Part 1 dealt with International Private Law issues. Under German Law, legally binding consumer regulations cannot be waived. In part 2, I will outline the (relatively complex) principles behind an AGB examination under German law as well as the individual examination steps and criteria.
From a legal point of view, betting regulations, particularly gambling terms and conditions, are considered – irrespective of how they are labelled – to be “AGB”s (Allgemeine Geschäftsbestimmungen, standard terms and conditions of business), i.e., contract conditions put forward by one side for use in a multiplicity (according to jurisprudence, at least 3) of instances.
If these AGB clauses do not withstand an AGB examination, then the deviant clauses are, according to the legislative regulations, invalid. There is also a danger that competitors (invoking arguments such as that the other party is “gaining a head start by breaking the law”) or consumer protection groups (under the Injunction Order Act (Unterlassungsklagegesetz) will be able to bring proceedings based on this invalidity.
The initial question in an AGB Examination is whether the customer is a company or a consumer. The answer depends on the spectrum in which the individual business is carried out. Where there is doubt, betting is always considered to take place in the private sphere. In this case, it is the considerably stricter “consumer contract” clause control which is applicable.
An AGB examination entails the following steps:
(1) Incorporation into the contract
The first stage in the examination is to investigate whether the clauses have been effectually incorporated into the contract. Practically this means: Even the most beautifully crafted of clauses is of no effect if it is not an integral part of the contract.
The onus of proof of effectual incorporation is on the bookmaker, which means that in a law suit he must be able to prove that the standard betting terms and conditions were agreed with effect. In relation to this, we would consider it advisable to have very exact documents which would hold up conclusively in legal proceedings.
The incorporation requirement is very strict because of the inalienability of German law. Under Art. 305, para. 2 of the BGB (Bundesgesetzbuch, German Civil Code), an express reference is required to incorporate AGB’s in contracts with non-companies in order that they are not overseen on cursory examination by “the average customer” (on whom the jurisprudence is based, BGH, NJW-RR 1987, 113). In particular, a reference in small narrow font is insufficient (OLG Düsseldorf, BB 1983, 84). The mere printing of the AGB on the back of the contract or on the betting slip is also insufficient. In this case, a clear easily read reference must also be included on the front. Similar conditions apply to contracts concluded via the internet. These also require a corresponding reference.
A further criteria is the reasonable possibility of knowledge . According to jurisprudence, a willingness to send AGB’s where there is a lack of knowledge is insufficient (Upper District Court of Munich; OLG München, NJW-RR 1992, 349). In the present case, this means that the standard betting terms and conditions should be hung up visibly in the receiving office (and that this can be proved in proceedings). Where required, further copies should also be available for handing out to customers (in practise, arguable not particularly relevant). Similar advice applies to the internet. Here, the AGB’s should be accessible with a click and should be printable without problems.
(2) Surprising /Unexpected Clauses
A clause which is incorporated after the standard terms will not be regarded as an integral part of the contract if it is surprising or if it is overruled by an individual agreement.
Clauses which breach binding legislative law are invalid ab initio. An example would be a clause providing for the exclusion of “all challenges”. In particular, a challenge on the grounds of deception cannot be excluded in the standard contracting terms.
If a clause has more than one meaning for the average customer, then under Art. 305c, para. 2 of the German Civil Code (BGB), only the interpretation which is most favourable to the customer applies (“bookmaker hostile” interpretation).
Where a clause is so unusual with regard to the actual circumstances that it is inherently surprising or deluding, then it is classed as a surprising clause under Art. 305c, para. 1 of the BGB (BGH, NJW 1998, 683). According to jurisprudence, an “established” clause can also constitute a surprising clause where it is hidden at a somewhat unusual point in the AGB’s.
A surprising clause could, for example, be a regulation that a betting slip must be presented within 20 days.
(3) Primacy of the Individual Agreement
Under Art. 305b of the German Civil Code (BGB), an individual agreement overrides the AGB clauses which differ from it. Such an agreement can be concluded orally, in writing, by letter of confirmation, by email or by conclusive conduct. Because of this, the primacy of the individual agreement cannot be excluded by a clause stating that all digressions from the AGB must be written (BGH, NJW 1995, 1488).
The onus of proving that a deviant individual agreement was made is on the party who is claiming that there is deviation (BGH, WM 1987, 646).
Oral assurances from the operator of the receiving office as well as assurances/comments in emails can be of importance in the sports betting area.
(4) Judicial Review of Contents
It is only after determining whether the clauses have been effectively incorporated and the examination of the above mentioned points has been completed that the actual judicial review of the business’s standard terms and conditions occurs.
Clauses which indirectly specify the main service which is provided are not subject to review, e.g., price and services (specification of services). Subsidiary agreements on the price are subject to review, even where they have a direct effect on the price (BGHZ 124, 254, 259; 106, 42, 46).
The following clause prohibitions are expressly legislatively regulated:
(a) Prohibition of Clauses which cannot be evaluated (Art. 309 of the German Civil Code, BGB)
Under Art, 309, no. 1 of the German Civil Code (BGB) the raising of prices on short notice is expressly prohibited.
