Distance Selling and German Law

November 1, 2000

EU Law and E-commerce

The DSA implements into German law mainly Directive 97/7/EC of the EuropeanParliament and of the Council of 20 May 1997 on the Protection of Consumers inrespect of Distance Contracts (hereinafter: ‘Distance Selling Directive’)and Directive 98/27/EC of the European Parliament and of the Council of 19 May1998 on injunctions for the protection of consumers’ interests. BothDirectives provide for harmonised standards of certain aspects of consumerprotection and have added new provisions to the already substantial body ofEuropean consumer protection law.

The major economic importance of the Distance Selling Directive and, byextension, the DSA pertains to e-commerce, i.e. the growing importance ofcontracts executed over the Internet (and, on a more ‘low-tech’ basis,call-centres). The Distance Selling Directive should also be regarded as a partof the European ‘mosaic’ of provisions for e-commerce, including the alreadyenacted EU Directives on Digital Signatures and e-commerce, as well as theimpending Directive on the Harmonisation of Copyright.

E-commerce is not only moving the act of purchasing from a ‘bricks andmortar’ shop to the Internet, accompanied by the emergence of previously moreor less insignificant types of transactions (powershopping, auctions, etc); itis also essentially a cross-border phenomenon (cf. recitals 3 and 4 DistanceSelling Directive). Thus, the Distance Selling Directive’s intent was toprovide for a harmonised minimum standard of protection for consumers. TheDistance Selling Directive did not, in contrast, intend also to harmonise themaximum standard of consumer protection. Accordingly, the German legislaturedecided in some respects to provide a higher level of protection in the DSA thanthe minimum standard set by the Distance Selling Directive, thus requiringsuppliers executing contracts with German consumers to adhere to theseadditional requirements.

Impact on German and Foreign Distance Sellers

These additional requirements not only have an impact on German suppliers,they also have an impact on every foreign business executing distance sellingcontracts with German consumers. According to Section 29 of the Introduction tothe German Civil Code (the ‘EGBGB’), which itself implements Article 5 ofthe Rome Convention on the Law Applicable to Contractual Obligations into Germanlaw, contracts executed with consumers are governed by German law if thecontract was entered into because of an advertisement made in Germany and if theconsumer acted from Germany.

Even though no case law exists on the question whether an offer on an EnglishInternet server would be regarded as an advertisement made in Germany, mostcommentators regard such offers as advertisements made in Germany unlessadditional aspects exist, such as an explicit refusal to supply goods toGermany. This renders it advisable for foreign e-commerce businesses concludingcontracts with German consumers to take the DSA into consideration.

Furthermore, this legal situation has not been changed through the Directiveon electronic commerce which, in general, implements or clarifies the state oforigin principle. The law relating to consumer contracts has in Article 3(3) inconnection with the Annex explicitly been exempted from the state of originprinciple.

The following, especially the provisions of the DSA which deviate from theDistance Selling Directive, should therefore be of material interest to foreigne-commerce entities intending to do business with German consumers.


What follows merely highlights the most important aspects of the DSA in orderto give an impression of the extent to which it may influence the businessinterests of the reader. I shall only briefly discuss the scope of the DSA andits two main provisions, namely the obligation to inform the customerextensively and the right of withdrawal from the contract, addressing the mostimportant deviations of the DSA from the Distance Selling Directive. I willconclude with a brief summary on the legal consequences if the supplier breachesits obligations under the DSA.

The Scope of the DSA

The DSA applies to contracts for goods or services between a business and aconsumer executed exclusively by way of distance communication, for example, bye-mail, telephone or mail-order. Unlike in the Distance Selling Directive(Article 3(1)), online auctions are not per se exempted from the DSA, but rather(to the extent they are regarded as auctions under Section 156 German CivilCode) exempted only from the customers’ right of withdrawal from a distanceselling contract. The providers of online auctions – not only those solicitingcontracts between consumers – are thus obliged under the DSA to inform thecustomer of the facts, as discussed below.

Obligations to Inform the Customer
The DSA provides for extensive obligations on the supplier to inform thecustomer. While the Distance Selling Directive differentiates only betweeninformation to be provided to the customer before executing the contract andinformation to be provided on a ‘durable medium’, the German legislatureextended the collateral provision of the Distance Selling Directive concerningtelephone calls. Under the Distance Selling Directive, the supplier mustidentify itself and the commercial purpose of its telephone call at thebeginning of any telephone contact with the customer. Under the DSA, theseobligations apply not only for telephone calls – they apply to all kinds ofcommercial contact with the customer. The DSA therefore differentiates between (i)information on the supplier’s identity and the commercial purpose made by suchcontact, (ii) pre-contractual information and (iii) information to be madeavailable on a ‘durable medium’.

Although I address these three aspects of the general obligation on thesupplier to provide information to the customer separately, this is not meant toimply that the supplier may not, for example, provide the pre-contractualinformation and the information on a ‘durable medium’ at the same timebefore executing the contact.

