The world is getting smaller. Events abroad – a war, the blockage of the Suez Canal – lead to delivery problems and/or higher costs in the Netherlands. In this article we look at the position of buyer and supplier in 'business-to-business' contracts with longer delivery times and rising purchasing prices.
Many sectors are plagued by supply problems and/or higher costs due to one or more crises. In this article we discuss the position of buyer and supplier in 'business-to-business' contracts with longer delivery times and rising purchasing prices.
On MyFHI you will find a model price change clause that we work with Sander Pieroelie by FHI Advice have developed and that you can use in your agreements.
Delivery problems
The (intended) delivery date is agreed in almost every contract. If the delivery date is not met, the following applies in short:
Can the supplier invoke 'force majeure'? If so, the supplier is not liable for damages in connection with the late delivery.
Is the contractual delivery date fixed (also known as 'fatal')? The supplier is automatically in default if a deadline for delivery is not met. The customer can then immediately terminate the contract. In the event of dissolution, the actions taken must be reversed. If the supplier cannot invoke force majeure, the supplier is liable for damages if a deadline for delivery is not met.
If the contractual delivery date is not fatal, then the contractual agreements must be taken into account. If the contract does not contain any rules for extending the delivery date, the buyer can give the supplier notice of default by giving a reasonable period for delivery. If the supplier does not meet the latter date, this constitutes default and gives rise to the right to termination and possible compensation.
Sometimes the agreement determines the period(s) by which the supplier can extend a delivery date. Until the end of these extensions, the supplier cannot be held in default and the agreement cannot be dissolved. Only if the supplier does not meet the final delivery date can the buyer send a notice of default with a final deadline. The right to termination and possible compensation then arises.
In exceptional situations, the supplier may request an adjustment of the delivery date in the agreement. This is possible if an unforeseen circumstance arises after the conclusion of the agreement that has not been taken into account in the agreement and which should not be borne by the supplier. Consider a seller of products from Ukraine who, before the outbreak of war, agreed to deliver products that are (temporarily) unavailable after the outbreak.
Higher purchasing and cost prices
The sales price is an essential part of every contract in which products and/or services are sold. If the supplier is confronted with higher costs, the following applies in short:
The basic principle is that costs vary and that suppliers must take this into account when setting sales prices. Even if a contractual price change clause has been agreed, as a rule not every increase in costs can be charged to the customer.
The possibility to change the price mainly depends on the contractual agreements. Sometimes fixed prices are explicitly agreed. In other contracts, the supplier stipulates the right to increase the price. If no contractual agreements have been made, the law contains the right in Article 7:758 of the Dutch Civil Code for work contractors to increase prices due to cost-increasing circumstances. For other contracts there is no specific legal right to increase prices.
If no price change clause has been agreed, the supplier (including contractors) can base a price change on the general legal doctrine of 'unforeseen circumstances'. This doctrine is intended for extreme situations in which circumstances arise that have not been taken into account in the agreement and as a result of which full application will lead to unreasonable results for the supplier.
If a price change clause has been agreed, the supplier can change the price in accordance with the agreements made. If this leads to unreasonable results, the customer could rely on the general legal doctrine of the restrictive effect of reasonableness and fairness.
If you have any questions or would like advice on this subject, you can contact us Sander Pieroelie by FHI Advice through legal@fhi.nl or 06 – 222 878 65.
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