Germany's approach to contracts is known for being un-customer-friendly. It usually takes consumers three months to be able to cancel services, for example. But, the German Federal Parliament, Bundestag, has passed through a new law that seeks to reduce minimum contract terms and shorten notice periods to facilitate consumers' lives.
Expats in Germany should be able to terminate contracts with internet providers, mobile phone companies, streaming services, gyms and other sorts of services more easily. The law limits minimum contract periods and notice periods in order to make it easier for customers to switch to another provider if they wish.
“Long contract terms and long notice periods restrict consumers' freedom of choice and prevent them from switching to more attractive and cheaper offers,” said Justice Minister Christine Lambrecht in an interview. Companies will be allowed to offer longer contract terms of up to two years, but only if they also offer a one-year contract that is a maximum of 25% more expensive.
What changes and for which sectors?
Notice periods for cancellations on the general market will now be shortened from three months to one month, but this does not include insurance contracts or job contracts. From July 1st 2022, the law also requires businesses to implement a “cancellation button” that enables consumers to easily terminate ongoing contracts concluded on websites with just a click. The functionality is mandatory and must be permanently accessible, comparable to the legal notice already required under German law (Impressum).
Providers will be obliged to confirm receipt of the cancellation request as soon as possible, for instance, via email, so that the customer can be sure their termination notice has been received. This regulation also applies to contracts that were concluded before this date.
It is also important to highlight that the new regulation does not apply to contracts concluded before March 1, 2022, with the major exception of mobile phone and internet contracts. Therefore, if expatriates signed a contract before this date and wish to switch providers, they will still have to remember to cancel it in good time once their original contract term finishes.
What about work contracts?
The new law on cancellation doesn't work for jobs. For the labour market, the rule continues the same. Employees that have been employed for two years have one-month notice. For employees with a five-year contract, a two-month notice is required, and if the employee has been employed for eight years, three months.
Although this new law applies to the market, Antonio Pérez, an expat from Honduras currently living in Munich and working as a financial controller, comments on what would it mean if such changes could be made in the labour market. “From my point of view, it would be a terrible idea. Let me explain: Now we have a typical 3-month notice period for jobs. This means that your income is guaranteed for the next 3 calendar months. If this law were to be applied to the labour market, it would reduce your safety net.” Antonio adds that such measures can hugely affect expats as unless they have a permanent residence, their legal status is tied to them having rightful employment in Germany. If expats are unemployed, they get a limited amount of time to find a new job.
For him, the positive side of this hypothetical implementation would be that it could make changing jobs a lot easier, so more opportunities could be available for expats. “It would make it easier for people to apply for new roles or responsibilities.”
Experience
Pérez comments on how the new law on cancellation facilitate his life in Germany. ‘It will help me save money. Last year I moved to a new flat and had to change my internet provider. Because of the 3-month notice period, I ended up paying double the internet for 2 months.” He adds “I could try a new gym or a training centre with a 12-month membership. It is less risky than taking on a 2-year contract.”
Pérez also thinks these changes on diminishing cancellation notice periods influence companies, but not in his case. “I work for a company that has a monthly subscription business model. This means that customers can already cancel at any time. The law will have no impact for us, but certainly for other sectors.”
