Delay in delivery: the buyer’s rights, compensation and a grace period

When does a delay in delivery arise under Section 286 of the German Civil Code (BGB)?

A delay in delivery is more than just a late delivery. Under Section 286 of the German Civil Code (BGB), it requires three conditions to be met. Firstly, the claim for delivery must be due and enforceable; in other words, the delivery date must have been reached and the supplier must not have any valid right of retention. Secondly, the creditor must, in principle, issue a reminder to the supplier, i.e. unambiguously demand performance once the claim has fallen due. Thirdly, the supplier must be responsible for the delay. Under Section 286(4) of the BGB, the supplier is not in default as long as performance is withheld due to circumstances for which the supplier is not responsible.

The demand for performance is a unilateral request requiring acknowledgement of receipt. It must sufficiently specify the performance owed, but must contain neither a deadline nor a threat of consequences. For evidential purposes, it should be in writing. Default only commences upon receipt of the reminder, and with it the application of the consequences of default. As long as no binding delivery date has been agreed, the performance becomes due immediately under Section 271 of the German Civil Code (BGB), meaning that the buyer can trigger default at any time by issuing a reminder. A reminder should therefore be dated, specify the performance precisely and provide proof of receipt, as all further claims are contingent upon this.

When is a reminder unnecessary in the event of a delay in delivery?

In many supply relationships, a reminder is not required because Section 286(2) of the German Civil Code (BGB) declares it unnecessary in four specific cases. The most important case is that of a date determined by the calendar (No. 1): if a performance date is fixed by the calendar – for example, delivery on 15 October – default occurs automatically at the end of that day.

Similarly, a deadline calculable by the calendar (No. 2) that is linked to a preceding event is sufficient; for example, delivery within three weeks of a call-off. Furthermore, a formal notice is not required if the supplier seriously and definitively refuses to perform (No. 3) or if special reasons, taking into account the interests of both parties, justify the immediate commencement of default (No. 4).

A non-binding delivery date or a mere calendar week as an approximate indication is not sufficient for this purpose. In the case of a non-binding date, the principle remains that the buyer must issue a reminder in order to trigger default. For claims for payment, Section 286(3) of the German Civil Code (BGB) additionally contains the 30-day rule; however, this relates to the debtor’s obligation to pay, not the supplier’s obligation to deliver. For procurement, it is advisable to specify a fixed calendar date in the contract, as this obviates the need for a reminder and triggers the consequences of default without any further action being required.

What rights does the buyer have in the event of a delay in delivery?

If the supplier is in default, the buyer may initially continue to insist on delivery whilst at the same time claiming compensation for the loss arising solely from the delay. Such damages arising from the delay, pursuant to Section 280(1) and (2) in conjunction with Section 286 of the German Civil Code (BGB), may include, for example, financing costs, the costs of a temporary replacement purchase, or contractual penalties which the buyer, in turn, must bear vis-à-vis their own customers. A grace period is not required for this. The decisive factor is that default has occurred.

If, on the other hand, the buyer wishes to withdraw from the contract, they must, as a general rule, first set the supplier a reasonable period for delivery. If this grace period also proves unsuccessful, they may withdraw from the contract under Section 323 of the German Civil Code (BGB). Any performance already exchanged must then be returned. Alternatively, the buyer may, under Section 281 of the German Civil Code (BGB), claim damages in lieu of performance. This includes, in particular, the additional costs of a substitute purchase. However, under Section 281(4) of the German Civil Code (BGB), making such a claim waives the right to the delivery originally owed.

Instead of damages in lieu of performance, the buyer may also, under Section 284 of the German Civil Code (BGB), claim compensation for expenses that have become futile and which they incurred in reliance on the delivery. Which option makes economic sense therefore depends on the specific loss incurred and on whether the buyer still wishes to insist on the original delivery. Withdrawal from the contract and damages in lieu of performance generally require a grace period to have been granted. Whether this is dispensable is determined by the statutory exceptions.

What rights does the buyer have in the event of a delay in delivery without a grace period?

In principle, the buyer must set the supplier a reasonable grace period before withdrawing from the contract or claiming damages in lieu of performance. However, the law provides for several exceptions in which the buyer may exercise these rights immediately and without setting a grace period. These are set out in Section 323(2) of the German Civil Code (BGB) for withdrawal and in Section 281(2) BGB for damages in lieu of performance.

