6 Contractual Myths to Consider When Signing Contracts in Germany

Vertrag Contract

Before making a decision let say buying a car, shopping online or employing someone in your small business, you will need a contract as a formal agreement. But what are the details that need to be considered? What makes a contract legally binding in Germany?

Let’s burst a few contractual myths, some of us might have heard while living here.

  1. Only Verbal contracts are legally binding. This is false

Contrary to the common belief that only written contracts are legally binding, oral contracts can as well be legally binding. According to the WAZ, verbal contracts with a few exceptions in the sales law will pass as legally binding agreements.

Lawyer’s advice that this should be done in the presence of a witness, in case something goes wrong and you want a witness statement in a court of law.

Verbal contracts are only accepted in certain transactions, let say in the purchase of a car, but will not account in real estate, here you will need to get a written contract.

Although a verbal employment contract entered at the start of a job is legally binding, it can be problematic especially when one is unfairly dismissed. Lawyers state that to be on the safe side always ensures that you have a written and signed contract.


  1. You may return a product after purchase. False

If you have been wondering whether you can return a product you bought and decided you didn’t like anymore, or doesn’t suit your taste. News is, there is no legal right to exchange a product after a sale transaction has been completed. However  if the store allows exchange of products most of the time  within 14 days , or it has conferred a conversion right through its receipts, notices or sale transactions , then legally the store has to stick to that.


  1. Children cannot get into legally contracts? False

Whether children can get into legally binding contracts, is another matter. In Germany, only those who have attained the age of 18 can get into legally binding contracts, otherwise the parents act as the legal representatives.

For example if  a seven year old  enters into a sales contract by paying for the goods with a sum of his pocket money or gets the parents to pay for it, then the contract becomes effective.


  1. All employees deserve a golden handshake in the event of a dismissal. False

You might have heard of CEOs or top managers who get a golden handshake once they are dismissed from their positions.

German labour laws do not provide for golden handshakes. According to lawyer, Maja Klingner, “One may work for 40years and end up getting nothing once they are dismissed.”

However, there are exceptions to this rule. According to the Workers Constitutional Act (Betriebsverfassungsgesetz), if a company is forced to lay off some of its workers  during a financial crisis, when a company is facing bankruptcy or when  the workers council (Betriebsrat) has negotiated for a compensation plan for the employees. Companies may also willingly offer its employees compensations, this must however be provided in the contract.


  1. An employer cannot fire a sick employee or an employee on holiday? False

Another commonly misunderstood contract law is termination of employment during sickness or when one is on holiday.

German labour law allows for termination, while on sick leave or holiday. An exception to this law is when one is critically ill e.g. in a coma.

So when you take a long holiday, make sure you have someone checking out your mails regularly to ensure you don’t get your dismissal mail while away. A termination via e-mail isn’t legally binding, while a physical letter is.

If the employee does not file a complaint (Kündigungsschutzklage) to the labour court for unfair dismissal within three weeks, failure to which the dismissal becomes final.


  1. A verbal termination of a employment contract is legally binding. False

An employment contract may only be terminated via a written mail, this is clearly stated in the labour laws § 623 BGB. Employees should however be quick to react even after receiving a verbal dismissal. In such a case, the employee is advised to file a declatory judgement (Feststellungsklage) at the local labour court. This ensures the courts together with the employee issue a legally binding declaration on whether the employment contract remains effective.

In case, a written dismissal is issued before the statement is issued by the court, then the employee should seek to file the Kündigungsschutzklage for unfair dismissal within 3weeks, failure to which the dismissal becomes final.

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