In a B2B-setting, there is far-reaching contractual freedom… But is this freedom really so beneficial for all contracting parties?
As a small business or start-up, it is nice to have a ‘big fish’ as a customer. But the company that is larger is often stronger, or at least positions itself in this way, by stating that its (purchase) conditions are non-negotiable. As a smaller supplier, you often have little or no room for negotiation in comparison to the large(r) company.
Therefore, it is not easy to challenge the sometimes exaggerated payment terms that larger companies grant themselves. For example, payment terms of 60 or 90 days in the general terms and conditions of larger companies are often no exception.
So that contractual “freedom” is relative…
Late Payment Act
Since 2002, the Late Payments Act (Act of 2 August 2002 on combating late payments in commercial transactions) has regulated the rights of companies in the event of late payment by the counterparty.
For example, the law provides for a standard 30-day payment term. Finally, the same law also permits a broad contractual freedom: companies are free to deviate from this in their mutual contracts (or general terms and conditions). This means that longer payment terms can still be implemented. As a result, this law fails to sufficiently protect entrepreneurs against late payment.
A bit stricter
In 2019, the legislator tightened the Late Payments Act to ensure that the payment period would at least be limited to 60 days.
But deviations remained possible, for example, drawing the card of the ‘verification period’. This is a period that allows the conformity of the delivered goods or services to be verified. In this way, the payment period only starts to run effectively after this verification.
The new B2B-Act (Act of 4 April 2019 on abuses of economic dependency, unfair terms and unfair market practices between undertakings) has also, at least in part, addressed the issue by imposing rules to tackle unbalanced contractual terms between companies.
Nonetheless, the method of the “grey clauses” in the new B2B Act is not perfect. In the end, ‘the little fish’ may still be left behind unprotected.
Moreover, the corona crisis has made the issue of (excessively long) payment terms even more acute.
Further tightening from 1 February 2022
The new law of 14 August 2021 is a legislative amendment to the Late Payments Act. In concrete terms, the legislator is further restricting the contractual freedom with regard to payment terms.
The law now stipulates that, as of 1 February 2022, companies can no longer set payment terms of more than 60 days. Unlike the previous legislation, this new law no longer allows forcontractual deviation.
Including loopholes is also pointless. It is still possible to build in a control period for checking invoices. But the duration of this control period must fall within the 60-day period. Contractual agreements on the date of receipt of the invoice (in order to artificially postpone the start of the payment period) are no longer possible: at the latest at the moment/time of delivery (of the services), the customer must provide the supplier with all the information needed to draw up the invoice (such as a P.O. number). The payment term starts at the moment of receiving the invoice.
What about your current general terms and conditions?
The new law applies to all B2B agreements and to all companies (note: the law provides that exceptions can be made by Royal Decree). Your current general terms and conditions will therefore have to comply with this new requirement!
Since the new law enters into force on 1 February 2022, it is best to check your general terms and conditions before the end of this year. After all, all provisions that are contrary to this new law are null and void and will therefore be considered as not written. If a contract still provides for a payment term longer than 60 days, this term will automatically be reduced to 60 days.
Do you have doubts about whether your general terms and conditions will stand the test of this new legislation? Contact us without any obligation at email@example.com.
Written by Sarah Dello, Senior Legal Adviser deJuristen, and Kris Seyen, Partner deJuristen