Consumers have long been protected against the “stronger” supplier. SHowever, since December 2020, there are also stricter rules on what companies can (and cannot) agree on in their contracts. It is therefore quite possible that the model agreements which your company has been using for yearscan now be legally challenged.
Unlawful or unbalanced B2B contracts
The new rules apply to all businesses, regardless of the nature of their activity or their size. They also apply to all contracts between enterprises. It is not only about invoice conditions, or general terms and conditions of sale or purchase. Also agreements in IT contracts, distribution agreements, building contracts or more generally service agreements: they all fall under the new regulation.
One thing is certain: your contractual arrangements must comply with the new B2B legislation. Contracts should therefore be drawn up in such a way that they do not contain any unlawful or disproportionate clauses. This will prevent them from being set aside by a judge at a later date.
Freedom of contract restricted?
The new B2B Act makes a distinction between three categories of unlawful clauses The Act provides for a list of ‘black clauses’, a list of ‘grey clauses’ and an additional catch-all principle that states that contractual agreements must, above all, be clear and intelligible: clauses that are ‘manifestly unbalanced’ are out of the question.
The ‘black list’ contains agreements that are in any case prohibited and void. They cannot be discussed and you cannot prove otherwise. Specifically, it concerns agreements about the following matters:
- You make the execution of the agreement dependent on your own will (or preference), while the other party remains bound;
Example: a company makes an offer that is accepted by the customer, but in yourgeneral terms and conditions you state that the order is only final once the management approves the order;
- You give yourself the right to interpret a part of the agreement (while the other party does not have the same possibility);
Example: the general terms and conditions stipulate that the agreement ends in the event of force majeure. However, you also stipulate that you are the only one to decide when there is a case of force majeure;t. However, you also stipulate that you are the only one to decide when there is a case of force majeure;
- You make it impossible to appeal to a judge (or arbitration) in the event of a dispute;
Examples of this are clauses in which a contracting party stipulates that bringing a lawsuit would no longer be possible after a certain period of time; even stronger, clauses in which it is stipulated that any disputes arising from the execution of the contract can under no circumstances be submitted to the competent court;;
- Where a party could only effectively take cognisance of the contract terms at the time of concluding the contract.
An example of this is a clause which states that the other party has accepted your general terms and conditions, even though these were not communicated to that other party before the conclusion of the contract.
The prohibition of the inclusion of such black clauses is not in itself legally earth-shattering: in the past such unfair terms were often already sanctioned on the basis of general legal principles.
The chance that this black list will have a significant impact on the freedom of contract between companies therefore seems rather small. Nevertheless, such clauses should be excluded from contracts or general terms and conditions in any event.
The “grey list” contains agreements of which the unlawfulness is suspected (and therefore prohibited). In concrete terms, this concerns many different agreements that can often be found in contracts or conditions:
- Unilateral change clauses;
Example: a clause allowing a contracting party to unilaterally change the price of its current serviceswithout giving reasons.
- tacit extension or renewal of a contract without reasonable notice;
Example: a clause in the general terms and conditions of a subscription which provides for automatic renewal of the subscription, without the possibility of cancelling it.
- Reversal of the economic risk without compensation;
Examples are: a clause stating that you, as a supplier, must bear the risk of theft after delivery of the good to the buyer, without any compensation; or a clause obliging you, as a supplier, to take back unsold products from your distributor, without compensation
- undue restriction or exclusion of legal rights in the event of a breach of contract;
Example: a clause in the service provider’s general terms and conditions stating that the service provider is not, without more, responsible for the non-functioning of the technological solution provided
- Exclusion of a reasonable period of notice;
Example: a long-term contract in which no or no reasonable notice period is possible and one party therefore quasi ‘locks’ the other party in place
- exclusion of wilful misconduct, gross negligence or non-performance of essential obligations;
Example: a clause in an architect’s service contract stipulating that his statutory duty of control is limited to a periodic visit to the building site;
- Restriction of the use of evidence;
Example: a clause stipulating that, in the event of a dispute between the service provider and the client, only documents issued by the service provider may be used as evidence against it (and thus that the client may not use any other means of evidence to defend itself)
- Disproportionate damage clauses
Example: a clause stipulating that a lump sum of 20% of the unpaid invoice amount is due, cumulated with an amount of EUR 50 per reminder, as well as late payment interest. Such a clause is unlawful insofar as the compensation clearly (‘obviously’) exceeds the actual damage suffered by the supplier in question.
This grey list introduces a presumption. In concrete terms, this means that the potentially unfair nature of the agreement can be refuted. It is then up to the company that has included the clause in its general terms and conditions or contract and is thus the beneficiary (or hopes to be) to prove that this is in fact kosher. The presumption can also be rebutted if both companies can demonstrate that they have deliberately chosen to include the arrangement that is behind the ‘unfair’ clause in question.
The inclusion of a “grey clause” in your company’s general terms and conditions does not seem to be a good idea; however, a “grey clause” can be upheld if the parties can prove that the “grey clause” did not slip into the contract unilaterally but was the result of mutual consultation and agreement. In view of this, it is certainly advisable to properly document the creation of certain clauses.
In addition, one may also ask whether contracting parties can hide behind a ‘four corners clause’ (in which contracting parties indicate that only what is written between the ‘four corners of the contract’ actually counts as ‘agreed between the parties’); perhaps the inclusion of such a clause will not offer any solace in refuting the presumption.
Besides the black and grey list, the new B2B law also provides for the principle that contractual agreements must be clear and comprehensible. In principle, any agreement which creates an ‘apparent imbalance’ between the contracting parties is unlawful (and therefore prohibited). Moreover, this may be evident from the totality of related agreements – it need not be a matter of a single isolated wording in the contract.
Here too, we can ask ourselves whether the inclusion of a ‘four-sided clause’ is opportune. After all, when assessing the possibly ‘unfair’ nature of a contract, a number of ‘preconditions’ of the contract may be taken into account. For example, commercial practices in force in the sector concerned or other terms of the contract may be taken into account, as well as the exchange of information between the parties.
Something new under the sun?
The entry into force of the new B2B Act gives companies ammunition to challenge unbalanced contractual terms of the other party. At the very least, critical questions can be asked.
The introduction of a general prohibition on ‘manifestly unlawful’ agreements is a noble principle, but on the other hand, it is not a totally unexpected legal turn. Rather, this ban is in line with already existing general legal principles.
Contractual freedom remains the starting point in the new B2B Act, but ‘open standards’ of the ‘grey list’ and the potentially far-reaching consequences of the ‘catch-all provision’ may lead to uncertainty. The impact of this new legislation is still unclear, almost five months after its entry into force; in any event, it is important to monitor how courts will interpret this set of rules.
What does this mean for your company?
As a company, you would in any case be well advised to critically examine your general terms and conditions and contract models in the light of the new B2B Act.
Apart from this exercise, it is strongly recommended to regularly review the general terms and conditions or model agreements of your company and to check whether they are still in line with your business model. During this exercise, sufficient attention must certainly be paid to the clarity and comprehensibility of what you have written.
Are the general terms and conditions of your company sufficiently clear and understandable? Do you want to be sure that your company’s general terms and conditions pass the test of the new B2B Act?
Please send us your questions or concerns free of obligation to email@example.com. Our team of specialists can help your company with a critical review of your agreements and/or general terms and conditions and adjust them if necessary.
Written by Sarah Dello , Senior Legal Adviser & IP/IT Chair theJurists, and Kris Seyen, Partner theJurists