Sale of Goods: Delivery, Defects, Warranty

Sale of Goods

In a German sale of goods contract, the seller owes delivery of goods free of defects; the buyer owes the purchase price. In practice, disputes usually come down to either the goods or the money not having arrived.

The sale of goods contract differs from the work contract (Werkvertrag) in that under a work contract the item is produced to the customer’s specification. In a straightforward sale the goods already exist. If you order a kitchen and have it installed, however, you have a combined supply-and-installation contract – a hybrid of sale and works. In that case the law applicable to the predominant element governs, typically works law.

A note for common law clients: German warranty law is not primarily contractual. The BGB gives the buyer statutory warranty rights that exist independently of what the contract says. You cannot simply exclude them in standard terms – such an exclusion is void.

Court Rulings on Sales of Goods

The following Federal Court of Justice (BGH) rulings deal with sales of goods (this list is still very incomplete):

(pls. scroll aside)

• Scooter wobbles dangerously the day after purchase – who's liable?
• Diesel scandal: Do you need to know the technical details to sue BMW? BGH VIa ZR 482/23 · 2.6.2026 Auto Sales Contract

Monitoring Performance

If you are waiting too long for delivery (or payment), you must first send a formal reminder (Mahnung) setting a deadline before damages claims accrue. Simply waiting and eventually suing without having sent a reminder puts you in a weak position. You cannot simply walk away from the contract either.

What Counts as a Defect

Goods are defective if they do not have the agreed specification. Simple in theory, complicated in practice when the contract says nothing about specification. In that case the standard is “usual quality” – which means what the court hearing the case decides is usual.

If there is a defect, the buyer’s first remedy is subsequent performance only: the seller gets a second chance. Only if subsequent performance fails, is refused, or is unreasonable does the buyer get the right to withdraw, reduce the price, or claim damages.

Limitation periods: in a sale between private individuals, claims expire two years after handover. This can often be shortened contractually, but not to zero. Selling “excluding all warranty” in standard terms usually achieves the opposite – the clause is void and full statutory liability applies.

Important for buyers: Document defects immediately, ideally with photos and date. Raising a complaint weeks later creates a proof problem.

Court Rulings on Loan Agreements

The following Federal Court of Justice (BGH) rulings deal with loan agreements (this list is still very incomplete):

vertragsbeendigung

Instalment Purchase and Linked Contracts

If you buy on instalments and the sale contract is linked to a loan agreement – meaning the bank pays the seller directly – you have a special tool in a dispute: the right to raise defences against the bank as well. If you are entitled to withdraw from the sale, you can also refuse further repayments to the bank. And if you concluded such a linked contract as a consumer at a distance or away from business premises, you have a right of withdrawal against both parties, regardless of whether the goods are defective.

Extended Retention of Title

If you supply goods to traders for resale, you will quickly encounter the consignment model: the trader takes the goods, sells them in its own name, and accounts to you afterwards. The supplier usually remains owner until payment under most contracts.

An extended retention of title clause goes further: the supplier retains not only title to the goods until payment but also an assignment of the claims the trader acquires by reselling them. Abstract in theory, but worth real money if the trader becomes insolvent.

If you use these structures regularly, it is worth having them set up properly once so you do not have to rethink every contract.

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