3 mistakes in contracts with partners from Germany

Excessive penalties for minor delays

In March 2024, we analyzed a contract for a manufacturer of metal parts near Lublin, where the penalty for one day of delay was 0.8% of the value of the entire order. With a transaction amounting to 48,000 euros, every day of downtime cost this company over 380 euros. German partners often write such rigid rates into the general terms and conditions of purchase (AGB), hoping that the Polish supplier will not dare to negotiate. Court is the last resort, which is why it is better to limit the total amount of penalties to 4.47% of the order value from the start.

The principle is simple: the penalty must be proportional to the real damage, and not constitute additional profit for the buyer. If you deliver goods worth 12,000 PLN and the customer demands 1,500 PLN for a two-day delay, something is wrong. At Lublin Union Arbitrage, we advise that a provision regarding the necessity of the contractor proving loss should always appear in the contract. Clear rules of the game require both parties to play fair, and rigid and excessive lump sums do not serve this. We helped 23 transport companies delete such points from their permanent framework agreements last quarter.

It is also worth paying attention to the way these amounts are calculated. Often in contracts with companies from Bavaria, we encounter provisions that allow for the calculation of penalties even in the case of force majeure, such as border strikes in January 2024. This is unacceptable. A good contract should provide for at least a 48-hour grace period during which a delay does not result in financial consequences. Such a minor correction in paragraph 7 or 12 of the contract can save your margin when an accident on the highway near Dresden blocks the passage for 6 hours.

A contractual penalty cannot be a way for a German recipient to lower the price of goods.

The trap of choosing German law

Most contracts with partners from Berlin or Munich contain a standard provision that the law applicable to the contract is German law (BGB). For a Polish entrepreneur, this means that in the event of a dispute, they must hire a lawyer in Germany, which costs an average of 220 euros per hour of work. Added to this are the costs of sworn translations of every document, which for a 15-page technical documentation generates an expense of around 1,800 PLN. Discretion is our standard, which is why we suggest moving the resolution of disputes to arbitrators in Lublin.

The application of the United Nations Convention on Contracts for the International Sale of Goods (CISG) is often excluded by German companies. They do this consciously because the CISG gives the supplier more rights in the case of minor defects in the goods. If your contractor insists on German law, ask them specifically: why? Usually, they cannot answer substantively. We solve the problem, we don't look for the guilty, so instead of arguing about the choice of country, propose the Lublin Union Arbitrage arbitration clause. This saves time because we close the case in 32 days, not in 3 years before a court in Hamburg.

We worked with a company from the furniture industry that was litigating in Germany for two years over an allegedly defective batch of 144 chairs. The court and legal costs exceeded the value of the goods by 14%. If arbitration had been used from the beginning, the case would have ended in one meeting at the office at Krakowskie Przedmieście in Lublin. Remember that German law is very formalized and every failure to meet the deadline for reporting readiness for collection can be used against you. A Polish company must know these risks before sending the first transport across the Oder.

Imprecise goods collection terms

The third error is the lack of definition of what exactly happens at the moment of unloading. German recipients often reserve the right to report hidden defects even 28 days after delivery. This is far too long for a manufacturer of fast-moving goods or components that go straight to the assembly line. At Lublin Union Arbitrage, we suggest shortening this time to 5 business days. A real example from November 2023: a company from near Puław sent components to Stuttgart and received a complaint after 22 days, when the goods were already mixed with batches from other suppliers.

The provision of 'collection without reservations' on the CMR document should be your main shield. If the driver hands over the goods and there is no entry about damage, a German court may still recognize a later complaint if the contract is poorly formulated. Therefore, a step-by-step complaint procedure must be included in the contract. Who takes the photos? Within what time is the email sent? What role does an independent expert play? Without these details, you are in a losing position when a partner from abroad unilaterally reduces payment by 2,400 euros for alleged scratches on the surface.

We also recommend introducing a provision for technical arbitration. If a dispute over quality arises, there is no need to involve lawyers immediately. Arbitrators from LUA, such as our experts with 8 years of experience in foreign trade, can assess the situation based on photos and protocols within 48 hours. Such an approach saved a commercial relationship between a Lublin window manufacturer and a developer from Leipzig in February 2024. Instead of breaking the contract for 156 pieces of woodwork, the parties agreed on a price correction of 3.2%, which was fair for both sides.

Effective collection is one that closes the path to groundless complaints a month after delivery.

The court location matters for your wallet

The final point is 'Gerichtsstand', i.e., the place of dispute resolution. If a city in Germany appears in the contract, you are at a logistical disadvantage. A trip for the company owner and two witnesses to a hearing in Frankfurt costs about 6,500 PLN (fuel, accommodation, per diems), not counting the time lost for absence at the plant. Lublin Union Arbitrage offers a neutral place in Lublin, which for a Polish company means zero travel costs and the possibility of conducting talks in their native language, which is key for technical complexities.

In our experience, German companies are more willing to agree to arbitration in Poland if it is presented to them as a faster and more discreet solution. Court is the last resort, and LUA arbitrators act based on regulations that both parties accept with one signature. In 2023, we conducted 47 such proceedings, 38 of which ended in a settlement at the very first meeting. This shows that the presence of an impartial person from Lublin helps break the ice and return to doing business, instead of throwing pleadings at each other for half a year.

The rules are clear: if you want to export safely, you must control the costs of a potential conflict. Choosing LUA as the resolving body is not just about convenience, but a specific saving of 12,000 - 18,000 PLN on legal service and dispute logistics alone. Every entrepreneur from the Lublin region who sends more than 12 transports to Germany annually should have a sample arbitration clause in their drawer, which we will gladly share during a short phone consultation.