Selling

Term and Legal Foundations of Selling

The term “Selling” originates from English and refers to the sale or act of selling goods, services, or rights. In a legal context, selling encompasses all actions aimed at transferring ownership, usage rights, or claims for consideration. The term is used in various areas of law, including contract law, commercial and corporate law, competition law, and consumer protection law. Depending on the context, the legal requirements and consequences of selling can vary significantly.

Legal Definition and Classification

Under German law, “selling” is generally to be understood as a legal act of disposal. The sale constitutes an obligation-based type of contract according to §§ 433 et seq. of the German Civil Code (BGB). The classical contract of sale obliges the seller to transfer ownership of the item sold as well as to hand it over in intact condition and to provide possession. The buyer, in return, is obliged to pay the agreed purchase price.

Legal peculiarities arise as soon as selling takes place within special business models (such as commercial online trading, franchise systems, or via agents). In such cases, alongside the German Civil Code, provisions of the German Commercial Code (HGB) and other special laws apply.

Key Areas of Law Related to Selling

1. Contract Law Aspects

Contract of Sale under the BGB

The basic legal foundation for selling in Germany is the contract of sale in accordance with §§ 433 et seq. BGB. Central elements are:

• Obligation to Transfer Ownership: The seller must transfer ownership of the sold item to the buyer.
• Obligation to Pay: The buyer owes the purchase price.
• Warranty Obligations: The seller is liable for material and legal defects in accordance with §§ 434, 435 BGB.

Special Features for Consumer Contracts

In relation to selling to consumers, special consumer protection rules apply. Particularly relevant are:

• Right of Withdrawal under §§ 355 et seq. BGB: Under certain conditions, consumers have the right to withdraw from a distance contract within 14 days without stating reasons.
• Information Obligations: Sellers must provide comprehensive information about the goods, their qualities, and the right of withdrawal before conclusion of the contract.

2. Commercial and Corporate Law

Business Acquisition (Share Deal/Asset Deal)

Selling within the scope of business acquisitions is subject to complex corporate and civil law provisions. Depending on the structure – whether by selling shares (share deal) or individual assets (asset deal) – different requirements apply regarding:

• Validity of the Sales Contract
• Transfer of Liabilities and Contracts
• Liability Issues for Existing Debts
• Approval Requirements and Notification Obligations

Commercial Agents and Brokerage Activities

In commercial law, selling is often associated with brokerage activities, for example through commercial agents (§§ 84 et seq. HGB) or brokers (§§ 93 et seq. HGB). In these cases, there are special duties regarding protection of interests, remuneration, and aftercare of clients.

3. Competition Law Provisions

Selling is subject to competition law restrictions under the Act Against Unfair Competition (UWG):

• Misleading Advertising: Any deception regarding the characteristics of the goods, the price, or availability is prohibited (§ 5 UWG).
• Comparative Advertising: Permitted only under strict conditions (§ 6 UWG).
• Aggressive Sales Practices: Unreasonable pressure or harassment during selling is prohibited (§ 4a UWG).

From a competition law perspective, anti-competitive agreements must be observed in selling (§ 1 GWB, Art. 101 TFEU), especially with regard to price agreements, territorial restrictions, or exclusivity clauses.

4. Consumer Protection Requirements

In B2C selling, there are numerous additional regulations to protect the buyers:

• Product Recall and Product Liability: The manufacturer and seller are liable to end consumers under the Product Liability Act (ProdHaftG) for damages caused by defective products.
• Distance Selling Contracts and E-Commerce: Selling over the internet is subject to special regulations, for example regarding contract processing, information obligations, and data security (Telemedia Act – TMG, General Data Protection Regulation – GDPR).

5. Tax Law Aspects

Every sale transaction may trigger tax consequences:

• Value-Added Tax: The supply of goods and services in Germany is subject to value-added tax in accordance with § 1 Value Added Tax Act (UStG).
• Income Tax Treatment: Profits resulting from selling transactions are subject to income or corporate tax.
• Documentation and Record-Keeping Obligations: Contracts of sale must be properly documented in order to comply with tax requirements.

6. Special Rules for Real Estate and Certain Assets

Sales of real estate, securities, trademark rights, and other special assets are each subject to their own, often extensive, special regulations:

• Real Estate Sales: Contracts require a specific form (notarial certification, § 311b BGB), land registry registration obligations.
• Sale of Securities: Compliance with capital market regulations, particularly with regard to the Securities Trading Act (WpHG).
• Sale of Intellectual Property: Application of the provisions of the Copyright Act (UrhG), Patent Act (PatG), or Trademark Act (MarkenG).

International Aspects of Selling

Sales contracts with a cross-border dimension are often subject to international agreements, such as the UN Sales Law (CISG) or bilateral treaties. Particular requirements arise here relating to the determination of the applicable law (Rome I Regulation) and jurisdictional issues (Brussels I Regulation, EuGVVO).

Risks and Liability Issues in Selling

Regardless of the form of sale, sellers face various risks:

• Liability for Defects: Sellers are liable for the freedom from defects as required by law.
• Rights of Cancellation and Withdrawal: Special risks of contract reversal exist under consumer protection laws.
• Obligations to Pay Damages: Misinformation or breach of contract may result in claims for damages.
• Fines and Penalties: Violations of information obligations or anti-competitive conduct can result in sanctions.

