Exporting to Germany? Choose German retention of title!

What happens if your German customer goes bankrupt while your deliveries haven't been paid for? When exporting to Germany, it makes a big difference whether you use a Dutch or German retention of title arrangement. Sticking with the Dutch version can be costly. With a German extended or comprehensive retention of title arrangement, you have more recourse. This article explains how it works.

What exactly does a retention of title entail?

A retention of title clause means that you, as the seller, retain ownership of the goods until the buyer has paid your invoice. This allows you to reclaim the goods if payment is not received or your customer goes bankrupt. It is common practice in both the Netherlands and Germany to include such a retention of title clause in general terms and conditions or agreements. As mentioned, the German clauses offer more options and better protection.

Why does a German retention of title offer more protection?

Dutch law only recognizes the so-called simple retention of title . This means you can no longer invoke it once the goods have been processed into a new product. For example, suppose your German customer processes the parts you supplied into machines. Once this has happened, you can no longer invoke the retention of title, even if payment has not yet been made.

In Germany, however, there's the so-called extended retention of title ( Verlängerter Eigentumsvorbehalt ). This allows you, as the supplier, to retain ownership even if your products are processed into a new item or resold to a third party. If your customer goes bankrupt, you can recover the damage from the new item, proportionally to the value of the products you supplied. Furthermore, with an extended retention of title, the buyer's customer must pay you instead of the buyer upon request.

German law also recognizes the extended retention of title ( Kontokorrentvorbehalt ). This means that you, as the seller, retain ownership of the delivered products until all claims, including interest and costs, have been settled. The retention of title does not apply per delivery, but throughout the entire relationship. This strengthens your position in the event of payment difficulties.

How do you apply a German retention of title clause?

A German retention of title agreement doesn't automatically apply when you export goods to Germany. You must explicitly agree on this and document it correctly. How do you do this?

• Determine that German law applies to the retention of title. For example, include the following provision in your general terms and conditions: "Export deliveries to Germany are subject to an extended retention of title under German law." or "The supplier retains ownership of all delivered products until all claims arising from the business relationship have been settled, including interest and costs, in accordance with the German Kontokorrentvorbehalt (Contract Rent Retention Act)." Then, insert the relevant clause regarding the retention of title under German law . Dutch law can apply to the remaining provisions.
• If you include this provision in your general terms and conditions, make sure they are drafted in a language the buyer understands, and that you provide them to the buyer in advance and declare them applicable.

It's also important that you deliver the goods in Germany. Only then does German law apply. If the German buyer collects the goods in the Netherlands, you cannot agree on a German reservation.

Practical checklist for exporters

1. Determine your risk: Do you supply goods that can be processed or resold?
2. Check your terms and conditions: does it contain a retention of title clause under Dutch or German law?
3. Adjust conditions: choose a clause according to German law and state this explicitly.
4. Inform your customer: ensure clear communication beforehand, preferably in writing.
5. Deliver to Germany.

Also read: ' General terms and conditions in Germany, how does that actually work? '

Have your contract checked: ensure certainty

Want to ensure your retention of title clause works as intended when exporting to Germany? Have your terms and conditions and contracts reviewed by the specialists at Heisterborg International. We advise you in plain language and with expertise in both Dutch and German law.