International debt collection
Germany 2021-06-08

The handling of unpaid bills in Germany

Every holder of a bill is prima facie presumed to be a creditor in due course. This is a most important rule in Germany; but it must be realized that it only imports a presumption, and that presumption may be rebutted (so as to render his claim invalid) if it is proved that the holder lacked good faith, ie took the bill knowing of a defect in title or knowing that the acceptance, issue, or subsequent negotiation was affected by fraud, duress or the refusing of payment.
The burden of proving such knowledge in respect of defective title lies upon the acceptor or other person who seeks to establish that the plaintiff is not a holder in due course, but where fraud, etc is alleged the creditor himself must prove affirmatively that at some time subsequent to the wrongdoing in question, and before the bill came into his hands, value was in fact given for it by someone (not necessarily himself) who took in good faith, without knowledge of the wrongful act.
There are two forms of presentment: 'presentment for acceptance' and 'presentment for payment'.
(a) Presentment for acceptance
Strictly speaking this is only necessary (and even so, subject to exceptions) in three cases. First, where the unpaid bill is payable 'after sight' (ie is expressed to be payable within a certain time after it has been brought to the notice of the drawee) - clearly here it must be 'presented' because, until it is, its maturity date remains unascertained. Second, where the bill itself expressly stipulates that it shall be presented for acceptance. Third, where the invoice is drawn payable elsewhere than at the place of residence or business of the drawee. Of course these categories do not include cheques.
Where a bill of these kinds comes into the hands of a holder he must either present it to the
drawee in Germany for acceptance, or negotiate it within a reasonable time. Upon presentment, the drawee must accept the bill within 24 hours. If the debtor fails to do so within that time, or if he repudiates liability, he will have 'dishonoured' the bill. If this happens, the holder must give notice of dishonour to the client, or to the person who indorsed the bill to him. Notice of dishonour must not be given prematurely before dishonour.
It is effective from time of receipt and must be given within a reasonable time of dishonour or in the case of written notice sent by post it must normally be despatched on the day of dishonour or, at least, by the following day.
The effect of giving notice is to fix the drawer, or the previous indorser, with liability for payment.