Unfair terms in B2B-contracts: entry into force 1 December 2020
On 1 December 2020 the new rules on unfair terms in contracts between businesses (B2B) - regardless of their size - entered into force. Introduced by the law of 4 April 2019, in Title 3/1, Book VI of the Economic Law Code, they apply to contracts concluded, renewed or modified after that date.
Below is an overview of the most important points to consider:
A contract must be clear and understandable.
Within a contract, the following four clauses (“black list”) are in all cases null, if they aim to:
- create an irrevocable obligation for the other party while the performance of the obligations of the business is subject to a condition of fulfilment which depends solely on the will of the business;
- give the business the unilateral right to interpret any term in the contract;
- in the event of a dispute, oblige the other party to waive any means of redress against the business; or
- irrefutably establish the other party’s knowledge or acceptance of terms which that party had not been able to become acquainted with prior to the formation of the contract.
Within a contract, unless there is evidence to the contrary, the following eight clauses (“grey list”) are null, if they aim to:
- give the business the right to unilaterally modify, without a valid reason, the price, characteristics or terms of the contract;
- tacitly extend or renew a fixed-term contract, without providing a reasonable notice period;
- place, without counter-performance, the economic risk on a party if that risk would normally be borne by the other business or by another party to the contract;
- inappropriately exclude or limit the legal rights of one party in the event of total or shared non-performance or defective performance by the other business of any of its contractual obligations;
- without prejudice to article 1184 of the Civil Code, bind the parties without providing a reasonable notice period;
- discharge the business from its liability for its willful misconduct, its gross negligence or that of its employees, except in case of force majeure, for the non-performance of essential obligations that are the subject-matter of the contract;
- limit the means of evidence a party may rely upon;
- in the event of non-performance or delay in the performance of the other party’s obligations, fix damages amounts that are manifestly disproportionate to the harm that may be suffered by the business.
Evidence must be provided that the clause concerned – taking into account the concrete circumstances (including the specific nature of the good or service, the sector concerned and the commercial practices, as well as the general economy of the contract) – does not create a manifest imbalance between the rights and obligations of the parties.
Finally, these clauses are also null if they - individually or in conjunction with one or more other clauses - create a manifest imbalance between the rights and obligations of the parties.
The new rules deserve your special attention. After all, they have a particularly broad application, and apply to all types of business contracts (including sales, hires, buildings, settlements, concessions, etc.), as well as to your general terms and conditions. It remains to be seen whether the courts will apply a rather restrictive interpretation of these rules.
It is therefore important to check whether your (standard) contracts and/or general terms and conditions pass the ‘litmus test’ in this respect. We are more than happy to assist you with this so please don’t hesitate to contact us for a “check-up”.