General terms and conditions and small commercial transactions: an impasse…

How do you ensure that your delivery conditions (still) apply for small (monetary) transactions without having to spend a lot of time, energy and costs to achieve that result? More and more often - even in the case of small monetary transactions - a picture emerges of parties negotiating general delivery and/or purchasing conditions. It is irresponsible from a business economics point of view, but a suitable answer does not seem immediately available.

Contracts and associated general terms and conditions coordinate commercial transactions. Relying on the blue eyes of the other party is a thing of the past, sealed contracts with associated general terms and conditions are the motto nowadays. Parties no longer discuss the purpose and added value; market practices have taken over our thinking. However, how far does the need to fully describe all (legal) aspects of a small (monetary) transaction go? In other words: how many transactions go wrong? The insurance of the very limited number of incorrect commercial transactions can be compensated by the vast majority of 'good' commercial transactions. 

Healthy trading spirit?

My position is that legal reality has taken over from healthy commercial spirit and that it is time to renew the debate surrounding the use of general terms and conditions, within an FHI context. The FHI industry conditions will undergo a revision in the last quarter of 2019. As a kick-off to start that discussion, I would like to recall the purpose and scope of general terms and conditions (liability, dispute resolution, guarantees, transport):

“After all, general terms and conditions are clauses that have been drawn up in order to be included in a number of agreements, with the exception of clauses that indicate the core of the performance, insofar as these latter clauses are formulated clearly and intelligibly.”  

The main rule is (therefore) that the person who has made an offer may apply his general terms and conditions. This is usually the person who provides the core performance within the commercial transaction, for example 'the delivery of certain parts of a machine in return for the performance “payment” from the buyer of those parts.'

The purpose of general terms and conditions is therefore to regulate that part of the cooperation between parties that does not concern the (objectified) core performance or the essentials of the agreement (type, quantity). In case of doubt about applicability, as a rule, provisions from the individual agreement take precedence over those from the general terms and conditions. In addition, a central role in that discussion is reserved for the concepts of 'offer & acceptance'. The answer to the question of whether general terms and conditions apply at all within a legal relationship can usually be traced back to the answer to the question of whether those terms and conditions were provided on the basis of correct and complete information.

Before the judge

Questions about the applicability of general terms and conditions are regularly submitted to the courts. For example, the Arnhem-Leeuwarden court was asked whether the general terms and conditions of one of the contracting parties were applicable (see: ECLI:NL:GHARL:2018:5138). The question was extra relevant in this case, because the intended agreement was laid down exclusively in the general terms and conditions. The court ruled that the general terms and conditions did not apply, because their applicability in this case should have been expressly accepted and that had not happened.

Are there any rules of thumb that can be identified if the other party wants to enforce its purchasing conditions by rejecting your delivery conditions? And how do you prevent endless negotiations?

Let us also address these questions at the upcoming workshops in the fall. Perhaps you already have the solution and would like to share it? Does the use of framework agreements with large customers provide a solution? Are transaction costs included in the price of your product? Are there other instruments available (other than the use of general terms and conditions) to regulate small commercial transactions and if so, which ones? Should threshold values apply and/or are the conditions applied balanced and reciprocal?

After all, it is not an unusual view that general terms and conditions exclusively serve the party interests of one person at the expense of the other. The 'proof of the pudding' often lies in the fact that the buyer of your product (for example a trading company) also sells (your) products; and what do those general terms and conditions look like? That will often produce a surprising picture... Finally, I wish you a very happy holiday; I look forward to seeing you at one of the FHI seminars in the autumn.

Bob van der Kamp, lawyer