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ReferenceInternational Business Law

How to withdraw from a purchase contract correctly

How to withdraw from a purchase contract correctly: requirements, deadlines, place of supplementary performance, and practical recommendations.

Peter Poleacov4 min

A wooden sign reading SORRY WE ARE CLOSED hangs on a shop’s glass door

Starting point

A buyer who wants to withdraw has to have set the seller a reasonable period for supplementary performance beforehand, and that period has to have expired without success. That is what Section 437 No. 2 BGB says, read together with Sections 440, 323(1), and 439 BGB.

A deadline alone is not enough. Under the BGH’s settled case law, the buyer also has to make the purchased item available for inspection, at the place of performance for supplementary performance (Section 439(5) BGB). This lets the seller check whether the alleged defect exists, whether it was already present when risk passed, what its cause is, and whether it can be remedied. Until the buyer gives the seller that opportunity, the seller need not engage with the demand at all.1

Where that place lies is determined in sales law by the general rule in Section 269(1) and (2) BGB.2 Where the contract says nothing, the circumstances of the individual case decide, particularly the nature of the obligation. Where those yield nothing either, the place of performance is the seller’s business establishment at the time the contract was concluded.3

When no deadline is needed

Setting a deadline is the rule, not a dogma. Sections 323(2) and 440 BGB list the cases in which the buyer may withdraw without one: a serious and final refusal to cure, a failed cure, unreasonableness, and a fixed-date deal. The most important in practice is the flip side of the inspection right above. Sometimes the seller refuses the very inspection it could otherwise insist on. Then a deadline is unreasonable for the buyer and therefore dispensable.4 A buyer who wants to withdraw should be able to prove that refusal. A seller who means to cure allows the inspection rather than fending it off.

The materiality threshold

Even a formally correct procedure fails if the breach is immaterial: withdrawal is then barred (Section 323(5) sentence 2 BGB). A small, cheaply fixed defect does not support withdrawal, only a price reduction and damages.

For the right to withhold performance the opposite applies, and that asymmetry is regularly missed. Until the defect is remedied, the buyer may withhold the full purchase price under Section 320(1) BGB, even where the defect is minor and remediable. The limit is reached only where exercising the right offends good faith (Section 242 BGB). In the case decided, paintwork damage on a new car was enough: the buyer was entitled to refuse the entire payment and did not fall into default.5 So as a buyer facing a trivial defect, your leverage sits with the purchase price, not with withdrawal.

Cross-border sale of goods

Everything above applies to a sale governed by the BGB. In a cross-border sale of goods between businesses in different Contracting States, the CISG applies instead, and it does so automatically, without the parties having to agree on it. Its thresholds are higher: the buyer can only walk away for a fundamental breach, or for non-delivery after a fruitless grace period, and even then only within a reasonable time (Article 49 CISG). A curable defect and an expired deadline are not enough there. An exporter who plans around the withdrawal requirements of the BGB is therefore often planning around the wrong rule. What follows from that for German exporters is set out in “CISG: advantages and disadvantages for German exporters”.

Practical recommendations

  1. In contracts for the sale or supply of goods, regulate not only the place of performance but also the place of supplementary performance. A blanket rule (for example, always at the seller’s location) is not the right approach; the place should be defined on a case-by-case basis. This avoids unnecessary disputes, costs, and risks in warranty scenarios.

  2. From the buyer’s side, also make sure to make the item available to the seller for supplementary performance, see Section 439(5) BGB.

  3. Finally, the demand to remedy the defect has to be drafted carefully. Otherwise no effective deadline for supplementary performance is triggered.

  4. Before withdrawing, check two limits: whether the defect is material (Section 323(5) sentence 2 BGB) and whether the deadline was exceptionally dispensable. Withdrawal over a trivial defect, or without a (dispensable) deadline, fails.

Notes

  1. BGH, judgment of 30 March 2022 – VIII ZR 109/20; on the version of Section 439(5) BGB effective from 1 January 2022, BT-Drs. 19/27424, p. 26 et seq. ↩

  2. The foundational decision is BGH, judgment of 13 April 2011 – VIII ZR 220/10. ↩

  3. BGH, judgment of 19 July 2017 – VIII ZR 278/16. ↩

  4. BGH, judgment of 26 October 2016 – VIII ZR 240/15. ↩

  5. BGH, judgment of 26 October 2016 – VIII ZR 211/15. ↩

Reference: Poleacov, P. (2026). How to withdraw from a purchase contract correctly. INN.LAW. https://inn.law/en/perspectives/cancellation-of-purchase-agreement/