Pay

Explanation of the term and basic classification of “Pay”

The term “Pay” is derived from English and fundamentally refers to the payment or remittance of a monetary amount. In legal scholarship, “Pay” stands for a variety of payment processes and payment types, particularly in the context of commercial transactions, legal obligations, employment relationships, and in the area of innovative payment services. The legal analysis encompasses aspects from civil law, commercial law, employment law, and payment services law.

Legal basis for Pay transactions

Civil law principles of payment obligations

In civil law, the German Civil Code (BGB) governs the obligations and rights associated with payment services. The obligation to pay may arise in particular from contracts, such as purchase agreements (§ 433 BGB), contracts for work (§ 631 BGB), rental agreements (§ 535 BGB), and service contracts (§ 611 BGB), or from statutory obligations (e.g. claims for damages, restitution claims). Payment (in the narrower sense, the “Pay”) fulfills the so-called performance obligation of the debtor to the creditor (§ 362 BGB: “Performance”).

Requirements for payment

For a payment to be legally effective, the following conditions must be met:

• Valid debt obligation: The payment to be made must be based on an existing and enforceable claim.
• Authority of the creditor to receive payment: The payment must be made to the correct payee (§ 362 BGB).
• Performance in lieu of or for fulfillment: If other means of payment besides cash, such as vouchers or checks, are used, the rules on performance in lieu of fulfillment (§ 364 BGB) or performance for fulfillment (§ 364a BGB) must be observed.

Commercial law aspects

In commercial law, “Pay” is particularly relevant in commercial transactions between merchants (§ 343 HGB). Here, there are sometimes differing deadlines and practices, such as regarding discounts, due dates, and default. The due date determines the time by which payment (“Pay”) must be made at the latest. Special importance is also attached to regulations regarding payment modalities (payment term, down payment, installment payment).

Payment services and regulatory requirements

The ongoing digitalization of payment transactions has led to specific regulations for payment services. Legal sources such as the Payment Services Supervision Act (ZAG), the EU Payment Services Directive (PSD2), and the German Civil Code regulate the legality, security obligations, and liability issues of payment transactions (“Pay”) via electronic payment methods (e.g., credit card, PayPal, mobile payment).

Payment services according to ZAG

The definition and legal framework of payment services can be found in the ZAG. These include in particular:

• Execution of payment transactions (e.g., transfers, direct debits, card payments)
• Payment initiation services
• Account information services

Payment service providers must meet certain requirements regarding identity verification, data protection, and transaction security. Consumer rights related to unauthorized or failed payments are especially protected (§§ 675u ff. BGB).

Contractual structuring of Pay

Payment modalities and freedom of contract

Within the scope of freedom of contract, the contracting parties are generally free to determine the type, deadline, and modality of payment. Permissible options include:

• Cash payment
• Bank transfer
• Check
• Credit card
• Mobile payment
• Pay-on-Delivery (payment upon delivery)

Contractually agreed payment terms are regularly part of the general terms and conditions (GTC). Unusual or surprising provisions may be invalid in individual cases under § 305c BGB.

Payment term and default

The payment term specifies the time or period by which payment must be made. If payment is not made on time, default occurs (§ 286 BGB). Default triggers certain legal consequences, such as default interest (§ 288 BGB), compensation obligations, and possibly the creditor’s right to refuse performance or terminate the contract.

Special legal forms of Pay

Remuneration (wages, salary)

In the context of an employment relationship, “Pay” usually refers to remuneration (wages, salary). Numerous protective provisions apply to the payment of remuneration, such as timing (§ 614 BGB), minimum wage (MiLoG), and protection against unlawful deductions and set-offs.

Pay-to-Play and related models

Specifically in Internet law and for digital services, “Pay” appears in terms such as “Pay-to-Play”, “Paywall”, or “Pay-per-Use”. These are contractual models in which the use of or participation in content or services is permitted only upon payment. Relevant issues here include price indication regulations (PAngV), information obligations (e.g., in distance contracts, §§ 312 ff. BGB), and reversal procedures in the event of withdrawal.

Tax law implications

Payments (“Pay”) are often subject to tax reporting and payment obligations in business transactions, for example regarding value-added tax (§§ 1 ff. UStG), payroll tax, or violations of the Money Laundering Act (GwG). Companies and self-employed individuals must document all payment transactions in a traceable manner (principles of proper accounting, GoB).

Liability issues and reversal of payments

Unauthorized payments and restitution

If a payment is made without legal basis, for example if a contract is voided or due to a mistake, there is generally a claim for restitution (“condictio indebiti”, § 812 BGB). However, reversal is excluded if the purpose of the payment was unlawful, unless the payer did not have the will to dedicate the payment for that purpose (§ 817 sentence 2 BGB).

