Inflation, changes in strategy, and rising costs for energy, staff, and raw materials can force companies to adjust their prices. Often, when making these changes, businesses must comply with transparency requirements and consumer protection regulations.

In this article, you’ll learn what price adjustments are, what legal requirements they’re subject to, and what special considerations apply to price adjustments for recurring payments and subscriptions. We’ll also explain how businesses in Germany can implement price adjustments and what risks are associated with making impermissible price changes.

Key takeaways

• Price adjustments require a valid contractual or legal basis.
  
• The wording of price adjustment clauses must be clear, transparent, and legally valid.
  
• Subscriptions and recurring payments, in particular, require businesses to communicate transparently with affected customers and to take into account any cancellation rights.
  
• Impermissible price changes can result in refunds, disputes, and a significant administrative burden.
  

What do price adjustments mean in business contracts?

A price adjustment refers to a change to a previously agreed-upon price for a product or service. This can involve either an increase or decrease in price. In practice, however, price increases pose the biggest legal and communication challenges for businesses.

For ongoing business contracts, the contractually agreed-upon price is valid for as long as the contract is in effect. A company cannot change this price simply because its own costs have increased. This type of price adjustment typically requires a contractual agreement or another legal basis.

Price adjustments vs. discounts

A price adjustment is different from a discount. The latter represents a reduction in the original price. It might be offered for a specific period of time, to a particular customer group, or as part of a sales promotion, for example. It’s typically part of a targeted pricing strategy and does not automatically alter the permanently agreed-upon base price.

What legal requirements apply to price adjustments in Germany?

Businesses can include provisions for subsequent price adjustments in their initial contract, for example, by adding price escalation clauses or value protection clauses. These clauses can be used to define the conditions under which a price is subject to change and the factors upon which the adjustment is based. Relevant factors could include specific cost trends, price indices, or other objectively definable economic indicators.

However, in the case of the general terms and conditions (GTC), the content of such clauses is subject to legal review. According to Section 307 of the German Civil Code (BGB), provisions in the GTC must not unreasonably disadvantage the contracting party. They must also be formulated in clear and comprehensible language. Therefore, a blanket reservation clause allowing a business to increase its prices arbitrarily and without any obvious limit is typically invalid.

Certain price increase clauses are additionally subject to the prohibitions set out in Section 309 of the BGB. For instance, a GTC provision is generally invalid if it stipulates an increase in the price of goods or services to be delivered or rendered within four months of the contract’s start date. Separate statutory provisions apply to continuing obligations.

Implementing price adjustments without an explicit price adjustment clause

Even without a corresponding contract clause, one-off price changes might still be possible within the law. A key statutory basis for this is Section 313 of the BGB, which addresses a disruption in the basis of the contract. According to this provision, a business can demand adjustment of their contract if the circumstances that formed the basis of the contract have undergone significant change since the contract was entered into and it would be unreasonable to expect the parties to adhere to the contract as originally agreed-upon.

That said, the threshold for invoking Section 313 of the BGB is high. A general increase in costs or an economic downturn are not typically considered sufficient grounds for adjustment of a contract. Decisive factors include, among others, the specific circumstances of the individual case as well as the contractual and statutory allocation of risk. If an adjustment is not possible or is unreasonable, termination of the contract might be an option in the case of long-term contractual relationships, provided the statutory prerequisites are met.

What regulations apply to subscriptions and recurring payments?

When businesses in Germany want to adjust prices for subscriptions and other contracts involving recurring payments, there are particular requirements they must observe. Unlike one-off purchase agreements, these contractual relationships are in place for an extended period of time. Businesses must therefore determine whether—and under what conditions—they are permitted to change the agreed-upon price during the term of the contract.

Price adjustment clauses in continuing obligations

In principle, contracts for subscriptions and other continuing obligations can be written in such a way that they permit price changes at a later time. However, any such clause must be effectively agreed-upon and must define the conditions for any subsequent price adjustment in sufficient detail. It should set out the grounds on which a price can change and the criteria that will be used to calculate the change in price. Clauses that grant a business the option of increasing a price without limits are generally not permitted.

Special requirements for recurring payments

When it comes to recurring payments, businesses must draw a distinction between different types of price changes. Price changes might affect the regular basic price, individual service components, or additional fees for new or previously unincluded services. If the agreed-upon basic price changes, then the terms of the contract change—and this requires a contractual or legal basis.

For businesses with a large volume of recurring payments, the technical implementation of the price adjustment also plays an important role. The change must be correctly recorded for existing contracts and applied at the scheduled time. At the same time, businesses must make sure they don’t inadvertently bill incorrect amounts. In addition, they can apply price changes only to contracts for which there is a corresponding legal or contractual basis.

Price changes and cancellation rights

Depending on the terms of the contract, a price adjustment could entail certain rights for the contracting parties. This applies particularly when a price change constitutes a material alteration to the contractual terms. In certain cases, statutory or contractual cancellation rights might apply. With long-term contracts, therefore, businesses should assess whether a price change would affect the contract term or its termination.

What transparency requirements apply to price adjustments for private individuals?

Price adjustments that affect private individuals are subject to specific transparency requirements. It must be clear for customers which price relates to a given product or service and under what conditions that price is subject to change. Therefore, businesses must not only implement price changes in accordance with the law, but also present them in a clear and transparent manner.

What are the requirements for indicating prices?