The first exception is a serious and definitive refusal to perform. If the supplier clearly states that they will not deliver, setting a grace period would be a mere formality. The buyer may withdraw from the contract immediately or claim damages in lieu of performance.

The second exception is the relative fixed-date transaction under Section 323(2)(2) of the German Civil Code (BGB). If it is apparent to the buyer that performance is dependent on the timely date – because they informed the supplier of this before the contract was concluded or because it is apparent from the circumstances – the grace period does not apply. A typical example is the supply of materials timed to coincide with a fixed production start date or trade fair date.

The third exception applies where special circumstances, taking into account the interests of both parties, justify immediate withdrawal.

For traders, Section 376 of the German Commercial Code (HGB) goes even further. In the case of a commercial sale between traders with a fixed date of performance or a fixed deadline (known as a ‘commercial fixed-date sale’), the buyer may, in the event of late delivery, withdraw from the contract without a grace period or claim damages for non-performance. If, in exceptional cases, the buyer nevertheless wishes to insist on performance, they must notify the supplier of this in accordance with Section 376(1) of the German Commercial Code (HGB) immediately after the deadline has expired. Otherwise, they forfeit their right to performance and are limited to withdrawal or damages.

Section 376 of the German Commercial Code (HGB) also permits an abstract calculation of damages based on the market price if the goods have a stock exchange or market price. In the case of tight delivery deadlines, one should therefore check whether a fixed-date transaction applies, as this significantly shortens the path to withdrawal and compensation for damages.

How long must the grace period be in the event of a delay in delivery?

The law does not specify a fixed duration. A reasonable period is required, and it is considered reasonable if it enables the supplier to fulfil an order that is already prepared, but does not grant them any additional preparation time. The type of goods, procurement channels and industry practice are decisive factors. For goods in stock, a period of a few days may suffice; for bespoke items or long supply chains, longer periods are appropriate. There is no standard duration, such as 14 days in all cases.

Two points are practically decisive. Firstly, setting a deadline that is too short does not prejudice the buyer: if the buyer inadvertently sets a deadline that is too tight, case law provides that a reasonable period shall be deemed to have commenced instead, so that the buyer may withdraw from the contract or claim damages once that period has expired. Secondly, the notice must contain a specific, time-bound demand. A mere request for prompt delivery is not sufficient. Since the reform of the law of obligations, a threat of rejection is no longer required. Anyone wishing to be on the safe side should specify a specific end date in the notice setting the deadline and expressly reserve their further rights.

How much compensation is payable in the event of a delay in delivery? An example involving a substitute purchase

In principle, the damages comprise the additional costs incurred by the buyer as a result of the delayed or failed delivery. The key scenario is a substitute purchase: the buyer procures the goods elsewhere after the deadline has passed without result and claims the difference in price.

According to the case law of the Federal Court of Justice (judgement of 3 July 2013, VIII ZR 169/12), the additional costs of a substitute purchase constitute damages in lieu of performance under Sections 280(1) and (3) and 281 of the German Civil Code (BGB) and are not merely damages for delay. The buyer may therefore only claim these additional costs if they have previously allowed the grace period to lapse or if such a period was unnecessary, and they may no longer insist on performance in addition to this.

The following example serves solely to illustrate the calculation method.

Under the original contract, 100 special pumps costing 2,000 euros each amount to a total of 200,000 euros. Once the grace period has expired, the buyer procures the same quantity from another supplier at 2,300 euros each, totalling 230,000 euros. The direct additional costs of the substitute purchase thus amount to 30,000 euros. If a further 4,000 euros is added for express freight and necessary retrofitting, this simplified example results in damages in lieu of performance totalling 34,000 euros.

In addition, the buyer may claim damages arising purely from the delay, insofar as these are not already covered by the replacement purchase, such as financing costs for the interim period or interest losses on advance payments already made. A distinction must be made regarding statutory interest on arrears: the increased rate of nine percentage points above the base rate pursuant to Section 288(2) of the German Civil Code (BGB) applies only to claims for payment between businesses – that is, to a business’s own claim for payment – and, in a supply relationship, primarily affects the supplier vis-à-vis a defaulting buyer.

