Term Definition: “Discounted” in the Legal Context
The term “discounted” originates from English and literally means “offered at a reduced price” or “discounted.” In legal contexts, “discounted” is used in various situations, always focusing on the reduction of an original value, price, or claim. It is particularly significant in relation to contracts, financial instruments, company valuations, tax law, as well as commercial and civil law.
Legal Principles and Fields of Application
Discounted im Vertragsrecht
Contract law recognizes various forms of granting discounts or applying deductions. A discount (“Rabatt”) can be agreed upon directly at the time of contracting or granted subsequently. The agreement on a discounted price directly affects the owed consideration and is generally permissible within the scope of contractual freedom. However, the restrictions under § 138 BGB (“usury”) and § 134 BGB (“statutory prohibition”) must be observed, especially if such a discount results in a striking imbalance between performance and consideration or violates statutory provisions.
Example Contract Structuring
- Purchase Agreement: A seller can grant a buyer a discounted price by deducting a certain percentage from the usual price.
- Contract for Work and Services: The contracting parties can agree on an “early-payment discount,” under which the client receives a price reduction for prompt payment.
Discounted in Financial and Capital Markets Law
Within financial and capital markets law, the term “discounted” is particularly relevant in the valuation and issuance of financial instruments such as bonds, stock options, and receivables.
Discounted Cash Flows and Present Value Calculation
A core area of application is the discounting of future cash flows to determine the present value, for example, in the valuation of bonds or in purchase price determination. The basis is § 253 (2) HGB, according to which provisions must be discounted at the “market interest rate for discounting.” In tax law, § 6 (1) No. 3 EStG governs the discounting of non-interest-bearing liabilities.
Discounted Bonds (“Zero-Coupon Bonds”)
“Discounted Bonds” are bonds issued below par value and redeemed at par. The difference between the issue price and the redemption amount constitutes the investor’s yield. For taxation purposes, in particular, § 20 (2) No. 7 EStG (income from capital assets) and § 32d EStG (withholding tax) must be observed.
Discounted in Corporate and Tax Law
Company Valuation Using Discounted Cash Flow Methods
In corporate law, companies are frequently valued using discounted cash flow (DCF) models. Here, the company’s future cash flows are discounted to the valuation cutoff date using a certain interest rate. While these procedures are not explicitly regulated by law, they are recommended by the IDW S 1 standard of the Institute of Public Auditors in Germany and accepted by courts as estimation methods under § 287 ZPO.
Tax-Related Guidance for Discounting
In tax law, discounting is mandatory for the valuation of provisions and liabilities, as regulated in § 6 (1) No. 3 EStG and § 253 HGB. This applies especially to non-interest-bearing liabilities with a term of more than one year.
Legal Consequences and Legal Nature of Discounting
Legal Consequences for Contractually Agreed Discounts
The discounted price is legally binding if the contracting parties validly agree to it. A subsequent discount requires a written contract amendment if provided for in the original contract or if a written form requirement exists (§§ 126, 127 BGB).
Implications in Insolvency Proceedings
In insolvency law, a discounted claim must be considered when future, not yet due receivables are filed for the schedule. According to § 45 InsO, such claims are discounted at the statutory interest rate as of the opening of insolvency proceedings.
Liability, Consumer Protection, and Competition Law
Notice and Information Obligations When Offering Discounts
When discounts are offered in B2C transactions, under § 312d BGB in conjunction with Art. 246a EGBGB, extensive information requirements exist, particularly regarding the indication of the price reduction, the calculation basis, and any conditions.
Competition Law Aspects
The offering of discounted prices must comply with the provisions of the Act Against Unfair Competition (UWG). Misleading information about the amount or duration of discounts (§ 5 UWG) or improper bait advertising (§ 4 No. 4 UWG) is prohibited.
Summary and Outlook
The term “discounted” plays a central role in German law in contract drafting, the valuation and issuance of financial instruments, insolvency law, as well as in tax and corporate law matters. Crucial at all times is compliance with statutory frameworks, particularly concerning protective provisions, transparency obligations, and the correct calculation of discounted capital or discounted prices. The legal specifics and limitations must always be derived from the relevant special laws.