The German Price Indication Ordinance (PAngV) contains key provisions on how prices are presented to private individuals. According to Section 1, Paragraph 3 of the PAngV, it must be clear which price relates to which offer. Pursuant to Section 3 of the PAngV, offers or price advertisements aimed at customers must, in principle, indicate total prices. Depending on the circumstances, additional requirements could apply—for instance, regarding unit price indications or distance selling contracts. Price indication requirements also apply to the communication of price changes. Generally speaking, changed prices must always comply with the principles of clear and accurate pricing.

Indicating prices subject to change

The PAngV also contains provisions regarding price indications where companies reserve the right to make subsequent price changes. According to Section 8 of the PAngV, businesses can reserve the right to change prices for services involving a delivery or performance period exceeding four months, as well as for continuing obligations.

However, this reservation alone does not automatically entitle the business to implement any price increase it chooses. Each price change must still have a valid contractual basis and comply with the other statutory requirements. Businesses should therefore ensure that their price indications, contractual terms, and price adjustment clauses are aligned with one another.

What information should businesses provide when adjusting prices?

Announcements of price adjustments should include the key details of the change. These includes:

• The previous price and the new price
  
• The effective date of the new price
  
• The goods or services affected
  
• For recurring payments, the relevant billing cadence
  
• The contractual basis for the change, where applicable
  

Depending on the terms of the contract and the type of price adjustment, additional information might be required. It’s necessary that consumers be able to understand the financial consequences of the change without undue difficulty.

Transparency is key to acceptance of price changes

Clear communication makes it easier for customers to understand price adjustments. Businesses should therefore clearly explain the main reasons behind a price adjustment, insofar as this is necessary for customers’ understanding of the change. However, it’s important to distinguish between a clear explanation and a legal duty to provide justification. Not every price adjustment requires a detailed breakdown of internal calculations. Nevertheless, in many cases, transparent communication can increase customer acceptance of price adjustments.

What are the risks of making impermissible price changes?

For businesses, a price adjustment that breaches contractual or legal provisions can entail a variety of different risks.This is particularly true if there is no valid contractual basis for the price adjustment, if the price adjustment clause is ineffective, or if the business fails to comply with the legal requirements for a price adjustment.

Inability to collect the higher price

The main risk associated with an impermissible price adjustment is that businesses might not be able to enforce the higher price. In certain circumstances, their contract partner might be obliged to pay only the originally agreed-upon price. In the case of recurring payments, the business could feel the impact of this risk for an extended period of time. If a business applies a new price to numerous contracts without first reaching a valid agreement with its contract partners, the difference between the amount it bills and the amount it is legally owed could be significant.

Financial burden

If a business has already received more than it was actually owed due to an invalid price adjustment, its customers could be entitled to a refund. In some cases, contract partners could demand that they be reimbursed for any overpayments. As well as the cost of the refunds themselves, businesses might also incur costs for processing the refunds or correcting invoices.

Disputes with contract partners

Improper price adjustments could lead to disputes with contract partners. They might dispute the validity of the price change, refuse to pay the higher amount, or demand that any payments already made be returned to them. In some circumstances, they might also enforce their claims in court—for instance, by suing a company for reimbursement of overpaid amounts.

A single erroneous price adjustment can trigger numerous similar disputes, creating a high administrative workload for the business. Additionally, if disputes become public knowledge, they could damage a business’s reputation and lead to a loss of trust among existing and potential customers.

How should businesses in Germany implement price adjustments?

Businesses in Germany should prepare for price adjustments systematically, as they have to balance legal, economic, communication, and organizational considerations. Although each business’s approach might vary slightly, the following outlines standard practice:

• Assess the economic basis
  Before implementing a price adjustment, businesses should first check whether and to what extent such a move is necessary and appropriate. This includes carefully assessing the economic conditions and the potential impact. By basing their decision on a solid foundation, businesses can ensure that any price adjustment is proportionate to their financial needs.

• Review the contractual basis
  Next, businesses should verify whether their existing contracts provide a valid basis for the planned price change, taking into account price adjustment clauses, general terms and conditions, and any applicable statutory regulations. The actual price adjustment should align with the agreed-upon conditions and calculation criteria.

• Assess the impact on contract partners
  Before implementing a price adjustment, businesses should determine exactly which contracts and contract partners will be affected by the change. For businesses with a large number of subscriptions or recurring payments, it might be a good idea to systematically document the impact of the price adjustment.

• Draft the price adjustment notice
  Next, businesses should draft a notice that conveys the price adjustment in a clear and transparent manner. The announcement should contain all necessary information, as well as, where applicable, the key reasons behind the measure. By providing details of the price adjustment, businesses can establish a solid foundation based on clear communication with affected contract partners.

• Announce the price adjustment
  Businesses should announce price adjustments well in advance and notify affected contract partners via suitable channels. Key information should be easy to find and written in clear language.

• Implement and monitor price the adjustment
  The final step is to implement the price adjustment. For recurring payments, it’s particularly important to ensure that the new price is applied starting at the correct time. It’s also advisable to monitor the situation carefully after implementation in order to identify potential errors early on.

How Stripe Billing can help businesses adjust subscription prices

Stripe Billing helps businesses in Germany with the technical implementation of price changes. The platform can handle a variety of billing models—from traditional recurring payments to usage-based models and individually negotiated contracts. This enables businesses to implement flexible pricing structures and easily make changes to their subscription models.

Stripe Billing also boasts features that automate billing processes, support over 100 different payment methods, and help businesses manage revenue data. This allows businesses to efficiently monitor and manage their subscription processes and price changes.

FAQs about price adjustments in Germany