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Ten Do’s and Don’ts in German Business

1. Avoid Misunderstandings

Germans’ knowledge of foreign languages is better than in many other countries. However, one should not overestimate their capabilities. Most German business people have a reasonable command of the English language. Still, once it comes to specific business, legal or technical terms outside of their particular area of expertise, misunderstandings are common. They may think they perfectly understand their counterpart and visa versa, when in fact both sides are entirely missing the other side’s point. To avoid future disputes, one should rather elaborate than rely on the other side’s understanding of specific terms.

2. Adjust Your Demeanor

Every stereotype contains a grain of truth. Germans actually do put a great emphasis on punctuality, good manners and the appropriate outfit. To observe that can make one’s life a lot easier. Germans also are a lot more formal than for instance Americans. While a lot of Germans generally find the American way refreshing, they might just as easily feel crowded, if the attitude becomes too friendly.

3. Respect the Decision Process

Germans have a tendency to closely review every little aspect at issue before they reach a decision. This perfectionism can be time-consuming and put foreign business partners’ patience to a test. Still, it is advisable to respect the German decision process. If the German partner is pressed to a decision, he will most likely consider it hurried ever after. This in turn may lead to a latent mistrust, which can doom the entire business relationship.

4. Beware of Local Distinctions

While Germany is only the size of Montana, the distinctions of local habits and attitudes can be just as significant as between New York and California or Texas. Thus, if one happens to have experience in dealing with people from Bavaria or the Rhine-land, one should be aware that people from Hamburg, Berlin or Dresden might act and react distinctively different. It is therefore advisable to familiarize oneself with the local distinctions.

5. Run Credit Checks

In Germany, as other countries, a credit check on the prospective partner should be run before a business relation is entered. This credit information should be obtained from domestic sources, since the information obtainable from credit record companies in the foreign partner’s home country are not always reliable and often outdated. There are a number of German data banks that provide credit information on basically all companies registered in Germany for reasonable costs.

6. Watch Who You are Dealing with

One has to make sure that he is actually dealing with the right entity. The “Hermann Meier GmbH” for instance is in no way identical with the “Hermann Meier GmbH & Co. KG”. One might be solvent while the other one is basically not. If the credit check is run on the wrong company, it will not do much good. Additionally, in case of dispute, the wrong entity might be sued.

7. Secure Your Interests – German Style

Make all sales conditional on payment in full. The retention of title, created thereby, will hold up even in bankruptcy. However, it is prerequisite that the retention of title is already stipulated in the sales contract. Putting it on the invoice or the bill of delivery will not suffice. Trough the retention of title one can reclaim one’s goods from the bankruptcy trustee, unless they were already resold or incorporated into other goods.

8. Confirm in Writing

The fact that anything of any importance in a business relationship should be put in writing is self-evident and therefore almost not worth mentioning. However, in one regard German law gives a new meaning to that principle. Under German law, if an agreement is reached on the phone and one party shortly thereafter confirms the contents, as understood, in a confirmation letter, the other party has to object without undue delay or the contents of the confirmation letter will be the contents of the agreement. In cross-boarder transactions this only applies if the foreign partner writes the confirmation letter and the German Partner does not object, unless the law in the foreign partner’s home country knows a similar rule.

9. Be Wary of German Fine Print

A lot of German businesses put their general business conditions, in German, on the back of orders, invoices and alike. Under certain circumstances those business conditions can become part of the agreement if not properly objected to. In those cases, the fact that the recipient was not even able to read those business conditions for lack of knowledge of the German language is no defense. It is therefore advisable to always object to the other side’s general business conditions and possibly even have them translated or reviewed by a German attorney.

10. Get Competent Advice

Doing business in Germany offers great opportunities. However, dealing with a foreign business culture and legal system also involves a considerable amount of risks. To minimize those risks, one should obtain competent advice. Looking for the consultant with the lowest rates will often prove to be the most expensive option. When retaining a consultant, may it be legal and otherwise, the appropriate expertise should be the deciding factor. The consultant should not only be familiar with the German market, but in particular with the kind of crossboarder business involved and preferably also with one’s own legal and/or business background to most effectively communicate the German requirements in familiar terms.