With a base rate of 1.52 per cent (since 1 July 2026), this results in default interest of 10.52 per cent per annum. By contrast, for the buyer’s own monetary claims against the supplier – such as the reclamation of an advance payment following withdrawal or a quantified amount of damages – the general rate of five percentage points above the base rate under Section 288(1) of the German Civil Code (BGB) applies, as these claims do not constitute claims for payment.

In addition, for claims for remuneration under Section 288(5) of the German Civil Code (BGB), a flat-rate sum of 40 euros applies; however, this is to be set off against any further compensation for legal costs. The buyer must specifically set out and prove the loss. It is therefore essential to carefully document the offers of a substitute purchase, the invoices and the date on which the notice was served.

What are the rules regarding contractual penalties and lump-sum compensation for damages in supply contracts?

Many framework and supply contracts contain clauses designed to obviate the need to prove specific loss. A distinction must be made between a contractual penalty, which encourages the supplier to comply with the contract and is payable only where the supplier is at fault, and lump-sum damages, which set a fixed amount for damages typically incurred. Both are permissible, but are subject to scrutiny under the rules governing standard terms and conditions if they are imposed by the user.

In business-to-business transactions, too, the principles set out in Section 309(5) and (6) of the German Civil Code (BGB) apply by virtue of the general clause in Section 307 BGB. A lump-sum compensation clause is invalid if it exceeds the loss to be expected in the ordinary course of events, or if the contracting party is precluded from the outset from proving that the loss was less. A contractual penalty must not provide for a flat-rate amount without distinguishing according to the seriousness of the breach and must be proportionate in amount.

Furthermore, according to case law, a clause is invalid if it permits both a contractual penalty and lump-sum damages to apply cumulatively, as this contravenes the principle of set-off. For the buyer, this has two implications: a well-drafted contractual penalty clause is an effective means of exerting pressure in the event of a delay in delivery; by contrast, an excessive clause is worthless in the event of a dispute, as it may be invalid in its entirety.

What impact do the supplier’s terms and conditions have?

Suppliers often limit their liability through their own terms and conditions of sale or delivery. It is common to find clauses that cap the amount of liability for damages arising from delay, restrict liability to cases of wilful misconduct and gross negligence, or limit lump-sum compensation for delay in favour of the supplier. Such clauses are not invalid per se in commercial transactions, but must be assessed in accordance with Section 307 of the German Civil Code (BGB). A complete exclusion of liability for the breach of essential contractual obligations (so-called cardinal obligations) generally does not stand up to scrutiny, nor does an exclusion of liability for wilful misconduct and gross negligence.

Another question of practical relevance is whose general terms and conditions actually apply. If both the buyer and the supplier refer to their own, conflicting terms and conditions, case law applies the ‘defence clause’: conflicting clauses do not form part of the contract; instead, the relevant statutory provisions take their place. Anyone wishing to plan reliably in procurement should check the supplier’s clauses on default and liability before concluding the contract and actively incorporate their own provisions – such as grace period mechanisms, contractual penalties and lump-sum damages – into the contract, rather than leaving them to the vagaries of a clash between terms and conditions.

Delay in delivery or force majeure?

Not every failure to deliver constitutes a delay. Under Section 286(4) of the German Civil Code (BGB), the supplier is not in default as long as the failure to perform is due to circumstances for which they are not responsible. If a supplier invokes force majeure – that is, an unavoidable external event such as a natural disaster, a strike in the upstream supply chain or official import bans – the question arises as to whether they are at fault.

If the delay is indeed beyond the supplier’s control, default interest and damages for delay do not apply for this period. The claim for performance remains valid as long as performance has not become permanently impossible within the meaning of Section 275 of the German Civil Code (BGB). In the event of permanent impossibility, the reversal of the contract is governed by Sections 275 and 326 of the BGB.

Force majeure clauses in supply contracts often shift this statutory allocation in favour of the supplier by defining which events exempt them from liability and for how long. Whether such a clause is valid in a specific case is a matter of interpretation and validity. We deal with this complex of issues in greater depth in a separate article. With regard to delay in delivery, it suffices to note that the delay may fail due to the absence of liability, and that, should the supplier invoke force majeure, the buyer should first check whether the conditions for such a claim are genuinely met.