Liability of payment service providers

In the event of payment defaults or erroneous transactions by payment service providers, statutory liability provisions apply to unauthorized payments (§ 675u BGB) and to delayed or non-executed payments (§ 675y BGB).

Summary

The term “Pay” in a legal context describes any form of payment and payment transactions. The legal framework conditions are complex and depend on the individual case, including civil law contractual obligations, commercial law specifics, regulation of payment services, employment law claims, tax law provisions, and liability issues. Legally compliant structuring and processing of payments (“Pay”) not only ensures contractual fidelity but also creates legal certainty for all parties involved in the exchange of services.

Frequently Asked Questions

When is remuneration considered “due”?

Legally, remuneration is generally considered due as soon as the contractually or collectively agreed payment period has expired (§ 614 BGB). Many employment contracts provide that payment is made at the end of the month or at the latest on the first day of the following month. If there is no explicit agreement, remuneration is due once the work has been performed. Collective agreements or company regulations may contain deviating arrangements, for example, payment in the middle of the month (“advance payment”), followed by a final settlement. Late payment after the usual deadline may have legal consequences such as default interest (§ 288 BGB) and possibly damages. Note that in disputes over due date, the burden of proof lies with the employer if they rely on special agreements.

Is there a statutory right to payment in a particular currency?

Under German law, remuneration must generally be paid in euros pursuant to § 244 BGB, unless otherwise agreed. Payments in foreign currency can be expressly stipulated in the employment contract, but mandatory legal requirements, such as the minimum wage, which is calculated in euros, must be considered. If there is no express currency agreement, payment must be made in euros. Exchange rate fluctuations or bank fees for foreign payments are generally borne by the employer, unless a different agreement has been made in compliance with the law.

Under what legal conditions is a wage reduction permitted?

A wage reduction is only permissible under very limited circumstances and always requires a legal basis. The employer is, in principle, not allowed to unilaterally reduce the agreed remuneration (§ 611a, § 615 sentence 1 BGB). Exceptions exist only for clear collective bargaining, statutory, or contractual regulations (such as short-time work according to § 95 SGB III or in the case of revocation clauses in the employment contract). Otherwise, a wage reduction always requires a written amendment agreement with the employee; unilateral reduction is ineffective and can lead to claims for back pay or damages by the employee. Furthermore, any co-determination rights of the works council under § 87 para. 1 no. 10 BetrVG must be observed.

How are statutory and collectively bargained minimum wages legally secured?

The Minimum Wage Act (MiLoG) obliges employers to pay a statutory minimum wage. Violations can be subject to significant fines under § 21 MiLoG and result in a back payment obligation. Collectively bargained minimum wages are set by the relevant sectoral collective agreements and can be declared generally binding (§ 4 TVG, § 7 AEntG). Employers are legally required to pay both the statutory and, if applicable, the higher collectively bargained minimum wage to their employees. Reduced performance or employee consents to waive part of the minimum wage are legally ineffective (§ 3 MiLoG). Enforcement is typically conducted through customs inspections and litigation before the labor courts.

What are the legal consequences of delayed or omitted payment of wages?

If the wage is paid late or not at all, the employer is automatically in default under § 286 para. 2 no. 1 BGB; default interest and, where applicable, a default surcharge are owed (§ 288 para. 5 BGB). Employees may assert their claims in court and seek further compensation (damages) before the labor courts. Repeated late or omitted payments also constitute a serious breach of duty and may justify termination of the employment contract without notice (§ 626 BGB). In certain cases, criminal consequences may also arise, such as in the case of withholding and misappropriation of remuneration (§ 266a StGB).

Is it permissible for the employer to set off counterclaims against wages?

Employers may only set off their own claims against remuneration under strict conditions (§ 394 BGB, § 850c ZPO). In particular, non-seizable portions of wages—the so-called minimum subsistence level—may not be set off. For set-off claims, there is a statutory obligation to provide a clear notification to the employee. Common grounds for set-off include advances, overpaid salaries, or costs arising from an employee’s breach of duty. If claims are undisputed or have been established by final judgment, set-off may be effected accordingly; however, unilateral set-off without clear legal basis is not permitted and may give rise to refund claims by the employee.

What legal specifics apply to wage payments in the event of illness?

According to the Continued Remuneration Act (EFZG), employees are entitled to continued payment of remuneration by the employer for up to six weeks in the event of incapacity for work through no fault of their own as a result of illness (§ 3 EFZG). After this period, a claim to sickness benefit from the statutory health insurance may exist (§ 44 SGB V). During the continued payment period, the amount is calculated on the basis of the average earnings of the last settled months, including regular allowances, commissions, and benefits in kind (§ 4 EFZG). Exceptions may arise from collective or individual contractual provisions but must not fall short of the statutory minimum protection. Wage reductions during illness or non-payment constitute a violation of the Continued Remuneration Act and can be enforced by legal means.