Obligation to Inform the Customer Immediately About the Commercial Contact
As indicated above, the DSA generalises the rule that the identity andcommercial purpose of the supplier have to be clearly understandable to thecustomer immediately upon establishment of a contact if some form of distancecommunication is used for soliciting or executing a contract. In most caseswhere a customer calls the call-centre of a supplier (cold-calling is prohibitedunder German law), the customer will be aware of the commercial purpose of thecommunication and the identity of the supplier. However, in the case where it isuncertain whether all customers calling are sufficiently informed of thesefacts, the supplier should implement a procedure to inform the customers.

The second question (i.e. which information the supplier has to provide tocomply with the obligation to identify itself) will have to be determined by thecourts. Some guidance as to what the courts may require under this obligation toinform is given in the following paragraph of the same section of the DSA whichobliges the supplier to inform customers about (1) its identity and (2) itsaddress, so that one may infer that giving the address would in general not berequired upon the first contact between the parties. A sensible interpretationof identity may be that it covers all information necessary under the particularcircumstances definitely to distinguish the supplier from any other person, i.e.its name and, as the case may be, information on the legal form of a company(for example, if more than one company with this name exists) or the place ofbusiness (if there are companies with an identical name in differentcities/countries), and so forth. Such a flexible approach which depends on thecircumstances of each individual case would meet the requirements of thecustomer and would also keep the amount of information required to a minimum.

Pre-contractual Information
In good time prior to execution of a contract, further information has to beprovided by the supplier in a clear and comprehensible manner which isappropriate to the means of distance communication used. The Distance SellingDirective’s catalogue of information to be provided has been extended by theGerman legislature. In addition to the requirements in the Distance SellingDirective, the entire address of the supplier must in any event be disclosed andthe supplier has to clarify to the customer which act will constitute the(legal) acceptance of an offer, i.e. at what point a contract would be executed.The latter is a legislative reaction to recent case law where uncertainty aroseas to when a contract in an online auction was executed.

Information Available on ‘Durable Medium’
Section 2(3) lists all the information which is to be made available to thecustomer on a ‘durable medium’. Except for some information which is nolonger of importance after the contract is executed (eg the period for which theoffer or the price remains valid), this list covers all pre-contractualinformation and some additional information, such as detailed information on theright of withdrawal or detailed information on warranties and any guarantee.

The supplier may fulfil all its obligations to inform at once by providingthe complete information on a ‘durable medium’ a reasonable time beforeexecution of the contract. In case the supplier decides against making suchinformation available to the customer on a durable medium prior to the executionof the contract, it must make it available no later than shortly after executionof the contract and, if goods are supplied, no later than upon delivery of thegoods.

In addition to the obvious ways of sending the information by way of letteror stating it upon product packaging, sending the information in an e-mail would(in contrast to placing it on a Web site) constitute making the informationavailable on a ‘durable medium’, according to the explanatory memorandum tothe DSA (which memorandum may be used for interpretation purposes under Germanlaw). It should be noted, however, that the burden of proof is on the supplierto show (i) that the customer received the information on a durable medium and(ii) which particular information has been provided. The supplier shouldtherefore use all technical means to enable itself to be able to provide suchproof.

Furthermore, the DSA emphasises that the additional information which is,together with the pre-contractual information, required to be made available ona ‘durable medium’ must be highlighted and clearly drafted to ensure thatthe customer will become aware of such information.

The list of such additional information to be made available on a ‘durablemedium’ has also been extended by the German legislature, in comparison withthe obligations under the Distance Selling Directive. For example, the supplieris required under the German implementation of the Distance Selling Directive toinform the customer not only of ‘the conditions and procedures for exercisingthe right of withdrawal’ (Distance Selling Directive, Article 5.1) but also onthe legal consequences of exercising that right of withdrawal.

Right of Withdrawal

The other main provision under the DSA is the customer’s right to withdrawfrom a contract within a certain period.

Scope and Exceptions
The customer may not exercise his right of withdrawal with regard to, forexample, goods produced on the basis of the customer’s specifications ornewspapers.

The Withdrawal Period
By deciding on a two-week period with a maximum period of four months, theGerman legislature extended the Distance Selling Directive’s seven workingdays period for withdrawal and its maximum period of three months (plus sevenworking days, in a case where the supplier informs upon the last day of thethree-month maximum period – in contrast to the DSA under which the periodunconditionally ends after four months).

The two-week period during which the customer may freely withdraw from thedistance selling contract commences with respect to contracts for the supply ofgoods upon delivery of these goods and fulfillment of all the above obligationsto inform. For services, the period commences upon execution of the contract andfulfillment of all the above information requirements.

