Document background
The Prepayment Agreement is essential in commercial transactions where one party makes advance payments before receiving goods or services. This document type is particularly relevant under German law, where specific legal protections for prepaid amounts must be addressed. The agreement is commonly used in manufacturing, construction, and service industries where significant upfront costs or custom orders are involved. It provides security for both parties by clearly defining payment terms, delivery obligations, and refund conditions. The document must comply with German civil law (BGB) and commercial law (HGB) requirements, including consumer protection provisions where applicable. The Prepayment Agreement typically includes security measures, such as bank guarantees or escrow arrangements, to protect the prepaying party's interests.
