When a customer is in default and what default costs them

A joinery invoices a property management GmbH €8,000 for fitted cupboards on Monday 2 March 2026; the invoice arrives by email the same day. By the end of July the GmbH has not paid, and the owner has sent no reminder, believing she is owed nothing extra without one. Yet the GmbH had been in default since 2 April. By 31 July, €274.07 of interest and a €40 flat fee had built up.

Due is not yet in default

Business practice often treats two ideas as one, although the German Civil Code (BGB) keeps them apart. A claim is due once the creditor may demand payment. The debtor is in default only when a further circumstance is added to that. Only default triggers interest and damages; the mere fact that a sum is due does not.

When a claim falls due is first a matter for the contract. If it says nothing and nothing follows from the circumstances, section 271(1) BGB lets the creditor demand performance immediately. An invoice without a payment term therefore usually makes the amount due at once, not after some customary period.

The basic case of default is set out in section 286(1) sentence 1 BGB. If the debtor does not pay after a reminder sent once the claim has fallen due, the reminder puts him in default. The order is mandatory: a reminder that arrives before the due date achieves nothing and has to be sent again later.

Section 286(1) sentence 2 BGB treats two court steps like a reminder: filing an action for payment and service of a payment order. A creditor who applies for a payment order without any prior reminder puts the debtor in default at the latest when it is served. The second module shows how that procedure runs.

Default without a reminder: calendar date, triggering event and refusal

Under section 286(2) BGB no reminder is needed in four cases. The most important for businesses is the first: a time for performance has been fixed by the calendar. If the contract or a validly agreed invoice says payable by 15 May 2026, the debtor falls into default when that day ends.

The second case covers periods that run from an event. If performance must be preceded by an event and a reasonable period has been set so that it can be calculated by the calendar from that event, no reminder is needed either. A typical example is an agreement such as payment 14 days after delivery.

The third case concerns a debtor who seriously and definitively refuses to pay. Someone who writes that he will not pay the invoice under any circumstances need not be reminded first. The fourth case is a catch-all: special reasons can justify immediate default after weighing the interests of both sides.

The 30-day rule and its consumer caveat

For payment claims, meaning money owed in return for goods or services, section 286(3) BGB contains a fallback rule. The debtor is in default at the latest if he does not pay within 30 days after the due date and receipt of an invoice or equivalent payment statement. No reminder is needed.

The words at the latest matter. The 30-day rule is not a payment term the customer is entitled to, but an outer limit. A reminder sent one week after the due date puts the debtor in default from that reminder. The rule only bites when the creditor does nothing else, which is exactly when it is valuable.

Both conditions must be met: the claim is due and the invoice has been received. The 30 days run from the later of the two. If an invoice is payable at once and arrives on 2 March, that day is not counted under section 187(1) BGB. The period ends when the 30th day ends, here on 1 April.

Against a consumer the rule applies only if the invoice or payment statement specifically pointed out this consequence (section 286(3) sentence 1, second half-sentence BGB). Without that notice, a private customer never falls into default merely by waiting. A reminder or an agreed calendar date is then needed.

Under section 13 BGB a consumer is any natural person who enters into a transaction for purposes that are predominantly outside their trade, business or profession. Under section 14 BGB a trader, the Unternehmer, is anyone who acts in the exercise of such an activity when concluding the transaction.

An effective notice costs one line. It should say that the customer will be in default without any further reminder if he does not pay within 30 days after the due date and receipt of this invoice. General wording such as payable immediately does not replace it, because it does not name the consequence the statute refers to.

If it is uncertain when the invoice arrived, section 286(3) sentence 2 BGB helps, but only against debtors who are not consumers. Such a debtor is then in default at the latest 30 days after the due date and receipt of the goods or services. There is no such fallback for private customers, so receipt must be provable.

Finally, under section 286(4) BGB nobody is in default as long as payment is not made because of a circumstance for which he is not responsible. For money debts this exception is narrow in practice; it may apply, for example, where the creditor itself gave the wrong bank details.

The rate: percentage points above a moving base rate

Section 288(1) BGB provides that a money debt bears interest during default. The annual rate is five percentage points above the base rate. The statute therefore does not name a fixed rate but a margin on top of a reference figure that moves with monetary policy.

Where no consumer is a party to the transaction, the rate for payment claims is nine percentage points above the base rate (section 288(2) BGB). Two conditions must both be met. The whole transaction must take place without a consumer, and the claim must be consideration for a performance, such as a purchase price or a fee.

