General Terms of Business (AGB)

General terms of business (Allgemeine Geschäftsbedingungen, hereafter referred to as AGB), have become so common in German business practice that it is certain they are here to stay. There is no company today that can afford to do without such standardization of its terms of contract if it doesn’t want to negotiate every single one of its terms for every transaction it makes. Standardization of a company’s conditions of contract in the form of AGB pursues the following objectives:

• Streamlining and standardization of contract closure and processing procedures

• Creation of efficiency advantages, especially through the shortening of the negotiation process but also through the reduction of processing time and effort

• Tailoring of a standard framework for certain types of contracts that are not provided for in the German Civil Code (Bürgerliches Gesetzbuch, or BGB) or that are not adequately dealt with there.

The last point contains considerable potential for abuse in that AGB can also be used to shift the bulk of risk to the other party, whereas statutory conditions of contract specifically provide for shared risk. It is especially easy to shift the risk to the other party through the use of standardized general terms of business, because the other party normally does not take the time to read all the complicated details that are contained in the pages of fine print. In most cases customers make their purchasing decision based on price and quality and not on the contents of what appears to them as a set of incomprehensible and boring AGB.