A general prohibition on accumulating in a betting agreement would be in breach of Art. 309, no. 3 of the German Civil Code (BGB). In order to remain valid, such a provision must be confined to undisputed claims or to claims which have been determined to be valid. It must be confined, with regard to undisputed allowances or allowances which have been determined to be legally binding in order to remain valid.
A limitation of liability is only admissible under the strict provisions of Art. 309, no. 7 and no. 8.
Art. 309, no. 12 of the German Civil Code (BGB) is of crucial importance regarding proof. This provision strictly prohibits alterations to the burden of proof which are to the disadvantage of the customer.
A confirmation that one has been referred to the AGB’s and that one has had the possibility of making oneself reasonably aware of their contents is also inadmissible (BGH, NJW 1990, 761).
Under this provision, a clause stating that only the “records of the provider are authoritative” would also be inadmissible.
Under Art. 309, no. 13 of the BGB (German Civil Code) the explanations to customers may not be of a stricter form than the written form nor tie the customer to particular access exigencies. A clause in the betting agreement that a complaint from the customer must be sent “by means of registered letter” would also be invalid.
(b) Prohibition of clauses which can be evaluated (Art. 308 of the German Criminal Code, BGB)
The clause prohibitions under Art. 308 of the German Civil Code (BGB) rely on uncertain legal concepts which are subject to judicial evaluation, i.e., the individual cases require judicial examination.
Art. 308, no. 1 of the German Civil Code (BGB) concerns the setting of deadlines for the conclusion of a contract where the customer accepts or rejects the offers submitted to him.
Art. 308, No. 3 of the German Civil Code (BGB) prohibits declaring the rights of the bookmaker, where there is no material justification or reasons given in the contract to release him from liability.
Art. 308 no. 4 of the German Civil Code (BGB) covers all clauses which allow the bookmaker to change or modify the agreed service following the conclusion of the contract with the customer. This would apply to a clause allowing for the one sided changing of odds.
Art. 308, no. 5 of the German Civil Code (BGB) encompasses all agreements under which the issue or non-issue of an explanation of legal importance is feigned by the contracting partner. An example of this would be a betting agreement regulation where the individual account balance provided by the betting customer is taken to be agreed.
© Contents Control under the General Clause (Art. 307)
Alongside the legislatively regulated clause prohibition, the “general clause” in Art. 307 of the German Civil Code (BGB) is of considerable practical importance. AGB’s which withstand the clause prohibitions under Art. 308 and Art. 309 of the German Civil Code (BGB) fall (in practice, very often) at this provision, if they cause the customers unreasonable disadvantage contrary to the requirement of good faith (this is one of the uncertain legal concepts which the judicature examines).
An unreasonable disadvantage can arise where the agreement is unclear or difficult to understand (Breach of the Transparency Requirement, Art. 307, para. 1, s. 2 of the German Civil Code, BGB). It is difficult to differentiate between provisions in a single case. If the clause is fundamentally understandable but unclear in relation to marginal questions, then the above mentioned “lack of clarity rule” of Art. 305c, para. 2 of the German Civil Code (BGB) applies. Contrary to this, if the clause is deeply difficult to understand then Art. 305, para. 2 of the German Civil Code applies, i.e., the clause is not an incorporated part of the contract.
Regarding many of the clauses in the betting agreement, I have the feeling that an average customer (and a judge who has not dealt with sports betting for some time) would have considerable difficulties in understanding. Care must be taken to create a simpler explanation and to formulate the clauses in a more transparent way.
There have been numerous decisions on what is regarded as unreasonable disadvantage. According to these decisions, the limitation of liability even for simple negligence is considered unreasonable where it had to do with the infringement of contractual obligations (co-called “cardinal obligations”, BGH, NJW 1993, 335). A very wide reaching limitation of liability agreement would on this basis be largely inapplicable.
(5) Legal Effect of Inapplicability
The inapplicability of individual clauses regularly leaves the rest of the contract undisturbed (Art. 306, para. 1 of the German Civil Code, BGB). It is only where one of the parties will suffer unreasonable hardship that the entire contract is rendered void (Art. 306, para. 2 of the German Civil Code, BGB).
The inapplicable clause falls without replacement. In particular, the clause will not be brought back into effect on the basis of its (remaining) admissible content (prohibition on “geltungserhaltende Reduktion” – reducing the negative effect from the clause until it is just admissible). Based on this, the limitation of liability is generally inapplicable and will not be confined to simple negligence. To put it colloquially: If one seeks to gather too many points in one’s own favour, then the “shot will backfire”, i.e., the entire regulation is rendered inapplicable. From our point of view, it should be aimed to formulate applicable regulations (which will mean that it is highly unlikely that the regulations will be afflicted by the “general clause” or one of the judicial amendments. Finally, it is only by formulating clauses which are not overly favourable to the bookmaker that the trust of the customer can be gained and retained on a long term basis.