Summary

The term selling refers to all acts associated with the sale of goods, services, and rights, and is associated with a wide variety of legal requirements. The range extends from basic provisions of contract law to special rules in commercial and competition law to tax regulations and international provisions. Especially in consumer protection and for certain assets, additional protective regulations apply, compliance with which is essential for sellers. Accordingly, selling in the legal context should be regarded as a multifaceted and complex process that requires careful consideration of a multitude of legal areas and standards.

Frequently Asked Questions

What legal obligations apply when selling goods to end consumers?

Anyone selling goods to end consumers, particularly via the internet, is subject to a multitude of statutory provisions. First, the right of withdrawal under §§ 355 et seq. BGB must be observed, which allows consumers to return the goods within 14 days after conclusion of the contract without stating reasons. Sellers must properly inform consumers of their right of withdrawal, for example by providing a withdrawal notice whose content and form are prescribed by law. There are also information obligations under § 312d BGB and Art. 246a EGBGB, which include, among others, details of identity, price, essential product characteristics, delivery and payment conditions, and the process of concluding the contract. Furthermore, sellers must comply with warranty rights per §§ 437 et seq. BGB, meaning they are liable for defects in the delivered goods for two years from handover. If personal data of buyers is collected or processed, the GDPR also applies, imposing extensive data protection duties. To avoid competition law warnings, it must also be ensured that all mandatory information is complete and correct, as violations are often subject to warnings.

What are the consequences of breaching information obligations in online trade?

Breaches of statutory information duties in online trade according to §§ 312d, 312g BGB and Art. 246a EGBGB can have far-reaching legal consequences. On the one hand, competitors, consumer protection organizations, or warning associations may issue a warning notice and assert cease-and-desist and, if applicable, claims for damages against the seller. This usually results in additional costs due to attorney fees and a cease-and-desist declaration subject to penalty. If the seller does not comply with the warning, legal proceedings with further costs are imminent. On the other hand, a breach may result in the buyer being able to withdraw from the contract, with the withdrawal period being extended to up to 12 months and 14 days if the seller has not properly informed about the right of withdrawal. Finally, regulatory offenses with corresponding fines are conceivable, especially in the case of violations of consumer protection or data protection provisions.

What warranty rights do buyers have in case of defects in the purchased item?

In case of defects in the purchased item, buyers have statutory warranty rights according to §§ 437 et seq. BGB. These include firstly the right to subsequent performance, i.e., the buyer may choose to demand either replacement delivery of a defect-free item or rectification of the defect. If the remedy fails or is refused by the seller, the buyer has the right to withdraw from the contract, reduce the purchase price, and claim damages and reimbursement of expenses. It should be noted that the statutory warranty period is two years from delivery of the goods. If the defect arises within the first twelve months, it is presumed that the defect already existed at the time of risk transfer, unless this is incompatible with the nature of the item or the defect. Shortening the warranty period is generally not permitted when selling to consumers.

What must be considered legally when selling used goods?

When selling used goods, the same legal provisions generally apply as when selling new items, particularly regarding the right of withdrawal and statutory warranty rights. However, the warranty period for used items may be reduced to one year by express and clear agreement in the contract of sale (§ 475 para. 2 BGB), which is not permitted for new goods. The reduction must be clearly and understandably communicated to the buyer before conclusion of the contract. Complete exclusions of liability towards consumers are, however, ineffective. There are also no simplifications regarding information obligations and data protection: Anyone acting as a commercial trader must also comply fully with all legal requirements when selling used goods.

What tax aspects must be considered when selling goods?

The sale of goods is generally subject to VAT in accordance with the UStG as soon as a commercial activity is present. Private occasional sales are tax-free, but as soon as a certain regularity and intent to make a profit are present, the status of a trader is assumed. Dealers must apply for a VAT identification number and submit regular VAT returns. When selling used items, the margin scheme (§ 25a UStG) may apply, which can offer tax advantages for the dealer. Profits from the sale of goods are also subject to income tax. Manufacturers and dealers are required to properly document and retain all tax-relevant transactions. Breaches of tax obligations may result in back payments, fines, or criminal penalties.

What must be observed legally when selling internationally?

When selling goods abroad, in addition to national regulations, the relevant provisions in the destination country and any international requirements must also be observed. This concerns, for example, customs regulations, export restrictions, product safety requirements, and tax provisions such as VAT for intra-Community supplies within the EU (reverse charge procedure). In addition, country-specific consumer protection laws may apply, e.g., special information obligations, guarantee provisions, or withdrawal rights. In cases of shipping to non-EU countries, exporters may also have to file export declarations and keep the relevant documentation. Data protection requirements, especially when transferring data across country borders, must not be overlooked.

What special rules apply to the sale of digital products?

When selling digital products (such as software, music, e-books), distance selling law applies in full, particularly information obligations and the right of withdrawal. According to § 356 para. 5 BGB, however, the right of withdrawal may expire if the consumer expressly agrees to the commencement of the contract’s performance and at the same time confirms that he is aware that he will lose his right of withdrawal as a result. Special attention must also be paid to compliance with data protection regulations when selling digital products, as personal data is often processed. In addition, copyright aspects are relevant, and license terms and export restrictions may also have to be complied with. Digital goods may also be subject to specific warranty rights under §§ 327 et seq. BGB, which cover, inter alia, obligations to provide updates or liability for defects.