The commercial inspection and complaint obligation under the German Commercial Code (HGB) is one of the most practice-relevant and at the same time most dispute-prone provisions of commercial law. Section 377 of the German Commercial Code (HGB) requires merchants to inspect delivered goods without undue delay and to notify the seller of any defects in a timely manner. Failure to comply generally results in the goods being deemed approved, with significant consequences for warranty claims.
The following article is intended to shed light on central problem areas that repeatedly lead to conflicts in practice.
A central practical problem of Section 377 of the German Commercial Code (HGB) lies in the close connection between two questions: How long is the buyer allowed to investigate and what defects should have been detected in the process? The uncertainty surrounding the applicable inspection period is directly linked to the difficult distinction between apparent defects and hidden defects.
1.1 No Fixed Deadlines - Case-by-Case Assesment
The Federal Court of Justice (BGH) emphasizes in established case law that there are no fixed deadlines for the investigation. Rather, the relevant assessment depends on criteria such as:
decisive.
Irrespective of these criteria, it can be stated that a strict standard applies in commercial transactions. An initial, random inspection must regularly be carried out within one working day of delivery. In the case of perishable goods, testing must begin immediately – in fact immediately – whereas in the case of technically complex products, on the other hand, the duration of the examination can extend to several days, in exceptional cases, up to approximately one week.
1.2 The Distinction as the Decisive Factor for Liability
Whether a defect is to be classified as “apparent” "concealed" determines the start of the period – and thus often the existence or loss of warranty rights.
Apparent defects are those that are easily recognizable during a proper examination, whereas hidden defects, as the name suggests, cannot be detected even after a careful initial inspection.
The practical difficulty lies in the fact that the question of whether a defect was “apparent” is assessed retrospectively based on the objectively owed intensity of the investigation. The standard is therefore not what the buyer has actually checked, but what he would have had to check if he had been properly organized.
This intertwines both problem areas:
If the inspection period is interpreted narrowly, the likelihood increases that a defect will be classified as apparent, which means that the complaint period begins to run as soon as it is delivered. If no immediate notification is then made, the fiction of approval under Section 377 of the German Commercial Code (HGB) applies.
In the case of latent defects, by contrast, the notification period begins only upon discovery of the defect. However, disputes frequently arise as to when the defect could have been detected through a proper inspection—an issue that often requires expert assessment.
In contentious disputes, the allocation of the burden of proof often determines the success or failure of a claim. The relevant principles are as follows:
It is therefore advisable for merchants to design internal audit and documentation processes in such a way that the investigation and complaint remain provable in the event of a dispute (e.g. audit protocol, e-mail archiving, goods receipt documentation).
In modern commercial traffic – especially within the framework of just-in-time structures – so-called drop shipping is becoming increasingly important. This is a model in which a seller sells to a first buyer, who then resells the goods to a second buyer. However, the delivery is made directly from the seller to the second buyer as the end customer. In fact, the first buyer never gets possession of the goods.
3.1 Complaint Along the Contractual Hierarchy
Due to the principle of relativity of contractual obligations, the notice of defects must generally be transmitted along the contractual chain:
Second buyer → initial buyer → seller
Between the second buyer and the initial buyer, notice must be given without undue delay. Subsequently, the initial buyer must also notify its seller without undue delay.
A direct notification from the second buyer to the seller may only suffice in individual cases to influence the relationship between the seller and the first buyer within the time limit.
3.2 No Access to the Goods by the Original Buyer
A key point of tension arises from the fact that the initial buyer in drop shipping often has no actual possibility of inspection due to a lack of de facto possession of the goods. Nevertheless, he continues to be subject to the obligation to complain pursuant to Section 377 of the German Commercial Code (HGB).
He can de facto leave the inspection to the second buyer but must ensure that the initial buyer informs him immediately of any defects.
The constellation becomes particularly problematic if the second buyer is not a merchant. Although Section 377 of the German Commercial Code (HGB) only applies directly to commercial purchases by both parties, the obligations under commercial law continue to apply in the relationship between the initial buyer and the seller. Under the recourse provisions of §§ 478 (1), 445a (4) and § 327 (5) of the German Civil Code (BGB), the initial buyer is treated as if he had received the goods himself and had them properly inspected.
If avoidable delays occur, the initial buyer must bear the legal consequences under Section 377(2) of the German Commercial Code (HGB).
However, the same strict standards regarding the speed of notification cannot be applied in cases where delivery is made directly to the initial buyer. It would be contradictory if the seller agreed to a direct delivery, but at the same time demanded a notification of defects as quickly as it would be possible with its own incoming goods inspection.
3.3 Expectations and Reasonableness
In practice, sellers frequently adopt unrealistic expectations, assuming that notices of defects in drop shipment transactions must be given “immediately”.
However, the objective standard of immediacy remains decisive. The decisive factor is therefore the immediate reprimand by the second buyer against the first buyer and the immediate forwarding by the first buyer to his seller.
In principle, only culpable delays lead to the loss of rights.
3.4 Modification by General Terms and Conditions (GTC)
Companies regularly try to modify the obligation to complain by means of general terms and conditions – for example, by shortening or extending deadlines. However, a deviation in the form in the case of open defects regularly violates Section 307 (1), (2) No. 1 of the German Civil Code (BGB), as it is incompatible with the basic idea of Section 377 of the German Commercial Code (HGB).
In an individual contract, however, § 377 of the German Commercial Code (HGB) can be waived in favor of the buyer if the agreement does not violate § 138 of the German Civil Code (BGB).
The obligation to investigate and complain pursuant to Section 377 of the German Commercial Code (HGB) is not a mere formal instrument, but a course set the course under liability law. Unclear deadlines, problems with the burden of proof, difficulties in distinguishing between open and hidden defects as well as complex supply chains regularly lead to considerable losses of rights in practice.
Companies are therefore well advised to align their internal processes with the requirements of commercial law and to make clear contractual and organizational regulations, especially in drop shipments. Clear goods receipt processes, documented inspection standards, escalation and forwarding mechanisms or even training of employees should be in place. In addition, it is advisable for entrepreneurs to have their existing contracts regularly reviewed by a lawyer and, if necessary, to have them adjusted by a lawyer in order to avoid ambiguities and to reflect the requirements of Section 377 of the German Commercial Code (HGB) as clearly as possible in the contract. This is the only way to avoid the considerable risks of a late or omitted letter of notification of defects.
Moritz Kopp
Katharina Reichert
![[Translate to English:]](/fileadmin/_processed_/a/0/csm_IP_Header_Scott_738ee40874.jpeg "[Translate to English:]")
