Unfair terms in B2B relations – What you should know from now on.
Estimated time to read this article2 min
Date of publication1 December 2020
Author(s)Alexia Faes, Rafaël Jafferali
CategoriesCivil and Commercial Contracts Distribution and Licensing
Are you a small, medium or big company? As a builder, banker, retailer, seller or any other business, do you enter into B2B agreements that usually provide for some penalties, limitation of liability, specific duration or transfer of risks?
Would you mind if a judge strikes down these clauses or reviews the price agreed to pay for your services or products?
Then watch out for the Law of 4 April 2019 which prohibits unfair terms in B2B relationships and enters in force today.
General prohibition of unfair terms in B2B contracts
As it was already the case for B2C relationships, the law of 4 April 2019 now also states that clauses in B2B contracts that create, alone or in combination with other terms, a manifest imbalance between professionals are unlawful and void.
The contract itself will, if possible, live on without the unfair terms and remain binding.
The unfairness of the terms is not assessed regarding the subject-matter of the contract nor the equivalence between the price and the products to be supplied as long as these terms are clear and comprehensible.
This general prohibition is translated into two lists of specific contract terms: (i) a blacklist of unfair terms which are always prohibited and (ii) a grey list of terms which are allowed only if they can be justified.
The blacklist includes terms that aim to:
1. create an irrevocable obligation for the other party while the performance of the obligations of the company itself is subject to a condition whose realisation depends solely on the company’s will;
2. grant a party the unilateral right to interpret any terms of the contract;
3. make the other party waive any means of recourse against the company in the event of a dispute;
4. irrefutably establish the other party’s knowledge or acceptance of terms of which that party did not have actual knowledge before the conclusion of the contract.
The grey list includes terms that aim to:
1. allow the company to unilaterally and without a valid reason modify the price, characteristics or terms of the contract;
2. tacitly extend or renew a contract of fixed duration without providing a reasonable notice period;
3. place, without compensation, the economic risk on a party where that risk would normally be borne by the other company or another party to the contract;
4. inappropriately exclude or limit the legal rights of a party in the event of total or partial non-performance or inadequate performance of the other party’s contractual obligations;
5. bind the parties to a contract without providing a reasonable notice period;
6. release the company from liability for its willful misconduct, for its gross negligence or that of its employees or, except in cases of force majeure, for the non-performance of the essential obligations that form the object of the contract;
7. restrict the means of proof available to the other party;
8. fix damages that are manifestly disproportionate to the prejudice that could be suffered by the company in the event of non-performance or delay in the performance of the other party’s obligations.
If a company claims to be harmed by a grey list term, the co-contracting party has to prove that the term is not abusive. The abusive nature will be assessed on the basis of the following elements which must be considered at the time of conclusion of the contract:
- the specific nature of the goods or services,
- all circumstances surrounding the conclusion of the contract,
- the overall economic balance of the contract,
- the applicable commercial practices,
- all other terms of the contract or of another contract on which it depends.
Application to (almost) all B2B contracts
In terms of scope, the new rules apply to any B2B contract regardless of the size or market power of the businesses involved. Financial services and public procurement contracts are not subject to the new rules unless provided otherwise by royal decree – which has not yet been the case.
Entry into force on 1 December 2020
The new rules enter into force on 1 December 2020, but only for contracts concluded, renewed or modified after that date. Contracts that existed before remain unaffected by these new rules.
And now what?
The new rules will have a substantial impact on many B2B relationships.
Therefore, we recommend that companies review their contracts as soon as possible, and where necessary update their standard B2B terms and conditions to ensure future compliance with this new legal – and controversial – framework.
For any question or assistance, please contact:
+32 (0)2 543 70 80