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Rules of Applicable Law

A substantial part of German international law is codified in the Introductory Code to the Civil Code ("Einf├╝hrungsgesetz zum B├╝rgerlichen Gesetzbuch"). As far as the business world is concerned, art. 27 provides for the freedom of the parties to a contract to mutually agree on the applicable law. Failing such agreement, the law of the country of the party executing the characteristic obligation of the agreement will be applicable, i.e. the country of the seller, the owner, the agent, the lawyer / tax consultant etc. will decide on the applied law.

However, labour contracts are governed by the law of the country where the work is performed; the choice of a different jurisdiction cannot free the parties from the observation of such rules of law being coercive in the country where the work is performed (e.g.: protection of the youth and of young mothers, notice of termination, public holidays, daily / weekly hours of work). As an exception, the collective bargaining in the German construction industry is coercive for any construction work performed in Germany, irrespective of the seat / residence of the parties.

The distinction in German law between the contractual obligation, e.g. of the seller of goods to transfer the ownership, and its execution, e.g. by the seller to actually transfer both ownership and possession of the goods to the buyer, is governed by the international law of property which specifies that the applicable law is the law of the country where such property is situated.

As a rule, German law does not require any particular form for any sort of contract or other. However, the sale of (German) real estate and the establishment in Germany of both stock holding companies and of corporations with limited liability require the signature of the document by all parties to be made in the presence of a German Notary ("Notar"); the registration of the companies and of its directors also require a notarised application. These rather inconvenient requirements may however be overcome by the intervention of a representative in Germany and the skilful drafting of some additional documents.