How do German service and works contracts apply to independent freelancers?

Under § 611 BGB, the service provider promises to perform the agreed services and the recipient promises to pay the agreed remuneration.

The contractual obligation generally concerns proper performance of an activity rather than achievement of a guaranteed result. Service contracts may therefore be appropriate for advisory, teaching, consulting, creative or other professional activities where the Client acquires the Vendor’s expertise or effort.

A service contract should ordinarily identify:

• the nature and scope of the services;

• the agreed remuneration;

• the duration of the Assignment;

• invoicing and expense rules;

• confidentiality and intellectual-property provisions;

• termination rights; and

• each party’s responsibilities.

Under § 613 BGB, services must generally be performed personally where the parties have not agreed otherwise. Consequently, a personal-performance obligation does not by itself prove employment. However, an unrestricted and genuine ability to use qualified substitutes may support independent status.

Under § 631 BGB, the contractor promises to produce an agreed work or result and the customer promises to pay the agreed remuneration.

The promised work may involve:

• producing or modifying a physical object;

• developing software;

• preparing a defined report;

• completing a specified design; or

• achieving another objectively identifiable result through work or services.

The contractor must provide work free from material and legal defects. Depending on the circumstances, the customer’s remedies may include subsequent performance, self-remedy with reimbursement, price reduction, withdrawal and damages.

Acceptance under § 640 BGB confirms that the customer accepts the completed work as substantially compliant with the contract. Under § 641 BGB, remuneration is generally due upon acceptance, unless another lawful payment structure applies.

The correct contract type depends on the obligation actually undertaken.

A service contract is normally more appropriate where the Client purchases professional effort or availability and the outcome cannot be guaranteed.

A works contract is normally more appropriate where the Assignment contains:

• a clearly defined deliverable;

• objective completion criteria;

• a completion deadline;

• acceptance requirements; and

• responsibility for correcting defective work.

An Assignment should state whether payment is linked to time, milestones, delivery or acceptance. It should also define dependencies, change procedures and the allocation of responsibility where the Client delays or alters the requested work.

The parties should not use a works contract merely because result-based language appears more independent. The actual commercial object and method of performance must support the selected structure.

Yes. Section 611a BGB applies where a person is required to perform instruction-bound, externally determined work in personal dependence.

Employment indicators may include:

• Client control over working time and place;

• detailed operational instructions;

• continuing reporting to a Client manager;

• integration into internal teams and workflows;

• employee-like availability requirements;

• use of the Vendor as ordinary internal capacity; and

• limited entrepreneurial freedom.

Independent-contracting indicators may include control over the method of performance, freedom to organise working time, use of an independent business structure, the ability to serve other Clients, responsibility for expenses and genuine exposure to commercial risk.

A works contract creates particular risk where the supposed deliverable is not clearly defined and the Vendor is instead supplied to perform ongoing tasks under the Client’s daily direction.