Should the supplier have omitted to fulfill completely all its obligationsunder the DSA to inform the customer, the right of withdrawal ends, at thelatest, four months after delivery, or for services after execution of thecontract. With respect to services, the customer may also not exercise his orher right of withdrawal if performance has begun with the customer’s agreementor because of the customer’s initiative before the end of the ‘withdrawalperiod’. The term ‘withdrawal period’ refers to the aforementionedtwo-week period: in turn, the parallel but differently constructed provision inthe Distance Selling Directive refers to the noted period of seven working days.Uncertainty remains as to whether the customer may exercise his or her right ofwithdrawal if the supplier has not completely performed its obligations toprovide the required information but has begun to perform the service with thecustomer’s agreement. It could either be argued (i) that no ‘withdrawalperiod’ has commenced and therefore it logically cannot be ‘before the endof the withdrawal period’ that the supplier began the performance or (ii) thatbefore the commencement of a period is necessarily also before the end of suchperiod. The consequences of this somewhat hair-splitting exercise arenevertheless significant. If the former interpretation should prevail, asupplier of services who failed, on purpose or unintentionally, to inform thecustomer as is required under the DSA would run the risk that the customer isentitled to exercise his or her right of withdrawal long after performance ofthe services began. In this event, the question whether the supplier is to becompensated for the performance of the services becomes crucial.

It is hard to foresee which of these interpretations will prevail in court,as the explanatory memorandum to the DSA is silent on this matter and the textof the Distance Selling Directive is also vague thereon. In support of the,somewhat harsh, first-mentioned alternative, it could be argued that in both theDSA and the Distance Selling Directive the simpler wording: ‘the consumer maynot exercise… if performance has begun with the customer’s agreement’could have been chosen. Any reference to the period of two weeks (or sevenworking days) could have been omitted without changing the meaning if it wasintended that the right of withdrawal also ceases to exist upon beginning ofperformance where the four-month period applies rather than the two-week period.The fact that both legislative bodies, for the Distance Selling Directive andthe DSA, refer explicitly to the shorter period is an argument for theinterpretation that the customer only loses his or her right to withdraw if thesupplier has begun to perform after it informed the customer completely.

The Exercise of the Right
Within the period applicable under the particular circumstances, thecustomer may withdraw from the contract by either sending back the purchasedgoods or by notice to the supplier in writing or on any another ‘durablemedium’. Should a purchase of goods be based on a product catalogue, thesupplier may in the terms of its sales contract provide for an alternativeright, namely the right to return the goods (which the customer can exerciseonly by sending back the purchased item).

Credit Financed Contracts
If the purchase was financed by a supplier credit, such credit contract iscancelled as well. This applies mutatis mutandis to cases where the credit isgranted by a third person and contract and credit are complementary from aneconomic perspective.

The Legal Consequences

As mentioned before, upon exercising its right to withdraw, the customer isobliged under the DSA to send back the purchased items at the supplier’s risk.Probably the most heavily debated provision during the legislative process –or at least the provision which held up the passing of the bill in the lastminutes requiring both chambers of parliament to discuss the bill again – isthe provision as to who bears the costs of sending the item back to thesupplier. The legislature finally struck the compromise that the customer bearsthe costs for items with a purchase price of up to Euro 40 and the supplier forall items which are more expensive.

Further legal consequences of a withdrawal from a contract are liability forall material damages or factual or legal obstacles to the returning of thepurchased item, provided they are caused by customer negligence. The customer isliable only for gross negligence if the supplier failed to adhere to the legalinformation requirements.

The customer is furthermore obliged to pay the supplier for the use of thegoods or for the received services in the period up to the exercise of his orher right of withdrawal. Basically, the amount due under this provision will bebased for goods on a rent analogy, and for services either on the actual costsof the supplier or the gain to the customer. The wording of the provisionobliging the customer to pay for use stems from another German law for consumerprotection under which the details of the amount due, in particular the extentof reductions for depreciation or profit, is not finally settled. Thisdiscussion will certainly continue also in respect of the DSA but, in the briefcontext of this article, will not be further discussed here.

The Legal Consequences of a Breach of the DSA

Some of the legal consequences of a breach of an obligation under the DSA, inparticular the information requirements, have been addressed above. The mostrelevant consequence provided by the DSA itself is the extension of the periodfor a withdrawal from the contract to a maximum of four months.

The customer may – based on general principles of German law – claimdamages if the supplier acted at least negligently in breach of its obligationto provide information and thereby caused the customer’s damages.

Furthermore, competitors or consumer organisations may apply for court ordersif the supplier acts in breach of its obligation. In extreme cases, the publicauthorities may prohibit a supplier who is consistently breaching itsobligations from further conducting its business.


The fact that national legislatures may deviate from the Distance SellingDirective, and the fact that Germany has chosen to do so, imposes an oneroustask on e-commerce entities conducting business in Europe. They need to researchthe respective national laws and to find a way to fulfill all requirements. Thisconflicts in my view with the general idea of the Single European Market, but,unfortunately, e-commerce business must currently deal with this situation.

Clemens T. Steins can be contacted at Clemens.T.Steins@bakernet.com.