Most important points

• Warranty refers to the statutory liability for defects of the seller or contractor vis-à-vis the buyer or customer if the item or service is defective at the time of delivery.

• Under sales law, the consumer can initially demand supplementary performance (rectification or replacement) in the event of a material defect or defect of title. If this fails, he is entitled to a price reduction (price reduction) or withdrawal (rescission), and possibly also compensation.

• The warranty period for new goods is 2 years (5 years for real estate), for used goods it can be reduced to 1 year for consumers. In the case of companies, warranty rights can be modified or excluded more extensively by contract.

• A warranty must be distinguished from a guarantee promise: A guarantee is a voluntary promise by the manufacturer or seller that supplements or extends the statutory rights.

• For start-ups, e.g. in e-commerce or software sales, it is important to know their own warranty obligations and to clearly regulate them in their general terms and conditions, as well as to provide for any warranty exclusions (where permissible) in B2B transactions.

Statutory regulations on liability for material defects

The warranty in sales law is regulated in §§ 434 ff. BGB (German Civil Code). A material defect exists if the actual condition of the purchased item deviates from the intended condition – for example, the product does not function as described or is defective. In the case of a contract for work and services (Section 633 BGB), a defect is said to exist if the work does not have the agreed quality or is not suitable for the usual/contractually stipulated use.

If a defect comes to light, the buyer/customer has the following rights:

1. Subsequent performance: The debtor (seller/contractor) may first attempt to remedy the defect. In sales law, the buyer has the right to choose between repair or delivery of a defect-free item, but the seller can refuse one type if it is disproportionately expensive.

2. Right of refusal: The seller can refuse subsequent performance altogether if it involves disproportionately high costs (which is rarely the case).

3. If the supplementary performance fails (at least 2 unsuccessful attempts or unreasonable delay) or is refused, the buyer can declare a reduction in the purchase price or withdraw from the contract (against return of the item).

4. Compensation: Irrespective of this, compensation can be claimed under certain conditions if the seller is at fault (e.g. negligent delivery of defective goods).

5. In the case of a contract for work and services, there are analogous rights to self-performance (remedy the defect yourself and demand reimbursement of the expenses).

Warranty in B2C vs. B2B business

Consumers enjoy comprehensive statutory warranty protection:

• Reversal of the burden of proof: If the defect occurs within 12 months (for contracts from 2022, previously 6 months) from handover, it is assumed that it was already present at the time of handover. The seller must then prove the opposite if they do not wish to provide subsequent performance.

• Warranty cannot be contractually excluded or shortened for consumers (for new goods). For used goods, a reduction to 1 year is possible, but a complete exclusion is not permitted.

• If the seller has fraudulently concealed the defect or assumed a guarantee for the quality, longer deadlines or special rules apply.

In pure business-to-business (B2B) transactions, the warranty can be modified by contract:

• Warranty periods are often shortened (e.g. 12 months) or the warranty is completely excluded (“as inspected and purchased”), provided there is no fraudulent intent to the contrary.

• Warranty cannot be excluded via § 444 BGB if the seller fraudulently conceals a defect or has assumed a guarantee.

• In the case of mutual commercial transactions, the obligation to inspect and give notice of defects (§ 377 HGB) also applies: The buyer (if a merchant) must inspect the goods immediately upon receipt and report any defects, otherwise the goods are deemed to have been approved and warranty rights are forfeited.

Differentiation from the guarantee

A guarantee is a voluntary promise that goes beyond the statutory warranty. For example, a manufacturer gives a 3-year guarantee on a product, although the statutory warranty is only 2 years. In the event of a warranty claim, the entitled party can demand the services specified in the warranty promise (often repair or replacement). The guarantee does not exclude the statutory rights (§ 443 BGB), but exists independently of them.

Important for customers: Always claim warranty from the contractual partner (dealer); warranty usually directly from the manufacturer or guarantor.

Practice for startups

Startups that distribute products or software should:

• Be aware of the statutory warranty obligations. For example, customer service should be clear about how to deal with complaints (rectification by update/patch, exchange, etc.).

• Limit warranty appropriately in the GTC for B2B customers (e.g. shortening the period to 1 year, exclusion for used parts, implementation of the obligation to give notice of defects).

• Consider whether you want to offer a guarantee to create trust (e.g. “12 months functional guarantee”). However, this must then also be able to be fulfilled, which can incur costs.

• When making your own purchases (e.g. components for hardware startups), check the supplier contracts: Warranty exclusions by the supplier can affect the startup, so this may be a point for negotiation.

Overall, the statutory warranty offers end customers important basic protection. Startups should not see this as an annoying obligation, but as a promise of quality: Those who supply good products generally have few warranty cases and can strengthen customer loyalty with goodwill and clear rules.