Why your supplier insists on signing a new agreement before December 1

The B2B Unlawful Terms Act dated April 4, 2019 protects entrepreneurs against unreasonable conditions imposed by their suppliers, partners, etc., which creates an imbalance between the rights and obligations of the contracting parties.

Who does this new legislation apply to?

This legislation applies to all companies, including sole proprietorships and companies, regardless of the legal form.
Financial services, government contracts and agreements resulting from government contracts fall outside the scope of this law.

When will this legislation apply?

The legislation applies to agreements that from December 1, 2020:

• being closed for the first time;
• be changed;
• be renewed.

Agreements that were signed before December 1, 2020, but are tacitly extended after this law comes into effect, do not benefit from this protection.
An “agreement” must be interpreted broadly here and also includes, for example, a purchase receipt or order, often with general terms and conditions on the back.

Which clauses will be unlawful from now on?

a. Article VI.91/3 of the Economic Law Code states that a clause is unlawful if this clause, whether or not in conjunction with other clauses, creates an apparent imbalance between the rights and obligations of the parties.

The assessment must take into account, among other things, the circumstances surrounding the conclusion of the contract (for example: were the provisions imposed unilaterally or were they negotiated), the prevailing commercial practices, the other terms of the contract and the general requirement of clarity and understandability of the clause.

b. Article VI. 91/4 Code of Economic Law determines a “black” list of 4 provisions that are always considered unlawful.

These provisions include, among other things, the irrevocable obligation of one party to perform the agreement, while the other party's performance is still dependent on a condition over which the other party has control or will be fulfilled. Also the clause that states that the contracting party has the unilateral right to interpret a contract provision. Also the clause under which a contracting party renounces any possibility of recourse against the other party in the event of a dispute.

c. Article VI.91/5 Code of Economic Law lists 8 provisions in a so-called “grey” list that are presumed to be unlawful, unless the contrary is proven.

The company can therefore include these provisions contractually, but must then be able to prove that in the concrete circumstances and given the characteristics of the agreement, no apparent imbalance has arisen between the rights and obligations of the parties.

The FPS Economy lists the following examples:

• A clause that allows the company to unilaterally change the price of its ongoing services, without any justification.
• A supplier who has the obligation to take back unsold products without any compensation. Or a seller who would have to bear a risk of theft without any consideration, even after delivery.
• Clauses that provide for the provision of technological services “as is” or “according to availability”, limiting the liability of the co-contractor in the event of non-functioning.
• A company that stipulates in a clause that in the event of a dispute, only documents that it itself issues may be used as evidence against it.
• Clauses stating that a lump sum of 10% of the unpaid amount is due, cumulated with an amount of 20 euros per reminder, and default interest. The lump sum is deemed to cover all extrajudicial collection amounts (including the costs of reminders and notices of default).

What are the consequences?

If a clause is unlawful, the contracting party can ask the court to declare this clause null and void. If the clause was applied in the past and damage was suffered as a result, compensation can be claimed.

A contracting party can also formulate a request for an injunction in order to stop the execution of an unlawful clause, possibly subject to forfeiture of a penalty.

Finally, intervention by the economic inspectorate, or even criminal prosecution, cannot be ruled out.

So if your supplier or commercial partner insists on signing a new agreement before December 1, 2020, there is a real chance that they will try to bind you to unlawful conditions that they know could be considered unlawful if signed after December 1, 2020. 

Even if your company itself uses general terms and conditions, purchase or sales conditions, or model contracts, it is advisable to have them checked for unlawful clauses by December 1, 2020, so that you can be sure that your company is protected by valid conditions.

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