Frequently Asked Questions
1. What legal requirements must be observed when offering discounted products online?
Various legal requirements apply to the offering of discounted products in online commerce, especially under the Price Indication Ordinance (PAngV). Traders must ensure that discounts are displayed transparently and understandably. This includes clearly showing the original price (“strikethrough price”) and the new, reduced price. Additionally, since May 2022, according to § 11 (1) PAngV, the lowest total price within the 30 days prior to a price reduction must be indicated as a reference price. Violations of these transparency requirements may constitute misleading advertising under § 5 UWG (Act Against Unfair Competition) and result in warnings, injunctive relief claims, and significant fines. Furthermore, commercial providers are obliged to clearly present all relevant consumer rights, such as withdrawal policies or warranty information.
2. What information obligations exist towards consumers for discounted goods?
When selling discounted goods, online traders are legally required to provide all essential product information—such as description, price, delivery conditions, and withdrawal rights—as thoroughly as for regular product offers. Furthermore, the Price Indication Ordinance stipulates that, especially for percentage discounts, it must be clear to which base price the discount applies. It must be evident whether the discount refers to the original price, a promotional price, or a time-limited special price. Any reductions and their calculation basis must be transparently and verifiably presented. Missing, unclear, or incorrect information can be considered misleading and be legally challenged by competition associations or consumer centers.
3. What legal risks do traders face with misleading discount advertising?
Misleading discount advertising includes, for example, indicating fictitious previous prices, incorrect percentage figures, or advertising discounts that do not actually exist. Legally, such actions constitute a violation of competition law (§ 5 and § 5a UWG). Traders that advertise with misleading discounted actions expose themselves to the risk of competition law warnings, which can be pursued by competitors, consumer associations, or trade associations. Apart from injunctions, there may also be claims for information, damages, or for reimbursement of warning costs. Additionally, administrative sanctions such as fines under the Act Against Unfair Competition and the PAngV may be imposed.
4. How do discount promotions affect the buyer’s warranty rights?
The statutory warranty rights under §§ 437 ff. BGB apply regardless of the purchase price or discount promotions. This means that no restrictions of statutory liability for defects are permitted even for discounted products, except for items explicitly declared as “defective products” (e.g., B-goods with specified defects). If a trader attempts to limit or exclude statutory rights through a discount, such a clause is invalid according to § 309 BGB. Significant restrictions are unlawful and can also lead to warnings.
5. What tax-related specifics must be observed for discounted offers?
For VAT purposes, the tax base for discounted offers is the actual, i.e., the discounted, price received (§ 10 UStG). This means that the trader must remit VAT on the final amount paid after deducting the discount. Credit notes, subsequent discounts, or bonuses must be documented separately. The discounting must be clearly traceable in invoice documents to avoid possible objections from the tax office. Incorrect or unclear declaration may result in tax assessments and penalties.
6. What should be noted regarding consumer protection regulations for discounted offers?
Discounted offers are subject to general consumer protection regulations, especially the right to transparent price indications, the right of withdrawal (§ 355 BGB), as well as duties to inform under §§ 312d, 312f, and 246a EGBGB. Discounts must not mislead as to the actual value or quality of the item. Discount campaigns must be clearly time-limited or made subject to conditions. Furthermore, the same return conditions apply to discounted goods as to regular offers, unless it concerns custom-made goods or goods otherwise excluded from the right of withdrawal under § 312g (2) BGB.
7. Does price maintenance also apply to discounted items?
Price-controlled goods—for example, books (§ 3 BuchPrG) or prescription medications (§ 78 AMG)—may not be discounted below the statutory or contractual minimum price. Discounting these goods contravenes price-fixing regulations and constitutes an administrative offense subject to substantial fines. Violations also expose traders to competition law injunction claims. Therefore, before any discount campaigns, merchants must check whether the products offered are subject to price maintenance regulations.
8. What documentation obligations apply to discounted price offers?
For traders, documentation obligations arise not only from a tax but also from a commercial and competition law perspective. It is advisable to keep records of all discounted sales prices, promotional periods, advertising activities, and calculation bases for at least the statutory retention period (usually 10 years under § 147 AO). This enables traders to fully respond to inquiries from authorities, courts, or warning associations and to prove the legality of their discount campaigns. Documentation deficiencies may shift the burden of proof adversely to traders in the event of disputes.
