Streaming services, gym memberships, regular deliveries—many German customers can no longer remember a time before subscriptions. For businesses, recurring payments are an attractive way to lock in customers long-term and generate more predictable revenue. At the same time, clear statutory regulations govern contract terms, renewals, and cancellations.

In this article, you’ll learn what regulations the German Fair Consumer Contracts Act contains, what types of contracts the law applies to, and the rules on subscription terms, renewals, and cancellations. We’ll also explain other obligations businesses face and the potential consequences of breaching the law.

Key takeaways

• The Fair Consumer Contracts Act protects individuals against unfair contract conditions.
  
• Section 309, No. 9 of the German Civil Code (BGB) stipulates an initial term of no more than two years for certain subscription contracts.
  
• New contracts in this category can be automatically renewed indefinitely, but you must be able to cancel them with no more than one month’s notice.
  
• For certain continuing obligations that can be entered into online, the BGB requires a cancel button that is straightforward to access.
  
• Impermissible clauses in terms and conditions (T&Cs) might be ineffective, and consumers can terminate their contracts early if there is no cancel button.
  

What is the Fair Consumer Contracts Act?

The Fair Consumer Contracts Act is a German consumer protection law. It strengthens the rights of private individuals against businesses. To implement it, the BGB and the Act against Unfair Competition (UWG) were amended.

The Act was announced on August 17, 2021, and was phased in gradually, starting October 1, 2021. Additional regulations came into effect on March 1 and July 1, 2022.

Explanatory statement

According to the accompanying explanatory statement, the Fair Consumer Contracts Act is intended to give consumers better safeguards against unfair contract conditions and commercial practices. Reasons for the amendment included long contractual tie-in periods, difficulty terminating agreements, and cold calling. Consumers are able to enforce their contractual rights and benefit from stronger protections when interacting with businesses.

For businesses, the law creates further obligations for handling consumer contracts. Different rules apply depending on the contract type and business model.

What types of contracts does the Fair Consumer Contracts Act apply to?

The Fair Consumer Contracts Act amended several regulations on contracts between consumers, as defined in Section 13 of the BGB, and businesses, as defined in Section 14 of the BGB. The BGB also contains further general provisions on consumer contracts, e.g., Section 312 et seq. BGB.

The most important amendments regarding subscriptions relate to contracts for the regular supply of goods or the regular rendering of services or work performances. Examples are magazine subscriptions, streaming services, gym memberships, telecommunications services, and software subscriptions.

What are the regulations on terms and renewals for subscription contracts?

According to Section 309, No. 9 of the BGB, contracts for the regular supply of goods or the regular rendering of services or work performances can be concluded for an initial contract term of no more than two years. In principle, consequently, businesses in Germany might not stipulate longer tie-in periods for such agreements in their T&Cs.

At the end of the agreed term, renewal for an indefinite period is permitted if the consumer can cancel the renewed contract at any time by giving no more than one month’s notice. These types of consumer contracts are not permitted to auto-renew for a further fixed period, e.g., one year. The notice period at the end of the initially agreed contract term is likewise limited to one month.

Under the Fair Consumer Contracts Act, older agreements remain partially subject to the old regulations. Section 309 of the BGB still applies to contracts entered into before March 1, 2022, in the wording in force at that time. The transitional provisions for the Fair Consumer Contracts Act are defined under Art. 229 Section 60 of the Introductory Act to the Civil Code (EGBGB).

How can consumers cancel online subscriptions?

Section 312k of the BGB provides special rules for canceling certain consumer contracts concluded via a website that create a continuing obligation to pay a fee. Examples include online subscriptions for streaming services, software, or other ongoing services.

The cancel button

Businesses in Germany are required to provide a button on their website to terminate agreements that fall under Section 312k of the BGB. This button must be straightforward for consumers to access and clearly labeled to indicate its function, e.g., “Cancel contract here.” The cancel button then takes users directly to a confirmation page where they enter contract information, the type of cancellation, and their desired effective cancellation date.

The confirmation page requires an additional button for consumers to confirm the cancellation. This button must also be clearly labeled, e.g., “Cancel now.” These requirements apply to both ordinary and extraordinary cancellations.

When a business receives a cancellation request, it must immediately confirm the notice’s content, the time of receipt, and the requested effective date of cancellation electronically in text form. The process also has to let consumers save their submission on a permanent data carrier, with its date and time.

What other requirements do businesses face?

Under the Fair Consumer Contracts Act, businesses have to account for both the maximum contract term of two years and the one-month notice period for contracts renewed for an indefinite period. They also need to design workflows to manage agreements, notice periods, and cancellations accordingly.

In practice, businesses are responsible for processing cancellation requests promptly and correctly. What matters is when they receive the cancellation notice. Businesses must therefore be able to compile auditable documentation of when they receive a cancellation notice and when the contractual relationship will end.

Businesses are also required to highlight the most important conditions in their contract information. This includes information on contract T&Cs for cancellation. Disclosure requirements vary by contract and sales type.

Industry-specific provisions

Businesses offering continuing obligations that can be concluded online must also comply with Section 312k of the BGB regarding the electronic cancellation process. That includes providing a cancel button and confirming cancellations electronically.

Some industries are also subject to certain provisions. For instance, Section 56 of the Telecommunications Act (TKG) sets specific rules for terms, renewals, and cancellations of telecommunications contracts. Businesses in turn need to check whether their business model triggers further legal obligations beyond the BGB.

What are the consequences of failing to comply with the Fair Consumer Contracts Act?

Businesses that breach the Fair Consumer Contracts Act could face several legal consequences, depending on the specific regulation breached and the type of agreement.

Consequences of impermissible contract clauses

Clauses in T&Cs breaching Section 309 of the BGB are ineffective. This includes impermissible clauses on contract terms or contract renewals, for instance. In principle, the statutory rules apply in place of any ineffective clauses.

Clauses in T&Cs might also be ineffective under Section 307 of the BGB if, contrary to the requirement of good faith, they unreasonably disadvantage the consumer. An unreasonable disadvantage could exist if a clause conflicts with key statutory principles or limits core rights or duties in the contract to such an extent that the purpose of the contract is jeopardized. In principle, T&C provisions must be clear and comprehensible. Accordingly, unclear or difficult-to-understand clauses could also be ineffective.

Businesses need to review their T&Cs regularly to ensure contract clauses do not unreasonably disadvantage consumers, comply with legal principles, and are sufficiently transparent. These reviews have to consider both the requirements of Section 307 of the BGB and the prohibited clauses under Sections 308 and 309 of the BGB.

Consequences of failing to provide a cancel button

If businesses in Germany fail to provide the mandatory cancel button, or it does not comply with statutory requirements, consumers are entitled to terminate their agreement at any time without observing a notice period. This might end the contractual relationship earlier than the business anticipated.

Businesses need therefore to review their contract terms and technical and organizational processes regularly to ensure they remain legally compliant and functional. Stripe Billing can support businesses with the technology behind subscription processes, contract terms, and cancellations, and help them manage the corresponding workflows efficiently.

How Stripe Billing can help

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Stripe Billing can help you:

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FAQs about the Fair Consumer Contracts Act