Two borderline cases follow. When a tradesman invoices a private customer, the rate stays at five points even though the creditor is a business. When one business claims damages rather than a price from another, the lower rate also applies, because subsection 2 covers payment claims only.

The base rate is governed by section 247 BGB. It changes on 1 January and 1 July each year by the points the reference rate has moved since the last change. That reference is the rate on the European Central Bank's most recent main refinancing operation before the first calendar day of the half-year.

There is a trap in the statutory text itself. Section 247(1) sentence 1 BGB still reads 3.62 percent; that is the provision's starting value, not today's figure. Under subsection 2 the Deutsche Bundesbank publishes the rate in force in the Federal Gazette, and the official footnote expressly points to those announcements.

The Bundesbank also publishes the values in a table on its website, read on 23 September 2026. According to it, the rate was 1.27 percent from 1 January 2026 and 1.52 percent from 1 July 2026. Between businesses that gives 10.27 percent in the first and 10.52 percent in the second half of 2026.

A default running across 1 January or 1 July is therefore calculated in segments, each half-year at its own rate. For the same reason, the calculator on this site takes the base rate as an input rather than as a fixed constant.

Interest on tax debts, by contrast, follows the Fiscal Code and has nothing to do with section 288 BGB. Late-payment surcharges and interest charged by the tax office are covered in the course on objections, deadlines and deferral with the tax office. Mixing the two worlds means using the wrong rate.

The 40 euro flat fee and further loss

On top of interest, section 288(5) BGB gives the creditor of a payment claim a right to a flat fee of 40 euros where the debtor is not a consumer. The statute says in addition: the fee is added to the interest and does not replace it. It arises with default, without any loss having to be proved.

Under subsection 5 sentence 2 the fee also applies where the claim is an interim payment or another instalment. If a customer falls into default on several interim invoices, each of them can trigger it. Anyone who bills in instalments should reflect this in their credit control.

Under subsection 5 sentence 3 the fee is set off against damages owed to the extent that the loss consists of the costs of pursuing the claim. If the creditor later instructs a lawyer or a collection agency, the 40 euros reduce that claim for costs. It is not, however, set off against the interest.

Interest is not the end of it. Under section 288(3) BGB the creditor may claim higher interest on another legal ground, for instance a valid agreement. Under subsection 4 a further loss can still be claimed, for example where the creditor had to take out a more expensive loan because the money did not come in.

Section 289 BGB sets a limit: no default interest is payable on interest. Accrued default interest therefore does not itself bear interest; compensation for a genuine loss caused by the default remains possible.

These rights can hardly be contracted away. Under section 288(6) BGB an agreement made in advance that excludes default interest on a payment claim is void. Limiting the interest or excluding the flat fee is void where it is grossly unfair to the creditor.

For an exclusion of the flat fee or of collection costs, the statute presumes gross unfairness in case of doubt. Purchasing conditions of a large customer that provide for no late-payment fee therefore generally do not hold. These protective rules do not apply, however, where the debtor is a consumer, as subsection 6 sentence 4 expressly states.

Payment terms between businesses: the limits of section 271a BGB

Large customers often demand long payment terms. Section 271a(1) BGB draws a line: an agreement under which the creditor can demand payment only more than 60 days after receipt of the goods or services is valid only if it was made expressly and is not grossly unfair to the creditor.

If the debtor receives an invoice after receiving the performance, receipt of the invoice takes the place of receipt of the performance. Until proven otherwise, both are presumed to coincide. If the creditor named a later date, that date counts. A business that invoices late therefore moves the start of the 60 days itself.

The statute is stricter with public contracting authorities within the meaning of section 99 nos. 1 to 3 of the Competition Act (GWB). With them, a term of more than 30 days is valid only if expressly agreed and objectively justified by the particular nature of the contract. More than 60 days is always void under section 271a(2) BGB.

Inspection and acceptance periods have a limit of their own. Where payment is due only after inspection or acceptance, the agreed inspection period may not exceed 30 days after receipt under section 271a(3) BGB, unless it is expressly agreed and not grossly unfair. The payment term cannot be stretched through an endless acceptance.

If such an agreement is void, the rest of the contract stands under section 271a(4) BGB; only the excessive period falls away. Under subsection 5, subsections 1 to 3 do not apply to agreed interim and instalment payments or to relationships in which a consumer owes the payment.

Under section 286(5) BGB the same limits apply to agreements departing from the statutory onset of default. A clause under which the customer would fall into default only 90 days after receiving the invoice is therefore measured against section 271a BGB. Anyone signing such terms should negotiate and document the exception expressly.