Fri, Sep. 05, 2014

New Statute to Stem Late Payment

MJ - Washington.   On August 23, 2014, a new statute, Gesetz zur Bekämpfung von Zahlungsverzug im Geschäftsverkehr und zur Änderung des Erneuerbare-Energien Gesetzes, an Act to Combat Tardiness in Business Payments and to Change the Renewable Energies, became effective.

The objective of the statute is to solve the problem of late payments between business parties and between businesses and public agencies. The federal legislator added a new section, sect; 271a, to the Civil Code, Bügerliches Gesetzbuch of 1900. The provision has a binding effect only on transactions subject to German law. Companies with a payment obligation must pay within 60 days after receiving the promised consideration. When a party is a public entity, payment must be completed within 30 days.

With the new section, the law intends to protect mid-size companies: When they perform their obligation, they should be paid promptly, thus receiving protection against liquidity squeezes. General terms and conditions may not supersede this section. A contractual agreement providing for a longer period is effective only if the agreement is made expressly and does not unfairly disadvantage the beneficiary. This new statute will apply to new contractual obligations. Contracts existing on August 23, 2014 will not be affected unless performances thereunder become due after that date.

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