Contracts

Commercial Law

The German Commercial Code (Handelsgesetzbuch - HGB) contains special civil-law provisions that govern professional business people (legally referred to as "Kaufleute", i.e. merchants). The Code applies to them as soon as their business, because of its volume, requires it to be operated pursuant to proper commercial practices. The law presumes this to be the case when an enterprise's annual turnover exceeds € 250,000 and its annual profits exceed € 25,000. The liberal professions (freie Berufe), which roughly include the medical professions, legal and tax advisers, accountants, and practitioners of the fine arts, are traditionally not governed by the Commercial Code.

The primary objective of German commercial law is the effective and unbureaucratic regulation of professional business transactions. Assuming that experienced entrepreneurs know their business and prefer efficiency to all-embracing protection, commercial law places the effectiveness of the transaction above the individual interests of the parties. Thus it enables cost-effective contractual drafting and has served as a model for European legal standardization.

To ensure legal transparency for everyone, certain fundamental information about the business enterprise - such as ownership, legal representation, and financial statements - must be disclosed in the respective, publicly accessible Commercial Register. These registries are administered by the various municipal courts (Amtsgericht) in Germany. The reliability  of the entries checked by notary publics and by the courts. The registered entries can also be inspected conveniently via the internet. This makes legal opinions and other forms of cost-intensive research unnecessary. More information on the Commercial Register and registration procedures is available in our section on business registration.

To facilitate negotiations between contracting parties, those business practices common to a specific industry will, if they are not explicitly waived, play a strong role in the interpretation of commercial contracts due to the fact that they are assumed to be accepted by such parties. The same holds true for international practices such as the Incoterms for instance. In addition, the Commercial Code contains standardized terms and conditions applicable to commercial agreements and to certain contracts such as those involving professional logistic services and commercial agents.