Germany: Reservation of Title

Abstract

It appears from section 433 BGB (Bürgerliches Gesetzbuch: the German Civil Code) that the basic idea underlying the law is that a purchaser pays for goods at the same time as the vendor gives him direct possession. Purchase for cash satisfies the needs of the vendor, who will immediately receive the full amount of money at the moment of the delivery of the goods. However, practice has rather deviated from this idea. In most cases (apart from the cash purchases of everyday life) the delivery of goods is effected in advance by the seller whereas the buyer transmits the purchase price to the seller by cheque, credit transfer or similar after the delivery of the goods. Today it is general business usage to allow a period for payment; this is done for working assets as well as for expensive and durable investment goods. If the purchaser becomes insolvent after the delivery of the goods, the vendor would lose the goods without being able to enforce his claim for the full amount of the price. In the case of the purchaser’s bankruptcy the vendor is an ordinary creditor in bankruptcy: that is, he has to content himself with a proportional payment out of the bankrupt’s estate.