. In addition, the Act introduces provisions for all civil proceedings to be conducted in English and measures to protect business secrets. The German Code of Civil Procedure (Zivilprozessordnung) has also been updated with reforms to facilitate video hearings (section 128a of the German Code of Civil Procedure). The Regulation on combating late payment in commercial transactions is still in the European legislative process.

At the time our update went to press, it was not clear whether the German Draft Bill for the Modernisation of Arbitration Law (Gesetzesentwurf zur Modernisierung des Schiedsverfahrensrechts), which contains provisions for arbitration agreements that are not subject to formal requirements, for instance, will be passed before the early elections to the Bundestag.

This article is part of the "Update Commercial 2025". All insights and the entire report as a PDF can be found here.